Indonesia's Economic Council Says State-Loss Provision Should Stay in Corruption Law

What DEN is proposing

After meeting President Prabowo Subianto on October 20, Luhut described corruption under the UN convention as bribery, adding: "So, it doesn't discuss state losses." On October 27, he said DEN did not recommend deleting the state-loss provision. "What we seek is legal certainty," he said.

DEN presented four recommendations to Prabowo at the Merdeka Palace in Jakarta on October 20: revise the rules governing corruption that harms state finances; set out a policy and business judgment rule; strengthen rules against bribing foreign public officials; and prepare an omnibus law clarifying the boundaries between state-owned enterprises (SOEs) and state finances. ANTARA reported that the study took six months.

The foreign-bribery proposal addresses what DEN describes as an omission in Indonesian law. Indonesia ratified the UN Convention against Corruption (UNCAC) through Law No. 7 of 2006, but DEN says implementation remains incomplete, including the absence of a criminal offense covering bribery of foreign public officials.

The convention does not require Indonesia to abandon a state-loss element, according to a Supreme Court judge's analysis published by Dandapala. Article 3(2) says offenses covered by UNCAC need not cause a loss of state property, while Article 65(2) permits countries to adopt stricter measures. The analysis therefore treats the inclusion of state losses as a national policy choice consistent with the convention.

Which losses count as state losses?

Distinguishing an ordinary business loss from one caused by misconduct requires more than checking whether money came from the state budget (APBN) or regional budgets (APBD). Law No. 17 of 2003 extends the scope of state finances to assets managed by other parties and assets separated into state-owned companies.

Law No. 16 of 2025 addresses how SOE financial results are recorded: an enterprise's profits and losses belong on its own accounts. The explanation of Article 4B specifies that they are not state profits or losses.

That treatment does not exempt SOEs from public scrutiny. Public accountants audit their annual financial statements, and the Supreme Audit Agency (BPK) retains authority to audit them under applicable laws. Defining the assets involved, establishing audit findings and proving a criminal offense remain separate questions.

According to the Dandapala analysis, Constitutional Court ruling No. 28/PUU-XXIV/2026, dated March 2, 2026, identifies BPK as the institution that declares state financial losses. The ruling also requires allegations of abuse of authority to be addressed through administrative channels first, leaving criminal proceedings as a last resort.

Changes to the criminal provisions

The legal test for losses has already changed. In ruling No. 25/PUU-XIV/2016, the Constitutional Court struck the word "may" from Article 2(1) and Article 3 of the Corruption Eradication Law, also known as the Tipikor Law. A possible loss alone was therefore insufficient.

A further change came when the new Penal Code took effect on January 2, 2026. Articles 603 and 604, which use the term "harmful," replaced those two provisions. As the Dandapala analysis explains, Article 622(1)(l) repealed Article 2(1) and Article 3 of the Tipikor Law, while Article 622(4) redirected references to them to the replacement provisions.

The repeal did not extend to Article 4 of the Tipikor Law. Its rule that repaying losses does not eliminate criminal liability now applies to Articles 603 and 604, according to the analysis.

DEN presents its proposed revisions as a response to Constitutional Court rulings No. 142/PUU-XXII/2024 and No. 28/PUU-XXIV/2026. In DEN's account, the court found inconsistency in law enforcement's application of Articles 2 and 3 and asked lawmakers to prioritize a comprehensive review, allowing for both provisions to be reformulated.

The court also set limits on revision. The Dandapala analysis says ruling No. 148/PUU-XXIV/2026, dated June 17, 2026, gave lawmakers five guidelines, including a requirement that changes must not weaken anti-corruption enforcement.

When business decisions would receive protection

DEN's proposed policy or business judgment rule would protect decision-makers only if they acted in good faith, complied with applicable procedures and had no conflict of interest. It would not shield embezzlement, bribery or self-dealing. DEN says the proposal draws on European practice and Indonesian Supreme Court jurisprudence, including rulings No. 130 PK/Pid.Sus/2013 and No. 121 K/Pid.Sus/2020.

Indonesian law already recognizes the business judgment rule, the Dandapala analysis notes. Article 97(5) of Law No. 40 of 2007 on Limited Liability Companies and Article 9F of the 2025 BUMN Law allow directors to avoid liability for losses if they establish that they were not at fault or negligent, acted in good faith and with prudence, had no conflict of interest, and took steps to prevent the loss.

The analysis identifies a particular limitation for SOE directors under Article 9G of the 2025 BUMN Law. Because they are not classified as state officials, they cannot challenge the legality of their decisions through the State Administrative Court (TUN). In the judge's assessment, that leaves the business judgment rule's evidentiary standard as their only filter.

Two cases illustrating the dispute

The Dandapala analysis points to a sugar importation case in which defendants received prison terms of four years and six months despite findings that they had not enriched themselves. The case ended with an abolition through Presidential Decree No. 18 of 2025.

In the case involving PT ASDP Indonesia Ferry and PT Jembatan Nusantara, directors received sentences ranging from four to four and a half years. The presiding judge dissented, viewing the conduct as a business decision protected by the business judgment rule. The president later granted rehabilitation.