BRIEF SUMMARY ON LAW NO. 17 YEAR 2008

1. The affirmation of cabotage application, in which foreign vessels are not allowed to carry passengers and/or cargoes inter islands or ports within the Indonesian territory.
a. Escape clause is inserted on the above but only if it happens that there is no vessel available and there is no company capable of transporting certain cargoes (article 13.5).
b. The person or entity violating rule no. 1 above can be subject to maximum 5 year imprisonment or maximum fine of Rp.600mil.
c. Foreign shipping companies have to appoint national companies to be their general agents in Indonesia;

2. Empowerment of national shipping under the responsibility of the government in providing financial and tax facilities, facilitating long-term contracts between cargo shippers and shipowners and assuring the availability of marine fuels;

3. To strengthen national shipping companies, the government intends to do the following:
a. To declare certain area as an integrated shipping industry zones;
b. To develop design centers, research and development programs of national shipping industry;
c. To develop standardization and industry for local component (spare parts) of vessels through transfer of technology
d. To develop the raw material production sources for shipping industry and the component for ships;
e. To provide incentive to local shipping companies that undertake the repair domestically or build vessels for overseas buyers;
f. To build vessels in local shipyards if the costs are to be charged to APBN or APBD

4. Legality of Vessels
a. Legality of certain vessel can only be determined after the processes of measurement, registration as well as the nationality of the vessel are completed (article 154)
b. Vessels to be registered in Indonesia must fulfill the following requirement:
i. Vessel with gross tonnage at least GT-7;
ii. Vessel owned by Indonesian nationals or Indonesian corporate being established under the law of Indonesia and domiciled in Indonesia;
iii. Vessel owned by Indonesian corporate which is formed by way of joint venture with foreign parties in which the majority of the shareholders of the joint venture are Indonesian nationals.
c. Vessels registration is done through the completion of Deed of Registration and recorded in the Indonesian List of Vessels.
d. For those Indonesian Vessels that have been registered, there is a mandatory need to display the Registration Sign.
e. Vessels are forbid to be registered if at the same time it is still registered under other jurisdiction (article 159). Foreign flagged ships willing to register in Indonesia must substantiate it with a Deletion Certificate from the origin country of the flag.
f. Transfer of rights on vessels must be done via change of name on the place where the vessel is registered.
g. Vessels registered in Indonesia and sail in Indonesian waters will be provided “Surat Tanda Kebangsaan Kapal Indonesia” by Minister.

5. The introduction of shipping mortgages in which Indonesian vessels can be used as collateral, so that Indonesian shipping companies can obtain financial support for their business development in Indonesia.
a. Grosse Akta Hipotek of a vessel has the same executorial power as a Decision by Court that has become a permanent junction (article 60).
b. One vessel can have more than 1 mortgage. The priority or ranking of the shipping mortgage is determined based on the date and number of the mortgage deed (Article 61 and 62)

6. If there is a lawsuit over the pledged vessel, the owner, the charterer or operator of the vessel must prioritize the payment of any payables first such as crew salaries, allowances, payment of vessel salvage, etc.

7. The shipping companies operating its vessels carrying cargoes or passengers are responsible to the safety of the cargoes and passengers (Article 40). All shipping companies are required to insure whatever it carries (Article 41).

8. On port management, the law has given emphasis on
1. The abolishment of monopoly in port management, sharpening competition and increasing efficiency in seaports - End of Pelindo’s monopoly in managing ports by 2011 – function of regulator and operator is segregated, regulator is changed to government and operator is pelindo;
2. The delegation of authority to local government under regional autonomy;
3. Private investment in port development; and
4. Separation of function between regulator and operator in port management.

9. Port Master Plan
a. The new law introduces a concept of National Port Master Plan, that governs the location, construction, operation, further development, and development of port master plan
b. All ports now should have or draw their own master plan (Article 73).
c. A port master plan will be developed by considering the national port master plan, zoning allotment, feasibility of technical, economical, and environmental, as well assafety and security. d. The port master plan will include zoning for land and water areas.
e. For ports that are allowed to deal with overseas or foreign trade are only assigned to the main ports and special terminals and is approved by the minister (Article 111).
f. The determination of the main ports is based on several considerations as prescribed by the government.
g. Port Operators consists of Port Authorities and Port Operating Units. Port Authorities are established for commercial ports, whilst Port Operating Units are established for ports that are not yet commercially operated. Port Authorities are responsible to the Minister of Transportation, and Port Operating Units are responsible to the Minister of Transportation and to the Governor and/or Mayor or Regent.

10. Crewing Matters
a. The mandatory use of Indonesian crews i.e. crews with Indonesian nationality (Article 13 and 136).
b. Case by case exemption is still allowed but subject to provision of approval.
c. All crews must meet national and international qualifications (Article 135).
d. Master of the vessels will not be responsible with the authenticity of the vessels documents (Article 137).
e. Master of the vessels has the right to refuse to sail if he believes the vessels is not fit to sail.
f. Master of the vessels should inform the inspector for vessel safety on any part of the vessel that may compromise the safety standard

11. Arrest of Ships
Port authority (Syahbandar) can arrest any ships with the existence of court injunction order (article 222)
Court injunction order can be issued due to the legal proceedings on the vessels i.e. the vessel is involved in criminal case or civil case
The procedures on the arrest of ships will be regulated in more details under the Ministerial Decree