Petitioner\\'s legal counsels, Irman Putra Sidin and Victor Santoso Tandiasa, attending the ruling hearing of the Law on Deposit Insurance Agency (LPS) in the Courtroom of the Constitutional Court. Photo by Humas MK/Ifa.

The petition filed by the Deposit Insurance Agency (LPS) was granted partially by the Constitutional Court (MK). "The verdict heard, grants the Petitioner’s petition in part," said Plenary Chairman Anwar Usman in the presence the other constitutional justices in the judicial review hearing of Law No. 24/2004 on Deposit Insurance Agency (LPS Law) on Monday (23/7). 

LPS as Petitioner reviewed Article 6 paragraph (1) letter c, Article 81 paragraph (3), and Article 33 paragraph (4) of the LPS Law. LPS argued that in the Law on Financial System Crisis Prevention and Mitigation (PPKSK), on systemic bank debtors, the Petitioner was explicitly authorized to perform write-off and absolute write-off (Article 46 paragraph (5) of the PPKSK Law), while on non-systemic bank debtors in the articles being reviews the authority of the Petitioner is not explicitly stated. Therefore, the Petitioner considered the articles not provide assurance of legal certainty and were contradictory to Article 28D paragraph (1) of the 1945 Constitution. 

In the legal considerations, the Court is of the opinion that in general, the management of receivables from individuals and entities, including the right to write-off and absolute write-off. Such authority under Law No. 9/2016 on the Financial System Crisis Prevention and Mitigation (PPKSK) is also granted to LPS. 

"However, because the PPKSK Law serves to overcome state financial crisis against systemic banks, the question is whether the authority is also necessarily belong to LPS in normal circumstances as regulated in the LPS Law. So, that authority also applies to both systemic and non-systemic banks," Constitutional Justice Manahan M. P. Sitompul explained, reading the opinion of the Court. 

With respect to the issue, if related to the Petitioner\\'s argument that the right to write-off and absolute write-off that LPS has shall also apply to the authority of LPS in the LPS Law, for reasons of efficiency and legal certainty. According to the Court, in general the argument of the Petitioner has a sound argument. However, since LPS-managed assets are related to state assets and community rights, the authority to write-off and absolute write-off cannot be regarded as a limitless authority such as in relation to receivables managed by an individual or a legal entity not related to state property. 

"Therefore, the right to write-off and absolute write-off of LPS can be given under normal circumstances as long as it is still relevant to state of crisis and implemented to meet the provision of Article 46 paragraph (5) of the PPKSK Law," Justice Manahan affirmed regarding Case No. 1/PUU-XVI/2018. 

According to the Court, in exercising the authority to write-off and absolute write-off, LPS should be guided by prudence and transparency. In other words, write-off and absolute write-off are a last resort and should not be done carelessly, especially to avoid moral hazard. 

Based on all the above considerations, the Petitioner’s petition for Article 6 paragraph (1) letter c of the LPS Law was declared unconstitutionally conditional as long as the phrase "to manage the assets and obligations of LPS" is not interpreted as "including the ability to perform write-off and absolute write-off on assets in the form of receivables." According to the Court, [the right] cannot be fully granted as long as it is still related to state of crisis and comply with the provision of Article 46 paragraph (5) of the PPKSK Law. Therefore, the Petitioner’s petition is reasonable according to law in part. (Nano Tresna Arfana/LA/Yuniar Widiastuti)