The history of Indonesian legal system is closely related to the Dutch legal system. During the colonial period, the Netherlands-Indies Government implemented the concordantie principle in the legal sector throughout the territory of Indonesia. On the basis of this principle, virtually every law that was passed by the Netherlands parliament would take effect in the Indonesian territory a few years later, with minor changes if necessary. When Indonesia became independent, its 1945 Constitution in Article II of the Transitory Provisions stipulated that all laws and legislation existing under the Dutch colonial administration automatically became the laws and legislation of the Republic of Indonesia, until repealed, revoked or amended or found to be contradictory to the Constitution.

As a consequence, the regulations governing business in Indonesia after independence remained the same as the legislation enacted in colonial times, such as parts of the Civil Code (Burgerlijk Wetboek), the Commercial Code (Wetboek van Koophandel) and the Bankruptcy Ordinance (Faillissement Verordening), until amended in by new laws introduced in 1960 -2004. In the 1960s, the government of Indonesia enacted several laws intended to foster investment, such as the Basic Agrarian Law (Hukum Agraria) and the Foreign Investment Law (Hukum Penanaman Modal Asing). In the period of 1980 -2000, major overhaul s of the laws governing Indonesian business practices resulted in the enactment of several more modern laws, such as the Mortgage Law, the Company Law, the Capital Market Law, the Bankruptcy Law, the Fiduciary Transfer Law, and the Arbitration Law as well as several Intellectual Property laws including laws on Copyrights, Patents, Marks, Industrial Designs, Integrated Circuits, and Plant Varieties.

Similarly, the rules governing commercial litigation procedures under Indonesian law are found in the Indonesian Civil Procedure Law derived from the Dutch colonial civil procedure codes (Herziene Indonesisch Reglement (“HIR”) and Rechtsreglement Buitengewesten (“RBg”)). The Indonesian judicial system is organized into three levels. The lower court is the District Court (Pengadilan Negeri) established in all districts and municipalities (Kotamadya or Kabupaten) in Indonesia. The first appellate court is the High Court (Pengadilan Tinggi) established in all provinces in Indonesia. The highest court is the Supreme Court (Mahkamah Agung). Indonesian civil law, unlike common law systems does not adhere to strict doctrines of precedent; each case must be determined on its own facts and merits, although consideration may be given to academic theories and prior decisions in similar cases, especially decisions of the Supreme Court.

In addition to the courts of general jurisdiction, Indonesia also has separate three-tiered structures or courts for handling disputes in administrative law, military law and Islamic family law. Since 1998, a number of specialized courts have been added to the Indonesian judicial system, including the Commercial Court, handling bankruptcy and intellectual property matters, the Anti-Corruption Court, the Human Rights Courts, and special tribunals for tax, labor, and fisheries disputes. Based on recent amendments to the Constitution, a Constitutional Court was established in 2003 and a Judicial Council is currently in formation. The Indonesian Supreme Court in 2004 began implementing a set of blueprints of comprehensive judicial reform and has earned significant levels of support from the Indonesian public and the international community for this effort.

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