The issuance of Law No. 11 of 2008 on Electronic Information and Transactions which was then amended by Law No.19 of 2016 (together as "EIT Law") in 2008 has introduced several new legal provisions related to the implementation of electronic transactions, such as (i) the definitions related to electronic transactions (ii) the rights and obligations of legal subjects under EIT Law, and (iii) prohibited acts and their criminal sanctions. Given the fact that this EIT Law has been in effect for over 15 years since its first issuance. Consequently, the Indonesian government amended the regulation for the second time by issuing Law No. 1 of 2024 on the Second Amendment to EIT Law (“Law 1/2024”) on 2 January 2024. The law has become effective since its date of issuance.
In connection with the above, we provide in this article, a high-level overview of Law 1/2024, particularly on the following topics: (i) Child Protection in Cyberspace, (ii) Mandatory Implementation of Electronic Signature in High-Risk Electronic Transactions, (iii) International Electronic Contracts shall be governed by Indonesian Law, (iv) Prohibited Acts and Imposition of Criminal Sanctions, and (v) Government Intervention on Electronic System Operators (“ESOs”) matters, followed by our (vi) Concluding Remarks.
A. Child Protection in Cyberspace
It is obvious that the advancement of technology has significantly increased accessibility to electronic systems and the internet. These systems are now easily accessible to underage children. Anticipating that, Article 16A of Law 1/2024 requires ESOs to take more responsibility in protecting children's activities in electronic transactions. This provision is designed to protect children from harmful publications (i.e., pornography, cyberbullying, sexual abuse, gambling, etc.).
Please be informed that the child protection shall, at least, include:
- clear information on the minimum age of children who can use the products or services;
- a reliable mechanism to identify child users and verify their age; and
- a robust reporting mechanism for any misuse of products, services, or features that may jeopardize or potentially infringe children's rights.
ESOs may become subject to administrative sanctions if they fail to meet these obligations. The sanctions include written warning, administrative fine, temporary service suspension, and/or termination of access.
B. Mandatory Implementation of Electronic Signature in High-Risk Electronic Transactions
In this modern era, various types of technologies are becoming increasingly integrated enabling various activities, such as marketplace interactions, financial transactions, trading activities, and other transactions that can be conducted electronically. Such online activities consequently reduce the need for direct, human-to-human contact.
Due to such factors, in order to protect the interests of all parties in electronic transactions, Law 1/2024 requires any high-risk electronic transaction to be executed by an electronic signature secured by an electronic certificate. (Article 17 of Law 1/2024). Law 1/2024 further emphasizes that one example of a “high-risk electronic” transaction is a financial transaction conducted online (non-physical financial transaction).
C. International Electronic Contracts shall be Governed by Indonesian Law
The advancement of electronic and digital information has provided a solution for engaging in international transactional or non-transactional activities. With the issuance of Law 1/2024, any international electronic contract drafted by the ESO must be governed by Indonesian law, in the event that:
- the users of the ESO are originated from Indonesia, and provide their consent from or within the Indonesian jurisdiction;
- the performance of the electronic contract will take place in Indonesian; and/or
- the ESO's business premises or activities are in the Indonesian territory.
Furthermore, a cross-border electronic contract must be written in straightforward, concise, clear, and easily comprehensible manner, adhering to the principles of good faith and transparency (Article 18A of Law 1/2024).
D. Prohibited Acts and Imposition of Criminal Sanctions
As Law 1/2024 has amended the previous EIT Law, it is important to note that it has also introduced several additional criminal sanctions and prohibitions, such as:
- Article 27A: Outlaws the public dissemination of electronic information/documents that malign another person's honour or reputation;
- Article 27B (1): Forbids the distribution/transmission of electronic information/documents aimed at unlawful self-benefit or benefiting others, especially when using violence to coerce property surrender or debt settlement;
- Article 27B (2): Prohibits the distribution/transmission of electronic information/documents for unlawful self-benefit, as well as utilize defamation threats or secret disclosures as a means of coercion;
- Article 28 (1): Prohibits the distribution/transmission of electronic information/documents containing hoaxes or misinformation in electronic transactions that lead to material losses;
- Article 28 (2): Prohibits the distribution/transmission of electronic information/documents intended to incite hatred or hostility against individuals or groups, based on identifying factors like race, ethnicity, religion, gender, or disability; and
- Article 28 (3): Prohibits the intentional distribution of fake/falsified electronic information/documents that may lead to social unrest.
These new prohibitions are subject to the imposition of criminal sanctions, which range from 2 (two) up to 6 (six) years of imprisonment and/or IDR400 million up to 1 billion fine (Articles 45. 45A, and 45B of Law 1/2024).
E. Government Intervention over ESOs
Law 1/2024 implements a new mechanism to be carried out by the government in fostering a fair, accountable, safe, and innovative digital sphere (Article 40A of Law 1/2024).
Under this law, the government has the authority to command ESOs to adjust their electronic systems, and/or perform certain actions within this framework. Law 1/2024 further elaborates that such adjustments include:
- Setting limitation or making addition in the software or hardware of the electronic system; or
- Prohibiting the use of a feature of the electronic system utilized in Indonesia's jurisdiction.
These adjustments are defined as affirmative obligations of ESOs in addressing concerns that potentially affect communities related to their software, hardware, and/or features in the electronic systems as well as adjustments to their business practices may also be adjusted to ensure equal business opportunities (Article 40A (2) of Law 1/2024).
Please note that non-compliance with these provisions could lead to imposition of administrative sanctions, which include written warning, administrative fine, temporary service suspension, and/or termination of access (Article 40A (5) of Law 1/2024).
Concluding Remarks
The present Law 1/2024 presents several amendments and had additional provisions with respect to the implementation of electronic transactions in Indonesia. The business actors or ESOs need to make some adjustments in their business activities and operations to ensure their compliance with these amendments. They need to provide adequate child protection, secure the execution of electronic contracts with certified electronic signature providers, and identify the correct governing law for electronic contracts.
Amending EIT Law has demonstrated Indonesian government's commitment to create a secure and responsible digital ecosystem by having all the stakeholders collaborate in addressing crucial aspects pertaining to the electronic services as the main objectives of this regulation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.