Pursuant to Government Regulation of the Republic of Indonesia Number 61 of 2009 on Ports (“GR 61/09”), Port Business Entity (Badan Usaha Pelabuhan, “BUP”) is a business entity which runs business activities specifically in the field of terminal operations and other port facilities. Business entities that have the right to establish BUP are State-Owned Enterprises, Regional Government-Owned Enterprise, or Indonesian legal entity specifically established for shipping activities. Indonesian legal entities, as aformentioned, can be owned by the state and / or regions and / or the private sector and / or cooperatives. To establish a BUP, since issuance of Regulation of Minister of Transportation, Number 89 of 2018 on Norms, Standards, Procedures and Criteria for Electronically- Integrated Business Licensing in Sea Transportation Sector, a business entity has to apply for BUP License to the Ministry of Transportation through One Single Submission (“OSS”) System. After the submission of the application, there are four commitments in OSS System to be fulfilled by the applicant to obtain BUP License, namely:
- Commitment Fulfillment of BUP Deed;
- Commitment Fulfillment of Location Determination;
- Commitment Fulfillment of Port Construction; and
- Commitment Fulfillment of Port Operation.
Besides those four stages, there is a stage that has also to be conducted by the BUP applicant, which is between the stage of Commitment Fulfillment of BUP Deed and Commitment Fulfillment of Location Determination. This stage is called Granting Concession Stage.
Concession, based on Article 1 (18) of Regulation of the Minister of Transportation of the Republic of Indonesia Number PM. 15 of 2015 concerning Concessions and Other Forms of Cooperation between the Government and Port Business Entities in the Port Sector (“MR15/15“), is the granting of rights by the Port Operator to the BUP to carry out activities in providing certain port services within a certain a period of time and certain compensation. Concessions are obtained through an auction mechanism and have a period of time that is adjusted to the return of investment funds and reasonable benefits. The granting of the concession, based on Article 1 (23) of MR 15/15, must be made in a concession agreement between the Port Operator and BUP, which is related to operational activities at the consigned port. The followings are contents of the concession agreement:
- Business scope;
- Period of concession;
- Initial tariff and tariff adjustment formula;
- The rights and obligations of the parties, including the risks borne by the parties where the risk allocation must be based on the principle of allocating risk efficiently and balanced;
- Service performance standards and procedures for handling community complaints;
- Sanctions in the event that the parties do not fulfill the concession agreement;
- Dispute resolution;
- Termination or termination of the concession agreement;
- The legal system that applies to the concession agreement;
- The legal system that applies to the concession agreement is Indonesian law;
- Force majeure; and
After the agreement is signed by both parties, the agreement has to be submitted in the stage of Commitment Fulfillment of Port Construction so the business entity could fulfill this stage and continue to construct the Port, and finally the applicant could submit the Commitment Fulfillment of Port Operation.
If the concession period stated in the agreement is expired, the concession port facility will be transferred or returned to the Port Operator. Then, the facilities returned to the Port Operator shall be given to other BUP through the auction mechanism for supplying and/or providing services for ships, passengers and goods activities based on utilization cooperation. This cooperation will be granted for a maximum period of 30 (thirty) years after the utilization cooperation agreement is signed.
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This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.