Review Of The Basic Agrarian Law Of 1960 (indonesia)

LAND ADMINISTRATION PROJECT

FINAL REPORT ON THE REVIEW OF THE BASIC AGRARIAN LAW 1960

Prepared By Warren L. Wright TA Land Law Adviser International December 1999 i

EXECUTIVE SUMMARY OF THE REVIEW OF INDONESIA’S BASIC AGRARIAN LAW 1960 Introduction This report is divided into five chapters, namely: Chapter I - Indonesian Land Tenures, Chapter - II Registration of Land Rights and Security of Title, Chapter III – ILAP, the Land Market and the Basic Agrarian Law, Chapter IV – Hak Ulayat and the Basic Agrarian Law, and Chapter V - Auxiliary Observations and Conclusions. Chapter I

Indonesian Land Tenures

After an intensive examination of the provisions of the Basic Agrarian Law which create the land tenures which exist in Indonesia and a review of several implementing laws and regulations, the general conclusion is that, from a legal perspective, those tenures are complex, use-related and are not at all secure. This is so because they remain continually liable to forfeiture to the State, usually without just compensation. Apart from the constant susceptibility to forfeiture by abandonment or failure to comply with the conditions of the grants of the main tenures, all but one of the tenures are limited in time and their extension and renewal is dependent on the exercise of executive discretions of the State. The result is that rather than there being a developed system of private land law, there is constant intervention in and control over land tenures by the State. Furthermore, this insecurity is compounded by an astonishing degree of uncertainty in the Indonesian land law which is generated by the basic provisions of the Basic Agrarian Law and maintained by successive governments since the law was enacted. The principle recommendations flowing from this examination include that this control by the State over tenures and its correlative allocative function ought to be abandoned in favour of secure private land tenures which are not susceptible to such control. The several distinctive use-related tenures ought to be rationalised into a simple ownership/leasehold dichotomy. The general uncertainty also needs to be addressed through a thorough review of the Basic Agrarian Law. Chapter II

Registration of Land Rights and Security of Title

In addition to the problem of the fundamental juridical insecurity of the existing tenures identified in Chapter I, the system of title registration which prevails in iii

Indonesia is a negative system. Furthermore, title to land passes regardless of registration. The deleterious consequences of these facts from the perspective of title security particularly and the land administration system generally are discussed. The negative and positive systems of title registration are compared and the benefits of positive registration discussed at length. Of particular concern is the problem of the maintenance of the land title registration system following initial registration and the prioritisation of competing interests in land. The conclusion from this Chapter is that it is essential for the Indonesian title registration system to move from the negative system to a positive system of land title registration. Chapter III ILAP, the Land Market and the Basic Agrarian Law One of the objectives of the Indonesian Land Administration Project is the creation of an equitable and efficient land market. This Chapter examines this objective having regard to the provisions of the Basic Agrarian Law which impact negatively on the creation and operation of such markets. It is concluded that if the goal of a stable land market is to be realised in Indonesia, then, in addition to addressing the problems of the insecurity and complexity of the tenures and the negative system of title registration, urgent attention needs to be given to re-examination of those provisions of the Basic Agrarian Law which inhibit or prevent a land market from developing. Those provisions are identified and briefly discussed. Chapter IV The Basic Agrarian Law and Hak Ulayat Chapter IV considers the issue of the rights of Indonesia’s indigenous peoples and the provisions of the Basic Agrarian Law which pertain to what is known as hak ulayat – the traditional right or relationship with land which is exercised by communal groups. An examination is also made of some recent legislative developments and their impact on hak ulayat. The main conclusion from those considerations is that there is little or no effective protection of the rights of indigenous peoples. Since much social conflict has been generated by the lack of effective legal protection of those rights in the basic law, it is recommended that a thorough review of the relevant existing laws be undertaken with a view to the drafting of an effective legislative scheme which has due regard to hak ulayat and provides an effective mechanism for the resolution of that conflict.

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Chapter V Auxiliary Observations This chapter contains some incidental observations which augment the general need for the reform of the Basic Agrarian Law and sets out some calls for review which have been made within Indonesia. General Conclusion The Basic Agrarian Law must be reviewed and replaced with a Basic Land Law which addresses the numerous problems identified in this review. Since secure land tenure and title is essential to good governance and civil peace. Having regard to the extraordinary degree of conflict between the State and society over land in Indonesia, it is essential that these problems be addressed. In addition, if the most benefit is to be gained from land and land-related markets, the substantial legal obstacles to the creation of truly efficient and equitable markets must be removed through the same review of the Basic Agrarian Law. Attention must also be given to the plight of traditional indigenous communities which exist in many parts of the nation. As Indonesia seeks to move away from its authoritarian past towards a just and peaceful society through a process of comprehensive reformation and renewal, a particular urgency attaches to the necessity to review the Basic Agrarian Law. Finally, attention is directed to the reports produced under the auspices of Part C of the project which also consider the Basic Agrarian Law; in particular, those entitled “Indonesian Land Law and Tenures - Issues in Land Rights” and “Commercial Transactions and Security Interests in Land”. This review of the Basic Agrarian Law has drawn significantly on the analyses and conclusions of the former report and the writer respectfully endorses the findings of that report.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY

1.

i - iii

CHAPTER I - LAND TENURES ........................................................................................................................................ 1 1.1 1.2 1.3 1.4 1.5

INTRODUCTION .................................................................................................................................................................1 OBJECTIVES OF THE INDONESIAN LAND A DMINISTRATION PROJECT (ILAP) ......................................................1 LAND TENURES - INTRODUCTION..................................................................................................................................3 ENGLISH COMMON LAW TENURES – THE FEE SIMPLE AND THE LEASEHOLD ESTATE ......................................3 INDONESIAN LAND TENURES..........................................................................................................................................5 1.5.1 Right of Ownership (Hak Milik)........................................................................................................................ 6 1.5.2 Right of Exploitation/Cultivation (Hak Guna Usaha).................................................................................. 6 1.5.3 Right to Use Buildings (Hak Guna Bangunan) .............................................................................................. 7 1.5.4 Right of Use (Hak Pakai) .................................................................................................................................... 7 1.5.5 Right of Lease (Hak Sewa).................................................................................................................................. 8 1.5.6 Apartment Ownership Right (Hak Milik atas Satuan Rumah Susun) ........................................................ 9 1.5.7 Security Right (Hak Tanggungan).................................................................................................................... 9 1.5.8 Right of Management (Hak Pengelolaan)....................................................................................................... 9 1.5.9 Right to Clear Land and Right to Collect Forest Produce (Hak Membuka Tanah dan Hak Memungut Hasil Hutan)....................................................................................................................................................10 1.5.10 Right to Use Water and Right to Cultivate and Catch Fish (Hak Guna Air dan Hak Pemeliharaan dan Penangkapan Ikan) ...................................................................................................................................................11 1.5.11 Right of Use of Airspace (Hak Guna Ruang Angkasa)................................................................................11 1.6 SECURITY OF INDONESIAN TENURES..........................................................................................................................11 1.7 THE ORIGINS OF LEGAL UNCERTAINTY IN INDONESIAN LAND LAW ....................................................................12 1.8 THE A BOLITION OF THE COLONIAL DUALISTIC LAND LAW AND THE UNIFICATION OF INDONESIAN LAND LAW – M ORE LEGAL UNCERTAINTY.....................................................................................................................................13 1.9 INSECURITY THROUGH FAILURE TO ENACT IMPLEMENTING REGULATIONS OF THE BASIC A GRARIAN LAW 15 1.10 THE REINFORCEMENT OF UNCERTAINTY .................................................................................................................16 1.11 CONFLICTS BETWEEN A DAT LAW AND THE BASIC A GRARIAN LAW ..................................................................17 1.12 A N EXPLANATION OF THE A RTICULATION OF A DAT LAW IN THE BASIC A GRARIAN LAW ..........................25 1.13 W HY INDONESIAN LAND TENURES ARE INSECURE ..................................................................................................26 1.14 EXTINCTION OF HAK M ILIK – THE BASIC A GRARIAN LAW ...................................................................................27 1.15 A BANDONMENT ..............................................................................................................................................................28 1.16 TIME PERIOD OF A BANDONMENT ...............................................................................................................................28 1.17 GOVERNMENT REGULATION NO 36 OF 1998 RE CONTROL AND UTILISATION OF A BANDONED LAND.........30 1.18 PROCEDURE FOR CONTROLLING AND UTILISING A BANDONED LAND .................................................................32 1.19 COMPENSATION FOR EXTINCTION OF RIGHTS ON A BANDONED LAND ...............................................................34 1.20 LOSS OF HAK M ILIK AND REVERSION TO STATE CONTROL UNDER OTHER LAWS............................................35 1.21 REGULATION OF THE M INISTER FOR A GRARIAN A FFAIRS NO 2 OF 1960 RE THE IMPLEMENTATION OF SOME PROVISIONS OF THE BASIC A GRARIAN LAW .............................................................................................................35 1.22 REGULATION OF THE M INISTER FOR A GRARIAN A FFAIRS NO 2 OF 1962 RE CONFIRMATION OF CONVERSION AND REGISTRATION OF FORMER INDONESIAN RIGHTS ON LAND ............................................................36 1.23 STATE CONTROL OF OTHER LAND UNDER THE CONVERSION PROVISIONS OF THE BASIC A GRARIAN LAW 37 1.24 M ORE UNCERTAINTY FOR HAK MILIK ........................................................................................................................38 1.25 HAK M ILIK ON STATE LAND .......................................................................................................................................38 1.26 CANCELLATION OF DECREE GRANTING HAK M ILIK ON STATE LAND ...............................................................39 1.27 CANCELLATION OF HAK GUNA USAHA, HAK GUNA BANGUNAN AND HAK PAKAI ...........................................40 1.27.1 Hak Guna Usaha.................................................................................................................................................40 1.27.2 Hak Guna Bangunan .........................................................................................................................................41

1.27.3 Hak Pakai ............................................................................................................................................................43 1.28 CONCLUSION RE GOVERNMENT REGULATION NO 40 OF 1996 ...............................................................................43 1.29 STATE CONTROL ENTRENCHED IN THE BASIC A GRARIAN LAW ..........................................................................44 1.30 W HY SECURITY OF LAND TENURE IS INDISPENSABLE – ECONOMIC DEVELOPMENT AND PROTECTION OF INDIGENOUS LAND TENURE .....................................................................................................................................................46 2.

CHAPTER II - REGISTRATION OF LAND RIGHTS AND SECURITY OF TITLE...............................................49 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18

3.

A LTERNATIVES TO NEGATIVE TITLE REGISTRATION SYSTEM ............................................................................50 TYPES OF REGISTRATION SYSTEMS ............................................................................................................................50 DEEDS REGISTRATION SYSTEMS..................................................................................................................................50 PRIORITY RULES IN DEEDS REGISTRATION SYSTEMS .............................................................................................51 RELEVANCE OF REGISTRATION IN DEEDS REGISTRATION SYSTEM .....................................................................52 TITLE BY REGISTRATION – THE TORRENS SYSTEM ................................................................................................52 INDEFEASIBILITY............................................................................................................................................................53 REGISTRATION IN THE INDONESIAN SYSTEM ...........................................................................................................55 INCENTIVES TO SEEK REGISTRATION.........................................................................................................................56 DEFERRED INDEFEASIBILITY V. IMMEDIATE INDEFEASIBILITY............................................................................60 INDEMNITY AND A SSURANCE – THE TORRENS POSITIVE SYSTEM .......................................................................61 REGISTRATION AND LAW REFORM .............................................................................................................................62 THE FIRST FALTERING STEP TOWARDS A POSITIVE SYSTEM IN INDONESIA .....................................................64 A RTICLE 32(2) AND THE CIVIL CODE .........................................................................................................................66 SOME ISSUES A SSOCIATED WITH THE INTRODUCTION OF A POSITIVE REGISTRATION SYSTEM ...................66 THE POSITIVE SYSTEM AND “LAND THEFT ”.............................................................................................................67 A DVANTAGES OF REGISTRATION OF TITLE TO DEVELOPING COUNTRIES .........................................................68 PRECIS OF M AIN BENEFITS OF TITLE BY REGISTRATION.......................................................................................70

CHAPTER III - ILAP, THE MARKET AND THE BASIC AGRARIAN LAW 1960................................................73 3.1 INTRODUCTION ...............................................................................................................................................................73 3.2 THE M ARKET AND THE BASIC A GRARIAN LAW .......................................................................................................73 3.3 THE SOCIAL FUNCTION OF RIGHTS ON LAND ...........................................................................................................75 3.4 PROHIBITION ON A BSENTEE OWNERSHIP AND LIMITS ON A REAL QUANTITIES ..............................................76 3.5 PROHIBITION ON CORPORATE OWNERSHIP OF HAK MILIK.....................................................................................77 3.6 RESTRICTIONS ON FOREIGN OWNERSHIP ...................................................................................................................78 3.7 FURTHER ISSUES FOR THE LAND M ARKET - LAW NO 4 OF 1996 RE SECURITY TITLES ON LAND AND LANDRELATED OBJECTS....................................................................................................................................................................80

4.

CHAPTER IV - HAK ULAYAT AND THE BASIC AGRARIAN LAW.....................................................................83 4.1 4.2 4.3 4.4 4.5

5.

INTRODUCTION ...............................................................................................................................................................83 HAK ULAYAT IN THE BASIC A GRARIAN LAW ...........................................................................................................83 GOVERNMENT REGULATION NO 24 OF 1997 RE LAND REGISTRATION AND HAK ULAYAT .............................86 REGULATION OF THE M INISTER FOR A GRARIAN A FFAIRS NO 5 OF 1999 ............................................................86 ILAP AND HAK ULAYAT ...............................................................................................................................................89 CHAPTER V - AUXILLIARY OBSERVATIONS AND CONCLUSIONS...............................................................91

5.1 5.2 5.3 5.4 5.5 5.6

POSSESSION .......................................................................................................................................................................91 REVIEW OF PUNITIVE PROVISIONS...............................................................................................................................91 INVOLVEMENT OF PRIVATE SECTOR IN LAND REGISTRATION..............................................................................92 REGISTRATION OUTSIDE CITIES ..................................................................................................................................93 CALLS FOR REVIEW OF THE BASIC A GRARIAN LAW FROM WITHIN INDONESIA ................................................93 GENERAL CONCLUSION..................................................................................................................................................94

BIBLIOGRAPHY & REFERENCE

a -f

REVIEW OF THE BASIC AGRARIAN LAW 1960 “The legal foundation…needs fundamental reform.” 1

1. CHAPTER I - LAND TENURES

1.1

Introduction

The Basic Agrarian Law of 1960 is the legal foundation of the Indonesian land law system. It was enacted on 24 September 1960.2 The purpose of this document is to provide a briefing paper on that law. This will be undertaken primarily from the perspective of the goals of the Indonesian Land Administration Project (hereafter ILAP). Consequently, not all of the provisions of that law will be subjected to scrutiny but only those which have a direct or indirect impact on the objectives of the project. It is to be noted, however, that, in the course of examining those provisions which are pertinent to ILAP, it is necessary to go beyond the Basic Agrarian Law itself and to include a review of some of its more important implementing laws and regulations. The paper begins which an overview of land tenure as regulated in the Basic Agrarian Law from the perspective of the legal security which is conferred on those tenures by that law and its main relevant implementing provisions. An examination of the negative title registration in Indonesia follows along with an analysis of the positive registration system and the benefits which it can have for developing countries. The paper then proceeds to look at the Basic Agrarian Law and the land market. Finally, the position of indigenous peoples under the Basic Agrarian Law will be considered.

1.2

Objectives of the Indonesian Land Administration Project (ILAP)

The main objective of ILAP is “to foster efficient and equitable land markets and alleviate social conflicts over land through the acceleration of land registration and,…through improvement of institutional framework for land administration needed to sustain the program” (sic).3 1

Indonesian Land Law and Tenures Issues in Land Rights Final Report Topic Cycle 4 Part C Indonesian Land Administration Project (Support for Long Term Development of Land Management Policies) at p. 1-11. 2

State Gazette No 1960-1-04

3

Per World Bank Staff Appraisal Report Document No 12820-IND Indonesian Land Administration Project 16 August 1994 at p. i. 1

It is said that efficient and equitable land markets are an important basis for economic development in terms of more efficient and transparent land transactions, less risk in land-related investment, mobilisation of financial resources through use of land as collateral and provision of incentives for longerterm investment towards sustainable land use.4 It is also stated that a “comprehensive, accurate and efficient land registration system is a sine qua non in developing such land markets since it enables land to be freely traded by reducing or eliminating the risk perceived by purchasers and vendors of land.”5 The progress to be achieved under the project is also supposed to be “instrumental to development in various sectors to encourage foreign investment.”6 The assertion that an accurate and efficient land registration system is an indispensable precondition to the development of a land market represents a superficial analysis of the problems which exist in the Indonesian land law system. This is so because registration, of itself, will not achieve the goal of an operational land market so long as there are other deep-seated problems with the land law system upon which rights to land depend. If the basic tenures which are the subject of registration are fundamentally insecure, then the stated objective can not be achieved merely through registration. Further, even if those tenures are otherwise secure, if registration of titles to the tenures does not result in a secure title, then the risks associated with transactions with land rights will not be eliminated. What is meant by security is firstly, the degree of security which is conferred by the law on private land right ownership from intervention from the State and, secondly, the degree of protection which is conferred by the land title registration system which a right holder who purchases land in good faith and for valuable consideration enjoys from claims from other people Once an initial land ownership record is constructed through the implementation of systematic registration, it is of the utmost importance that the land law and registration system contain effective mechanism which ensures that derivative registrations (that is, the registration of transactions and devolutions with the land 4

Ibid. at page 2.

5

Ibid.

6

Ibid. at pages i-ii.

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right after it has been registered for the first time. If there is not sufficient incentive in the registration system to ensure the capture in the register of transactions with land following initial registration or the system itself inhibits derivative registration capture, then the maintenance of the system will not be achieved. If maintenance is not achieved, then the results of initial registration will be meaningless and what progress was made through systematic registration will be irretrievably lost. It is with regard to such issues that the following overview of the Basic Agrarian Law has been undertaken. 1.3

Land Tenures - Introduction

Tenure defines the nature and characteristics of the object of ownership and is prescribed by the basic concepts of the land law. A land tenure defines the length of item the land is used or owned, the rights and responsibilities of use or ownership, the opportunities for transfer and devolution and the risk of its extinction and reversion to the public authority of the State. By contrast, title identifies the owners of the tenure in particular parcels of land at a particular time. Whereas tenures are the subject of this Chapter, the issues pertaining to title are discussed in Chapter II. Security of tenures from forfeiture to the state and security of title to those tenures from the claimed constitute the real sine qua non of not only a land market but are also essential for the maintenance of a just social order. There follows, for the purposes of comparison, a brief discussion of the land tenures which exist under one of the contemporary predominant land tenure models - the English common law tenure system. This will be followed by an examination of Indonesian land tenures with a view to establishing whether or not the latter can be considered to be legally secure land tenures.

1.4

English Common Law Tenures – The Fee Simple and the Leasehold Estate

The English land tenure model is a dominant model in many advanced market economies. It admits only two basic tenures: freehold and leasehold. Within the category of freehold tenures, there are three sub-categories: the fee simple, the fee tail and the life estate. The fee tail no longer exists. It descended only to lineal heirs. The life estate is not inheritable at all; lasting only so long as the owner of it is alive and it can not be transferred from the original grantee. Its creation and use is usually limited to family arrangements. The most important tenure under the English common law is the fee simple. The estate in fee simple is the largest estate known to that law. It is the most “extensive 3

in quantum, and the most absolute in respect to the rights which it confers”.7 The essential features of the fee simple which distinguish it from the fee tail and the life estate are: w the owner may be an individual or a body corporate and has the unfettered power to dispose of the fee simple either by sale or gift during the owner’s life or by will upon his death; and w on intestacy (dying without making a will), the land devolves, in the absence of lineal heirs, to collateral heirs.8 Freehold estates are conceptually tenures held of the State although this now has only one practical but extremely rare consequence of reversion to the State if the owner dies without a will or without lineal or collateral heirs; a process known as “escheat”.9 It is otherwise a perpetual estate which can never be lost to the State through, for example abandonment, failure to use or care for the land or any other provision of the law. Nor can it vanish because of the destruction of the physical earth. Land in English law is indestructible since it is not merely the surface nor the physical substance of the earth but is the three dimensional space defined by reference to natural or artificial boundaries. Tenures under the Indonesian system can vanish because of the so-called destruction of the land 10. A fee simple can be compulsorily acquired by the State in the public interest but compulsory acquisition can only be implemented for public purposes and it is a power which all States exercise in relation to the land within their territories. Where property rights are protected by the law from arbitrary acquisition by the State, just compensation must be paid to the owner. The other broad category of tenure in English law is the leasehold estate. The leasehold estate is a lesser tenure than the fee simple because it is limited in duration. It is created by agreement between the person who leases and the owner

7

Per Butt P Land Law Edition 3 1996 LBC Information Services p. 112.

8

Lineal heirs are direct descendants (children). Collateral heirs siblings or relatives other than children.

9

Escheat also occurred under feudal land law rules where the owner was convicted and sentenced to death for crimes. Per Williams The Fundamental Principles of the Present Law of Ownership of Land (1931) 75 Sol J 843 cited at footnote 12 in Butt op. cit p.67. The death penalty since been abolished in many common law jurisdictions. 10

For example, Article 27b Basic Agrarian Law: A right of ownership shall be nullified when any of the following takes place…..b. the land in question vanishes.

4

of the fee simple. It is terminable for breach of terms of the lease and is therefore a lesser estate than the fee simple. Its primary use is in connection with commercial transactions.

1.5

Indonesian Land Tenures

Whereas there are only two basic land tenures in common law systems of land ownership, in Indonesia there are several unique tenures. Article 16 of the Basic Agrarian Law creates the following tenures: w the right of ownership (hak milik); w the right of exploitation/cultivation (hak guna usaha); w the right to use buildings (hak guna bangunan); w the right of use (hak pakai); w the right of lease (hak sewa); w the right to clear land (hak membuka tanah); and w the right to collect forest produce (hak memungut-hasil-hutan). Article 16 also provides for the creation of rights other than those mentioned above which must be stipulated by way of an act and also refers to “the rights of temporary nature which are mentioned in Article 53” (see infra). Rights which have been stipulated by way of an Act are: w the right of ownership of apartments (hak milik atas satuan rumah susun); w the security right (hak tanggungan); and w the right of management (hak pengelolaan). In addition, the Act creates the following additional rights to water and airspace: w the right to use water (hak guna-air); w the right to cultivate and catch fish (hak pemeliharaan dan penangkapan ikan); and w the right to use airspace (hak guna-ruang-angkasa).

5

There follows a brief description of the basic nature of the several Indonesian land tenures.

1.5.1 Right of Ownership (Hak Milik) A hak milik is described as “the strongest and fullest right which one can have to land and which goes down from one generation to the next”. A hak milik can be transferred to other parties. Only Indonesian citizens (that is, individuals) can own a hak milik but the government may determine which corporate bodies can have a hak milik and what requirements they shall fulfil to make them eligible for holding a hak milik.11 The Act also states that “the use of land having the status of a hak milik by a party other than the owner shall be defined and regulated by way of legislation” and that “hak milik can be used as debt collateral by encumbering it with a hak tanggungan (security title).”12

1.5.2 Right of Exploitation/Cultivation (Hak Guna Usaha) A hak guna-usaha is the “right to work on land directly controlled by the State for a definite term which can be granted to a company dealing in agriculture, fishery, or animal husbandry. A hak guna-usaha may only be granted on land whose area is at least five (5) hectares, “on the condition that in the case where the area of the land is 25 hectares or more, adequate investment shall be made and good corporate management techniques shall be adopted as appropriate, given the current developments in times.” A hak guna-usaha may be transferred to another party. The term for which a hak guna usaha may be granted is strictly prescribed. The Act provides that the term of a hak guna-usaha shall be “at most, 25 years”. However, where a company requires more time, it can be granted a hak guna-usaha with a term of “at most, 35 years”. In addition, the Act further provides that, “upon request of the right holder and in view of the condition of the company in

11

Articles 20, 21 Basic Agrarian Law.

12

Articles 24, 25 Basic Agrarian Law.

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question, the terms of a hak guna-usaha as meant in paragraphs (1) and (2) of this article can be extended for, at most, 25 years.”13 Only Indonesian citizens and corporate bodies established under Indonesian law and domiciled in Indonesia may be granted hak guna usaha.14 A hak guna-usaha is created by a right granting decree by the State and it can be used as debt collateral by encumbering it with a hak tanggungan (security title).15

1.5.3 Right to Use Buildings (Hak Guna Bangunan) Although the term for this right implies that it is limited to the use of existing buildings, it includes the right to construct buildings on another’s land as well as to use such buildings. Thus, a hak guna-bangunan is described in the Basic Agrarian Law as “the right to establish and possess structures on land which is owned by another party for a period of at most, 30 years”. Upon request of the right holder and in view of the needs and of the condition of the structures, the term can be extended for “at most, 20 years”. A hak guna-bangunan can be transferred to another party. Ownership of hak guna usaha is also restricted to Indonesian citizens and corporate bodies established under Indonesian law and domiciled in Indonesia. A hak guna-bangunan can be created, in the case of land directly controlled by the State, by a right granting decree by the Government and, in the case of land having the status of a hak milik, by an agreement between the owner and another party intending to acquire a hak guna-bangunan with the purpose of giving rise to the intended right. A hak guna-bangunan can be used as debt collateral by encumbering it with a hak tanggungan (security title).16

1.5.4 Right of Use (Hak Pakai) The right of use is “a right to use, and/or to collect produce from, land directly controlled by the State or land owned by another individual which provides the holder with powers and obligations as determined in the relevant right-granting 13

Articles 28, 29 Basic Agrarian Law.

14

Article 30 Basic Agrarian Law.

15

Articles 32, 33 Basic Agrarian Law.

16

Articles 35-40 Basic Agrarian Law.

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decree by the official who is authorised to grant such a right or as determined in an agreement with the owner of the land, such an agreement being other than a land-lease agreement or land-exploitation agreement, given that everything is possible as long as it does not contradict the spirit and provisions of this Act.” A hak pakai can be granted for a definite term or for as long as the land is used for a specific purpose or for free, for a certain payment, or for any kind of service. The Act provides that “the granting of a hak pakai shall not be entailed with conditions which contain elements of human exploitation.” Hak pakai may be owned not only by Indonesian citizens but also by foreign citizens residing in Indonesia and corporate bodies established under Indonesian law and domiciled in Indonesia or foreign corporate bodies having representation in Indonesia. In the case of land directly controlled by the State, a hak pakai can be transferred to another party only with approval of an authorised official. A hak pakai on land having the status of a hak milik (right of ownership) can be transferred to another party only in the case where such a transfer is possible under the relevant agreement.17

1.5.5 Right of Lease (Hak Sewa) The Act states that “an individual or a corporate body has a hak sewa atas tanah (right of lease of land) when the individual or corporate body in question is entitled to use land owned by another party for purposes related to structures by paying to the owner of the land a certain sum of money as rent.” The payment of the rent can be made either on a once-and-for-all basis or on an instalment basis and either before or after the use of the land in question. The Act also provides that “an agreement on land lease as meant in this article shall not be include conditions which contain elements of human exploitation.” A hak sewa atas tanah may be owned by Indonesian citizens, foreign citizens residing in Indonesia, corporate bodies established under Indonesian law and

17

Articles 41-43 Basic Agrarian Law.

8

domiciled in Indonesia, and foreign corporate bodies having representation in Indonesia.18 The elucidation states that a hak sewa is a hak pakai with special characteristics and, in view of the provisions of Article 10(1) which require land owners themselves to work the land over which their right exists, a hak sewa is only available for structures. A hak sewa on agricultural land is transient (and was therefore supposed to have been abolished in accordance with Article 53 of the Law). Hak sewa is not available over State land.19

1.5.6 Apartment Ownership Right (Hak Milik atas Satuan Rumah Susun) The apartment right is regulated in Law No 16 of 1985 Re Right of Ownership of Apartments and approximates to the strata title right in common law jurisdictions. However, unlike the common law jurisdiction where strata title is a mere elaboration of the fee simple tenure, the apartment right in Indonesian law is treated as a distinct tenure. It is not necessary for present purposes to further detail this right.

1.5.7 Security Right (Hak Tanggungan) This right was created by Law No 4 of 1996 Re Security Title on Land and LandRelated Objects. Prior to the enactment of this law, mortgage law governed by the colonial legislation concerning what was called hipotheek (hypothecation) which was the only part of the Indonesian Civil Code relating to land which was not expressly revoked by the Basic Agrarian Law. The security right on land and landrelated objects corresponds to the mortgage interest in common law jurisdictions. It is not necessary to elaborate this right for present purposes. Further brief analysis of hak tanggungan is in the separate Chapter III on the land market (infra).

1.5.8 Right of Management (Hak Pengelolaan) The right of management is a right on State land which confers authority on the grantee to plan the supply and use of the land the subject of the right, to use the 18

Articles 44-45 Basic Agrarian Law.

19

Per elucidation of Article 44 Basic Agrarian Law.

9

land for the requirement of the implementation of the holder’s duties and o grant to third parties a right of use with a term of 6 years over the land which is subject to the right of management. The right of management may only be granted to government departments and official or corporate entities appointed by the government. It is said to be a right which emanates from the State’s general right of control (as to which see infra). The right of management has not been created in accordance with an Act, as required by the Basic Agrarian Law, but by a mere ministerial regulation; that is, Regulation of the Minister for Agrarian Affairs No 9 of 1965 Re Hak Pengelolaan. To that extent, there must exist uncertainty about the validity of this right.

1.5.9 Right to Clear Land and Right to Collect Forest Produce (Hak Membuka Tanah dan Hak Memungut Hasil Hutan) The Act does not provide much detail about the right to clear land (hak membukatanah) and the right to collect forest produce (hak memungut hasil hutan) other than the following: w A hak membuka-tanah and a hak memungut hasil hutan can be acquired only by Indonesian citizens and shall be regulated by way of a Government Regulation. w Using a hak memungut hasil hutan legally does not necessarily mean acquiring a hak milik (right of ownership) to the land in question.20 The elucidation states only that the right to clear land and the right to collect forest products are land rights under adat law and that these rights need to be regulated by way of a government regulation in the interests of the public “which are broader than the interests of the individual or those of the adat-law community in question.”

20

Article 46 Basic Agrarian Law.

10

1.5.10 Right to Use Water and Right to Cultivate and Catch Fish (Hak Guna Air dan Hak Pemeliharaan dan Penangkapan Ikan) The hak guna-air is the right to obtain water for a certain purpose and/or to flow water above another person’s land. The right to use water and the right to cultivate and catch fish are to be regulated by way of a Government Regulation.21 Such regulation does not yet exist.

1.5.11 Right of Use of Airspace (Hak Guna Ruang Angkasa) The right to use airspace (hak guna-ruang-angkasa) provides its holder with the power to use the energy and other elements existing in the airspace for the implementation of efforts at maintaining and developing the productivity of soil, water, and natural resources contained therein and for other purposes related to such efforts.22 It too is supposed to be further regulated but no such regulation presently exists. 1.6

Security of Indonesian Tenures

It was noted above that the basic tenures under English land law can not revert to the State except in the most limited and rare circumstance that the owner dies without leaving a will or heirs. In this regard, common law tenures enjoy the utmost legal security. The tenures are not liable to forfeiture to the State in any other circumstance; neither on the basis of abandonment nor failure to use the land in accordance with the nature, condition or characteristics of the right. Land may, in principle, be used for any purpose. Use is regulated by laws but none of those laws provide that the tenure will be extinguished and the land revert to the State for failure to comply with the use laws. Other penalties such as fines and injunctions by the courts are provided to ensure compliance with planning and use laws. The existence of the common law tenures does not depend on the use to which the land is put. There are no limitations on the amount of land which may be owned and land can not revert to the State by reason of a transfer of ownership to non-citizens. Control of ownership by non-citizens is implemented through immigration and capital investment laws in the common law jurisdictions. By contrast, as the following analysis demonstrates, Indonesian tenures are use-related and are extinguished if the land is not used in accordance with the use for which a right has been granted. This is most evident in relation to the right of exploitation/cultivation, the right to 21

Article 47 Basic Agrarian Law.

22

Article 48 Basic Agrarian Law.

11

use buildings and the right of use but even the fullest right of ownership may be lost to the State through several provisions of the law. In stark distinction to the legal security of the English common law tenures, Indonesian land tenures are not secure from the legal perspective because of the many ways in which tenures become liable to forfeiture to the State. The extensive and pervasive State control and intervention in land tenure ownership and allocation mean that the tenures can not be considered as legally secure. This analysis will examine the ways in which Indonesian tenures are subject to State control, extinguishment and reversion to the State in unique ways. This is the reason why Indonesian tenures are not secure. Before turning to a detailed examination of the provisions of the Basic Agrarian Law which result in insecurity, it is instructive to consider the fundamental nature of the land law system introduced by the Basic Agrarian Law because the insecurity of tenure is closely related to a more general uncertainty which characterises Indonesian land law. This uncertainty has been allowed to prevail for four decades notwithstanding that the uncertainty which was brought about by the Basic Agrarian Law could have been addressed or at least substantially reduced if governments had taken the opportunity to enact the implementing regulations contemplated by the Basic Agrarian Law.

1.7

The Origins of Legal Uncertainty in Indonesian Land Law.

Prior to the enactment of the Basic Agrarian Law, Indonesian land law was regulated by numerous colonial Decrees, Ordinances and the Civil Code. The Basic Agrarian Law, among other things, explicitly revoked the central tenets of the colonial land law including: w the Agrarian Act of 187023; w all of the regulations establishing State land rights (domeinverklaring)24; w the agrarian property right (agrarische eigendom) contained in Royal Decree of 1872; and 23

Agrarische Wet (S. 1870-55), Article 51 of the Act on the Polity of the Nederlands 1925 (Wet op Staatsinrichting van Nederlands Indie). 24

Agrarian Decree (Domeianverklaring in Agrarisch Besluit) (State Gazette 1870 No 118) and Declarations of State Property for Sumatera 1874, Manado 1877 and South and East Borneo 1888.

12

w most of Book II of the Civil Code (only the provisions on hypothek (mortgage) were expressly retained).25 In addition to the express revocations, other regulations were implicitly revoked. Article 58 provides that the old regulations which are not expressly revoked continue to be in force but only so long as they are not contrary to the spirit of the Basic Agrarian Law. An example of a colonial regulation which is considered to contrary to the spirit of the Basic Agrarian Law is the Prohibition on Land Alienation according to which indigenous Indonesians were forbidden to alienate adat land to non-indigenous Indonesians. Being based on the colonial racial categorisation of the population rather than the concept of nationality contained in the Basic Agrarian Law and being also based on the colonial land law’s distinction between Western and Indonesian rights on land which was abolished by that law, the Prohibition on Land Alienation Ordinance is to be considered to be contrary to the spirit of the Basic Agrarian Law and therefore revoked. As is apparent from Article 58, not all of the colonial legislation was repealed by the Basic Agrarian Law . The problem created by Article 58 is that there were vast numbers of regulations promulgated by the colonial State and it is difficult to determine with certainty which have been invalidated by the Article and which ones continue to be in force. The compilation of the list of colonial regulations would be an enormous task in itself let alone determining which are contrary to the spirit of the Basic Agrarian Law. There is no legal mechanism or authority to determine a complete compendium of the colonial land laws. Nor has any authority been constituted to determine whether and why they are contrary to the Basic Agrarian Law. Thus, the first major source of uncertainty in Indonesian land law arises. 1.8

The Abolition of the Colonial Dualistic Land Law and the Unification of Indonesian Land Law – More Legal Uncertainty

Apart from the revocation of the basic principles of the colonial land law, the most fundamental change effected by the Basic Agrarian Law was the abolition of the dualistic system in which Western rights on land were governed by the written colonial law and Indonesian rights based upon adat law. With the enactment of the Basic Agrarian Law, all Western as well as indigenous adat rights were converted into a single system of new rights based on adat law. But it is not the original adat 25

These provisions of the Civil Code concerning credietverband (State Gazettes No 540 of 1908, No 586 of 1901 and 584 of 1909) and the provisions concerning hypothec in Book II of the Indonesian Civil Code in so far as the exertion of security titles to rights on land and land-related objects were revoked in 1996 with the enactment of the Law No 4 of 1996 Re Security Rights on Land and Land -Related Objects Article 29.

13

law of Indonesia but an adat law which was radically altered by the principles of the Basic Agrarian Law. Not all of the colonial law was revoked by the Basic Agrarian Law. The provisions of Book II of the Indonesian Civil Code regulating mortgages were expressly retained pending the enactment of the mortgage legislation. With the revocation of Book II of the Civil Code, rights which were formerly regulated by written law became governed by the unwritten adat law or, where they were formally converted to the statutory rights in the Basic Agrarian Law, subject to the non-specific and incomplete provisions of those rights. The legal certainty achieved by the written Code disappeared and was replaced by the uncertainty of a system of unwritten and incomplete adat law. The drafters of the Basic Agrarian Law realised that further positive law was necessary to augment the new land law system and provided in the Basic Agrarian Law that the creation and transfer of rights according to adat law were to be the subject of further implementing regulations. But 40 years after the enactment of the Basic Agrarian Law, these critically important implementing regulations still do not exist. The continuing failure to enact the implementing regulations mandated by the Basic Agrarian Law concerning the creation and transfer of adat land rights means that a second major source of legal uncertainty prevails. How and, indeed, whether new rights on land can come into existence in accordance with adat law and if, they can come into existence according to local adat, how they may be transferred remain unclear questions. This uncertainty is compounded by the very nature of adat law as an unwritten law and the fact that there has never been an attempt made to codify ascertainable adat principles and rules concerning land. The introduction of the Basic Agrarian Law and its declaration of adat law as the basis of all rights in land, water and air meant that uncertainty was bound to follow; a peculiar outcome considering the repeated and express emphasis in the basic purposes of the Basic Agrarian Law of the abolition of legal insecurity and its replacement by legal security. The uncertainty which was intended to be addressed was the uncertainty of the land rights of the indigenous population under colonial law according to which all land in respect of which it could not be established that there existed eigendom (the Dutch right of ownership) was State land. But in doing so, the legislature of the independent State of Indonesia substituted one kind of insecurity for another “in the hope eventually doing away with legal insecurity altogether”.26

26

Gautama S. Indonesian Business Law 1995 Bandung PT Citra Aditya Bakti at page 151.

14

It is to be further noted that not all of the rights proclaimed by Basic Agrarian Law were known in the adat law.27 Hak guna usaha and hak guna bangunan bear remarkable similarity to the Dutch colonial rights of erfpacht and opstal. The elucidation of Article 16 states that “hak guna usaha (the right to cultivate) and hak guna bangunan (the right of use of structures) have been created to respond to the needs of modern society in the current era.” Hak tanggungan is also unknown in adat law. The institution of hak gadai was used for the purposes of securing loans but it involved a transfer of the ownership of the land.28 Furthermore, some adat rights have no corresponding statutory right; for example hak terdahulu (the right of pre-emption) and hak menikmati (right of enjoyment – a right to cultivate granted to outsiders which terminates upon harvest).29 In view of all of the foregoing, it is impossible to maintain that adat is either the practical or philosophical basis of the Basic Agrarian Law. The articulation of adat as the basis of the national land law turns out to be mere rhetoric which is not substantiated by the Basic Agrarian Law itself or its implementation.

1.9

Insecurity through Failure to Enact Implementing Regulations of the Basic Agrarian Law

Acknowledging the insecurity which was inevitably to follow with the enactment of the Basic Agrarian Law which was not a complete system of land law but a set of fundamental propositions and principles, numerous implementing regulations were anticipated. This was also an acknowledgment that adat itself was not sufficient to full in the details of the new rights on land. Pending the promulgation of such implementing regulations, a period of additional uncertainty was also inescapable. Incredibly, this uncertainty has endured for nearly forty years. Many significant implementing provisions of the Basic Agrarian Law are yet to be enacted including the following: w the government regulation on the creation of the right of ownership according to adat law as specified in Article 22; 27

Also per interview with Mr Herman Soesangobeng ILAP Socio-Economic Adviser ILAP and former National Land Law Adviser 22 September 1999. 28

Per Reinhart A National Land Law Adviser interview 16 December 1999.

29

Per Ter Haar B Asas-Asas dan Susunan Hukum Adat trans. Soebakti Poesponoto 1960 Eleventh Printing at pp. 69-70.

15

w the government regulation on transactions according to adat law intended to transfer the right of ownership mandated in Article 26(1); w the law concerning further provisions on the right of ownership mandated in Article 50(1); w the imposition of areal limitations on non-agricultural land in accordance with Article 17; w the government regulation on the right to clear land referred to in Article 46(1); w the government regulation on the right to collect forest products referred to in Article 46(1); w the government regulation on the right to use water referred to in Article 47(2); w the government regulation on the right to cultivate and catch fish referred to in Article 47(2); w the regulation of the right on the use of airspace in accordance with Article 48; w the legislation on the right of lease of land for structures specified in Article 50(2); and w the abolition of temporary rights in accordance with Article 53. Article 50(2) also states that further regulations concerning the rights of exploitation, right of building, right of use and right of lease shall be regulated by way of legislation. This regulation, Government Regulation Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai was not enacted until 36 years after the enactment of the Basic Agrarian Law. The Act specified in Article 51 on hak tanggungan (security right) also took 36 years to appear.

1.10

The Reinforcement of Uncertainty- Further Modification of Adat Land Law

While uncertainty arises from the provisions of the Basic Agrarian Law discussed above, uncertainty was further compounded by the provision that while the new agrarian law is adat law, that is only to be so as long as it was not contrary to: 1. the interests of the State and nation based on national unity; 2. Indonesian socialism; 3. the provisions of the Basic Agrarian Law itself or other prevailing legislation; or

16

4. stipulations based on religious law.30 These qualifications have never been elaborated to establish just what parts of the adat law are rendered invalid by the provisions of the Basic Agrarian Law. Part of this difficulty is the problem of ascertaining exactly what the adat rules themselves are. That has never been attempted in a systematic and thorough way. When the Bill for the Basic Agrarian Law was introduced, the Minister stated that, “in this bill…adat law is the main foundation because only that foundation is in accordance with the identity of the Indonesian nation. We also realise, however, that the adat law which we now know is really the result of development which has been influenced by colonial politics so that it reality, there are several aspects of that adat law which have quietly benefited certain small groups in the adat community itself and created contradictions in our midst which are not in accordance with the basic goals of the struggle of the Indonesian nation. For that reason, then, the adat law which is the foundation of this Basic Agrarian Law is not that which has been made decrepit and inoperable by colonial politics but an adat law which is based on gotong-royong, which has the potential for development which is consistent with the principles of religious law and modified to the demands of the future”. There follows an analysis of the principles to which adat is made subject to by the Basic Agrarian Law. 1.11

Conflicts between Adat Law and the Basic Agrarian Law

The potential conflicts between adat law and the principles mentioned in the Basic Agrarian Law are not comprehensively articulated in the elucidation. The elucidation merely states that “since most Indonesian people adhere to adat law, the new agrarian law will also be based on the provisions of adat law…improved and adjusted to the interests of the people of a modern nation state which connects the international community as well as to Indonesian socialism.”31 Thus, contrary to the unqualified assertions made by some observers that adat law in the basis of Indonesian agrarian law, in fact, “the Basic Agrarian Law creates its own unique hybrid system which is perhaps as different from traditional adat law as it is from Western law.”32

30

Article 5 of the Basic Agrarian Law .

31

Elucidation Part II (1).

32

Gautama op. cit. page 154.

17

1. Adat Law Subjugated to the National Interests of the State based on National Unity Perhaps the most controversial illustration of this principle is in regard to hak ulayat. Hak ulayat is the historical and philosophical cradle of adat land rights and yet even it is subjected to the national interest. The problems created for hak ulayat by the Basic Agrarian Law are discussed in detail in a Chapter IV. While the Basic Agrarian Law does away with one type of pluralism, it substitutes another, even more complex legal plurality. This provision demonstrates a fundamental conflict within the Basic Agrarian Law. Adat law is the law of the numerous traditional social formations which existed throughout Indonesia prior to colonisation. Van Vollenhoven identified 19 so-called “law areas”. In one sense, the existence of the many diverse and independent adat law communities predicates legal pluralism. Legal pluralism predicates the coexistence of different systems of law; something which is the antithesis of the nation state and its omnipotent and singular positivist conceptualisation and manifestation of law which tolerates no other legal authority other than that which emanates from the State in the form of legislation enacted by its legislative organs or case law developed by its judicial organs (as well as a carefully proscribed arena of executive law-making processes which have been ordained by the legislature and scrutinised by the judiciary). The existence of legal pluralism within the unified nation State therefore represents a fundamental dilemma.33 This was probably realised by the framers of the Basic Agrarian Law when they imposed the far-reaching qualifications on the articulation of adat law as the basis of the new land law contained in the Basic Agrarian Law. It may also explain the State’s refusal to expressly and properly deal with the contradictions and problems which were consequential upon the apparent adoption of adat land law as the basis of the land law. It has also been observed that the drafters of the Basic Agrarian Law adopted and adapted adat/ulayat principles in order to enshrine two major objectives which reflected the politics of the day – the State as controller (socialism – see below)) and an imposed form of top-down national unity in which legal plurality could not be tolerated.34

33

It is sometimes said that legal pluralism exists in other spheres of Indonesian law; for example, in marriage law. But that so-called pluralism is generally limited to private law and not to public law (see also Gautama op. cit. at pp. 1-7). It is not pluralism in the sense of this discussion; that is, a pluralism which grows out of several sources of legal authority. While different rules apply in family law matters, the authority for all of those rules emanates from the central state and not from independent sources of legal authority. 34

Evolutionary Change in Indonesian Land Law Traditional Law (Adat) Perspectives Final Report Part C Land Administration Project at p. 10-2.

18

In the first instance, then, the subjection of adat land law to the national interest based on the unity of the nation means that adat authority must crumble whenever it came into conflict with the exercise of authority by the central State because the State can not tolerate any other source of legal authority other than its own. Further elucidation of this problem appears in the discussion of hak ulayat in Chapter IV. The interrelationship between the legal authority arising from the multitude of traditional social structures and the authority of the central State has never been the subject of land law jurisprudence and adds complexity to and confusion over the state of the land law. The elimination of the conflicts which arise from attempting to force traditional legal structures into spheres of operation such as the modern nation state where they are dysfunctional - is a compelling reason in itself for the review of the Basic Agrarian Law. 2. Adat Law May not Contradict Indonesian Socialism Indonesian socialism is mentioned in Article 5 where it states that adat must not be contrary to Indonesian socialism. Article 14 also states that “…the Government shall – within the context of Indonesian socialism – devise general plans concerning the supply, allotment, and use of the soil, water and aerospace…..”. But it is nowhere made clear what Indonesian socialism is. It is certainly not a prescription for the ownership and control of the means of production in the Marxist sense. Marxist theory predicates the destruction of private property ownership and social ownership of the means of production and that is clearly not contemplated by the Basic Agrarian Law which permits private land ownership and has no other real expression of socialism as it was understood in the 1960’s not as it is understood now. At the same time, the law appears to confer a high degree of State control over land which one would more likely have found in the communist States of the twentieth century. Perhaps this control, which is further discussed infra, is the real meaning of Indonesian socialism in the sphere of land affairs. But even this analysis does not fully explain the State’s dominance in land affairs because it is maintained by bureaucrats that the State does not actually own the land but merely controls it. This fiction allows the State to avoid the problems created by the assertion of the domain declaration by the colonial state but does not prevent the State from acting as if it were the owner of land when it grants rights on State land or assumes control over privately held land when the rights on it expire by reason of the land law and it reverts to State control.

19

The failure to clearly articulate what Indonesian socialism is means that further uncertainty was implanted into the land law. The only other guidance on the principle of Indonesian socialism is to be gleaned from other provisions in which it is said that the idea of socialism is implicit. For example, Article 6 provides that all rights on land have a social function. Land must not be used only for the benefit of the owner but also in such as way as to benefit the people. Article 15 states that every land right holder is obliged to take care of the land, to prevent if from being damaged and to increase its fertility. The explanatory memorandum emphasises the importance of maintaining harmony between individual interests and general interests “in order to achieve the goals, prosperity, justice, and happiness of the people.”35 But these are not expressions of socialism but general statements about the nature of land ownership which could apply to any system. According to Gautama36, the principles of Indonesian socialism are most evident in Article 7 which prohibits excessive land ownership and possession to prevent harm to the public interest; Article 10 which obliges land right holders to work the land themselves; and Article 17 which authorised the government to set areal limitations on land ownership. Areal limitation was first introduced prior to the Basic Agrarian Law through Law No 1 of 1958 Re Abolition of Partikelir Land which was subsequently confirmed in Government Regulation (in lieu of an Act) No 56 of 1960 concerning the Fixing of Area of Agricultural Land) and Law No 1 of 1961 and Government Regulation No 12 of 1961. These limits apply only to agricultural land and not to other land.37 Presumably, where adat law placed no limits on the quantity of land which may be owned by any particular entity, that adat law is invalid. The imposition of areal limits on land ownership is not an expression of the classical concepts of socialism. Having regard to the political history and fate of the Indonesian Communist Party in 1965-1966, it is difficult to understand how any expression of socialism has been retained in the basic law. Gautama notes that land reform, under the New Order regime, “was regarded as no longer popular and a program of the leftist influence.”38 Consequently, no effective or substantial land redistribution has 35

Part II(4) Elucidation.

36

Gautama op. cit. at pp158-159.

37

Although there is presently draft legislation to impose limits on the ownership of non–agricultural land as well. 38

Ibid. p. 160. 20

been undertaken and so even “Indonesian socialism” as expressed in the Basic Agrarian Law has not been realised in any concrete way. Yet it remains a principle of the Law. This is even more surprising when regard is had to the contents of the speech by the Minister for Agrarian Affairs concerning the issue of land reform when he introduced the bill. The Minister stated in his speech to the House that “land reform can not be separated from the Indonesian National Revolution; a land reform program which has the following purposes: w to implement a just division of the land resources for the livelihood of farmers along with the revolutionary structural reformation of land affairs to achieve social justice; w to implement the principle of “land for the farmers” so that land will not become an object of speculation and exploitation; w to strengthen and widen the right of ownership of land as the strongest right for every Indonesian citizen, for men and women which is individual and inheritable but which also has a social function; w to end the landlord system and to abolish unlimited land ownership by implementing maximum and minimum limits for each family with the result that the liberal capitalist system over land is gradually eroded away and protection is given to economically-weak groups; and w to increase national production and promote intensive cooperative farming in the form of cooperatives and other gotong royong groups to achieve prosperity which is strong and just and accompanied by a system of credit especially for the farmers.” After 40 years, more than 80 million Indonesian citizens still live below the poverty line while incalculable wealth has been accumulated by certain small groups of the ruling political and military elite. There is no just division of resources. Land reform programs which began in the mid-1960’s were abandoned following the elimination of the Communists and there has been no substantial effort to implement this objective of the Basic Agrarian Law. After a period of selfsufficiency, rice now has to be imported. Cooperatives have not flourished. The landlord system has not been abolished and a form of capitalist economic development (commonly referred to as crony capitalism) flourished under the New Order government. The rights of the Indonesian people to their land are not strong but continue to be subject to the control of the State, interference and unjust acquisition by the State and the State’s private sector companions. Conflicts over land constitute an enormous social problem. 21

Another expression of socialism is the vast State control over land which is conferred by the Basic Agrarian Law. In the “classical” socialist/communist States, State control extended to every aspect of life in much the same way as the leviathan Indonesian State totally dominated the public and private life of the nation and its citizens during the New Order. The State’s domination in land affairs has been yet another dimension of such domination. There seems to be no purpose to the continued articulation of socialism of any kind in the basic land law. 3 (a) Adat Law Subject to other Provisions of the Basic Agrarian Law An example of possible conflict between adat law and the Basic Agrarian Law arises from the adat law of the Minangkabau in West Sumatera39 where, through the matrilineal system of social organisation, only women inherit and own land. Article 9(2) of the Basic Agrarian Law , however, provides that every Indonesian citizen, be it male or female, has equal opportunities to acquire a land right and to obtain benefits and yields thereof…”. This is an obvious conflict between adat land law and the Basic Agrarian Law. If the gender-equality provisions of the Basic Agrarian Law were to be enforced over the adat law of the Minangkabau people, it would mean the complete breakdown of the Minangkabau social system as it presently exists. The implementation of gender-equality provisions of the land law must take account of such problems and can not be enforced in an unqualified way in the Indonesian context. Thus, the provision of the Basic Agrarian Law which recites gender-equality in relation to access to land needs to be tempered in its application rather than being an unqualified assertion as an uncompromising legal principle. Adat law also permits the use of land by persons other than the owner through the institution of share-cropping.40 Article 53 of the Basic Agrarian Law, however, provides that “the provisional (temporary) rights as meant in Article 16(1)(h) of….hak usaha-bagi-hasil (right of output-sharing endeavour), hak menumpang (right of transient occupancy), and hak sewa tanah pertanian (right of lease of agricultural land),….shall be regulated in order to put restrictions on their characteristics which contradict this Act while efforts shall be made to nullify the existence of such rights within a short time.”

39

See Benda-Beckmann The Minangkabau of West Sumatera An Anthropological Study.

40

See Ter Haar’s detailed description of perjanjian paruh hasil tanam (agreements to share land produce) at pages 102-105 of Asas-Asas dan Susunan Hukum Adat.

22

In this regard, it is to be noted that while certain provisions have been imposed on share-cropping by Law No 2 of 1960 Re Share-cropping Agreements (Agricultural Land), no efforts have been made to abolish this institution. Indeed, sharecropping is still very widely practised. The failure to abolish share-cropping is contrary to the provisions of Article 53 of the Basic Agrarian Law. The continuing practice of share-cropping is also in conflict with the Article 10 of the Basic Agrarian Law which states that owners must work the land themselves. There seems to be little point in retaining provisions of the Basic Agrarian Law such as Article 53 which directs that efforts be made to abolish legal institutions relating to land, such as share-cropping, when, in reality, such institutions continue to exist and operate on a significant scale. That is a further ground for reviewing this aspect of the Basic Agrarian Law. 3 (b) Adat Law must not contradict Other Legislation Article 5 provides that another of the things which adat law must not contradict is “other legislation”. This is also a broad basis upon which adat law may be annulled. An example of other legislation which is contrary to adat land law is Government Regulation No 24 of 1997 Re Land Registration. ILAP is implemented under this regulation which contains the rules which must be complied with before a right of ownership is acknowledged by the State and may therefore be registered. One of the rules in that the present right holder or, the present right holder and his/her predecessors, must have been in actual possession for an uninterrupted period of twenty years before s/he is entitled to be recorded as the owner.41

This provision seems to be applicable even within areas where hak ulayat still exists. To the extent that this regulation conflicts with adat principles whereby the creation of a hak milik does not require 20 years possession and which does not admit successive occupations and uses by predecessors in possession as a basis for the creation of a hak milik, it is in conflict with the adat law because hak milik adat can come into existence after only one or two harvest seasons.42 The Government Regulation No 24 of 1997 has precedence over the adat rules because adat may not contradict “other legislation” as prescribed by Article 5. One argument which flows from this is that hak milik adat may not come into existence

41

Per Article 24(2) Government Regulation No 24 of 1997 Re Land Registration.

42

Ter Haar op. cit. at p. 68.

23

in accordance with any rule other than that government regulation and that it in direct conflict with adat being the basis of the land law system.

It is also in open conflict with other provisions of the Basic Agrarian Law which direct the government to enact legislation concerning the creation and transfer of hak milik according to adat. The failure of successive governments to enact the regulation referred to in Article 22 of the Basic Agrarian Law concerning the creation of the right of ownership according to adat law, together Government Regulation No 24 of 1997 Re Land Registration which sets out rules contrary to adat land rules, adat law on this important aspect has been invalidated. The same analysis applies to the other rules of evidence mentioned in Article 24 of Government Regulation No 24 of 1997. The other bases upon which a right may be registered are: w written evidences which establish the existence of the right as at 24 September 1960 (the date of enactment of the Basic Agrarian Law) together with written evidences of the transfer of the right to the present right holder where the right holder who owned the right as at that date transferred the right.; or w a statement by a witness or the party in question “provided that the truth of the statement..can be evaluated as reliable by the Adjudication Committee”.43 Both of these methods of establishing a right of ownership are not in accordance with adat land law procedures and, to that extent, they also render the adat land law nugatory. Practically no adat system used formal written evidence of the type specified in the elucidation of Article 24 of Government Regulation No 24 of 1997. The creation of the right of ownership according to adat law is described by Ter Haar and it is completely different to the methods in that regulation for establishing the creation of a right of ownership. The elucidation of Article 24 of Government Regulation No 24 of 1997 opens with the words: “Basically, what is meant by evidence of ownership is the evidence of ownership on behalf of the right holder which already existed at the time the Basic Agrarian Law came into effect…”. This implies that no rights of ownership other than those which are granted on State land are able to be created after the date of enactment of the Basic Agrarian Law. That is also in conflict with the continued operation of adat land law in accordance with the Basic Agrarian Law. 43

Article 24 Government Regulation No 24 of 1997 and its elucidation.

24

To the extent that “other legislation’ has so far rendered the fundamental tenets of adat land law concerning the creation and transfer of the right of ownership, this other legislation has left adat law as a dead letter and again demonstrates that what is needed is not a variable unwritten uncertain land law based on adat but one which is positive and comprehensive and founded upon a new basic land law. 4. Adat Must Not Contradict Religious Law It may only be speculated what the practical consequences of this provision are. One possible contradiction arises from the differences in the inheritance rules contained in Islamic law and adat law; particularly in relation to the distribution of the estate between heirs where the heirs include both males and females. Generally, adat law does not make distinctions between the rights of female and male heirs whereas Islamic law does; with the latter stipulating that male heirs receive a greater share of the estate that females. This problem is further complicated by the existence of 5 official religions in Indonesia– Islam, Catholicism, Protestantism, Buddhism and Hinduism. The articulation of religious law is an additional confounding factor in the interpretation and application of the Basic Agrarian Law. 1.12

An Explanation of the Articulation of Adat Law in the Basic Agrarian Law

With such emasculating provisions of the Basic Agrarian Law which have the effect of making a myth out of the principle that adat is the basis of Indonesian land law, attention ought to be given to the question why this myth continues in the legal system and the ideology of the land law. The endurance of the existing land law is said to be based on its claims to be adatbased. However, rather than having been developed into a clear written land law system since the enactment of the Basic Agrarian Law, the amorphous adat rules and philosophy have been manipulated as an ideological tool by those in power. This ideology finds expression in the Basic Agrarian Law as well as in its apologists who argue that since adat can not be understood by outsiders, any one who is not a member of the culture can not understand or criticise land law. Because adat is inherently flexible, unwritten and community-based, it enables the modern State to justify what it does in relation to land by referring to “adat principles and philosophy” which arose out of small agrarian societies, had the 25

implicit consent of the people and the unchallengeable motive of pursuing their prosperity.”44 Adat principles function perfectly well in their traditional environments. In land law, the influence of adat is strong and the result is mystification. By using adat which, in its traditional form is based on an oral tradition, is vague and cryptic and required interpretation by the adat chiefs, the new State was assured the role of interpreter of the law to manage its inherent unworkability and lack of explicitness. Adat can answer any problem but it can not do so is a systematic way. In the final analysis, adat can not operate on the national scale because it is the unknowable unwritten way small communities traditionally operate. It can not explain or justify the activities of a nation state. Adat is not a legal system which is necessary for the existence of a nation state and outside its sphere of legitimate operation in the traditional communities, it is not a normative system.45 It is not capable of addressing the fundamental problems attaching to land affairs in modern Indonesia. The conclusion which is compelled from the foregoing is that it is imperative to review the Basic Agrarian Law from a realistic and practical perspective focussed on the needs which are relevant to this point in the development of Indonesia.

1.13

Why Indonesian Land Tenures are Insecure

According to the Report entitled Indonesian Land Law and Tenures Issues in Land Rights, the tenures which exist under the Basic Agrarian Law are, as commodity rights, fundamentally flawed. Legally, the insecurity factors are overwhelming. Where certainty is most needed in the law governing land rights, it is least available. The discretion of the State to extend, renew or terminate the tenures means that security may only be obtained from extra-legal sources which are “ultimately political or bureaucratic patronage”46 because the rights which exist on land do not exist as of right as they ought to but on the non-legal exercise of the State’s executive discretion. Legal security of land tenures is not granted by the land law system. Rather, uncertainty is entrenched by the Basic Agrarian Law. It is 44

Per Indonesian Land Law and Tenures op. cit at page 1-8.

45

Ibid.

46

Final Report Indonesian Land Law and Tenures Issues in Land Rights Indonesian Land Administration Project Part C Support for Development of Long-Term Land Management Policies at pp 7-25 - 7-26.

26

said that State powers to annul titles are extensive and discretionary. It is therefore proposed to examine the principle rights on land to determine whether and why this is the case. The General Elucidation of the Basic Agrarian Law states that the colonial agrarian law did not guarantee legal certainty for the indigenous population and that, in that regard, there is a need for a new agrarian law which is simple and which guarantees legal certainty for the whole Indonesian community. The reference to the guarantee of legal certainty is stated repeatedly throughout the elucidation. However, a closer examination of the fundamental provisions of the Basic Agrarian Law and its implementing laws demonstrate a bewildering degree of general uncertainty in the land law (as shown above) as well as in its tenures as we shall now see.

1.14

Extinction of Hak Milik – The Basic Agrarian Law

Hak milik (the right of ownership) is described in the Basic Agrarian Law as “the strongest and fullest right which may be owned by a citizen”. However, it is incontestable as a matter of legal principle that this most basic right of ownership is not secure from extinguishment and forfeiture to the State in ways which are far beyond the usual prerogative of the State to acquire private property rights in the public interest and upon payment of just compensation. Article 27 of Basic Agrarian Law provides that the right of ownership is annulled if the land is destroyed or the land reverts to the State because of: w the revocation of the right based on Article 18 (compulsory acquisition in the interest of the nation and State or the common interest of the community); w voluntary transfer by its owner; w the land is abandoned/neglected; and w the provisions of Articles 21(3) and 26(2) (foreign acquisitions). Resumption by the State of land ownership is not in principle objectionable provided that it is implemented with just compensation. No State can be denied the power of resumption. In this regard, Article 18 of the Basic Agrarian Law provides that rights on land may be annulled in the public interest by the payment of proper compensation. Nor is voluntary surrender of rights to the State problematical.

27

The abolition of the right if it is transferred or devolves to a foreigner if that foreigner does not voluntarily transfer it to a citizen is part of the general prohibition on foreign ownership which is discussed in further detail in Chapter III.

1.15

Abandonment

The most interesting of the bases upon which hak milik is annulled and reverts to the State is abandonment (Article 27a.3). “Abandonment” means not only physical abandonment but also use which is not in accordance with the “conditions or characteristics and purposes of the right”. By contrast, under Anglo-Australian law as noted earlier, this can never occur. A fee simple can never be lost to the State by “abandonment” or “use which is not in accordance with the conditions, characteristics or purposes of the right”. Ownership of the basic tenure in common law jurisdictions is only forfeited to the State if there are no heirs following the death of an owner who fails to leave a will – a circumstance which is extremely rare in any society. According to the common law, physical abandonment coupled with physical possession by another for a specified period of time, land may become the property of someone other than the owner where the land is possessed adversely to an owner by someone else for the necessary period of time and the owner fails to exert his right and seek to evict the adverse possessor. But it will never become State land by virtue of abandonment. The process of adverse possession which results in the extinguishment of an owner’s title is clearly regulated in the law with the circumstances under which it may occur and the necessary time periods clearly specified. It does not depend in any way at all on the exercise of the executive discretion of the State, as the loss of rights by abandonment are manifest in Indonesian land law, and the tenure itself does not become extinct. Misuse of land is regulated in the common law jurisdictions not through the tenure or land law system but through other regulatory mechanisms such as environmental law and planning and use laws; breaches of which do not result in the extinction of the fee simple but which result in other penalties such as fines or court injunction and damages awards.

1.16

Time Period of Abandonment

Perhaps the most remarkable omission from all of the Indonesian legislation concerning the extinction of rights by abandonment, and one which compounds the hazardous nature of Indonesian tenures, is the failure to specify the period of

28

time during which abandonment will result in the loss of the right. The lack of a clear time period for the processes of abandonment to operate is another area of uncertainty in the land law. Articles 27, 34 and 40 of the Basic Agrarian Law which deal with the extinguishment of the principal rights of hak milik, hak guna usaha and hak guna bangunan and their elucidations do not mention any time period. Nor do the provisions of the Government Regulation No 40 of 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai47 or their elucidations specify any time period (see infra). In the absence of the specification of the period of time during which a right must be abandoned in order to result in its extinguishment under the provisions of the Basic Agrarian Law and Government Regulation 40/1996, the only other guidance is the adat law. But this does not assist because adat does not contain such time periods.48 In his seminal work on Indonesian adat law, Ter Haar discusses the effect of time on rights; particularly rights on land according to adat. According to adat law, there are no definitive time periods set for the determination of abandonment. A right may disappear “when the signs of land use have disappeared and the land is again covered by forest”. Rights in respect of trees vanish if the marks which have been cut into the bark have been recovered by the growing tree bark. Preferential rights are lost when the prohibitive signs have disappeared. Phrases in local languages to denote the time period which is requisite for a right to be lost through the effluxion of time include “that the time has happened too long in the past” and “it has faded because it happened too long in the past”. According to adat law, rights on land can disappear “because of the abandonment of the rights for a long time, or new rights created because of the real situation which has happened for a long time which situation is in conformity with the implementation of a certain rights. In adat law, the course of time and what has happened during the time will always be calculated – after appropriate consideration has been made; and no calculation is made on the exact number of years. Ter Haar observes that the assumption that limitation has in fact existed in the adat law has caused a misunderstanding as if the time of limitation of thirty years or

47

See Articles 17, 35, and 55 of Government Regulation No 40 of 1996.

48

Per Herman Soesangobeng interview 16 November 1999.

29

ten or five years has been known as a public institution of the Indonesian people in a certain legal environment.”49 In the context of a contemporary nation state, such principles do not assist in achieving legal certainty in a concrete way. The application of adat law in a modern city, for example leads only to more uncertainty. On the other hand, any adoption of set periods of time in State legislation would contort the adat principles so as to render them unrecognisable. This again demonstrates the inadequacies of adat law as a basis for a modern land law and the need to move away from adat in this area of the law. What is also unsatisfactory about this aspect of the land law is that the determination of whether or not a right has been lost through abandonment is that there is no due process. Rather, it is a determination by the executive and without just compensation. The land becomes State land and available for further disposal by the executive without any intervening judicial process. There are no provisions concerning appeals for judicial review of the administrative determinations of land abandonment. Presumably, appeals to the State Administrative Court would be possible but access the courts is impossible for most Indonesians and the independence of the courts from the executive has been compromised throughout the greater part of Indonesian history.

1.17

Government Regulation No 36 of 1998 Re Control and Utilisation of Abandoned Land

This regulation governs in further detail abandoned land which is the subject of hak milik, hak guna usaha, hak guna bangunan, hak pakai or hak pengelolaan (the right of management) as well as abandoned land “the basis for possession of which has been obtained but a right on which has not been obtained in accordance with the applicable legal provisions”.50 It implements the provisions of the Basic Agrarian Law referred to above which establish the principle of the loss of rights on land by abandonment and the reversion of the land to the State. This regulation demonstrates the unusual degree of control over land by the State and is another source of fundamental insecurity of tenure of rights on land in Indonesia.

49

Per Ter Haar Asas-Asas dan Susunan Hukum Adat trans. K. Ng. Soebakti Poesponoto Pradnya Paramita Jakarta 1994. in Chapter 12 The Influence of the Passage of Time. 50

This latter class of land seems to include land in respect of which an izin lokasi has been granted and the land has been acquired from the previous right holders but in respect of which the izin lokasi holder has not sought the grant of the necessary right.

30

There follows an overview of the main provisions of the regulation. Aspects of the regulation which appear to be problematical or which expand the degree of control beyond that which is granted to the State by the Basic Agrarian Law will be included in this overview. Those latter provisions are beyond power and exemplify not only the expansion of the State’s control but also a disregard for the rule of law as contained in the Basic Agrarian Law itself which is apparent in other aspects as well (such as failure to enact implementing provisions concerning the creation of hak milik in accordance with adat land law, the failure to enact implementing provisions concerning the transfer of adat rights and the failure to abolish share-cropping). It is instructive to note, firstly, that while express articles of the Basic Agrarian Law provide that hak milik, hak guna usaha, and hak guna bangunan are cancelled and the land reverts to State land by abandonment (Article 27.a.3 (hak milik), Article 34.e (hak guna usaha), and Article 40.e (hak guna bangunan))51, there is no express provision in the Basic Agrarian Law for hak pakai to be cancelled on this basis. That provision only exists in this regulation and therefore appears to be contrary to the Article 18 of the Basic Agrarian Law which states that rights can only be annulled by an Act. Even so, hak pakai is included along with hak milik, hak guna usaha, and hak guna bangunan in Article 3 which sets the criteria for determining when such rights are annulled under the principle of abandonment. Article 3 provides that land parcels with the status of those rights can be declared as abandoned land where the land is “wilfully52 not used by the right holder…in line with its condition or with the nature and purposes of the right in question or if it not properly taken care of. The precise meaning of the words “condition…or nature and purposes of the right” are not explicitly defined. Ordinarily, one would expect to find definitions of these critical words in the legislation and the omission of clear definitions further opens the door of executive discretion. This leads to more uncertainty. The addition of the words “or it not properly taken care of” takes this provision beyond the Basic Agrarian Law in which the elucidation only states that the land is

51

See Government Regulation No 40 of 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai Articles 17(1).e (hak guna usaha), Article 35(1).e (hak guna bangunan) and Article 55(1).e (hak pakai) 52

The land will not be deemed to be wilfully not used if the non-use is due to the economic circumstances of the right holder in which case the Head of the Land Office shall “supervise” the right holder to help him use it (Article 11) What supervision means is not clear. The “wilful non-use” criterion will also not apply where the land has been sequestered in the course of a dispute (per Elucidation of Article 11).

31

abandoned if it is wilfully not used in accordance with its condition or with the nature and purposes of the right. The additional words are not a mere elaboration of the previous phrases but purport to give an additional ground upon which the land can be considered to be abandoned. This is also inconsistent with Article 18 of the Basic Agrarian Law to the extent that it purports to result in the extinction of a right pursuant to a law-making instrument which is not an Act. Article 4 provides an additional basis upon which the rights can be treated as abandoned in the case where land which is not intended to be subdivided is “not used in accordance with its allotment as determined in the Spatial Use Plan which was applicable at the time of the use of the land in question or the physical development of the land in question started.” Similar objections to this provision as beyond power may also be raised because this ground does not appear in the Basic Agrarian Law. Moreover, spatial use plans may be reviewed and changed from time to time and so the opportunity is opened by this provision for the government to introduce new bases upon which rights may be lost through abandonment. Article 5 states another ground upon which land with the status of hak guna usaha can be declared as abandoned; viz. where the land is not being cultivated in accordance with the criteria concerning proper cultivation of agricultural land as stipulated in the applicable regulations. Similarly, Article 6 provides that land with the status of hak guna bangunan or hak pakai which is meant to be subdivided….within the context of its utilisation…can be declared as abandoned if it has not been subdivided for development purposes. As a matter of principle, that private property rights might be extinguished merely because no subdivision is effected after approval from the subdivision authorities has been given is an extraordinary result. Practically, it raises extra legal risks for developers which compound the market risks associated with land development. 1.18

Procedure for Controlling and Utilising Abandoned Land

As noted above, further uncertainty arises from the lack of a clear time period in the legislation during which a parcel of land must be abandoned before it can be declared “abandoned”53. This depends on executive determination and the discretion is given to the Minister. So while Article 9(4) states that for identification

53

See also discussion of this issue supra.

32

of abandoned land, it is necessary to take into consideration the time lapse between the time of the acquisition of the right and the time of the identification process which is regarded as reasonable for the identification process to proceed further, paragraph (5) states that the time lapse shall be determined by the Minister. As at the date of writing, this time period has not yet been specified.54 This again confers wide powers on the executive government which compound state control and injects further uncertainty into the land tenure system. Article 9(1) assigns this activity to the Land Office “either on its own initiative or upon order of the Minister or the Head of the Provincial Office or on the basis of a report from another government institution or from the people”. The Minister is directed to establish an Assessment Team with the Head of the Land Office as its leader and with representatives from the institutions related to the use of the land parcel in question as its members. The Team is therefore entirely comprised of members of the administrative agencies of the government; none of which can be considered to be independent. Once the determination is made that the land has been abandoned, a series of administrative warnings is issued that the right holder must, within a certain period, start to use the land in line with its condition or with the nature and purposes of the granting of the right. The administrative warnings, of which there are three, give the right holder a period of one year in each warning to utilise the land in accordance with its condition or the nature and purposes of the right or to take proper care of it.55 If the right holder fails to respond in the necessary way to the third warning, the Head of the Provincial Land Office makes a proposal to the Minister that the land be declared as abandoned.56 Article 14 then allows the Minister to make the declaration but before doing so must provide the right holder with an opportunity to transfer the land through public auction within three months. If that does not happen, Article 15 then confirms that a land parcel which has been declared as abandoned shall become land which is directly controlled by the State.

54

Per Mr Anton Reinhart, National Land Law Adviser Interview 23 November 1999.

55

Article 12.

56

Article 13(4).

33

1.19

Compensation for Extinction of Rights on Abandoned Land

Article 15 provides that a right holder shall be paid compensation but the compensation is only equivalent to the price which, on the basis of the relevant evidence available, the party paid when it acquired the right. Where improvements have been made, the amount of money which has been spent by the right holder on “physical infrastructure or structures” shall be counted in determining the compensation. The compensation must be paid by the party which the Minister declares as the new right holder of the right on the land parcel in question57. The elucidation of Article 15(2) states that “any escalation has to be determined using normal calculations but that “it must be kept in mind that the calculation of compensation is intended to serve as a sanction”; as if the loss of the right and the intervention of the State were not sufficient sanctions in themselves! The compensation scheme established by this regulation in relation to abandoned land can not be described as just compensation. It is explicitly articulated as intended to be punitive. There is no independent valuation. There is no clear articulation of the factor of value appreciation or of the extra value added by the improvements to the land which usually exceeds the actual cost of the improvements. The elucidation of Article 15(1) states another coercive action by the State: “The former land-right holder..is no longer entitled to use it and must surrender it to the party who has been designated by the Minister as the new right-holder.” This extraordinary provision entails another wide and powerful discretion in the executive agent of the State which should properly be exercised by the judiciary. The extinguishment of legal rights, particularly property rights, in democratic societies, is generally assigned to the judiciary which is independent of the executive law enforcement and administration agencies of the State. Article 11 provides that where the results of the identification show that the land parcel in question is owned by an individual who is not capable of using it in line with its condition, nature and purposes, because of economic constraints, the Head of the Land Office shall propose that the individual be given some supervision to help him utilise the land parcel in the land in question. This is the basis of another administrative discretion to determine whether a person is

57

Article 15(1), (2).

34

incapable because of economic constraints. “Economically incapable” appears in the elucidation but there is no elaboration on the meaning of this important term. There are no provisions in the legislation in relation to appeals from the determinations of the Assessment Committee or the Minister’s decision so it can only be assumed that the right holder may, if he can, pursue his remedies through the State Administrative Court. Having regard to the condition of the Indonesian judiciary, the judicial system and the inaccessibility to the courts by the people, it is highly unlikely that there would be an independent judicial review adverse to the executive’s decisions. The conclusion from the foregoing examination of this law is that the uncertainty principle in Indonesian land tenures is further entrenched and significantly elaborated by this government regulation.

1.20

Loss of Hak Milik and Reversion to State Control under other Laws

There are other provisions of the land law which extinguish hak milik and cause the land to revert to the control of the State. Two regulations are of particular notoriety. They are ministerial regulations which purport to implement some of the conversion provisions of the Basic Agrarian Law; Regulation of the Minister for Agrarian Affairs No 2 of 1960 Re The Implementation of Some of the Provisions of the Basic Agrarian Law and Regulation of the Minister for Agrarian Affairs No 2 of 1962 Re Confirmation of Conversion and Registration of former Indonesian Rights on Land.

1.21

Regulation of the Minister for Agrarian Affairs No 2 of 1960 Re The Implementation of Some Provisions of the Basic Agrarian Law

This regulation deals with the rights on land which existed under the colonial land laws.58 Under this regulation, land owned under colonial legislation reverted to the State for failure to comply with the provisions of this regulation. Indonesian citizens who had only Indonesian citizenship as at 24 September 1960 who possessed land with the Dutch right of ownership (hak eigendom) were obliged, within 6 months of that date to attend the Land Office and give clarification about their citizenship. If the owner did not so attend or did attend but was unable to

58

Namely, hak eigendom, hak opstal and erfpacht, hak gebruik and vruchtgebruik , hak agrarische eigendom, hak gogolan, pekulen or sanggan, hak concessie and sewa and “other rights”. 35

prove citizenship, then the hak eigendom was automatically converted into a hak guna bangunan with a period of twenty years.59 Similar provisions applied to religious and social organisations,60 and hak eigendom owned collectively by persons or corporate bodies. Although the regulation does not expressly say so, the land, at the end of the term of the hak guna bangunan, falls back to the State. This regulation is still in force.61

1.22

Regulation of the Minister for Agrarian Affairs No 2 of 1962 Re Confirmation of Conversion and Registration of former Indonesian Rights on Land

Until its repeal by Regulation of the Minister for Agrarian Affairs No 3 of 1997, hak milik could also be lost and the land revert to the State by the operation of Regulation of the Minister for Agrarian Affairs No 2 of 1962 merely because the holder failed to seek registration of the right. Article 4 of this regulation provided that where there was a transaction with a right on land, then an application for confirmation of conversion and registration had to be submitted through the relevant land deed official to the head of the Land Registration Office together with the deed which evidences the transaction. If the transaction occurred through an auction, then the application had to be submitted through the Head of the Auction Office. Article 8 then provided that “in the case where a legal action as meant in Article 4 takes place in an area in which the implementation of Government Regulation No 10 of 1961 has started and no application for confirmation of conversion in made for the legal action in line with the provisions contained in this regulation, the right in question shall be regarded as a hak pakai having a validity of at most 5 years following the enactment of the Basic Agrarian Law, upon expiry of which the land parcel in question shall become state land”. While the validity of this regulation is questionable having regard to Article 18 of the Basic Agrarian Law which provides that rights on land may only be annulled “in the public interests, including the interests of the Nation and State as well as 59

Articles 1-4 of PMA No 2 of 1960.

60

Article 6 PMA 2 of 1960.

61

It was not repealed by PMNA3/1997. Confirmed in interview with Mr A Reinhart National Land Law Adviser on 30 November 1999.

36

the common interests of the people….with due compensation and according to a procedure laid down by Act”, it will never be known how many of the people’s rights were considered and treated as extinguished by the administration during its operation. One may reasonably assume that it was not a few.

1.23

State Control of other Land Under the Conversion Provisions of the Basic Agrarian Law

Control of other lands was also assumed by the Indonesian State either as successor to the colonial State or as the successor to rights owned by nonindigenous entities. This included land which was the subject of hak erfpacht for the large-scale plantation companies which was converted to a hak guna usaha with a duration not exceeding 20 years. Hak erfpacht was the most complete right under the Civil Code which could be acquired in someone else’s land and was like full ownership except for its reversion after a period of years. It was pursuant to the erfpacht regulations that the colonial state granted such rights of 75 years to private foreign entrepreneurs in total disregard of the rights of the indigenous owners of the land. Just as the Dutch ignored the rights of the indigenous people in such circumstances, the new State, instead of returning the land to its original indigenous owners, assumed control of it under these conversion provisions. Where the owners of underlying rights of ownership from which these lesser rights derived were not Indonesian citizens, any ownership rights which they had before the enactment of the Basic Agrarian Law were invalidated. The same observations apply to hak erfpacht and hak opstal in the following paragraph. Hak erfpacht for small-scale agricultural undertakings was cancelled upon the enactment of the Basic Agrarian Law which meant that such lands immediately became State lands.62 Concession and lease rights for large scale plantations were converted to hak guna usaha with a period not exceeding 5 years.63 Hak opstal 64or hak erfpacht for residential complexes were converted into hak guna bangunan with a term not exceeding 20 years. Again, upon the expiry of such rights, the land reverted to the State instead of to the original owners or their heirs.

62

Article III of the Conversion Provisions of the Basic Agrarian Law.

63

Article IV of the Conversion Provisions.

64

Hak opstal was the right to build and possess buildings on someone else’s land.

37

1.24

More Uncertainty for Hak milik

Article 22 of the Basic Agrarian Law provides that the creation of hak milik according to adat law shall be regulated by Government Regulation. The elucidation states that an example of the way in which hak milik is created according to adat law is “pembukaan tanah” (the clearing of land)65. The methods of creation of the right shall be regulated so that there will not arise matters which are detrimental to the interests of the state or the public. After 40 years, the government regulation still does not exist leaving a vacuum as far as the creation of hak milik according to adat law is concerned. Article 50(1) provides that further provisions about hak milik shall be shall be regulated in an Act and Article 50(2) provides that further provisions about hak guna usaha, hak guna bangunan, hak pakai and hak sewa untuk bangunan shall be regulated in further legislation. While there has been a recent government regulation on hak guna usaha, hak guna bangunan and hak pakai66, there is yet no further provision on hak milik or hak sewa; again resulting in a legal vacuum and further uncertainty in relation to these rights. While Article 56 provides that “as long as the Act about hak milik referred to in Article 50(1) is not enacted, then the provisions of the local adat law and other provisions about rights on land which confer authority as or similar to the that referred to in Article 20 (hak milik) apply as long as they are not in conflict with the provisions of this Act”, whether or not a particular adat law right on land is in conflict with the provisions of the Basic Agrarian Law can not be known unless there is an authoritative and comprehensive examination of the relevant adat land law which in turn must be itself be established followed by a comparison with the provisions of the Basic Agrarian Law to determine any conflict and so the result is still uncertainty.

1.25

Hak Milik on State Land

To acquire a hak milik on State land, an application must be made to the National Land Agency in accordance with Regulation of the Minister of Home Affairs No 5 of 1975 Re Granting of Rights on State Land. The application must contain information on, among other things, the evidential documents (if any) showing the status of the land before it became State land, and be accompanied by the fee (entry money). 65

This contradicts the elucidation of the pembukaan tanah right referred to in Article 16of the Basic Agrarian Law which states that the clearing of land does not result in a right of ownership. 66

Peraturan Pemerintah No 40 Tahun 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai

38

If the application is refused by the authorised official, then an appeal can be made to the Minister. Ultimately, therefore, everything depends on the exercise of the administrative discretion of the State. Even then if a grant of hak milik is made it will revert to the State for abandonment which includes not just physical abandonment but also use which is not in accordance with its character and purpose discussed earlier. In addition, a right-granting decree will also be cancelled for the reasons discussed below.

1.26

Cancellation of Decree Granting Hak Milik on State Land

If a decree granting the hak milik is granted, it specifies several obligations which must be fulfilled by the grantee67. The decree states that “all consequences, expenses, debts and damages which arise from the granting of this right, as well as all actions for the possession of the land are the total responsibility of the grantee of the right”. This is so even though the State receives substantial fees for the granting of the right and acts as if it were the actual owner of the land by granting a right on it. The grantee must pay the State land “entrance fee” and the registration fees68. Boundary marks must be installed and maintained by the grantee in accordance with the relevant regulation.69 The land must be used and put to good use in accordance with its allotment and nature as well as the purpose for which the grant was made. Tax for the acquisition of rights on land and buildings70 must be made at the latest within 9 months from the date of the grant. Failure to fulfil any of the obligations set out in the right-granting decree will result in its cancellation whereupon the land will fall back into the control of the State. The decree will also be “revised as necessary” if it is subsequently established that there is a mistake or error in the determination.71

67

See Surat Edaran Menteri Agraria/Kepala BPN No 500-2165-DIII 27 Mei 1999 Tentang Penyeragaman Bentuk dan Naskah SK Pemberian Hak dan Pemberian Perpanjangan Hak Atas Tanah Dicta Three and Four of Annexure 1. 68

The right is deemed to come into existence as from the date of registration at the Land Office Dictum 5 of SEMA 500-2165-DIII Annexure 1 op. cit. supra. 69

Formerly, PMA No 7 of 1961 Re Land Registration Administration now PMNA No 3 of 1997 Re Provisions for the Implementation of Government Regulation No 3 of 1997 Re Land Registration. 70

Undang-Undang No 21 of 1997 Re Bea Perolehan Hak Atas Tanah dan Bangunan.

71

Dicta 6, 7 and 8 SEMA 500-2165-DIII op cit supra.

39

It is not clear what happens in this regard where the land has been transferred to a third party and the failure of the law to deal with this question is also problematical. 1.27

Cancellation of Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai

1.27.1 Hak Guna Usaha Government Regulation No 40 of 1996 reiterates the nature of hak guna usaha. It is a right which may only be granted by the State on State land and is limited in time. Extensions and renewals are dependent on the exercise of discretion by the State through the National Land Agency. Article 3 of that Regulation imposes restrictions on the area of land which may be the subject of the right. The minimum area is 5 hectares. The maximum which can be granted to an individual is 25 hectares while the maximum which may be granted to a body corporate is entirely at the Minister’s discretion “with due observance of the considerations of the competent official in the business sector concerned bearing in mind the extent required for the implementation of the most efficient enterprise in the sector concerned”. Conditions may be imposed72 which, if not complied with, result in the forfeiture of the right so that the land reverts to unencumbered State land 73. Extensions and renewals are dependent on the further conditions the land is “exploited properly in accordance with the conditions, nature and objective of the granting of the right”74. The right holder is obliged to: w conduct an enterprise in agriculture, plantation, fishery and/or livestock breeding in accordance with the conditions as stipulated in the decree granting the right; w use the right himself “properly in accordance with the business feasibility based on the criteria stipulated by the technical agency”75; w develop and maintain the existing environmental infrastructures and land facilities in the environment of the right;

72

Article 6(2) Peraturan Pemerintah No 40 Tahun 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai. 73

Article 17 PP40/1996.

74

Articles 8 and 9 PP40/1996.

75

Article 12(1) oPP40/1996.

40

w maintain the fertility of the land and prevent the destruction of the natural resources and safeguard the preservation of the environmental capabilities in accordance with the applicable regulations; and w not delegate the exploitation of the land to another party except in cases where it is allowed in accordance with the applicable regulations. 76 The right may be encumbered with the security right but the security right is void if the right is terminated for failure to comply with any of conditions 77 which leaves the security right holder in a rather vulnerable position. If the right is void for failure to meet any of those conditions and is not extended or renewed, the former holder must, at his own expense demolish the buildings and objects on the land and surrender the land and plants existing on it to the State.78 Some of the provisions of this regulation seem to rely on Article 28(2) of the Basic Agrarian Law which provides that, where the area of land granted with a hak guna usaha is 25 hectares or more, then it is granted on the condition that “adequate investment shall be made and good corporate management techniques shall be adopted, as appropriate, given the current developments in time”. These are rather vague criteria and may change from time to time. The conduct of a business on land with a right which is subject to such discretions of the State and potential forfeiture adds considerably to the business risks.

1.27.2 Hak Guna Bangunan Similar provisions apply to hak guna bangunan.79 The holder of a hak guna bangunan “is entitled to control or use the land “for a certain period” or erect or have a building for private purposes or for their business”80. The holder of the right must: w use the land in accordance with the designation there of and the conditions stipulated in the decree or agreement on the granting of the right;

76

Article 12(2) PP40/1996.

77

Article 15 PP40/1996.

78

Article 18 PP40/1996.

79

Articles 19 – 38 PP40/1996.

80

Article 31 PP40/1996.

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w properly maintain the land and the buildings and ensure environmental conservation; and w resurrender the land…to the State (or the hak milik/hak pengelolaan holder if the right has been granted under such rights) after the hak guna bangunan has become void. The right will be invalidated if the holder has not met these obligations.81 The use of hak guna bangunan for residential or business purposes is also problematical and does not assist in the achievement of incentives for long-term investment and sustainable land use. The expectation that a holder of such a limited right to invest a lifetime of savings or capital into land, the right over which is both limited in time and subject to the peculiar conditions noted above, defies both economic equity and logic. The right holder can not be secure in the reality that the efforts of a lifetime of struggle or enterprise which are more often than not in the form of real property will benefit his/her descendant generations. The nature of these rights, particularly when they exist on State land, also opens opportunities for official corruption as right holders must return to the State and seek the extension or renewal of their right. Extensions or renewals can only be made once and are subject to the discretion of the “authorised official”. The right does not exist perpetually or “as of right” as such a right ought.82 Some attempts have been made by the State to facilitate the transformation of hak guna bangunan which has been granted for residential purposes (but not for business purposes) into a hak milik but only for the limited classes of: w simple and very simple houses (up to a value of approx. US$4500); w houses purchased by public servants from the government; and w land which has been granted with a hak guna bangunan or hak pakai for residential purposes owned by Indonesian citizens the area of which is 600 m2 or less. 83

81

Article 35 PP40/1996.

82

The same problems exist in relation to hak pakai. See Articles 39-58 PP40/1996. KMNA No 9 Th 1997, No 15 Th 1997 No 1 Th 1998 Tentang Pemberian Hak milik Atas Tanah Untuk Rumah Sangat Sederhana dan Rumah Sederhana; KMNA No 2 Th 1998 Tentang Pemberian Hak milik Atas Tanah Untuk Rumah Tinggal Yang Telah Dibeli oleh Pegawai Negeri dari Pemerintah dan Instruksi Menteri Negara Agraria No 4 Tahun 1998 Tentang Percepatan Pelayanan Pendaftaran Hak milik Atas Tanah Untuk Rumah 83

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These efforts are merely in the form of administrative law-making instruments which may be withdrawn at any time by the Minister and do not address the fundamental problems described above. Application must still be made to the land registration authority and the usual fees paid.84 Fees for the granting of the rights on State land are also at the discretion of the Minister for Agrarian Affairs and the Minister for Finance85. Where the rights are terminated for failure to comply with the conditions, the fees which have been paid for the right are also forfeited to the State and are not refundable.86

1.27.3 Hak Pakai Hak pakai is governed by similar provisions.87

1.28

Conclusion Re Government Regulation No 40 of 1996

The main conclusion which is compelled by the foregoing analysis of the Indonesian rights on land is that they are uniquely structured and involve a high level of insecurity. The powers of the State to annul tenures and titles are extensive and discretionary. Failure to use the land as required, failure to adequately invest or “adopt good management techniques in accordance with the developments in time”, failure to subdivide, failure to comply with spatial use laws, etc. will all result in the extinguishment of the right. Such a system requires considerable revision and substitution by a rationalised system which is more suited to modern times and in which the basic right on land and derivative rights can not revert to the State except where there is no heir or no will. Consideration of the introduction of an absolute ownership right along with the dissolution of the rights of hak guna usaha, hak guna bangunan and hak pakai and hak sewa untuk bangunan into a single and clear ownership or leasehold without the peculiarities of these existing tenures are essential to overcome the problems which flow from the existing system.

Tinggal; Keputusan Menteri Negara Agraria No 6 of 1998 Tentang Pemberian Hak Milik atas Tanah Untuk Rumah Tinggal. 84

See, for example, Article 1 KMNA 6/1998.

85

See, for example, Articles 11(2) and 28(2) PP40/1996.

86

See Article 50(3) PP40/1996.

87

Articles 39-58 PP40/1996.

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1.29

State Control Entrenched in the Basic Agrarian Law

The discretionary nature of entitlements to land rights in Indonesia is an expression of the predominance of the State in land allocation. This predominance also proceeds from an interpretation of the provisions of the Basic Agrarian Law, namely, Article 2, which provides as follows: (1) On the basis of the provisions contained in Article 33(3) of the Constitution and of the things meant in Article 1 of this Act, the soil, water and aerospace, including the natural resources contained therein, are, at the highest hierarchical level controlled by the State in its capacity as all the people’s organisation of powers. (2) The State’s right of control as meant in paragraph (1) of this Article provides the State with the following powers: (a) the power to regulate and administer the allotment, use, appropriation, and maintenance of the soil, water, and the aerospace; (b) the power to determine and regulate legal relationships between people on the one hand and the soil, water, and aerospace on the other hand; (c) the power to determine and regulate relationships among people as well as legal acts concerning the soil, water, and aerospace…. Several subsequent Articles of the Basic Agrarian Law refer to this provision as their basis. Article 4 states that it is on the basis of the State’s right of control as meant in Article 2 that the State determines the types of rights to the surface of the soil, which is called tanah (land) that can be granted to people…and corporate bodies. Article 16 proceeds to further implement Article 4 by setting out the types of tenures discussed earlier in this paper. Articles 20 – 48 are also based on the power of the State’s control over land. Article 8 also states that it is on the basis of the State’s right to control as meant in Article 2 that it regulates the acquisition of the natural resources which are found in the soil, water and airspace. Pursuant to this provision, legislation has been enacted in relation to mining and forestry under which concessions to mine and take timber are granted. Articles 9, 11, 13, 14, 17 also refer expressly to the provisions of Article 2. A total of 36 of the Basic Agrarian Law’s 58 provisions relate directly or indirectly back to Article 2. From those provisions, particularly Articles 27, and 34 and 40 concerning the extinction of hak milik, hak guna usaha and hak pakai through abandonment and the consequent reversion of the land to the State’s control, there is an extraordinary level of State control over land. 44

This power is further explained in the General Elucidation which, amongst other things, states that: “The State’s power..concerns all the soil, water and aerospace including parts of them which are already possessed by individuals under certain rights. The State’s power over land which is already possessed by an individual under a certain right is defined by the contents of the right..and this means that the State’s power…ends at the point to which it gives the individual in question authority to execute the right….The State’s power over land which is not possessed under a certain right by an individual or another party is broader and full…The State can grant such land to an individual or body corporate with a certain right…”. The State’s control continues to be extensive over all of the rights which are lesser than the right of ownership because they are limited in time and their nature and extensions and renewals must be continually sought from the State. Even the “fullest and most extensive right” of ownership, can be lost to the State through mechanisms other than expiry by effluxion of time. The problem of the State’s right of control is further manifest in certain legislative definitions of “State land” and “land directly controlled by the State”. For example, Article 1(1) of Government Regulation No 24 of 1997 defines “State land or land directly controlled by the State” as “land which is not possessed under a certain land right”. “Land right” is further defined as “the rights mentioned in Article 16 of the Basic Agrarian Law”. It seems not unreasonable to conclude that rights which have not been formally converted to the statutory rights under the Basic Agrarian Law are to be treated as no rights at all. So land upon which exist adat rights will be treated as State land. At least two ministerial regulations, PMA2/1960 which is still in operation and PMA 2/1962 which operated for 35 years, treated unregistered adat hak milik rights as lost or converted to lesser rights of set periods upon expiry of which periods that land was treated as State land (see discussion of these regulations earlier). Unregistered or unconverted adat rights will be ignored for the purposes of that definition of State land. That means that the expanse of State land was been vastly extended because, again, most land owners did not seek registration. It has been noted that “if this is the definition of state land (that is, as defined in Government Regulation No 24 of 1997 (PP24/1997)), this means that a land parcel which does not have a right on it is state land. What is regulated in Article 1(3) of PP 24/1997 is substantively not different from the principle of domein as meant in Article 1 of Agrarisch Besluit 1870. As may have been known, the principle of domein stipulated that unless it had a proven right on it, a land parcel was the domein 45

(belonging) of the State. It is this principle of domein which the Basic Agrarian Law seeks to do away with.”88 A definition of state land is also found in another regulation, namely, Government Regulation No. 8 of 1953 Re The Control of State Land, which reads in its Article 1(a) that “State land is land which is directly controlled by the State.” This definition does not really explain what is meant by “land which is directly controlled by the State” but merely replicates what is said in the Basic Agrarian Law. The failure to clearly define the concepts of “State land” or “land which is directly controlled by the State” leads to additional uncertainty in the land law; although in practice, it means that the State acts as owner of most land. There is a curious argument which is articulated in the elucidation of the Basic Agrarian Law as well as regulations and their elucidations dealing with the granting of rights over State land that the State is, through its direct control, not the owner of the land. But one does not have to be the owner in order to act as if it were the owner. Whatever the confounding effect of this legal fiction is, the fact remains that the State does act as the owner of the land over which it grants rights and it receives valuable consideration when it does so; although this is referred to “uang pemasukan” (entry money”) or recognitie rather than consideration for the sale of the right. If equitable and efficient land markets are ever to develop in Indonesia, accelerated registration of rights on land will not suffice. The predominance of the State must be abandoned in favour of far more secure and rationalised tenures and market allocation of land. The State’s control must be whittled back to allow a conventional land market to operate and to achieve security of tenure.

1.30

Why Security of Land Tenure is Indispensable – Economic Development and Protection of Indigenous Land Tenure

Insecure property rights are said to inhibit use and investment in both rural and urban land. They “hinder good governance and the emergence of….civil society”.89 Without effective access to property, economies are unable to progress and sustainable development can not be realised. Better defined property rights lead to more efficient and sustainable use of land resources and improvement in

88

Reinhart A ILAP National Land Law Adviser Annotations on Government Regulation No. 24 of 1997 Jakarta 1999. See also the revocation provisions of the Basic Agrarian Law. 89

Bathurst Declaration on Land Administration for Sustainable Development Report of the Workshop on Land Tenure and Cadastral Infrastructures for Sustainable Development United Nations International Federation of Surveyors Bathurst October 1999 at p. I.

46

the definition of those rights is achieved through improvements in the land tenure system and in the dissemination of information on those rights. Land is incontrovertibly an asset for economic development. As an object with secure rights, it has the capacity to underwrite and accelerate economic development through the utilisation of interests in land as marketable commodities. The capacity of land, or, more strictly, rights and interests in land, to generate wealth, to attract capital investment and for creating opportunities for the development of the financial sector are critical to sustainable economic and social development. However, to stop there in the analysis of the problem is to look at only one side of the problem. The commoditisation and individualisation of land rights may not support sustainable development in pre-capitalist societies but threaten their existence. In that social context, treating land rights merely as a prima facie commercial commodity and imposing that conceptualisation from above may not be acceptable to those societies. These two dimensions of sustainable development clearly generate conflict and it is the fine balancing of these two competing conceptualisations of land which must also attend the central contemporary debate on land reform issues. In Western societies, the balance between the demands of the market economy for commoditised land rights and the rights of indigenous peoples in relation to land has only recently been addressed in a just and equitable way. It was only after centuries of denial, genocidal policies, legal lies and cultural prohibitions that the Australian polity finally addressed the past injustices perpetrated upon the Australian indigenous peoples by acknowledging their just claims to rights on land which had existed since time immemorial and which had been systematically denied for two centuries. The rights of the Australian indigenous people in relation to their land are now enshrined in the common law and national and state legislation.90 The recent Bathurst Declaration on Land Administration for Sustainable Development calls for a commitment to providing effective legal security of tenure and access to property for all men and women, including indigenous peoples and those living in poverty.91 The lack of security of tenure and the failure of policy and law-makers to protect the land rights of indigenous people are identified as two of the most serious problems facing the relationship between land and people.92 90

Mabo v The State of Queensland (No 2) (1992) 66 CLR 186, Native Title Act 1993 (Commonwealth), Aboriginal Land Rights Act 1983 (New South Wales), Native Title Act 1994 (New South Wales) 91

Bathurst Declaration op. cit. at p. II.

92

Bathurst Declaration op. cit. at p.2

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Governments all over the world have committed themselves to the resolution of these problems. The vision of land administration systems is to provide security of tenure. Historically, land administration systems have not dealt with or have not properly dealt with geographical areas under which customary land tenure or where informal land tenure arrangements have existed. Customary land tenure is a legal tenure system based on customary law. Informal tenure is frequently considered to be illegal in that it is not recognised by either statutory State law or customary law. Land administration systems must be developed to reflect these realities always bearing in mind the goal of security of tenure. The question of the security of the rights of Indonesia’s indigenous peoples is the subject of Chapter IV.

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2.

CHAPTER II - REGISTRATION OF LAND RIGHTS AND SECURITY OF TITLE

It was noted at the beginning of this analysis that there is a difference between tenure and title. The foregoing analysis of the Basic Agrarian Law focused on the tenures which exist according to that law from the perspective of the degree of legal security which they have from interference and forfeiture to the State. Apart from the importance of the legal security of land tenures, it is also necessary to consider the impacts of the title registration system on the issue of security of title. The Indonesian title registration system is a negative registration system; although the provisions of Article 19 of Basic Agrarian Law do not necessarily compel this conclusion. Such an assertion is based upon beguiling reasoning. The conclusion that the system is a “negative publication system” is based on the words in Article 19(2)(c) which provides that registration includes “[t]he issue of certificates of rights on land, which will be valid as a strong evidence.” It is argued that because the certificate is only strong evidence, then the system can not be a positive system. Such a conclusion flows from a misunderstanding of the nature and function of a certificate in a land registration system. It is also inconsistent with the repeated claim in the Basic Agrarian Law of legal certainty. No probative value attaches to a certificate. It is a document which is outside the control of the land registration administration system; being handed over to an owner or other person entitled, by law, to the physical possession of it. It is the records of the registration authority (in the Indonesian case, the buku tanah), and not the certificate, which proves ownership. Even in a positive system, the certificate can never be conclusive evidence of anything. The conclusion that the system is negative simply because the certificate is only strong (and therefore not conclusive) evidence ignores the opening words of the Article which are: “In order to guarantee legal security, the government shall conduct land registration…” The meaning of the words “[I]n order to guarantee legal security” are fairly clear in their natural and ordinary meaning and are consistent with the nature of a positive system not a negative one. The Part C Report “Indonesian Land Law and Tenures Issues on Land Rights” notes that “usually, registration of land is a phrase associated with positive registration systems”. 93

93

At page 4-20 op. cit.

49

Furthermore, the elucidation of Article 19 of the Basic Agrarian Law states: “That this law seeks to provide legal certainty concerning land rights is evident from the provisions in it which regulate land registration. Articles 23, 32 and 38 (which impose an obligation on right holders to seek registration of their rights) are intended to enable them to obtain legal certainty concerning their rights”.94

2.1

Alternatives to Negative Title Registration System

In order to compare the alternatives which are available for registration, it is instructive and necessary to consider the fundamental features of the various systems.

2.2

Types of Registration Systems

There are two essential types of registration systems: deeds registration and title registration. Registrations systems are also divided into systems with negative effect wherein registration does not provide any guarantee for the registered title (and in some systems such as Indonesia’s, only provides “strong evidence” of title) and systems with positive effect. In the latter case, the administrative act of registration confers “a higher degree of security of title and protection against adverse claims or, as in the case of the Torrens system, creates and protects the title absolutely”95. Whereas deeds registration can be positive or negative, title registration is always positive.

2.3

Deeds Registration Systems

In deeds systems, the deeds themselves are the source of the title and its transfer and registration is not essential but only for convenience although, in developed deeds systems, the benefit of registration is that the registered deed prevails against unregistered or later registered deeds. Conveyancing is complicated and a transaction requires investigation of the historical chain of deeds and the official registration records. This historical investigation was theoretically required to trace back to the original grant from the state but eventually was limited to what is described as a “good root of title”.96 94

Per the General Elucidation Part IV.

95

Save where the registered owner has participated in a fraud.

96

A good root of title is a deed evidencing a transaction made between the then purported owner with an unrelated party for the market value of the land which has been accompanied by a thorough investigation of the title at the time of that transaction and all subsequent documentary devolutions of the title up to the time of the present transaction.

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The deed operates to transfer title to a new owner who has rights enforceable against third parties. Registration enhances the legal consequences of the deed as the deeds system usually includes complex rules to determine priorities between competing interests. But registration does not otherwise cure defects arising from fraud, forgery or mistake.

2.4

Priority Rules in Deeds Registration Systems

The establishment of a secure title is not of itself sufficient to address the critical issues associated with the acquisition of title to land. In addition, rules of law known as priority rules were also developed to determine disputes between competing interests in the same parcel of land. If two or more interests are granted in the one parcel of land, how is priority between them determined? In the absence of rules developed by the judicial system, legislation is necessary to enable priority between competing interests to be determined, generally, by the order in which the instruments embodying those interests are registered. A comprehensive priority rules structure does not exist in the Indonesian land law system. One might have reasonably expected to find some rules about priorities in Government Regulation No 24 of 1997. However, that regulation is silent on this issue. There is some attention to the priorities problem in Law No 4 of 1996 Re Security Rights on Land and Land-Related Objects. Article 5(2) provides that, in the case where a security title object is encumbered with more than one security title, the degree of importance of each security title shall be determined according to the date of its registration with the relevant Land Office. However, Article 5(3) further provides that, in the case where more than one security title on the same object are registered on the same date, the degree of importance of each of the security titles in question shall be determined according to the date of the making of the deed on security title conveyance. Where the deeds are made on the same day, then the elucidation states that their priority is determined on the basis of the serial number of the respective security right conveyance deed. In the absence of a comprehensive structure for priority rules, there is a clear need for legislation which should be embodied in a new basic land law or a revised government regulation on registration.

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2.5

Relevance of Registration in Deeds Registration System97

The deeds registration legislation does not require registration as a condition precedent to the validity of the deed. However, registration may give an interest priority over a competing interest. Prior to the introduction of the legislative scheme concerning priorities according to the order in which competing interests are registered, the rule was that, where a land owner sold land to one person and then later purported to sell the same land to another person, then the person to whom the first sale had been made would gain priority and therefore protection under the law in a competition between the two competing purchasers. The principle here was that the transfer to the second purchaser failed because “he that does not have can not give”98. That priority rule was modified by the legislation so that if the second purchaser registered his deed before the first purchaser and did not have notice of the first sale, then his interest would prevail over the earlier one. Thus, in conferring priority, registration may give a deed an operation it would not have apart from registration. Under the original priority rule, the second conveyance would have been ineffective to transfer title. Under the rules as modified by the deeds registration legislation, the second conveyance, if it is registered first and is not tainted with fraud or notice, is effective to pass the legal title. Except for priority purposes, however, the legislation does not give a registered deed any greater efficacy that it otherwise would have. So, registration will not render operative a deed impugned for fraud, mistake or forgery. Such deeds are liable to be set aside by the court consistent with the negative nature of the deeds registration system.

2.6

Title by Registration – The Torrens System

By contrast to deeds registration systems, in title registration systems, title to the land derives not from the execution of the document to be registered but from the event of registration itself. Title rests upon the act of the state registration official in registering an instrument evidencing a transfer of title or the creation of a derivative interest rather than upon the act of the party executing the instrument. It is not the parties who effectively transfer the land but the state.99

97

Per Butt P Land Law Op. Cit. pp. 648-673.

98

In English common law, this rule is known as the nemo dat rule (nemo dat quod non habet).

99

Per Butt op. cit. at pages 692-696.

52

Priorities in Title Registration Systems Registration also determines priority between registered dealings. Their priority is determined by their order of registration not by the date of execution. Order of registration is determined by the sequence in which the documents are lodged of lodgment with the registration authority in a form which entitles the instrument to be registered (registrable form100).

2.7

Indefeasibility

The foundation of the Torrens system is the principle of indefeasibility of title. An indefeasible title is one which can not be set aside on the ground of a defect existing in the title before the interest was registered. The following illustrates the principle. A is the registered owner of a right. B steals the certificate of title and, posing as A, sells the land to C, forges A’s signature to a transfer and hands to C the certificate of title and transfer. C, who is ignorant of the fraud, then becomes registered as the owner. Upon registration, C acquires a title that A can not set aside. In contrast, if the land had been governed by the deeds registration system, A could have set aside C’s title and registration would not have cured the forgery. The indefeasibility provision of the New South Wales Real Property Act 1900 is section 42 which provides as follows: 42

Estate of registered proprietor paramount

(1)

Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except:

100

Section 36(6)(b) Real Property Act 1900 (New South Wales). “A dealing shall be deemed not to be in registrable form: (i) if, notwithstanding anything done under section 39 (3), the dealing requires a material correction, alteration or addition, (ii) unless the Registrar-General has authority to use, for the purpose of registering the dealing, the relevant certificate of title, or (iii) unless the dealing is in the approved form....”

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(a) (a1)

(b) (c)

(d)

(2)

the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land, in the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act, in the case of the omission or misdescription of any profit à prendre created in or existing upon any land, as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected: Provided that: (i) The term for which the tenancy was created does not exceed three years, and (ii) in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years. (iii) (Repealed)

In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio.

In addition, unlike the deeds registration system where notice of an earlier interest will disentitle the holder of an registered interest to deny an earlier interest, even a 54

person who has notice of an unregistered interest and who registers with the intention of destroying that interest is safe. Notice is not fraud. The system permits the holder of unregistered interests to freeze the register by the lodgment of a caveat which prevents registration without the consent of the person lodging the caveat.101 A feature of the Torrens system is that registration is not compulsory. No where in the legislation is there any obligation to register. The system is not based upon compulsion or punishment for failing to register. But if the owner of an interest does not register, he does not obtain the benefit of indefeasibility and his interest will be defeated by a later registered interest. In short, it is pure folly not to register. Indeed, compulsion can never be a sound basis for achieving the goals of registration system maintenance. It is presently the only basis upon which maintenance is sought to be achieved under the Basic Agrarian Law and Government Regulation No 24 of 1997 Re Land Registration. Compulsion has failed to achieve maintenance even where the threat has been the extinction of the right in respect of which registration was not sought such as that contained in Regulation of the Minister for Agrarian Affairs No 2 of 1962 (see discussion supra). 2.8

Registration in the Indonesian System

The title by registration system offers real and complete security of title and protection from claims from persons who are not recorded on the Register. Deeds registration systems vary in the effect they give to registration because, essentially, the deeds are effective to pass the title before registration102. As noted above, the land title registration system mandated by the Basic Agrarian Law is a negative system. The Supreme Court of Indonesia has also confirmed that the provisions of the government regulation on land registration are merely administrative and compliance with them is not necessary for a valid land conveyance103. The Supreme Court thereby confirmed the validity of adat transactions which do not rely at all on formal registration structures. This, of course, has rather drastic and obvious consequences for the administration of land right ownership record. Registration is not required in order that title legally pass to the transferee, and, if a transaction is registered, it does not confer any real additional security on the right holder.

101

Indonesian Land Law and Tenures Issues in Land Rights op. cit. at page 4-11.

102

Ibid at p. 4-13.

103

Decisions of the Mahkamah Agung 16 June 1976 No 1082/K/Sip/1976; 19 September 1970 No 123/K/Sip/1970, 12 June 1976 No 952/K/Sip/1974.

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This problem has been realised since before the substantive commencement of ILAP. In the discussion in the Project Preparation Report104, it is noted that the objective to register has not been facilitated by the Indonesian courts which hold that the absence of registration does not make a transaction invalid and that the legal validity of the transaction depends on its requirements; that is, the payment of cash in the presence of a suitable witness in accordance with adat. It was further noted in the ILAP preparation report that an obvious means of overcoming this problem is to legislate “to defer the passing of title to the moment of registration” but that “a measure of that nature would be in direct conflict with adat law” and would therefore “present too great a quantum leap to gain acceptance”. What that argument fails to recognise is that adat has already been so modified by the Basic Agrarian Law and, where the Basic Agrarian Law does make provision for the implementation of adat, successive administrations have failed for forty years to implement the very clear directives in the Law such as Articles 22 concerning the government regulation on the creation of hak milik by way of adat law and Article 26 concerning the government regulation on transactions with hak milik in accordance with adat that this argument is specious. In any event, the Project Preparation Report went on to recommend a structure which was supposed to capture transactions with land by forcing parties to resort to an overly formal and monopolistic mechanism in the form of the Land Deed Official105 which is also in clear contradiction to the tenets of adat. Government Regulation No 24 of 1997 Re Land Registration institutionalised this mechanism106 which, rather than ensuring capture of transactions with the millions of rights which will be registered under this project, its demonstrable result has been quite the opposite; failure to achieve system maintenance.

2.9

Incentives to Seek Registration

It has been noted that “all registration schemes must contain strong incentives to achieve a universe of registration of transactions” and “a registration system which fails to track…transactions..will fail”107. If legal title passes without registration, as it does in the existing system in Indonesia, then there is no real incentive to register. 104

At p. 275. Annex 8 Land Law.

105

Ibid. at pp. 275-276.

106

See Articles 37-40 Government Regulation No 24 of 1997 and the implementing regulations concerning Land Deed Officials: Government Regulation No 37 of 1998 Re Regulation of the Position of Land Deed Officials and Regulation of the Minister for Agrarian Affairs No 1 of 1996 Re Formation of Land Deed Officials. 107

Indonesian Land Law and Tenures Issues in Land Rights op. cit. at page 4-13.

56

In positive systems of registration, the incentive to register is the incentive to become the legal owner. Without registration, a person who takes a transfer is not recognised as the legal owner of the land. By way of illustration, the New South Wales Real Property Act 1900, in addition to the indefeasibility provisions, contains the following: 41

Dealings not effectual until recorded in Register (1) No dealing, until registered in the manner provided by this Act, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any dealing in the manner provided by this Act, the estate or interest specified in such dealing shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature.

(2)

Repealed.

The indefeasibility provisions and these provisions comprise the central pillar of the positive system as embodied in the Torrens legislation in New South Wales. They system is further enhanced by the following provision which bars recovery of land registered under the Real Property Act 1900: 124 Registered proprietor protected against ejectment except in certain cases (1) No proceedings in the Supreme Court or the District Court for possession of any land, or other proceedings or action for the recovery of any land shall lie or be sustained against the person registered as proprietor thereof under the provisions of this Act, except in any of the following cases, that is to say: (a) The case of a mortgagee as against a mortgagor in default. (b) The case of a chargee or covenant chargee as against a charger or covenant charger in default. (c) The case of a lessor as against a lessee in default. (d) The case of a person deprived of any land by fraud as against the person registered as proprietor of such land through fraud, or as against a person deriving 57

otherwise than as a transferee bona fide for value from or through a person so registered through fraud. (e) The case of a person deprived of, or claiming, any land included in any folio of the Register for other land by misdescription of such other land, or of its boundaries as against the registered proprietor of such other land not being a transferee thereof bona fide for value. (f) The case of a registered proprietor claiming under a folio of the Register created before a subsequent folio of the Register was created, in any case where the two folios were created for the same land. And in any case, other than as aforesaid, the production of the folio of the Register, if it is a manual folio, or the production of a computer folio certificate, relating to the folio, if it is a computer folio, shall be held in every Court to be an absolute bar and estoppel to any such proceedings or action instituted before the production of the folio, if it is a manual folio, or before the time specified in the computer folio certificate, if it is a computer folio, against the person named in that folio or certificate as seised of or as registered proprietor or lessee of the land therein described, any rule of law or equity to the contrary notwithstanding. In addition to the near-absolute security afforded to registered title holders by the positive system, the Torrens system also provides compensation from the Sate for losses caused by the principles contained in the above provisions as well as for losses caused by errors in the register caused by the officials of the registration authority. 126 Compensation for party deprived of land (1)

Any person deprived of land or of any estate, or interest in land:

(a)

in consequence of fraud, or

(b) Act, or

through the bringing of such land under the provisions of this

(c) by the registration of any other person as proprietor of such land, estate, or interest, or (d) in consequence of any error, omission, or misdescription in the Register, may bring and prosecute in any Court of competent jurisdiction an action for the recovery of damages.

58

(1)

An action under subsection (1) shall, in any case in which the land to which the action relates has been included in two or more folios of the Register created under Part 3, or a folio of the Register has otherwise incorrectly been created under Part 3, be brought and prosecuted against the Registrar-General as nominal defendant and, in any other case, shall, subject to subsections (3), (4) and (5), be brought and prosecuted against the person:

(a) upon whose application the land was brought under the provisions of this Act, (b) upon whose application the erroneous registration was made, or who acquired title to the land, or the estate or interest therein, through the fraud, error, omission or misdescription. (3) In every case in which the fraud, error, omission, or misdescription occurs upon a transfer for value, the transferor receiving the value shall be regarded as the person upon whose application the transferee was recorded as registered proprietor in the folio of the Register. (4) Except in the case of fraud or of error occasioned by any omission, misrepresentation, or misdescription in the person's application, or in any instrument executed by the person, the person upon whose application such land was brought under the provisions of this Act, or such erroneous registration was made, shall, upon a transfer of such land bona fide for value cease to be liable for the payment of any damages which might have been recovered from the person under this section. (5) In any of the following cases, that is to say: (a) where such person ceases to be liable for the payment of damages as aforesaid, or (b) when the person liable for damages under this section is dead, bankrupt, or insolvent, or cannot be found within the jurisdiction, such damages with costs of action may be recovered out of the Torrens Assurance Fund by action against the Registrar-General as nominal defendant. 127 When actions may lie against the Registrar-General as nominal defendant 59

(1) Any person sustaining loss or damages through any omission, mistake, or misfeasance of the Registrar-General or any of the Registrar-General's officers or clerks in the execution of their respective duties under the provisions of this Act, or by the registration ….. of any other person as proprietor of land, or by any error, omission, or misdescription in the Register, and who by the provisions of this Act is barred from bringing proceedings in the Supreme Court or the District Court for possession of that land, or other proceedings or action for the recovery of such land, estate, or interest or to whose claim every such proceedings or action would be inapplicable may, in any case in which the remedy by action for recovery of damages as hereinbefore provided is inapplicable, bring an action against the Registrar-General as nominal defendant for recovery of damages.

2.10

Deferred Indefeasibility v. Immediate Indefeasibility

In the history of the development of the concept of indefeasibility by the courts in interpreting the positive legislation implementing the Torrens system in Australian jurisdictions, two theories have struggled for predominance. The first is “immediate indefeasibility”. The other is “deferred indefeasibility”. Generally, the theory of immediate indefeasibility has ultimately prevailed An illustration of the way in which the positive title registration system operates to confer indefeasibility is as follows. A is the registered proprietor of the land. B steals A’s certificate of title and, posing as A, sells the land to C. B forges A’s signature to a transfer of the land to C and hands the certificate of title to C along with the forged transfer. C, who is ignorant of the fraud, then becomes the registered proprietor. Upon registration, C acquires a title that A can not set aside by seeking an order from the court. C’s title is immediately indefeasible. In contrast, if the land had been under a deeds registration negative system, A could have C’s title set aside by the court. Registration of the deed would not have cured the forgery. The result of immediate indefeasibility may seem harsh towards A, who loses the land; but it is a necessary consequence of the theory of immediate indefeasibility. A is left only with a personal action against B or, if the positive system is accompanied by a compensation provisions and certain circumstances such as if B is dead, bankrupt, can not be found in the jurisdiction, a right to compensation from the assurance fund. The assurance fund mitigates this otherwise harsh effect of the positive system. But it should be remembered that the positive system need not necessarily be accompanied by a compensation scheme. As noted above, the negative system also has the harsh effect of the innocent purchaser’s registered title being set aside rather than the extinguishment of the defrauded previously registered owner’s 60

title. But that harshness is not exclusive to the Torrens system. It also exists in the negative system which casts the burden of losses caused by fraud on the innocent registered owner who loses both title to the land as well as the valuable consideration which was paid to the fraudster and the defrauded party has no remedy or compensation unless he carried title insurance. An objection raised to the theory of immediate indefeasibility is that it effectively gives operation to a transfer which, because of the fraud, ought not to be given effect to. An earlier theory developed just after the introduction of the Torrens system showed a reluctance by the judiciary to accept the consequences of immediate indefeasibility and the theory of deferred indefeasibility was advanced. Under the theory of deferred indefeasibility, A could seek the court’s order to set aside C’s registration in the circumstances described above. A would not lose the right to have his name restored to the Register as proprietor until both C had become registered and a third party (D), acting on the existing state of the Register (showing C as the registered proprietor) had purchased bona fide for value from C and become registered, C’s title, though not itself indefeasible, would form the basis of an indefeasible title in D. Essentially, where title was claimed under an instrument that was void or voidable, registration of the claimant as proprietor did not overcome the defect. Indefeasibility of title was deferred until the next proprietor was registered.108 The modification of the theory of immediate indefeasibility by the deferred indefeasibility theory may be more suitable as a transitional step towards an immediate indefeasibility system as it permits recovery of the land where its alienation from the true owner has been effected through a forgery and the title has not been passed on to another innocent purchaser.

2.11

Indemnity and Assurance – The Torrens Positive System

It is important to note that the positive system of registration can not, at the initial stages, be accompanied by title assurance or title insurance because the system would be quickly bankrupted by claims109. Insufficient time has been provided for an in-depth analysis of this problem. It has been analysed in the Part C Report and the conclusions in that report are respectfully adopted. What is important to note is that “security of title should not be confused with title assurance or insurance. Insurance is not a substitute for security of title. Registration could theoretically offer title security without an insurance system. 108

Per Butt op. cit. pages 695 – 698.

109

Indonesian Land Law and Tenures Issues in Land Rights op. cit. at p 4-28.

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No Torrens system does this, for the good reason of seeking a reasonable balance between the high level of certainty of interests on the register and compensation for losses caused by the high level of security afforded to registered and later registered interests”.110

2.12

Registration and Law Reform

The Part C Report Indonesian Land Law and Tenures – Issues in Land Rights notes that “a good registration system aims at creating information about land for the State and information about titles for the public for land use and land trading” but “that a focus on mechanical registration is too narrow. Good governance requires a systemic and fair balance between the powers of the State over land and the rights of owners.” 111Even if an exact record of land ownership is initially created, security of ownership only comes about when land registration is combined with land law which delivers tenures “producing the comfort necessary for a civil society, whether or not it encourages local and foreign markets…Registration without meaningful rights is self-defeating and costly. That report concludes that “the drive behind registration should be the establishment of a balance between rights of owners and the state that is capable of delivering good governance and civil peace”. 112 113 The fundamental problem with the Indonesian registration system is that registration does not confer a better proprietary right than is obtained without registration. So long as registration is only evidentiary and not proprietary, registration itself is not a sufficient incentive for owners to seek registration.114 In addition, as the present analysis of Indonesian land tenures under the Basic Agrarian Law shows, the rights on land are not secure from arbitrary termination by the State. In an earlier report by the writer115, it was noted that one of the central concerns of registration is the maintenance of the initial register created following the implementation of systematic land registration. A scrutiny of the provisions of Government Regulation No 24 of 1997 concluded that the regulatory structure pertaining to the maintenance of the system tended to failure in this critical area.

110

Ibid.

111

At p 4-13 – 4-14 op. cit.

112

Ibid.

113

The principle of good governance was recently articulated in Indonesian Law No 28 of 1999 Re State Organiser Which is Clean and Free from Corruption, Collusion and Nepotism. 114

Ibid. op. cit. at page 4 -21.

115

LASA Report on the Review of Government Regulation No 24 of 1997 dated 9 September 1999.

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In addition to the deficiencies in this regulation in relation to maintenance, several other factors which also suggest that initial registration is not followed up by registration of derivative transaction registration. Those factors include the tax imposed on transfers of land 116, avoidance of laws imposing limits on the quantity of land ownership117 and the avoidance of the restrictions on absentee landownership118. The failure of the present registration system to capture derivative transactions has recently been confirmed by an empirical study funded by the World Bank,119 as well as by studies by the ILAP socio-economic adviser.120 The incentives for owners to seek registration are less compelling than is usual in deeds registration systems. While registration might “guarantee rights of individuals on land by enabling third parties to ascertain easily whether or not a certain rights existed and by facilitating the creation of security interests”121 these results are “the trite and inevitable results of any registration system” and are not sufficient to secure registration in the contest of competing rights. “To equate with modern schemes, registration must confer a better property right than is obtained without registration. According registration only an evidentiary and not a proprietary impact ensures that registration..is not an attractive proposition for an owners.”122 Thus the necessity for a system which is based solely on compulsion and potential threat of criminal sanctions contained in Article 52 of the Basic Agrarian Law for failure to comply with the obligations to register contained in the Government Regulation referred to in Article 19. That Government Regulation is PP24/1997 (formerly PP10/1961) which imposes the obligation “to Register” transactions with land.123

116

Undang-Undang No 21 Tahun 1997 Tentang Bea Perolehan Hak Atas Tanah dan Bangunan

117

Undang-Undang No 56 Tahun 1960 Tentang Penetapan Luas Tanah Pertanian

118

Peraturan Pemerintah No 224 Tahun 1961 Tentang Pelaksanaan Pembagian Tanah dan Pemberian Ganti Rugi. 119

World Bank A Social Assessment Study of the Land Certification Program The Indonesian Land Administration Project esp. Chapter 6 Sustainability Part A The Recording of Transactions. 120

Soesengobeng H Social Assessment Impact Study 1 November 1999 Land Administration Systems Australia Pty Limited Jakarta 1999. 121

See also the General Elucidation of Government Regulation No 24 of 1997 Re Land Registration.

122

Per Indonesian Land Law and Tenures Issues in Land Rights op. cit. p. 4-21

123

See, for example, Article 36(2) of PP24/1997 “The right holder..shall register with the Land Office the changes in [the physical or juridical data]”and Article 42 “…the recipient of the bequeathed land shall submit..[the evidence necessary for] the registration of a right transfer resulting from a bequest….”.

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The critical proposition of the recommended reforms advanced by the Part C Report in this regard and from the perspective of the registration system in Indonesian which is the present basis of ILAP, is that “[i]t is essential to convert Indonesia’s registration into a positive system”. That conclusion is respectfully endorsed. Registration alone can not overcome the inherent limitations of the Basic Agrarian Law and without substantive land law reform, registration will not improve the economic functions of land and land titles.124 Furthermore, without effective limitation laws, claims can continue to exist from generation to generation giving rise to yet another source of uncertainty in the registered titles. Consequently, any steps towards a positive system must be accompanied by the enactment of the necessary limitation laws. Attention is also redirected to the fundamental insecure nature of the land tenures themselves discussed above which must also be addressed in any future land law reform program. New priority rules are also essential. 2.13

The First Faltering Step towards a Positive System in Indonesia

The introduction of a positive system would not necessarily be a remarkably dramatic change because, although the existing system is negative, a positive element was introduced in Article 32 of Government Regulation No 24 of 1997 which provides that: “In the case of a land parcel for which a certificate has been legally issued on behalf of a certain individual or a corporate body that has acquired the land parcel in question in good faith and has in reality been possessing it, any other parties think they have rights thereon can no longer claim for these rights in the case where, within five (5) years following the issuance of the said certificate, they never raised their objections in writing to the holder of the certificate and to the Head of the relevant Land Office and never filed a law suit with the court over the possession of the land parcel in question or the issuance of the said certificate.” The enactment of this provision has been described as the introduction of a positive element into the negative system. However, this provision is problematical for several reasons and does not address the problem associated with the uncertainty of registered title which is inherent in the negative system and which is compounded by the uncertain nature of the tenures themselves. 124

Indonesian Land Law and Tenures Issues in Land Rights op. cit. at p. 4-28.

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To begin with, the vehicle for this provision is a government regulation whereas the negative system is entrenched by the Basic Agrarian Law is an Act. The hierarchical structure of law-making instruments in Indonesia in which an Act is a higher-level legislative instrument than a government regulation means that in the event of inconsistency or conflict between an Act and a government regulation, the inconsistency or conflict must be resolved by regarding the Act as prevailing over the government regulation. Consequently, Article 32 can not be considered as a legal provision whose validity is beyond question. The elucidation of this provision also raises problems and again demonstrates the inadequacies of adat law as the basis of the national land law system and the need for new central State legislation to deal with the problems posed by the existing system. It states that: “One shortcoming of the negative publication system is that the party whose name is recorded as the right holder in a land book and certificate is always faced with the possibility of a claim from another party who thinks s/he owns the land parcel. Generally, this shortcoming is overcome by using the so-called “acquisitieve verjaring” or “adverse possession” institution. Our land law, which is based on adat law can not use this institution because our adat law does not recognise it. However, in our adat law, there is an institution which can be used to overcome the said shortcoming of the negative publication system, namely, the so-called “rechtsverwerking” institution. Under our adat law, one who has left his/her parcel idle for a certain period of time, after which the land parcel in question is acquired in good faith and worked upon by another party shall lose his/her right to make a claim for the land parcel in question. The Basic Agrarian Law provisions on the nullification of land rights due to abandonment (Articles 27, 34 and 40) are in line with this institution.” Thus, what is stipulated in this paragraph in not a new legal provision; rather it is an application of a legal provision which has existed in adat law, which has now become part of Indonesia’s National Land Law, and – at the same time – it is a concrete way of applying the Basic Agrarian Law provisions concerning abandonment.” Article 32 of Government Regulation No 24 of 1997 can not properly be described consistent with the provisions of Basic Agrarian Law concerning abandonment. Article 27 of the Basic Agrarian Law provides that the right of ownership is annulled if the land falls back to the State because the land is abandoned. Abandonment of the land means that the right is cancelled and the land becomes State land. A new right on state land can not be acquired by possession of any length of time. Similarly, Article 34 concerns the extinguishment of hak guna usaha 65

which is a right which can only be granted on State land. So, if it is neglected, then the land reverts to unencumbered State land and, again, possession in good faith can never be the basis for the acquisition of a right on State land under the existing law. This provision is another instance of what Gautama describes as a law which is as different to traditional adat as Western law is. Under adat law, if land is abandoned, it reverts to the full control of the community and any new rights must be acquired in accordance with the local adat. It does not result in the automatic creation of a new right by someone in actual possession. Article 32 can not be properly described as founded upon adat. The emphasis on the certificate in Article 32 is also problematic. Nothing should depend on the certificate. All emphasis must be placed on the land book.

2.14

Article 32(2) and The Civil Code

The provisions of the Civil Code may also impact on the validity of Article 32(2). Article 1963 provides that an individual, who in good faith acquires an immovable object…with a possession of twenty years shall acquire a hak milik on the said object by way of limitation. Further, Article 1967 provides that all legal claims…shall become null and void because of limitation with the lapse of 30 year period. These provisions appear to be still a part of Indonesian law and directly relevant to the determination of the validity of Article 32(2). However, the issue of the application of the limitation law to land requires further clarification and elucidation. The two provisions cited above contain conflicting periods of time. What is apparent from the foregoing discussion of Article 32 of Government Regulation No 24 of 1997 Re Land Registration is that it is not a panacea for the multi-faceted problems of the negative system of registration which has been implemented under the Basic Agrarian Law. Rather, what is required is the review of the Basic Agrarian Law itself. 2.15

Some Issues Associated with the Introduction of a Positive Registration System

One objection raised to the proposal to move from a negative system to a positive system is that persons who have been wrongfully deprived of their land will not be able to recover it because registration confers indefeasibility of title. What this delusive argument fails to realise is that under either system, some one will lose out where there has been a wrongful deprivation.

66

Under the negative system, a defrauded land right holder can always apply to the court for the return of the land even where the currently-registered owner has paid valuable consideration and acquired the right in good faith. Without insurance, the innocent registered owner whose title is upset and returned to the defrauded owner and who can not recover from the fraudster, must bear the loss. In a positive system, in the absence of insurance or assurance, the innocent owner keeps the land and the defrauded owner must, if he is unable to recover from the fraudster, bear the loss. The change from a negative registration system to a positive one simply moves the burden of losses from the innocent purchaser to the innocent defrauded owner. Neither system is capable of accommodating both the innocent purchaser and the innocent prior owner unless the State intervenes and provides compensation. There is no real reason why a person who has lost his land through fraud should be treated any differently from the innocent purchaser for value. Both have the been the victims of crime. But where the positive system of title registration (or title by registration as the Torrens system has been described) is augmented with the State guarantee and compensation for losses caused by the operation of the principles of the positive system, then is there achieved a perfect world of registration

2.16

The Positive System and “Land Theft”

It might also be argued that positive registration will protect so-called “land theft”. Indefeasibility does not protect fraudulently acquired title while it is still in the hands of a fraudster. Deferred indefeasibility will also not protect an innocent purchaser who has acquired the title pursuant to a fraudulent instrument. If someone is alleging that a title has been acquired through the process of land theft, it will be necessary for them to adduce evidence to establish that. If that evidence is found and presented and the theft established, then what remains to be determined by a court is the remedy. The remedy in a negative system is the return of the land. In a positive system, the remedy is converted into monetary compensation in the form of a damages award but the land can not be returned from an innocent purchaser, subject to the doctrine of deferred indefeasibility described above. Of course, damages will only be an effective remedy if the fraudulently party can be found and has assets against which execution of an order to pay damages may

67

be made. If that is not the case, then only compensation provided by the State will offer an effective remedy. In the end, if the State is unable or unwilling to provide compensation, then the loss of the land must be borne by the person from whom the land has been “stolen”. In this case, then it must be admitted that the ultimate result will be that the loss will have to be suffered by the defrauded person. But that is not a peculiar situation as far as the law in respect of such issues concerning theft of assets other than land. This disadvantage may fall heavily on the persons who have lost their land through “land theft” but this disadvantage is far outweighed by the advantages which the positive system creates and which are discussed herein. One substantial benefit which flows from positive registration which can never be achieved by the negative is that there is an effective incentive to register thus ensuring the universal goal of registration systems – maintenance. In addition to the legal security conferred on a registered owner by the positive system, the Register is able to function as an effective tool for the implementation of other government policies which are dependent on a reliable record of land ownership. Furthermore, disputes are taken outside the registration system. These additional advantages along with the essential legal mechanism which attracts holders of rights to seek registration alone justifies the change to the positive system. But there are many other benefits which flow from positive registration which are discussed further below.

2.17

Advantages of Registration of Title to Developing Countries

In the developed economies which adopted the Torrens system, registration of title was introduced for the purpose of simplifying the conveyancing process. Conveyancing of interests in land was greatly simplified by this system with its use of simple forms and the abolition of the need to investigate the history of a registered owner’s title. It has been described as essentially a device designed to benefit private land owners rather than in terms of social benefit or benefit to the State. The benefits which have accrued to the State in the form of increased revenues as well as more rational decision making in policy formulation have been coincidental but have now become an enduring feature associated with the system. Furthermore, the creation of an indefeasible title has meant that investors and lenders can act confidently in relation to their decisions about the land. The inchoate benefits of positive title registration systems such as rational decision making and resource allocation are often not seen or acknowledged but they undoubtedly flow from the positive register and they transcend the financial aspects of the system. 68

In addition, the process has remedial effects because upon first registration, defects in the title which in unregistered or non-registration of title systems are the subject of repeated investigation every time the land is dealt with, are permanently remedied by registering the title as absolute with the proviso for the interface of a provisional title which will eventually be transformed into an absolute title. The third advantage described by Rowton Simpson is the provision of an accurate plan based upon the latest revision of the survey record identifying the land and the fourth is the issue of a certificate containing a facsimile of the register and of the plan (although this fourth advantage is a dispensable one and in theory ought not to exist as the register is the only source of proof of title). The simplification of the land transfer and derivative right creation is another advantage achieve through the provision by this system of simple forms and procedures for effecting such conveyances of land rights and interests. Registration of title not only obviates the investigation of title but also enables any contract to be limited to current issues affecting the enjoyment of the rights in question because the seller does not have to deal in the contract with issues such as special stipulations as to past title and the identity of the land nor does the buyer have to assume the risk of past defects which impugn the integrity of the title and hinder the subsequent dealing with the land whether by way of transfer or mortgage or lease. A bonus of all of this is greatly reduced costs and errors can be more readily detected and rectified upon examination by the registration authority while the parties to the present transaction are readily available. In other systems, errors may not be detected for years when it is too late to rectify as between the relevant parties. The unambiguous and brief definition of the land is an advantage which does not require much further elucidation. Only, it should be remembered that this, and all other benefits of registration of title will only avail if the system is self-sustaining a matter about which there has been much discussion in this course. These advantages will not be achieved by any other system and reforms which fall short of the prescriptions of the registration of title system contain within them the seeds of their own destruction and we can reasonably expect those projects which have failed to come to terms with these issues will also fail generally and have to be abandoned.

69

Rowton Simpson also asserts that registration of title is also a means of improving the land law system125. It contains a relatively simple substantive land law structure compared to systems which require title and boundary investigation. Here, the reforms of the nature advocated by Rowton Simpson, contain the potential to render existing land law obsolete and implies that there must also be a radical review of the existing substantive land law. In all of the contemporary reforms, such substantive reform has not been contemplated or implemented. In Indonesia, the review of the substantive land law and the effect of registration as conferring only strong not conclusive evidence of rights to land was not the subject of the necessary analysis to determine whether, in the absence of such a substantive land law reform, the implementation of systematic registration was worth pursuing unless such reforms were undertaken.

2.18

Precis of Main Benefits of Title By Registration

The main benefits which title by registration confers, when it is “competently established and efficiently operated” are further discussed briefly hereunder. An inspection of the record shows at all time the legal situation of the land so any person dealing on the evidence of the register can do so with confidence. The abolition of the constantly repeated relatively expensive and sometimes inconclusive examination of title every time a transaction occurs and the substitution of one final and authoritative examination by the State. As a result of this examination is the formation ….of a record of proprietors of land with a title good against the whole world, subject only to such mortgages and other burdens as are set out in the Register or…which are declared by the legislation to be overriding interests. The registered title needs no further investigation because the law provides that the register shows the state of the title up to date and complete at all times (except for interests which are expressly excepted in the actual legislation itself or in subsequent legislation). It is only this provision of the law which confers on the register that special quality which distinguishes the title by registration from registration of deeds. No other system enables title to be presented with the

125

Rowton-Simpson Land Law and Registration at p 168.

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continuous finality which is the unique characteristic of title by registration.126 It is this continuous finality which reduces disputes and litigation. All transactions with land can be effected with security, simplicity and affordability (simplification of conveyancing). The acquisition and retention of land by small proprietors is greatly facilitated. A registered proprietor can borrow money more easily and cheaply. The register at all times shows the legal definition of the land and its ownership as well as derivative rights thereby abolishing the retrospective investigation of title. It is this feature of certainty of title which makes the land reliable security for loans of money. The loan will still depend on the value of the land and the availability of credit and to a large extent on the capacity of the land owner to repay the loan. But the loan will not be withheld because of unsoundness of title. In recent literature, it is asserted that land registration will undoubtedly lead to the availability of credit by the land being made available as secure collateral but it must be remembered that registration alone is not a sufficient condition for the provision of credit to land owners. Once registered, absolute security is given to the mortgagee. The register of title can be utilised in tax collection, land reform, and land use.127 Indeed, “the administration of every public service and every branch of national activity connected with land is greatly assisted in the execution of its work by the existence of an upto-date unimpeachable map and record of landed property throughout the country.” As West notes,“[a]s an institution a system of land registration must stand or fall on the service it provides to the state, to the local community and to the individual land-owning member of society. The idea that it is a sterile and technical exercise must be dispelled. Instead, it must be recognised as a social and economic service, part of the administrative infrastructure so necessary for the developing of an increasingly complex economy. It may be argued that experience to date in introducing registration of title to developing countries has not been encouraging; that existing systems are faltering and do not warrant the expenditure they entail; or that a titles register is too

126

Rowton Simpson op. cit. Chapter 9.

127

See Rowton Simpson op. cit. pp 169-170.

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sophisticated an institution for operation in a developing country at the present time. But what alternative do we have, except confusion in land affairs?…We must not be too discouraged by past failures but must learn from bitter experience. In our present state of knowledge, registration of title is the best we can do to provide stability, security and clarity in land ownership and a basis for the structural and physical planning of the future”128. The question is not whether registration of title can be afforded but whether any country which recognises private ownership and allows dealing in land can afford to do without it because there is no other system which “when competently established and efficiently operated makes the creation and transfer of interests in land so simple, quick, cheap and certain or which if such be the policy makes possible the control of transfer and other dealings. This is incontrovertible”.129

128

West D. “The Role of Land Registration in Developing Countries” 102 Chartered Surveyor November 1969 212 129

Rowton Simpson op. cit. at pp 173-174.

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3.

CHAPTER III - ILAP, THE MARKET AND THE BASIC AGRARIAN LAW 1960

3.1

Introduction

The main objective of ILAP is “to foster efficient and equitable land markets and alleviate social conflicts over land through acceleration of land registration…and improvement of the institutional framework for land administration…”130 ILAP is supposed to “foster more efficient and equitable land markets in terms of: more efficient and transparent land transactions, less risk in land-related investment, mobilisation of financial resources through the use of land as collateral; and provisions for longer-term investment towards more sustainable land use”.131 It is stated in the World Bank Staff Appraisal Report that “[e]fficient and equitable land markets are an important basis for modern economic development since they would quickly and flexibly accommodate changes in land use, allow fair land transactions, and mobilise financial resources through collateral arrangements. A comprehensive, accurate and efficient land registration system is a sine qua non in developing such markets since it enables land to be freely traded, by reducing or eliminating the risk perceived by purchasers and vendors of land”.132 However, contrary to such analyses, registration, while it is a universal feature of market economies and is a necessary condition of a functioning land market, it is not sufficient for the operation of a land market. The land market in Indonesia is dysfunctional for far more fundamental reasons than the lack of comprehensive registration and the review of the land registration legislation was a totally inadequate response to the problems with the land market. Unless these problems are properly addressed, it is fairly certain that the main objective of this project as expressed in the Staff Appraisal Report can not be realised. Reforms to the land registration alone are entirely insufficient. Tenures must also be freed from the strictures of pervasive State control.

3.2

The Market and the Basic Agrarian Law

The principle cause of land market dysfunction in Indonesia is the Basic Agrarian Law itself. There are numerous provisions in this law which either inhibit the

130

Staff Appraisal Report Indonesia Land Administration Project 16 August 1994 World Bank Report No 12820-IND Agriculture Operations Division Country Department III East Asia and Pacific Region p. 10. 131

Ibid. page i.

132

Ibid. at page 2.

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development of an open and free land market or which are in direct contradiction to the dictates of the land market. It is proposed to examine these provisions and to determine how they conflict with the stated objective of ILAP.

The provisions of the Basic Agrarian Law in this regard are: Article 6:

All rights on land have a social function.

Article 7:

In order not to harm the public interest, excessive ownership and control of land are not permitted.

Article 9:

Only Indonesian citizens may have the fullest relation with the earth, water and airspace….

Article 10(1):

Every person and every corporate body having a certain right on agricultural land is in principle obliged to cultivate or to exploit it actively her/himself while avoiding extortionate methods.

Article 17(1):

With due regard to the provisions of Article 7 and in order to achieve the aim meant in Article 2(3), the maximum and/or minimum area of land which may be owned by a family or corporation under any right mentioned in Article 16, shall be regulated. (Law No 56 of 1960 Re Determination of the Area of Agricultural Land)

Article 17(3):

The land in excess of the maximum limit meant in paragraph (1) of this Article shall be taken by the government against compensation and shall be further distributed among the people who need it according to provisions provided by Government Regulation.

Article 21(1):

Only an Indonesian citizen may have the 74

right of ownership. Article 24:

The use of land with the right of ownership by someone other than the owner shall be restricted and regulated by legislative regulation.

Article 26(2):

Each sale and purchase, exchange, gift, bequest by will and other acts which are meant to transfer the right of ownership directly or indirectly to a foreigner, to a national possessing a foreign nationality in addition to his Indonesian nationality or to a corporation, except those which have been determined by the government as meant in Article 21(2) are cancelled for the sake of law and the land falls back to the State with the provision that rights of another party incumbent thereon remain valid and that all payments which have been received by the owner may not be reclaimed.

Further legal obstacles to a free land market and interests in land exist in other land-related laws such as the notorious izin lokasi legislation133 and the Security Title Act.134

3.3

The Social Function of Rights on Land

Article 6 of the Basic Agrarian Law states that “all land rights have a social function”. This is not really a statement of law but a statement of fact. Land rights in any society have a social function. That is their essential nature. The elucidation of this provision does not clarify the legal meaning of this Article. The General Elucidation of the Basic Agrarian Law states that what this means is that “whatever land right one has, it is not justifiable for the individual..to use or not to use his land exclusively for his own interests, much less so if this

133

Presidential Decrees Nos 97 of 1993 and 41 of 1996, Regulation of the Minister of State for Agrarian Affairs No 2 of 1993 Re Procedures for Companies Wishing to Invest Capital to Obtain Location Permits and Land Rights. 134 Undang-Undang No 4 of 1996 Re Hak Tanggungan on Land and Land-Related Objects.

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disadvantages the people. Rights on land can not be used for individual purposes only but are subordinate to the higher interests of the community and the State. Land must be used in accordance with the character of the right…Due to its social functions, it is only appropriate that land should be well taken care of so as to improve its fertility and to prevent it from damage.” This provision is the basis for the subsequent provisions in the Basic Agrarian Law which prohibit absentee ownership and the use of land as a commercial commodity or as an object of investment or speculation.135136 It also seems to be a basis for the provisions of the Basic Agrarian Law which extinguish land rights through abandonment and legislation such as Government Regulation No 36 of 1996 discussed above.

3.4

Prohibition on Absentee Ownership and Limits on Areal Quantities

The provisions concerning the restrictions on absentee ownership, the requirement for personal use of agricultural land and the limits on ownership of agricultural land have, according to some analysts, failed to prevent the exploitation of land and labour and, more importantly, have diminished the land market. In addition, they threaten the accuracy of the land ownership record as people seek to avoid their provisions.137 These “blunt and unworkable tools” are also indefensible on economic grounds. According the Part C Report Indonesian Land Law and Tenures Issues in Land Rights, the theory behind requiring personal use and limits on ownership is the assumption that absentee ownership is equivalent to speculation while in a proper market, absentee land ownership and land accumulation are “effective allocators because they tend to price land at the opportunity costs and yield potential”. Ownership of large amounts of land is not necessarily “bad ownership” and, in fact, can serve desirable social and economic purposes138. Large-scale agricultural production is the norm in developed economies. It is the nature of the use of the

135

“Evolutionary Change in Indonesian Land Law Traditional Law (Adat) Perspectives” Final Report Arcadis Euroconsult 7 April 1999 Land Administration Project Part C Support for Long Term Development of Land Management Policies Topic Cycle 4 National Development and Planning Agency and National Land Agency at p. 4-2 citing Harsono B 1997 Hukum Agraria Indonesia: Sejarah Pembetukan Undang-Undang Pokok Agraria, Isi dan Pelaksanaannya Jakarta Djambatan p pp. 263-268. 136

Speculation is a salient feature of a land market.

137

See Indonesian Land Law and Tenures op. cit. at p. 7-17.

138

Ibid.

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land and not its quantity which determines whether massive land ownership is exploitative or not. As the Part C Report concludes, “to the extent that the system fails to admit absentee owners, it denies Indonesians the capacity to create markets in land interests, arguably the greatest land market available”139. This is a consequence of the State assuming that it, rather than the market, can efficaciously allocate land. The untenable nature of such central command-orientated economic planning, in view of the collapse of such economic principles as the century draws to a close, does not require further elucidation here.

3.5

Prohibition on Corporate Ownership of Hak milik

Comparative studies show that Indonesia is virtually alone in regard to the issue of ownership of land by corporations 140. Under Indonesian land law, only a limited class of corporations may own hak milik. This is a consequence of Articles 9, 21(1),(2) and 26(2) of the Basic Agrarian Law. The implementing regulation pursuant to those Articles is Government Regulation No 38 of 1963 Re Designation of Legal Bodies Which May Own Hak Milik which allows only state banks, agricultural cooperatives, religious bodies and social bodies to own hak milik. Consequently, corporations may only obtain the lesser rights of hak guna usaha (Article 30(1)(b)), hak guna bangunan (Article 36(1)(b)), hak pakai (Article 41c) or hak sewa untuk bangunan (Article 45b). The corporations must also have been incorporated in accordance with Indonesian law and be domiciled in Indonesia. These rights are far more limited than the hak milik and more prone to termination and reversion to state control as is evident from the description and discussion of them earlier. The Basic Agrarian Law, by denying corporations the right of ownership, denies substantial opportunity to undertake investment and land development. Apart from forcing entities to resort to artificial mechanisms to overcome the limitations imposed by the restricted nature of the rights on land which corporations may acquire, the most dire consequence is that “the Indonesian public is not allowed to collect together to obtain and develop land through the most influential and successful method of capital acquisition and development ever invented – the

139

Ibid.

140

Indonesian Land Law and Tenures op. cit. pp. 7-20 – 7-21.

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corporate organisation which limits liability, allows share transfer and has perpetual life”. Allowing corporations to own hak milik would have be an immediate stimulus to the land market and, “more importantly, it would allow [Indonesians] the same opportunities for capitalisation that are available to market economies everywhere in the world”. 141 Another consequence of the prohibition of the ownership of hak milik by corporations is that the hak milik which is owned by an individual and is to be acquired by a corporation for its own uses or for the purposes of further development is that the hak milik must be surrendered to the State and an application made to the State for the grant of one of the rights to which a corporation is entitled to own such as hak guna usaha or hak guna bangunan. This also reinforces the State’s control.

3.6

Restrictions on Foreign Ownership

Articles 9, 20, 21, 26, 30, 36, 46, 54, 55 of the Basic Agrarian Law and Articles I and II of the Conversion Provisions all deal with or mention the issue of foreign ownership and demonstrate the obsessive opposition to foreign ownership of land in Indonesia at the time of the drafting of the Basic Agrarian Law.142 Having regard to the 350 years of colonial domination, ruthless exploitation of the land and violent oppression of the Indonesian people by the Dutch, it is hardly surprising that such sentiments were pivotal to the post-colonial State’s policies, laws and ideology. However, in the present day, the restrictions in the Basic Agrarian Law on foreign ownership have drastic consequences for the land market and the economy in general. In Indonesian, the land law is the primary mechanism to control investment in land by foreigners. Other legal mechanisms such as foreign exchange controls, investment approval systems, zoning legislation and land tax can achieve the same results. The restrictions on foreign ownership constitute a significant obstacle to foreign investment and, in the era of economic globalisation,

141

Ibid.

142

These prohibitions are duplicated in Government Regulation No 40 of 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai – see Articles 3, 20 in relation to hak guna usaha and hak guna bangunan so that if any of those rights devolve or are transferred to a person who is not an Indonesian citizen or a corporation which has not been incorporated according to Indonesian law and is domiciled in Indonesia and that person or entity fails, within one year to transfer the right to an Indonesian citizen or corporation, then the right is void and, if the land is State land, the land reverts unencumbered to the State.

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impede capital flows and thereby destroy economic opportunities for the nation.143 Capital will move to places where these restrictions do not exist. Nationalist groups within Indonesia assert that the admission of foreign ownership of land is tantamount to the loss of sovereignty and control. But that has not occurred in jurisdictions which have permitted foreign ownership of land. It has been noted elsewhere that, while foreign ownership may cause some problems, for example, Japanese investment in the USA in the 1980’s or northern Europeans purchasing Mediterranean residential properties, it is important to recall that these phenomena are cyclical when excess capital is generated in the dynamic economies. The Japanese suffered heavy losses and retreated from their US purchases and the trend noted in Europe diminished. The essential fact is that land is immobile. While ownership may change, no one can physically take the land away and it is more likely to be used for productive purposes by foreigners who seek to maximise their capital.144 Amongst the objectives of ILAP as stated in the World Bank Staff Appraisal Report is the encouragement of foreign investment. Foreign capital demands security in relation to the land upon which it operates. So long as the prohibition of foreign ownership is embedded in the law, capital will relocate to other jurisdictions which do not have such restrictions. The hasty flight of foreign capital in times of economic or political crises is made easier because the foreign corporations do not have permanent rights of ownership on the land. The movement of foreign capital out of Indonesia since the 1997 economic crisis continues to be a critical factor in Indonesia’s recovery. Some reports estimate that, as at November 1999, approved foreign investment is negative 76%.145 In his speech to the Indonesian House of the People’s Representatives by the Minister for Agrarian Affairs upon the introduction of the Bill, the Minister stated that: “The struggle to reform national agrarian law is closely linked to the history of the struggle of the Indonesian nation to free itself from the grip, influence and remnants of colonialism; particularly the struggle of the farmers to free themselves from the restraints of the feudal system over land and exploitation by foreign investors.” The first operational part of the Basic Agrarian Law therefore immediately revokes the principle bases of the colonial land law imposed by the Dutch which is discussed in some detail in Chapter I. So long as such sentiments

143

Indonesian Land Law and Tenures op. cit. at p. 7-22.

144

Per Land Acquisition and Development Controls Final Report Part C Land Administration Project at p. 7-2.

145

Asian Wall Street Journal 24 November 1999 page 5 Thompson Global Markets. Approved domestic investment in negative 51.2%

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are expressed in the law, it will not be surprising if the goal of encouraging foreign investment is not optimally achieved. It is also worth noting the observation made in the Part C Report Indonesian Land Law and Tenures Issues in Land Rights that “Unlike other countries, Indonesia uses its tenures as primary social and economic policy tools to prevent corporate and foreign ownership of land, to limit the amount of land available to an individual and to prevent ownership by groups and this has deterred the emergence of a civil society. The unfortunate reality is that a tenure system can not answer the fears of land concentration, land grabbing and abuse of power. By focusing on tenures rather than taxation, planning and investment controls and allocations, distortions in the distribution pattern are further entrenched and opportunities for enduring and reasonable land allocations are lost. Land transfers are inhibited, changes in ownership are concealed and other mischiefs are apparent.146

3.7

Further Issues for the Land Market - Law No 4 of 1996 Re Security Titles on Land and Land-Related Objects

A cursory examination of this important law, which implements Article 51 of the Basic Agrarian Law, reveals that it too poses significant issues for the market. The Part C Report on Indonesian Land Law and Tenures – Issues in Land Rights notes that this law does not give effective remedies to a mortgagee which are “familiar in the commercially developed systems of land mortgage”.147 It does not entitle a mortgagee upon default by the borrower to sell the land by private treaty. Private treaty is only possible with the agreement of the borrower and where doing so will increase the price of the said object to the maximum to the benefit of all interested parties148. Nor does it confer on the mortgagee the right to possession of the land, the right of foreclosure or the right to appoint a receiver.149

146

Op. cit. at pp. 7-28 – 7-29.

147

Ibid. at p. 7-25.

148

Article 20(1), (2) Law on Security Titles

149

c.f. Conveyancing Act 1919 (New South Wales) Section 109 Powers of mortgagees and certain chargees

(1) A mortgagee and a chargee shall by virtue of this Act have the following, namely: (a) A power to sell or to concur with any other person in selling the mortgaged or charged property, or any part thereof, either subject to prior charges or not, and either together or in lots, in subdivision or otherwise, by public auction or by private contract,

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The immediate right to possession is not only the greatest incentive to avoid default by the borrower but entitles the mortgagee to the rents and profits of the mortgaged land and the mortgagee can continue the borrower’s business in preparation for any sale of the land.150 The right to appoint a receiver is important for commercial securities. A receiver may demand and recover all the income of the property exercise any powers which may have been delegated by the mortgagee. The right of foreclosure is not available to the mortgagee. The critical deficiencies of the Law on Security Rights have obvious and profound impacts on the security market and require substantial revision to permit creditors effective remedies when borrowers default on loans. Additional problems for security right holders arise from the insecure nature of the tenures which may be the subject to the security right. Article 4 of the Act provides that hak milik, hak guna usaha, hak guna bangunan and hak pakai on State land may be the subject of a security right. In the discussion of those tenures in Chapter I, it was noted that those tenures are not legally secure because they may be nullified and the land revert to the direct control of the State for various reasons. Neither the Law No 40 of 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai nor Government Regulation No 36 of 1998 Re Control and Utilisation of Abandoned Land deal with the position of security right holders when the right which is encumbered with the security right vanishes and the land reverts to the State. Law No 40 of 1996 indeed confirms that upon cancellation of the right, the security right is also cancelled.151 Law No 4 of 1996 Re Security Rights provides that “the nullification of a security right as a result of the nullification of the land right which is encumbered with the security right shall not result in the nullification of the debt guaranteed with the security right in question”.152 That is cold comfort to the creditor who has, upon cancellation of the land right, lost the only effective means of recovering the

(b) A power at any time after the date of the instrument to insure..against loss or damage by fire any building or any effects or property of an insurable nature whether affixed to the freehold or not being or forming part of the mortgaged or charged property,... (c) A power to appoint a receiver of the income of the mortgaged or charged property (d) A power, while the mortgagee or chargee is in possession, to cut and sell timber. (e) A power to sever and sell fixtures apart from the balance of the mortgaged or charged property. 150

Indonesian Land Law and Tenures op. cit. at p. 7-23.

151

See Articles 15(2), 33(2) and 53(2) of Law No 40 of 1996.

152

Article 18(4) of Law on Security Rights on Land and Land-Related Objects

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money lent to the right holder. Furthermore, the rights, apart from hak milik, are limited in time and that again increases the risk for the lender. These deficiencies in the land law and security law systems need to be redressed. If the Law of Security Rights is not revised and the insecurity of tenures removed, then those laws will continue to inhibit one of the stated goals of ILAP; that is, the mobilisation of financial resources through the use of land as collateral.153

153

Staff Appraisal Report at p. 2.

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4.

4.1

CHAPTER IV - HAK ULAYAT AND THE BASIC AGRARIAN LAW

Introduction

Further compelling reasons for the reform of the Basic Agrarian Law arise from the issue of hak ulayat which can not be admitted as a right over land in either the Basic Agrarian Law or the registration scheme constructed by Government Regulation No 24 of 1997. The earlier part of this paper examined the lack of security of Indonesian land tenures. Legal security of tenure is also a critical issue for indigenous peoples. It is therefore now proposed to briefly examine Indonesian land law from this perspective. Hak ulayat is usually described as the customary right of local indigenous communities to manage the land within their traditional territories. Early Dutch scholars described this concept as the “right of disposal” and “sovereignty” over the land.154 Many traditional communities continued to exercise rights over the land within their territories. In modern times, as in the past, much conflict between the traditional communities and the State has been generated as the State sought to exploit the vast natural resources within the traditional territories. Such exploitation takes the form of the granting by the State to private capital of forestry and mining concessions, rights of exploitation for the establishment of plantation cultivation and the implementation of transmigration policies and laws. The exploitation of land which is the subject of hak ulayat has been implemented without a just settlement with its indigenous peoples. The assertion of the superior authority of the State, administrative failures in law enforcement and a general political disregard or denial of the traditional rights of those people has resulted in cultural destruction, social displacement and environmental degradation.

4.2

Hak Ulayat in the Basic Agrarian Law

It is claimed that hak ulayat is recognised and protected in the Basic Agrarian Law. But a closer examination of the provisions of this law shows that hak ulayat does not enjoy any substantive recognition and protection under this law. Hak ulayat 154

Van Vollenhoven in Indonesian Adat Law (beschikkingsrecht); Ter Haar (hak pertuanan) op. cit. at p.78.

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must, under the present legislation, crumble along with the traditional social organisations in the face of the superior legal and executive forces of the State. Article 3 of the Basic Agrarian Law provides as follows: “In view of the provisions contained in paragraphs (1) and (2) of Article 2, the implementation of the ulayat rights and other similar rights of adat-law communities – as long as such communities in reality still exist – shall be such that it is consistent with the nations interests and the interests of the State based on national unity and shall not contradict the laws and regulations of higher levels.” The General Elucidation of the Basic Agrarian Law states that “This provision rests on the new agrarian law’s recognition of the existence of hak ulayat..which has never been officially recognised in law. The lack of recognition has resulted in the fact that during the period of colonisation, the implementation of agrarian regulations frequently neglected the existence of hak ulayat. The fact that hak ulayat is mentioned in the Basic Agrarian Law basically means that the said right is recognised. Therefore, in principle, hak ulayat will be taken into consideration as long as the said right in reality still exists in the law community n question.” The elucidation gives the example that, in the granting of a land right (such as the right to cultivate (hak guna usaha)), the relevant law community will first be heard and given some recognitie (recognition) to which they are entitled in their capacity as holder of the hak ulayat in question. However, the elucidation goes on to state that “it would not be justifiable for an adat community….to reject a plan on large-scale clearing of forests on an on-going basis” which is required for the implementation of projects for food production or relocation of people. Experience shows that regional development is impeded by problems related to hak ulayat. The interests of the adat community should be subordinated to the broader interests of the nation and of the State and the implementation of hak ulayat should also be consistent with the broader interests.” Nor would it be justifiable, according to the elucidation, for an adat community to adhere to “the contents and implementation of their hak ulayat on an absolute basis as if the law community in question were disengaged from other adat communities and other regions in the current atmosphere of the State as a unity”.

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The qualifications in the actual provision of the Basic Agrarian Law and its elucidation result in only nominal recognition of hak ulayat. While it is said that hak ulayat is recognised by the Basic Agrarian Law, in reality, this recognition is tokenistic and superficial. The adat community may continue to exercise its right of disposal only so long as the government does not dispose of the land. Once the government plans to dispose of the land, the adat right of disposal must yield to the national interest of the State. There are numerous contemporary schemes which recognise and protect the nonindividualistic rights of indigenous peoples to land. Despite attempts to mystify hak ulayat and claims that it is uniquely Indonesian and something which is beyond the comprehension of outsiders, it is fairly clear that hak ulayat and the problems which the modern world pose for Indonesia’s indigenous peoples are no different from the problems faced by indigenous communities any where in the world. The central problem posed by the Basic Agrarian Law for the rights of the indigenous is the focus on individual ownership and the lack of protection afforded to hak ulayat and the subjugation of hak ulayat wherever it conflicts with the exercise of power by the central State. Hak Ulayat is not recognised in juridical terms. Another difficulty posed for hak ulayat by the Basic Agrarian Law is as follows. A person who has acquired a hak milik according to the local adat may, in principle, apply for the registration of the right as a statutory hak milik under the Basic Agrarian Law. Once a hak milik is registered, it can not return to the jurisdiction of its original adat law. Upon extinction of the right through abandonment, the land will revert to the control of the central State and not back to the adat community. This is a consequence of Article 27a.3 of the Basic Agrarian Law. Through such processes, the original territory of the adat community will be diminished until eventually it disappears. This process is acknowledged in the Regulation of the Minister for Agrarian Affairs No 5 of 1999 discussed below where it provides in Article 4 that “the possession of land parcels which are included in ulayat land as meant in Article 2 by an individual and a body corporate can be carried out by a member of the adat law community concerned with the right of possession according to the provision of the existing adat law which, id demanded by the right holder, can be registered as the right on land which is in line with the provision of the Basic Agrarian Law.” It is clear, therefore, that the threat posed by the registration under the Basic Agrarian Law of hak milik which has come into existence in accordance with local

85

adat law requires considerably more substantial consideration. If the legal security which is sought for hak ulayat is to materialise in legislation, then this issue must also be resolved.

4.3

Government Regulation No 24 of 1997 Re Land Registration and Hak Ulayat

Government Regulation No 24 of 1997 Re Land Registration does not include hak ulayat as a right which is capable of registration.155 Furthermore, the definition of State land in that regulation does not admit the existence of hak ulayat. It defines State land as “land which is not possessed under a certain land right”. Land rights are defined in that regulation as the rights as meant in Article 16 of the Basic Agrarian Law. It follows from these definitions that any land upon which it can not be demonstrated that a statutory right exists is State land. Such land therefore includes land governed by hak ulayat. This is essentially the same definition of the colonial State’s domein. The problems relating to hak ulayat are related to the control by the State over all land in Indonesia.

4.4

Regulation of the Minister for Agrarian Affairs No 5 of 1999

There has been a recent departure from the previous policy adopted by the National Land Agency towards hak ulayat. The regulation is Regulation of the Minister for Agrarian Affairs No. 5 of 1999 Concerning Guidelines for the Settlement of Hak Ulayat Issues of the Adat Law Community which was signed by the Minister on 24 June 1999. Article 5(1) provides that the investigation and determination that ulayat still exists..shall be conducted by the Regional Government with the participation of adat law experts, the adat law community, non-government organisations and other institutions involved in the management of natural resources. Paragraph (2) further provides that the ulayat land of the adat law community …shall be stated on the land registration base map by giving a cartographic mark and, if possible, by drawing the boundaries and recording them in the land register. The regulation specifies a role for the Regional Government in the process of settling hak ulayat and indeed, it seems that the full implementation of the regulation relies on the enactment of Regional Government regulations. Article 3 155

Article 9 lists the objects of land registration as land parcels having the status of hak milik, hak guna usaha, hak guna bangunan, hak pakai, hak pengelolaan, wakaf, hak milik atas satuan rumah susun, hak tanggungan, and state land (tanah negara ).

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provides, for example, that hak ulayat can no longer be exercised on land parcels which, at the time of the enactment of the Regional Regulation as meant in Article 6 have already been possessed by an individual or a corporate body with a certain right according to the Basic Agrarian Law or land parcels which have already been acquired by a government institution, body corporate or individual in accordance with the existing provisions and procedures. Article 6 provides that further stipulations concerning the implementation of Article 5 shall be regulated by a regulation of the Region concerned. The elucidation states, in relation to this Article, that if the boundaries of the land can be provided according to the boundary marking procedure in the implementation of land registration, the said boundaries can be drawn on the land registration base map and recorded in the existing land register (daftar tanah not the buku tanah). All of this should be arranged in a Regional Regulation in line with the condition of the respective regions as meant in Article 6. The elucidation further states that: “In the meantime it can be confirmed that at the time of the issuance of the Regional Regulation regulating hak ulayat there will be land parcels which have already been possessed by individuals or corporate bodies with a certain right on land in line with the Basic Agrarian Law or already acquired in line with the existing provisions and procedures although the right has administratively not been acquired.”; and “Further arrangement on the above matters (criteria and determination of hak ulayat and the authority of the adat law community) is delegated to the Regions according to existing laws and regulations (Article 6), in line with the purpose of Law No 22 of 1999 RE Regional Government and thus they will be able to absorb more aspirations of the local community”. The implementation of this regulation requires further Regional Government regulation. The elucidation states that the investigation of the existence of the three elements of hak ulayat; namely, the existence of the adat law community, the existence of the ulayat area of land and the existence of the relationship between the community and the territory are to be conducted by the Regional Government. The question whether or not communal rights exist is a difficult one involving issues of proof and evidence; for example. how and by whom can traditional claims to areas of land conclusively be justified in terms of statutory law. This is 87

particularly problematical for shifting agriculturists in forest and mining concession areas.156 The assignment of the determination of the existence of hak ulayat to the regional government is also problematical. The regional government is a political organisation. The determination of legal rights should not be left to agents who are susceptible to political influences. An independent and specialised judicial or quasi-judicial body should be constituted with the power to determine the critical aspects of hak ulayat. Further provision is required in relation to agreements between the community and outside commercial interests concerning the use of the land, the resolution of disputes and the constitution of bodies corporate as representatives of the community and the operation of those bodies. The regulation is neither adequate in itself to deal with the problem of hak ulayat nor does it apply in non-forest areas which are outside the jurisdiction of the National Land Agency. There is a debate about whether hak ulayat is a right on land or a mere right to manage the land. The focus on the nature of hak ulayat as a relationship with the land rather than an enforceable land right inhibits efforts to secure the rights of indigenous people in Indonesia. This semantic debate distracts attention from the central issues which are the security of the rights of the indigenous communities to their land, the right to make decisions about its use by members and nonmembers, compensation when hak ulayat is extinguished according to acquisition laws or intruded upon through the past and future grants of mining, forestry, plantation concessions or other uses in the public interest, and its surrender to outsiders. None of these issues is dealt with in the existing regulation. What is required is an Act of the Indonesian Parliament to deal comprehensively with hak ulayat. Until that occurs, the difficult issues associated with hak ulayat will continue. As Sumardjono notes, “some explicit clarification is…required about what is meant by recognition of ulayat rights and such clarification needs to be stated in a piece of legislation that can serve as a fair basis for settling the existing cases of ulayat land and for managing ulayat rights.

156

See Evolutionary Change in Indonesian Land Law Traditional Law (Adat) Perspectives Final Report Part C Land Administration Project pp. 10-1 – 10-2.

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If neglected, the ulayat right issue will be a time bomb that is ready to explode anytime”.157

4.5

ILAP and Hak Ulayat

During the first five years of the implementation of ILAP, areas in which hak ulayat existed were avoided or, where it was found in selected areas, it was left outside project implementation. This was a wise decision. Following the World Bank/AusAID mid-term review mission in November 1999, a decision was made to abandon this policy. It is now proposed to implement pilot projects with the express purpose of confronting and dealing with the “problem” of hak ulayat in the second phase of ILAP. Arguments are presented that this be done in the name of efficiency (to ensure completeness of cadastral maps) and to secure legal security for traditional communities.158 It said that “the purpose of registration of communal land is to record in the land register in a conclusive and authoritative way the rights of the community over land that is collectively used and over which the community..has acquired the right of use or the right of ownership.” This proposal is fraught with considerable difficulties in light of the many elemental deficiencies in the existing legislation. The arguments upon which this proposition are based are illusory. Hak ulayat is not presently regarded as a right on land, either in the broad juridical sense under the Basic Agrarian Law nor under the land right registration legislation. The authority to administer hak ulayat is vested in the community. The hak ulayat of the community is not a hak milik or a hak pakai. Confusion between the hak ulayat and a hak milik acquired by a communal group159 must be disposed of. Where a non-individual entity has acquired a hak milik over particular parcels of land used for specific communal purposes, that might be registered, subject to the prohibition of corporate entity ownership of such rights which presently deny such registration. Furthermore, under the existing laws, no corporate entities may own land rights save for those specifically designated by Government Regulation No 38 of 1963.

157

Sumadjono M Land Policy Reforms Kompas 25 September 1998.

158

Developing a Strategy for Registration of Communal Systematic Paper by Registration Systems Adviser ILAP 13 December 1999 Land Administration Systems Australia Pty Limited Jakarta 1999 159

See the discussion of this in Ter Haar op. cit. at p. 68.

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An adat community enjoys no legal status under existing law let alone being recognised a corporate entity capable of owning land rights. As Slaats has noted, “it may be questioned whether registration of land will add to their security if the rights granted to them through registration do not coincide with the traditional system..”160 No proper mechanism exists for the determination of the existence of hak ulayat. Registration under Government Regulation does not provide legal security of any rights; even those acknowledged as rights on land under the Basic Agrarian Law. Proposals that its existence be determined by the Adjudication Committee constituted under Government Regulation No 24 of 1997 are inappropriate especially having regard to the anticipated role of the Regional Governments in this process. Any proposal to bring hak ulayat within the registration system must first resolve a multitude of issues, not the least of which is what is to happen in relation to individualised rights within a hak ulayat area once the hak ulayat area is brought within the registration system. The current proposal is to register such individualised rights but that is in direct conflict with the continued existence and protection of hak ulayat. It might also be reasonable anticipated that there will be opposition to what might be perceived as intrusion into the hak ulayat areas. In the recent past, there has been vigorous opposition to the registration of hak ulayat.161 Consequently, it is recommended that attempts to deal with hak ulayat, in view of the many legal issues identified above, ought to be abandoned until there is a comprehensive legislative scheme which addresses those issues.

160

Slaats H Adat Land: A Socio-Anthropology of Law Approach” paper presented at Seminar “Tanah Adat” Research Centre Universitas Kristen Atma Jaya and Research Centre National Land Agency Bogor September 1996 at pp. 2-3 cited in Memoranda KPA Keempat Mengenai Proyek Administrasi Pertanahan “Tidak Untuk Pendaftaran Tanah Komunal Konsortium Pembaruan Agraria Bandung 1997 at p. 2. 161

For example, Memoranda KPA Keempat Mengenai Proyek Administrasi Pertanahan “Tidak Untuk Pendaftaran Tanah Komunal” Konsortium Pembaruan Agraria Bandung 1997

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5.

CHAPTER V - AUXILLIARY OBSERVATIONS AND CONCLUSIONS

5.1

Possession

The Basic Agrarian Law (Article 19) provides for the registration of land rights to be implemented throughout Indonesia. Pursuant to this Article, Government Regulation No 10 of 1961 was enacted but did not achieve the objective of registering all land in Indonesia during the 36 years of its operation; mainly because of the huge number of land parcels but also because the necessary funds were not allocated by successive governments. This regulation was replaced by Government Regulation No 24 of 1997 which is the current legal basis for the implementation of systematic and sporadic registration of land rights. An earlier report by the writer analysed some of the problems associated with that legislation including the requirements to establish entitlement to registration as owner of a hak milik. One of the bases upon which a right holder might be registered is 20 years possession; either by the present right holder or by the present right holder and his/her predecessors. However, possession is only acknowledged for the purposes of registration of rights and it otherwise does not have any legal effect. Given that ILAP anticipates at least 25 years before all land rights will be registered, the land law also requires review in order to admit possession of land as constituting a legal title to land whether or not it is registered under Government Regulation 24 of 1997. This issue is substantially considered in the Report by Part C referred to elsewhere in this paper and entitled “Indonesian Land Law and Tenures Issues in Land Rights” at Chapter 2. The recommendations made in that report are respectfully adopted for the purposes of this report. Careful consideration of the application of the principle of possession must be given in the context of land where hak ulayat exists.

5.2

Review of Punitive Provisions

The punitive provisions of the Basic Agrarian Law and the authority granted by the Basic Agrarian Law for implementing regulations to impose punitive provisions provide that the maximum penalties which may be so imposed are imprisonment for a maximum of three (3) months and/or a fine of Rp 10 000. While these limits on penalties may have been appropriate when the law was enacted, a fine of Rp10 000 nowadays would not dissuade breaches of obligations imposed by the Basic Agrarian Law or any of its implementing regulations. 91

In particular, if the recommended introduction of the positive system is implemented, there will be no need to threaten criminal sanctions for breaching obligations to seek to register. Such obligations should be omitted from any subsequent land law or land right registration government regulation. The history of land right registration demonstrates the failure of coercive mechanisms as attempts to ensure registration is sought by right holders.

5.3

Involvement of Private Sector in Land Registration

Article 19 of the Basic Agrarian Law provides that “To guarantee legal security, the Government shall administer land registration throughout the whole territory of the Republic of Indonesia.” It seems fairly clear from this provision that land registration must be implemented by the Government as opposed to the private sector. Government Regulation No 24 of 1997 confirms that registration is to be implemented by the National Land Agency through it Land Offices.162 However, certain ministerial regulations permit the engagement of private sector surveyors in the surveying and mapping activities of land right registration; viz., Article 45 of PMNA 3 of 1997 Re Implementing Provisions of Government Regulation No 24 of 1997 Re Land Registration. Regulation of the Minister for Agrarian Affairs No 2 of 1998 regulates Licensed Surveyors. There are certain proposals to involve the private sector in activities beyond the technical activities of surveying and mapping to include right determination. It is unfortunate that the decision to involve the private sector was not submitted to a higher law-making authority than the Minister. It is, in principle, not objectionable that purely technical activities of land right registration be delegated to the private sector but that is an important policy decision which ought to have been submitted to the legislature (the DPR). In any review of the Basic Agrarian Law, consideration should also be given to this question.

162

Article 5 Government Regulation No 24 of 1997 Re Land Registration.

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5.4

Registration Outside Cities

The Elucidation of the Basic Agrarian Law states that “registration will be implemented by taking into account the interests and condition of the State and its people, the needs for socio-economic movements, and the possibilities open in terms of personnel and equipment. In view of this, the cadastre will be implemented first in cities and subsequently, on a gradual basis, throughout Indonesia.”163 Land registration to date has not focussed solely on the cities. This practice is in direct conflict with the elucidation. So that this contradiction is removed, the law requires amendment to enable registration to focus on the poor, the greatest number of which live in rural areas.

5.5

Calls for Review of the Basic Agrarian Law from within Indonesia

The view that the land law confers wide administrative discretions on the agencies of the State is also being expressed within Indonesia. In a State where the executive power is stronger than the judiciary and the legislature, the right of control over land as stipulated in the Basic Agrarian Law can easily turn into arbitrariness on the part of the government. This has been evident in the growing discrepancy in the ownership of land as a productive asset, the lack of recognition and protection for the people’s rights on land, the government’s unclear attitude towards hak ulayat, the people’s access to land and their weak bargaining position in the settlement of land disputes. The State’s right of control over land should be limited by law. This means that the Basic Agrarian Law needs to be revised.164 There has also been recent developments within the government to generate a reform process. Presidential Decree No 48 of 1999 Re Team of Policy and Regulation Review for Land Reform Implementation was issued on 27 May 1999. The ambit of the decree went beyond the mere land reform provisions of the Basic Agrarian Law and extended to a review of the regulations concerning land affairs generally165. It has also been said “that it is the right time for us to develop a new Land Law as a replacement for the Basic Agrarian Law, more so because the considerations given for the establishment of the Basic Agrarian Law --which were made in reference to Presidential Decree No. 5 of 1959 and to the Political Manifesto of the

163

General Elucidation Part A (IV).

164

Per Prof. Lutfi Nasution Bogor Institute of Agriculture reported in Kompas 29 October 1999.

165

Article 3 of the Decree stated the tasks of the Land Reform Team as including the “review of the regulations concerning land affairs”.

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Republic of Indonesia as stated in Presidential Address dated 17 August 1960-are no longer relevant now.”166 The pressures for reform of land policy generally have been identified as population growth, the shrinking supply of land, the deterioration of its quality, the shift in land functions, the mounting seriousness of conflicts over land use, poverty, unemployment, unequal distribution of access to land and the marginalisation of the rights of adat-law communities.167 5.6

General Conclusion

The general conclusion from the foregoing analysis of the provisions of the Basic Agrarian Law which relate to land tenures and title registration, those which impact on the development of the land market and those dealing with traditional rights of indigenous peoples is that, on all three counts, radical review of that law and its main implementing provisions is essential to remedy the multitude of problems caused by excessive State control of tenures and their basic legal insecurity, legal provisions which prohibit or inhibit the development of a land market and those which fail to secure the interests of traditional communities in respect of land. These wide-ranging and multi-dimensional issues concern the whole of Indonesian society and can not be dealt with solely through the land administration agency. What is required to address the problems of the present land law system is an independent National Land Law Reform Commission or similar body established by an Act of the Parliament to: w develop land law reform policies and strategies; w develop inter-agency cooperation; w undertake strategic reform activities; w generate and supervise legislative reforms; and

166

Prof. C.F.G. Sunaryati Hartono, SH Hak Ulayat Arrangements in the New Basic Agrarian Law Jakarta, reported in Kompas 31 August 1999. 167

Per Sumadjono M Professor of Agrarian Law University of Gajah Mada Yogyakarta Land Policy Reforms Kompas 25 September 1998.

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w procure advice from experts.168 Without such a broad-based land law reform agent, it is difficult to see how the problems presented by the Basic Agrarian Law for the people of Indonesia, particularly those pertaining to the security of land tenure and invasive State control, civil peace and the problems it poses for the Indonesian economy and indigenous peoples will ever be solved in a just way. Warren Wright Land Law Adviser – International 16 December 1999 Jakarta

168

Per Indonesian Land Law and Tenures Issues in Land Rights op. cit. pp. 8-3 – 8-4. A recent development is the creation of the National Law Commission comprised of prominent intellectuals and practitioners (Kompas 14 December 1999 “Anggota Komisi Hukum Berannggotakan Enam Orang”)

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BIBLIOGRAPHY & REFERENCES LAWS AND REGULATIONS Nederlands Agrarische Wet 1870 (Agrarian Act State Gazette 1870-55) Domeinverklaring 1870 (Declaration of the State as Owner 1870 State Gazette 1870115) Algemene Domeinverklaring (General Declaration of the State as Owner State Gazette 1875-119a) Domeinverklaring untuk Sumatera (Declaration of the State as Owner for Sumatera State Gazette 1874-94f) Domeinverklaring untuk Keresidenan Menado (Declaration of the State as Owner for the Regency of Manado State Gazette 1877-55) Domeinverklaring untuk Residentie Zuilder en Oosterafdeling van Borneo (Declaration of the State as Owner for the Regencies in the Southern and Eastern Parts of Kalimantan State Gazette 1888-58) Koninklijk Besluit (Decree of the Dutch Kingdom State Gazette 1872-117) Grondvervreemdingsverbod (Ordinance on Prohibition on Land Alienation 4 August 1875) Burgerlijk Wetboek voor Indonesie (Civil Code for Indonesia State Gazette 1847-23) Indonesia Basic Agrarian Law 1960

a

Circular Letter of the Minister for Agrarian Affairs No 500-2165-DIII 27 May 1999 Re Forms and Drafts of Decisions on the Granting and Extension of Rights on Land Decision of the Minister for Agrarian Affairs No 2 of 1998 Re Granting of Hak Milik on Land for Houses Purchased by Civil Servants Decision of the Minister for Agrarian Affairs No 6 of 1998 Re Granting of Hak Milik on Residential Land Decisions of the Minister for Agrarian Affairs No 9 of 1997, No 15 of 1997 and No 1 of 1998 Re Granting of Hak Milik on Land for Simple and Very Simple Houses Government Regulation No 224 Tahun 1961 Re Implementation of Land Subdivision and Compensation Government Regulation No 24 of 1997 Re Land Registration Government Regulation No 36 of 1998 Re Control and Utilisation of Abandoned Land Government Regulation No 40 of 1996 Re Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai Government Regulation No 38 of 1963 Re Designation of Bodies Corporate which may Own Hak Milik Instruction of the Minister for Agrarian Affairs No 4 of 1998 Re Expedition of Land Registration Service for Hak Milik on Residential Land Law No 21 of 1997 Re Tax on the Acquisition of Land Rights and Buildings Law No 1 of 1958 Re Abolition of Partikelir Land Law No 4 of 1996 Re Security Rights on Land and Land-Related Objects

b

Law No 56 of 1960 Re Limits on the Area of Agricultural Land Law No 2 of 1960 Re Share-cropping Agreements (Agricultural Land) Law No 28 of 1999 Re State Organiser Which is Clean and Free from Corruption, Collusion and Nepotism. Presidential Decrees Nos 97 of 1993 and 41 of 1996 Regulation of the Minister for Agrarian Affairs No 2 of 1960 Re The Implementation of Some Provisions of the Basic Agrarian Law Regulation of the Minister for Agrarian Affairs No 2 of 1962 Re Confirmation of Conversion and Registration of former Indonesian Rights on Land. Regulation of the Minister for Agrarian Affairs No 9 of 1965 Re The Right of Management Regulation of the Minister for Agrarian Affairs No 3/1997 Re Implementing Provisions of Government Regulation No 24 of 1997 Re Land Registration Regulation of the Minister for Agrarian Affairs No 7 of 1961 Re Land Registration Administration Regulation of the Minister of State for Agrarian Affairs No 2 of 1993 Re Procedures for Companies Wishing to Invest Capital to Obtain Location Permits and Land Rights Speech by the Agrarian Minister to the Dewan Perwakilan Rakyat-Gotong Royong (Gotong-Royong House of Representatives) 12 September 1960 on the Introduction of the Basic Agrarian Law Australia Aboriginal Land Rights Act 1983 (New South Wales) Conveyancing Act 1919 (New South Wales)

c

Native Title Act 1993 (Commonwealth) Native Title Act 1994 (New South Wales) Real Property Act 1900 (New South Wales) COURT DECISIONS Mahkamah Agung 16 June 1976 No 1082/K/Sip/1976 and 19 September 1970 No 123/K/Sip/1970, 12 June 1976 No 952/K/Sip/1974 Mabo v The State of Queensland (No 2) (1992) 66 CLR 186 REPORTS AND TEXTS Bathurst Declaration on Land Administration for Sustainable Development Report of the Workshop on Land Tenure and Cadastral Infrastructures for Sustainable Development United Nations International Federation of Surveyors Bathurst October 1999 Benda-Beckmann The Minangkabau of West Sumatera An Anthropological Study Butt P Land Law Edition 3 1996 LBC Information Services Developing a Strategy for Registration of Communal Systematic Paper by Registration Systems Adviser ILAP 13 December 1999 Land Administration Systems Australia Pty Limited Jakarta 1999 Evolutionary Change in Indonesian Land Law Traditional Law (Adat) Perspectives Final Report Land Administration Project Part C Support for Long Term Development of Land Management Policies Topic Cycle 4 Gautama S. Indonesian Business Law 1995 Bandung PT Citra Aditya Bakti Harsono B 1997 Hukum Agraria Indonesia: Sejarah Pembetukan Undang-Undang Pokok Agraria, Isi dan Pelaksanaannya Jakarta Djambatan p pp. 263-268

d

Harsono B Hukum Agrarian Indonesia Himpunan Peraturan-Peraturan Hukum Tanah Djambatan 1973 Indonesian Land Law and Tenures Issues in Land Rights Final Report Topic Cycle 4 Part C Indonesian Land Administration Project (Support for Long Term Development of Land Management Policies) Informasi Peraturan Peraturan-Undangan Pertanahan Biro Hukum dan Humas BPN Jakarta 1996 – 1999 Vols. 1-4, 6-9 Land Acquisition and Development Controls Final Report Part C Land Administration Project (Support for Long Term Development of Land Management Policies) LASA Report on the Review of Government Regulation No 24 of 1997 dated 9 September 1999 Masruchah Untoro (ed.) Tanah, Rakyat dan Demokrasi 1995 Forum LSM – LPSM DIY Memoranda KPA Keempat Mengenai Proyek Administrasi Pertanahan “Tidak! Untuk Pendaftaran Tanah Komunal” (No! to Communal Land Registration) Konsortium Pembaruan Agraria Bandung 1997 Pendaftaran Tanah di Indonesia Edisi 2 1998 Koperasi Pegawai Badan Pertanahan Nasional Bhumi Bhakti Project Preparation Report Indonesian Land Administration Project 1993 LASA/BPN Reinhart A ILAP National Land Law Adviser Annotations on Government Regulation No. 24 of 1997 Jakarta 1999. Rowton-Simpson Land Law and Registration

e

Soesengobeng H Social Assessment Impact Study 1 November 1999 Land Administration Systems Australia Pty Limited Jakarta 1999 Sumadjono Maria Land Policy Reforms Kompas 25 September 1998 Ter Haar B Asas-Asas dan Susunan Hukum Adat trans. K. Ng. Soebakti Poesponoto Pradnya Paramita Jakarta 1994 Van Vollenhoven in Indonesian Adat Law West D. “The Role of Land Registration in Developing Countries” 102 Chartered Surveyor November 1969 212 Wignjodipoero S Pengantar dan Asas-Asas Hukum Adat 1988 Jakarta C V Haji Masagung World Bank Staff Appraisal Report Document No 12820-IND Indonesian Land Administration Project 16 August 1994 World Bank A Social Assessment Study of the Land Certification Program The Indonesian Land Administration Project 1999 Jakarta NEWSPAPER REPORTS Asian Wall Street Journal 24 November 1999 page 5 Thompson Global Markets Sumadjono Maria Land Policy Reforms Kompas 25 September 1998 Prof. Dr. Lutfi Nasution Bogor Institute of Agriculture Kompas 29 October 1999 Prof. Dr. C.F.G. Sunaryati Hartono, SH Hak Ulayat Arrangements in the New UUPA Jakarta, 31 August 1999

f

Anggota Komisi Hukum Beranggotakan Enam Orang (Law Commission Comprised of Six Members) Kompas 14 December 1999

g