This thesis compares the corporate criminal liability regimes in Indonesia and Australia, identifying the features inhibiting successful prosecutions of companies for acts of bribery. This thesis demonstrates the importance of equitable enforcement in fulfilling rule of law, preventing companies being used as vehicles to escape legal criminal responsibility. In countries such as Indonesia where corruption in both the public and private sector is deeply embedded, there is a greater need for corporate criminal responsibility and its enforcement. While corporate criminal responsibility in Australia remains imperfect, the author champions its Criminal Code as it contains a ‘pure mens rea element’ that can be applied with relative ease to corporations.
Rule of law demands equitable enforcement of laws. Rule of law in Indonesia (negara hukum) may not be consistent with Western liberal democratic norms such as the Australian thinking on rule of law. Despite this, it is clear that equality before the law remains a key feature of both legal systems. However, corporate impunity poses a significant threat to ensuring this requirement is fulfilled. The reality is that ‘law [i]s both essential in the control of corporate crime and [is] an enabler of corporate harm’.[1] This is because companies can and are circumventing anti-corruption and anti-bribery laws in order to get deals across the finishing line, both on domestic and transnational levels. In so doing, corporations are effectively setting their own rules for engaging with one another other and, more importantly, the state.[2] For example, there is a proliferation of private actors offering or facilitating bribes to public officials, particularly in the public procurement process in exchange for bid-rigging during the tender stage.
While corporations are critical to the development of an economy, they should not be permitted to create or exploit loopholes in the law to avoid corporate criminal liability.[3] Such an outcome is inequitable. This is particularly the case if the circumstances of the commission of the criminal act are such that criminal responsibility would otherwise be easily attributed to the individual.[4] Similarly, it must be recognised that corporate crime occasions harm not only to the State and taxpayer funds, but also to individuals (whether directly or indirectly).[5] Law enforcement and the administration of criminal justice should theoretically operate as the primary check and balance on ‘unruly’ behaviours in the private sphere.[6] However, the ability to achieve enforcement objectives is limited (and equally is enabled) by the strength of laws recognising corporate criminal liability. The non-recognition or non-enforcement of corporate criminal liability can have detrimental consequences for the people’s trust in the integrity and performance of public institutions.[7]
There are, however, barriers to achieving equitable enforcement and recognition of corporate criminal liability. First, enforcement can be onerous where the relevant legislation is unorganised and confusing.[8] This can arise where there are multiple statutes recognising corporate criminal liability that are difficult to consolidate and their application is difficult to ascertain.[9] This is usually the case where corporate criminal liability is omitted from the primary source of a country’s substantive criminal law.[10] Second, the law recognising criminal responsibility for corporations fails to clearly differentiate the liability of natural persons from legal persons (that is, corporations).[11] Often, this is attributed to poor legislative drafting where the criteria for imputing the ‘knowledge’ of criminal behaviour from the individual to the corporation is entirely unclear.[12] This leads to the absence of a ‘pure mens rens element’ for corporations (although this is less problematic where the offence requires only strict liability).[13] Third, even where corporations can be prosecuted, the available sanctions are entirely inadequate. While individuals can be imprisoned for equivalent acts, corporations face only financial consequences, which they perceive as the ‘cost of doing business’ or a tax they are willing to incur.[14] This fails to recognise the objectives of criminal justice, being punishment rather than asset recovery.[15] This also fails to recognise the harm to victims,[16] though this involves ancillary issues regarding the difficulty in identifying the victims of white-collar crime and how their needs can be met.[17]
While individuals are clearly capable of criminal responsibility, the situation is, evidently, less clear for corporations. In Australia, corporations were not traditionally capable of liability at criminal law.[18] However, the common law and statute has created the basis for recognising and enforcing corporate criminal liability. While the process of attributing liability from the individual to the corporation has attracted controversy, there now exists a clear legislative process to pursue corporate crime. Since 1995, the Criminal Code has been successfully implemented at the federal and state and territory levels.[19] Part 2.5 of the Criminal Code creates a clear basis for the attribution of liability to the corporation by providing for a ‘pure mens rea element’. Domestic and foreign bribery is prohibited by various statutes. Together, these create a clear and uniform approach to enforcing corporate criminal liability. This has been successfully implemented in the seminal decision of the Supreme Court of Victoria with the conviction of two corporations on bribery allegations.[20] It should be acknowledged, however, that the Australian system is not without its criticism. For example, the Australian system has been criticised as allowing companies to ‘scapegoat’ individuals merely by reason of the fact that he or she is an officeholder or a member of senior management.[21] Legislative reform is, however, underway to rectify this outcome.[22] Nonetheless, the development of corporate criminal liability in Australia far outpaces its counterpart in Indonesia.
In Indonesia, the legislative basis for corporate criminal liability is far less robust compared to Australia. In fact, the legal system acquiesces – if not allows – corporations to be used as vehicles to evade criminal responsibility. This is largely due to the fact that the notion of holding corporations responsible for white-collar crime, such as bribery, remains in its infancy.[23] Indonesia inherited archaic laws during the Dutch colonial rule. Of those laws, the Criminal Code (Kitab Undang-Undang Hukum Pidana or KUHP) formed Indonesia’s primary (if not sole) source of substantive criminal law. However, one of the legacies of the Dutch Criminal Code (Wetboek van Srafwet Nederlandsch Indie) was the omission of corporations from criminal responsibility. In fact, corporations were not recognised as capable of committing criminal acts. While the Netherlands has since amended its Criminal Code to introduce article 51 which creates corporate criminal liability for economic crimes,[24] the Indonesian Criminal Code remains as it was in 1918.[25]
As things stand, there is no uniform law. Since Indonesia declared its independence in 1945, the House of Representatives (Dewan Perwakilan Rakyat) has implemented a series of ‘specific purpose laws’ which create a labyrinth of offences across approximately 120 separate and distinct statutes.[26] Of these is the Anti-Corruption Law which forms Indonesia’s most important anti-bribery framework.[27] However, the Anti-Corruption Law does not deal with procedural matters. Procedural issues associated with enforcing corporate criminal liability has not been addressed by the legislature. Rather, these are governed by two non-binding and low-ranking regulations (peraturan) of the Attorney-General of Indonesia (Kejaksaan Agung) and the Supreme Court (Mahkamah Agung).[28] It was not until these regulations were created, in 2014 and 2016 respectively, that Indonesia’s anti-corruption regulator (the Commission for the Eradication of Corruption or Komisi Pemberantasan Korupsi) was able to enforce corporate criminal liability.[29] In fact, this was not successfully done until 2019 and the process was obfuscated by the judiciary and prosecutors fumbling their way to a conviction, primarily due to the inadequacies and deficiencies of Indonesia’s corporate criminal liability regime. One of the core challenges posed by this system is the absence of a pure mens rea element.
Laws attributing criminal liability to corporations are necessary to achieve the equitable enforcement of justice as demanded by Rule of Law. However, the law remains underdeveloped in both Australia and Indonesia, though much more so in the Indonesian context where there are significant obstacles in enforcing corporate crime against legal entities. Until there is a clear and uniform approach to imputing knowledge of crime to corporations, law enforcement and Rule of Law in Indonesia will remain ever difficult to fulfil. This thesis proposes three avenues for reform, adopting the successes of the Australian system. First, the creation of a ‘specific purpose law’ regarding corporate criminal liability akin to Part 2.5 of the Australian Criminal Code. Second, the empowerment of Indonesia’s anti-corruption regulator including the imposition of a mandate targeting corporate criminal liability. Third, the introduction of compliance monitoring and increased demands for corporate cultures of compliance. Until reform is implemented, corporate bribery will continue to contribute to and thus perpetuate Indonesia’s deeply institutionalised system of corruption.
References:
[1] Fiona Haines and Kate Macdonald, ‘Grappling with Injustice: Corporate Crime, Multinational Business and Interrogation of Law in Context’ (2021) 25(2) Theoretical Criminology 284, 285.
[2] Chantal Mak, ‘Mapping Wild Zones of Globalisation: On Private Actors and the Rule of Law’ (2021) 17 International Journal of Law in Context 107, 107.
[3] Ibid 108.
[4] Tina Søreide, ‘Practical Obstacles to Efficient Criminal Law Enforcement’ in Corruption and Criminal Justice: Bridging Economic and Legal Perspectives (Edward Elgar Publishing, 2016) 76, 92.
[5] Paul Almond, ‘Understanding the Seriousness of Corporate Crime: Some Lessons for the New “Corporate Manslaughter” Offence’ (2009) 9(2) Criminology & Criminal Justice 145, 157.
[6] Miriam H Baer, ‘Conceptions of Corporate Crime (And One Avenue for Reform’ (2020) 4 Law and Contemporary Problems 1, 14, 16.
[7] Almond, ‘Understanding the Seriousness of Corporate Crime’, 155; Balsia Spalek, ‘White-Collar Crime Victims and the Issue of Trust’ (British Society of Criminology Conference, July 2000) 3, 7. On trust being an important factor for victims in fraud cases, see: Michael Kempa, ‘Combating White-Collar Crime in Canada: Serving Victim Needs and Market Integrity’ (2010) 17(2) Journal of Financial Crime 251, 252.
[8] Søreide, ‘Practical Obstacles to Efficient Criminal Law Enforcement’, 90-91.
[9] Haines and Macdonald, ‘Grappling with Injustice’, 297.
[10] See above n 8.
[11] Ibid 93.
[12] Almond, ‘Understanding the Seriousness of Corporate Crime’, 157.
[13] Francis T Cullen, Bruce G Link and Craig W Polanzi, ‘The Seriousness of Crime Revisited: Have Attitudes to White-Collar Crime Changed?’ (1982) 39(4) Criminology 83, 92.
[14] Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640, 659 [66]. See also Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249, 265 [62]–[63].
[15] Søreide, ‘Practical Obstacles to Efficient Criminal Law Enforcement’, 109.
[16] Mary Dodge, ‘A Black Box Warning: The Marginalization of White-Collar Crime Victimization’ (2020) 1(1) Journal of White Collar and Corporate Crime 24, 24.
[17] Lorraine Wolhuter, Neil Olley and David Denham, Victimology: Victimisation and Victims’ Rights (Routledge, 2009) 40, 60-61; Nicole Leeper Piquero, ‘White-Collar Crime is Crime: Victims Hurt Just the Same’ (2018) 17(3) Criminology & Public Policy 595, 597-9. On there being limited literature regarding victims and corporate crime, see: Wolhuter, Olley and Denham, Victimology, 59.
[18] Ford Austin & Ramsay [16.130]; Halsbury’s Laws of Australia [120-3140].
[19] Criminal Code Act 1995 (Cth).
[20] Commonwealth Director of Public Prosecutions v Note Printing Australia Ltd & Securency International Pty Ltd [2012] VSC 302.
[21] Ford, Austin & Ramsay [16.310].
[22] Personal Liability for Corporate Fault Reform Act 2012 (Cth) recognises a principle of ‘extended accessorial liability’. This was implemented in the various states and territories: Miscellaneous Acts Amendment (Directors’ Liability) Act 2012 (NSW); Statute Law Amendment (Directors’ Liability) Act 2012 (Vic); Directors’ Liability Reform Amendment Act 2013 (Qld); Statutes Amendment (Directors’ Liability) Act 2013 (SA); Directors’ Liability Legislation Amendment Act 2013 (ACT); Statute Law Amendments (Directors’ Liability) Act 2015 (NT).
[23] Indonesian Criminal Code art 59. See Mas Achmad Santosa and Stephanie Juwana, ‘Corporate Environmental Criminal Liability in Indonesia’ in Simon Butt and Tim Lindsey, Indonesian Law (Oxford University Press, 2018) 315.
[24] Berend F Keulen and Erik Gritter, ‘Corporate Criminal Liability in the Netherlands’ in Mark Pieth and Radha Ivory (eds), Corporate Criminal Liability: Comparative Perspectives on Law and Justice (2011, Springer) 177, 180.
[25] Simon Butt and Tim Lindsey, Indonesian Law (Oxford University Press, 2018) 185-6.
[26] Kristian Dwidja Pryatno, Kebijakan Formulasi Sistem Pertanggunjawaban Pidana Korporasi: Dalam Peraturan Perundang-undangan Khusus di Luar KUHP di Indonesia [Policy on the Formulation of the Corporate Criminal Liability System: In Special Laws and Regulations Outside the Criminal Code in Indonesia] (Sinar Grafika, 2017) 29 [tr author].
[27] Law No 31 of 1999 on Corruption Eradication as amended by Law No 20 of 2001 (Indonesia).
[28] Attorney-General Regulation No 28 of 2014 on Guidance for the Handling of Criminal Cases with Corporations as the Legal Subject (PER-028/A/JA/1-/2014) (Indonesia); Supreme Court Regulation No 13 of 2016 on Case Handling Procedures for Corporate Crimes (Indonesia).
[29] Kevin R Feldis et al, ’Indonesia’ in T Markus Funk and Andrew S Boutros (eds), From Baksheesh to Bribery: Understanding the Global Fight Against Corruption & Graft (Oxford University Press, 2019) 305.
Image: Law Fuel
Samira is a final year Arts (International Relations), Law and DipLang (Indonesian) student. Her choice of thesis topic was inspired by her experience assisting Eleos Justice with matters involving Indonesian law and performing research for the Monash Network of Corporate Accountability.
Currently, she leads a team at the LIV Young Lawyer’s Law Reform Committee researching Australia’s mutual legal assistance obligations in capital cases. After graduating, Samira is looking forward to joining Allens Linklaters and commencing her LLM in International Economic Law.