Clearing the Air: Indonesian Courts Decide to Hold Officials Liable for Jakarta’s Air Pollution

On September 16, 2021, the District Court of Central Jakarta released its judgment on a lawsuit concerning air pollution in Jakarta. Following extensive legal proceedings and delays, the court found that various branches and representatives of the Indonesian government, including the President, the Minister of Environment and Forestry, the Ministry of Home Affairs, the Health Minister, and the Governors of Jakarta, West Java and Banten, are liable over Jakarta's chronic and notorious air pollution.

Legal proceedings began in July 2019 when the civil alliance submitted its class action, arguing that Indonesian officials violated Law 32 of 2009 on Environmental Protection and Management. The plaintiffs in this class action specifically argued that Indonesian officials failed to undertake immediate measures in addressing Jakarta’s air pollution crisis, which has resulted in escalating health concerns for Jakarta’s citizens.

We anticipate that this decision will create a notable precedent. Specifically, this ruling will likely inspire plaintiffs to bring other civil claims against public officials, state-owned companies and/or private sectors in the future, specifically in relation to environmental claims. Consequently, this decision will likely have a significant impact on businesses and investments in Indonesia – which foreign investors and companies operating in Indonesia should be aware of. Industries that are fossil-fuel intensive, or involve intense infrastructure development, high carbon-emissions, agriculture, large waste incineration, and other forms of extensive construction may potentially be subjected to claims (including class-action lawsuits) by affected communities and NGOs.

Based on the court’s decision, the Indonesian government will likely set high environmental standards, and tighten thresholds relating to air quality, carbon emissions, and more broadly, environmental compliance frameworks.

Based on our review of the judgement, there are some key takeaways for foreign investors and corporates operating in Indonesia:

• Foreign entities seeking to invest or operating in extractive and manufacturing sectors should be aware of environmental risks and potential liability. Adequate risk-based due diligence (e.g., through environmental impact assessments) should be conducted pre-transaction and periodically. Such due diligence should be in line with relevant Indonesian law, including Indonesia’s latest Omnibus law.
• Undertaking adequate insurance (with appropriate coverage) that ideally should cover such bases of liability as they relate to environmental issues.
• Broadly, strengthening environmental, social, and governance (ESG) frameworks to identify and mitigate the risks related to environmental degradation and human rights issues (e.g., impact of projects on indigenous communities) in Indonesia. In so doing, investors and corporates will be taking pre-emptive action to mitigate any reputational and litigation risk litigation which may arise in the future.