Abuse of Authority by State Officials and Its Application in State-Owned Enterprises (BUMN) under Indonesian Law

Kenny Wiston

INTRODUCTION

This memorandum addresses the legal definition, examples, and case law concerning the abuse of authority by state officials, with a particular focus on its manifestation within State-Owned Enterprises (BUMN) in Indonesia. The analysis is grounded in the relevant statutory framework, including the Law on Government Administration, the Indonesian Criminal Code, and anti-corruption legislation, as well as pertinent Supreme Court jurisprudence. The memorandum further examines the application of the business judgement rule in BUMN governance and provides recommendations for compliance and risk mitigation in accordance with Indonesian law.

Definition, Examples, and Case Law of Abuse of Authority by State Officials

• Abuse of authority by state officials is defined as the act of exercising official powers contrary to the intended purpose, exceeding the scope of authority, or acting arbitrarily.
• Under Indonesian administrative law, particularly Law Number 30 of 2014 concerning Government Administration, abuse of authority (detournement de pouvoir) occurs when an official:
  • Makes decisions or takes actions outside the scope or subject matter of their authority
  • Acts contrary to the purpose for which the authority was granted
  • Acts without a legal basis
  • Acts contrary to a final and binding court decision
  • Refer to Article 18 and Article 19 of Law Number 30 of 2014
• The Indonesian Criminal Code (KUHP) also criminalizes such conduct, particularly in Articles 419, 421, and 423, which address officials who abuse their position for personal gain or to coerce others. Examples of abuse of authority include:
  • Issuing business permits outside the official’s area of competence
  • Manipulating procurement processes for personal or group benefit
  • Coercing individuals by misusing official power
  • Making decisions without a clear legal basis or in violation of a binding court ruling
• Case law: The Supreme Court Decision No. 1340 K/Pid/1992 (the “export certificate” case) affirmed that abuse of authority occurs when an official uses their power for purposes other than those intended by law.
• Accepting gifts or promises to act contrary to official duties, as regulated in Article 419 KUHP, is also a form of abuse of authority.
• In summary, abuse of authority encompasses actions that exceed, mix, or deviate from the intended purpose of the authority, or are taken without legal basis or in contravention of court decisions.

Abuse of Authority in BUMN: Cases and Supreme Court Jurisprudence

• In the context of BUMN, abuse of authority typically involves directors, commissioners, or structural officials using their positions to enrich themselves, others, or corporations, resulting in state financial losses.
• This conduct is regulated under Articles 2 and 3 of Law Number 31 of 1999 concerning the Eradication of Corruption Crimes, which criminalize unlawful acts that enrich oneself/others/corporations and cause state financial loss.
• Notable case: In the PT Asabri (Persero) case, two former CEOs were convicted for making high-risk investments contrary to prudent governance, causing state losses of approximately IDR 22.788 trillion. The court found this to be an abuse of authority as the investment decisions disregarded good corporate governance and the interests of the state as shareholder.
• Supreme Court jurisprudence, including Decisions No. 1340 K/Pid/1992 and No. 977 K/Pid/2004, affirms that the concept of “abuse of authority” may be adopted from administrative law, i.e., using authority for purposes other than those intended by law (detournement de pouvoir).
• In BUMN cases, directors or officials who make decisions outside the company’s or state’s interests, or deviate from the BUMN’s objectives, may be held criminally liable for abuse of authority if state losses result.
• The Supreme Court has clarified that, in corruption cases involving BUMN, the assessment of abuse of authority may rely on administrative law concepts if not explicitly regulated in criminal law.
• The business judgement rule, as adopted in BUMN law, protects directors from liability for business decisions made in good faith, without conflicts of interest, and based on adequate information. However, this protection does not apply where abuse of authority, fraud, or corruption is proven.
• In summary:
  • Abuse of authority in BUMN often relates to decisions that violate governance principles, benefit individuals or groups, and cause state losses.
  • Supreme Court jurisprudence supports the use of administrative law concepts in assessing abuse of authority in BUMN corruption cases.
  • The business judgement rule does not shield directors from liability where abuse of authority is established.

CONCLUSION

Abuse of authority by state officials, including within BUMN, is clearly defined and regulated under Indonesian law. Actions exceeding, deviating from, or lacking a legal basis for the exercise of authority, especially when resulting in state losses, may result in administrative and criminal liability. Supreme Court jurisprudence supports the application of administrative law concepts in such cases. It is recommended that BUMN officials strictly adhere to the principles of good governance, ensure all decisions are legally grounded, and avoid any conduct that could be construed as abuse of authority, as the business judgement rule does not provide protection in cases of proven abuse.

1. Ensure all official actions and decisions are within the scope and purpose of the granted authority and supported by a clear legal basis.
2. Implement robust internal controls and compliance mechanisms in BUMN to prevent and detect potential abuse of authority.
3. Provide regular training for BUMN officials on good corporate governance and the legal consequences of abuse of authority.
4. Consult legal counsel before making high-risk or significant business decisions to ensure compliance with applicable laws and regulations.

LEGAL BASIS

• Law Number 30 of 2014 concerning Government Administration (link)
• Indonesian Criminal Code (Wetboek van Strafrecht, KUHP) (link)
• Law Number 31 of 1999 concerning the Eradication of Corruption Crimes (link)
• Supreme Court Decision No. 1340 K/Pid/1992 (link)
• Supreme Court Decision No. 977 K/Pid/2004 (link)