LEGAL UPDATES BY BEPARTNERS
Government Accommodates Registration of Electronic System for Offshore ESOs and Handling of Negative Content
24 February 2021

The Indonesian Government through Ministry of Communication and Informatics (“MCI”) has just enacted a new implementing regulation on 24 November 2020 as the continuation of Government Regulation No. 71 of 2019 concerning Organization of Electronic System and Transaction (“GR 71/2019”) in the midst of the growing online activity which involves electronic transaction and processing of personal data. As the newly enacted regulation, MCI Regulation No. 5 of 2020 concerning Private Electronic System Operator (“MCI Regulation 5/2020”) shall further provide elaboration on procedure of conducting Electronic System Operator Registration (“ESO Registration”) and management of negative content in a digital space.

 

Mandatory Registration of Offshore Private Electronic System Operator

 

Upon enactment of GR 71/2019, any Private Electronic System Operator (“Private ESO”) is currently subject to a mandatory ESO Registration to MCI prior to such electronic system is used by and offered to user/subscribers in Indonesia. Private ESOs shall include almost every provider who owns portal, sites or application within a network through internet and utilized for several functions among others: (i) sales of goods and/or services; (ii) management and/or operation of financial transaction service; (iii) transmission of paid digital content; (iv) provision of communication service in form of digital platform and social network; (v) search engine service; and/or (vi) processing of Personal Data for providing service to public which is associated with electronic transaction activity. Accordingly, such ESO Registration requirement is stretched to offshore entity who provides its electronic system in Indonesia (“Offshore Private ESO”)

 

However, prior to the enactment of this MCI Regulation 5/2020, the implementation of ESO Registration by Offshore Private ESO was not a straightforward process and, subsequently, making such ESO Registration generally only applicable for onshore ESO, particularly due to the application documents for ESO Registration requiring local corporate documents. Due to the foregoing, there were obstacles and hurdles for Offshore Private ESO to conduct ESO Registration to the MCI. Anticipating the scale of prospective developments of online transaction activities, the government has now provided further elaboration of ESO Registration conducted by Offshore Private ESO in MCI Regulation 5/2020.

 

Under MCI Regulation 5/2020, MCI sets out new provisions on ESO Registration for Private ESO which is established not according to Indonesian law or permanently domiciled in another country but (a) providing services in the territory of Indonesia; (b) operating business activity in Indonesia; and (c) the Electronic System is being used and/or offered in the territory of Indonesia. Under this circumstance, an Offshore Private ESO needs to file a registration form addressed directly to MCI which contains several information among others:

 

  • general description of the operation of Electronic System;
  • its obligations on information security and personal data protection; and
  • information on Offshore Private ESO including person in charge, domicile, number of customers, certificate of incorporation, or total transaction value originating from Indonesia.

 

Management of Negative/Restricted Content

 

In the midst of the increasing online activity, the government has now set further provisions and requirements upon Electronic System Operator (“ESO”) in relation to the handling of negative content within its platform through enactment of MCI Regulation 5/2020. While the current regulatory framework has recognized the concept of Safe Harbor, the government is still urging ESOs in Indonesia to have an active supervision and management of negative content including user-generated content. Accordingly, Private ESO need to provide a reporting platform to its users for accommodating publics complains or reports upon any negative or restricted content within its platform.

 

While the government does not want to provide a rigid definition on which content are categorized as ‘negative content’, Private ESOs are now required to conduct the taking down within a specific deadline upon receiving warning from the government, in which the deadline might differ depending on the urgency of taking down such content. Accordingly, the initiative for such take down can come up from public, ministry or agency, enforcement authority; and/or judicial institution. Failure of conducting such take down upon negative content may lead to further administrative sanctions including penalty and access blocking to its platform.

 

Considerations

 

While there are other matters elaborated within MCI Regulation 5/2020, the above discussions are among some important matters which has immediate impact to the operation of an electronic system. At the time being, the mandatory ESO Registration of Offshore Private ESO is one of the government’s important initiatives from which offshore entities needs to take into account and comply with such ESO Registration accordingly. To date, we understand that MCI is still making incremental improvements to its platform which will serve as a platform for ESO Registration by Offshore Private ESO. Accordingly, MCI Regulation 5/2020 has provided a 6-month transition period for any Private ESO to comply with this mandatory registration since the enactment date of MCI Regulation No. 5 of 2020, which is 24 May 2021.

 

If there are any queries with regards to how this may affect your business, please contact us for further legal consultation.

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