Background

The shipping industry in Indonesia plays a pivotal role in the nation's economy, given its archipelagic nature and reliance on sea transportation for trade. In October 2024, updates to the provisions regulating the shipping industry were introduced with the issuance of Law No. 66 of 2024 on the Third Amendment to Law Number 17 of 2008 concerning Shipping (“New Shipping Law”). These changes aim to strengthen the shipping industry, addressing various challenges and opportunities. We are thrilled to present the key updates from these amendments below.

Key Updates of the New Shipping Law

1. Strengthening of Cabotage Principle 

One of the key highlights of the New Shipping Law is the change in technical provisions related to cabotage. Specifically, the requirements for Indonesian companies cooperating with foreign parties and forming a joint venture to own and operate Indonesian-flagged vessels have been significantly revised. The minimum vessel size that was previously set at 5,000 GT has now been increased to 50,000 GT.[1] That said, the technical requirement became significantly more difficult. Additionally, the prison sentence for violations has been raised from 5 years to 11 years, and the maximum fine, previously capped at 600 million, is now aligned with Category VII penalties,[2] which have yet to be regulated. These changes, however, are applied with a transitional provision and will only be implemented a year after the enactment of the New Shipping Law,[3] which will be effective on 28 October 2025. 

2. Institutional Arrangement of Shipping Supervision

The New Shipping Law eliminates the terminologies of Port Authority and Port Operator Unit and groups both under a new terminology, namely "port management". As such, the port management carries the functions of the Port Authority, which are regulating, controlling, and supervising port activities that are commercially operated,[4] as well as the functions of the Port Operator Unit, which are regulating, controlling, supervising port activities, and providing port services for ports that are not yet commercially operated.[5] Further, there is an additional provision, where the responsibility for establishing port operators is divided between the Minister and the Regional Government. The Minister is responsible for ports that are important nationally or regionally (Main Ports[6] and Collection Ports[7]), while the Regional Government handles Feeder Ports,[8] which serve a more limited range of services within the province. 

3. Stakeholders Participation

The New Shipping Law removes references to the Sea and Coast Guard, which has the function of guarding and enforcing laws and regulations at sea and on the coast to ensure that safety and security at sea are implemented, replacing them with the Ministry. Another significant change is the shift in regulatory authority, provisions regarding the implementation of duties, functions, and authorities are now governed by Ministerial Regulation, as was the case in the previous Shipping Law, it was governed by Government Regulation.[9]These changes mark a departure from the previous regulatory framework, simplifying the bureaucracy in the port sector and streamlining the institutional arrangement for shipping supervision, which is now centralized within the Ministry.

4. Protection of Maritime Environment in the Shipping Industry

The New Shipping Law introduces the phrase “and/or environmental damage” in every provision that addresses “environmental pollution.” This addition is significant because the previous version of the law did not include these terms. However, the New Shipping Law does not provide a detailed definition of either "pollution" or "environmental damage." Consequently, reference shall be made to Law No. 32 of 2009 concerning Environmental Protection and Management (“Environmental Law”), which provides definitions for these terms. According to the Environmental Law, environmental pollution is defined as the entry or inclusion of living organisms, substances, energy, and/or other components into the environment due to human activities, such that it exceeds the established environmental quality standards.[10] Environmental damage, on the other hand, refers to direct and/or indirect changes to the physical, chemical, and/or biological properties of the environment that exceed the criteria for environmental damage standards.[11] The inclusion of "environmental damage" in the New Shipping Law signifies a strengthened commitment by the state to protect the maritime environment from both pollution and environmental damage. The addition reflects the government's broader approach to safeguarding the environment in the shipping sector.

5. Empowerment of People's Shipping Maritime Transportation Activities

The New Shipping Law introduces the empowerment of people's shipping maritime transportation activities as part of the broader shipping organization.[12] This initiative will be carried out by the Government,[13] Regional Governments,[14] and/or people's shipping companies.[15] People's Shipping Maritime Transportation Activities are defined as traditional maritime operations, characterized by the use of sailing ships, motorized sailing vessels, and/or simple Indonesian-flagged motorboats of a certain size, typically conducted by local communities.[16] 

The New Shipping Law specifies that this empowerment aims to strengthen the people's economy, particularly within small and medium-scale businesses. The goals include enhancing connectivity and services to inland areas and/or waters, preserving the nation's cultural heritage, and supporting the Pioneer Shipping[17] program. These objectives will be pursued while considering the principles of economics, safety, security, and the operational capacity of the People's Shipping vessels.[18]

Conclusion

In a general sense, the New Shipping Law introduces five key updates concerning the Cabotage Principle, the Institutional Arrangement of Shipping Supervision, Stakeholder Participation, the Protection of the Maritime Environment in the Shipping Industry, and the Empowerment of People's Shipping Maritime Transportation Activities. These amendments are designed to better address the evolving needs of the law and society. While the aim would be to provide greater legal certainty in the implementation of shipping regulations in Indonesia, certain technical provisions remain to be further regulated, awaiting Government Regulations, Ministerial Regulations, and/or other subordinate regulations necessary to implement the New Shipping Law. As such, it is crucial to continue monitoring the development of these regulations to gain clarity and certainty on provisions that remain undefined or imprecisely regulated. 

UMBRA – Strategic Legal Solutions’ Natural Resources and Projects Practice Group

We are one of Indonesia's largest law firms with more than 70 lawyers, and among those we have a team of more than 30 lawyers specializing in projects and energy sector, as we recognize the unique complexities that comes within the sector. Our Natural Resources and Projects Practice Group is dedicated in providing practical and effective legal support to guide clients through every phase of their projects. From mining and oil & gas to infrastructure and shipping, our team offers expert legal advice across these industries, ensuring that clients navigate challenges with confidence. 

Team Credentials

Our lawyers have assisted clients in numerous major transactions in the development, construction, and financing of matters related to shipping and ports in Indonesia, including port constructions and development and other projects in industries such as mining, oil and gas, and infrastructure. We have extensive experience handling significant projects in Indonesia, and below are a few highlights from the past few years.

1. Shipping Industry Highlights

One of our ongoing projects involves assisting PT Pelabuhan Indonesia (Persero) (“Pelindo”), a state-owned port operation company offering integrated port services across Indonesia. We have been working with Pelindo since 2022, helping them streamline their operations following the merger of Pelindo I, II, III, and IV. Since then, we have been trusted to assist in reducing the company’s 60 subsidiaries to around 20, improving management efficiency and business excellence for Pelindo’s four main sub-holdings. Here are a few key areas where we have provided support to Pelindo:

1. Corporate Restructuring in Pelindo’s Human Resource Solution Service Cluster – We assist PT Pelindo Jasa Maritim and PT Pendidikan Maritim dan Logistik Indonesia in the corporate restructuring of PT Intan Sejahtera Utama, primarily involved in providing workforce and outsourcing services for various industries, particularly in the port and logistics sectors (2024 – ongoing).

2. Restructuring PT Pelindo Energi Logistik - This company focuses on energy logistics, and we assist with its corporate restructuring, particularly in the maritime and port sectors. (2024 – ongoing)

3. Business Restructuring for PT Pelindo Terminal Petikemas - We advise in the restructuring of 20 subsidiaries across various business sectors and handling several corporate actions. (2023 – ongoing)

4. Business Restructuring for PT Pelindo Jasa Maritim - We advise and assist with the restructuring of 10 subsidiaries and overseeing various corporate actions. (2023 – ongoing).

5. Business Restructuring for PT Pelindo Multi Terminal - We advise and assist with the group restructuring, consisting of 10 subsidiaries from various businesses and several corporate actions (2023 – ongoing).

In addition, back in 2022 we represented PT Jembatan Nusantara and its affiliates in their acquisition by PT ASDP Indonesia Ferry (Persero). This deal, valued at USD 100 million, marked the largest M&A transaction in Indonesia’s shipping history. PT Jembatan Nusantara group, the second-largest shipping company in Indonesia with a fleet of more than 50 ferry vessels, was acquired by PT ASDP Indonesia (Persero), the country’s largest ferry operator. The strategic consolidation of these two major players is poised to reshape the landscape of the Indonesian maritime sector and further enhance their collective capacity to serve the nation's transportation needs. 

This historic deal was particularly challenging due to the operational cooperation between the two companies prior to the acquisition, and the financial and legal hurdles of dealing with significant debt from both parties. Given that the buyer is a state-owned enterprise, all shares and ferry vessels had to be free of any encumbrances. It was an honor to be part of such a groundbreaking deal in the Indonesian ferry industry.

2. Other Industry Highlights

We have extensive relevant experience in structuring and advising on oil and gas projects. One of our most recent experiences was in assisting PT Pertamina EP Cepu in a landmark deal involving a trustee borrowing scheme in the USD 1.85bn financing for the development of the Jambaran – Tiung Biru Unitized Field Gas Project, which was nominated as Project Finance Deal of the year for Asian Legal Business Law Awards 2019. The financing consisted of both conventional and Syariah tranche where all borrowing, repayments and disbursement of project cost are made by the Trustee instead of the project company.

In addition, we also assisted PT Perusahaan Gas Negara Tbk. in the acquisition of PT Pertagas for the establishment of Indonesian Oil & Gas Holding Company, which was nominated as M&A Deal of the Year by Asian Legal Business – Thomson Reuters in 2018. We also advised on the assignment of gas downstream business management in the Indonesian Oil & Gas Holding Company for the continuous of Indonesian oil & gas business. In another project, we prepared some advice for the standardization of master gas sales and purchase agreements which includes the component of pricing. We also provide our service offshore, in relation to the expansion and development of some offshore assets.

For mining industries, we also have experience in various mining projects, such as assisting in Contract of Work and Coal Contract of Work, drafting, and negotiating mining business contracts with mining subcontractors, meeting with government authorities, procuring licenses, and providing legal advice both for restructuring and compliances.

Team Profile