Carbon Exchange User Obligations Introduced: Non-Compliance to Be Subject to the Imposition of Sanctions

PT Bursa Efek Indonesia (“BEI”), as the party that has secured a business license to operate as a Carbon Trading Organizer (“Organizers”), has already introduced various legal frameworks that specifically address the implementation of carbon trading, including the recently issued Decree of the BEI Members of Board of Directors No. KEP-00297/BEI/09-2023 (“Decree 297/2023”) on the Regulation of Carbon Exchange Users (“Exchange Users”), which has been in force since 20 September 2023.

Decree 297/2023 sets out various provisions that address Exchange Users, as detailed under the Appendix to Decree 297/2023, which specifically sets out arrangements that relate to the following areas, amongst others: 1) Exchange Users; 2) Requirements and procedures for Exchange Users; 3) Registration of persons in charge (user) of Exchange Users; 4) Rights and obligations of Exchange Users; 5) Sanctions; 6) Examinations of Exchange Users; 9) Revocation of approvals for Exchange Users; and 10) Fees.

Due to the wide scope of the arrangements contained under Decree 297/2023, this edition of Indonesian Legal Brief (“ILB”) will limit its discussion to the following Exchange User-related topics:

1. Classifications, requirements and procedures; and
2. Obligations and sanctions.

Classifications, Requirements and Procedures

Exchange Users may comprise Indonesian/foreign legal entities, specifically:

1. Emissions trader business actors;
2. Non-emissions trader business actors;
3. Project owners; and
4. Other parties who have secured official approvals from the Financial Services Authority (Orotitas Jasa Keuangan – “OJK”)

Decree 297/2023 contains certain provisions that specifically address the above parties, as also regulated under Decree of the BEI Board of Directors No. KEP-00296/BEI/09-2023 of 2023 on the Regulation of Carbon Unit Trading Through Organizers, which was specifically discussed in the following edition of ILB: “BEI Introduces Mechanism for Carbon Trading via PBK: Four Market Segments Introduced.”

Both Indonesian/foreign legal entities as Users must fulfill various general and specific requirements :

- Must employ a officer who will take responsibility for the use of any facilities provided by the Organizer.
- Must attend training sessions that specifically address the carbon exchange, as organized by the Organizer.
- Must possess an e-mail address and use the relevant company’s domain name.
- A minimum of two Exchange User representatives of must attend the training sessions.
- Must settle the relevant Exchange User registration fees.
- Must be in possession of a bank account that is connected to the BI-FAST and BI-RTGS systems.
- Must have a financial statement for one book year at the least (“Financial Statement”).
- Must be in possession of a company deed that has been authorized, announced (diberitahukan) or approved by the relevant authorized parties.
- Must be in possession of an official Taxpayer Identification Number (Nomor Pokok Wajib Pajak/NPWP) and Business Identification Number (Nomor Induk Berusaha/NIB).
- Must be in possession of a legal identity identifier that has been registered with the Regulatory Oversight Committee (ROC).

Procedure that should be followed in order to become an Exchange User :

Step 1: Submission of Application
- A prospective Exchange User should submit an application letter to the Organizer using Form 1 (which is set out under the Appendix to Decree 297/2023), along with the following required documents in either printed or electronic form:
1. Certificates of carbon exchange training, as issued by the Organizer;
2. Evidence of payment that relates to the registration fee; and
3. Financial Statement.

- Indonesian/foreign legal entities must also submit the specific required documents.

Step 2: Review of Submitted Documents and Stipulation by the Organizer

- The Organizer will complete a review of the submitted documents within five Organizer days after the required information and documents have been duly submitted.
- The Organizer will submit a confirmation to the prospective Exchange User within five Organizer days of the review phase being deemed complete. Said confirmation may take the following forms:
1. Statement affirming that the prospective Exchange User has fulfilled the requirements (an approval letter will be issued); or
2. Statement affirming that the prospective Exchange User has not fulfilled the requirements (a rejection letter will be issued). It should be noted that any rejected parties may re-submit their applications in accordance with the applicable provisions that are set out under Decree 297/2023.

Obligations and Sanctions

In terms of the implementation of carbon exchange trading, Exchange Users are required to comply with various obligations. However, certain administrative sanctions may be imposed upon Exchange Users in relation to any acts of non-compliance.

- Must assume full responsibility for the use of any facilities that are provided by the Organizer, including for the use of their issued user-id and password
- Must maintain the confidentiality of their issued user-id and password, which are prohibited from being transferred to any other parties
- Must comply with provisions, requirements and procedures that relate to the use of facilities, as set by the Organizer
- Must pay the relevant transaction fee
- Must assume responsibility for other Exchange Users in relation to any obligations that arise from any transactions and settlements
- Must submit incidental reports within a maximum of seven Organizer days of any changes being made to certain types of information (e.g. business licensing, names of Exchange Users, information relating to Exchange Users, company deeds, etc.)

In terms of violations of the above-listed obligations, the Organizer is authorized to impose certain sanctions, which will be summarized in written announcements. Said sanctions break down as follows:

1. Written reprimands;
2. Written warnings;
3. Fines of up to Rp. 500 million;
4. Suspensions of Exchange Users;
5. Revocations of Exchange User approval letters.

Source : hukumonline.com