Issue
Recently, the corruption case involving crude oil and refinery product management at PT Pertamina Patra Niaga caught public attention after complaints about the poor quality of Pertamina’s RON 92 fuel, commonly known as “Pertamax,” surfaced. Initial reports came from residents in Papua, Palembang, and South Sumatra, who claimed that the fuel quality did not meet the expected standards.
The Attorney General’s Office investigated the issue and uncovered illegal blending practices, where RON 92 fuel was mixed with RON 90 or even RON 88. As a result, consumers paid higher prices for lower-quality fuel, while the state suffered increased subsidy burdens due to these irregularities.
Further investigations revealed that the Board of Directors of Pertamina’s subsidiaries deliberately implemented policies to reduce domestic refinery readiness, ultimately increasing crude oil imports. According to Minister of Energy and Mineral Resources Regulation (Permen ESDM) No. 42 of 2018 on the Priority Utilization of Crude Oil for Domestic Needs, domestic crude oil should be prioritized. Article 2(1) of this regulation states:
“PT Pertamina (Persero) and business entities holding oil processing business licenses must prioritize crude oil supplies from domestic sources.”
This means that before importing, Pertamina, as the entity responsible for fuel distribution, must first absorb domestic crude oil production. However, in this case, the Board of Directors of Pertamina’s subsidiaries allegedly adopted policies that reduced domestic refinery readiness, leading to greater dependence on crude oil imports. This action clearly contradicts regulations prioritizing domestic resources and has resulted in potential losses of up to IDR 193.7 trillion annually, while consumers incurred losses of approximately IDR 17.4 trillion per year due to purchasing substandard fuel.
Responsibility of the Holding Company and Its Board of Directors
From a corporate law perspective, although the main perpetrators were subsidiaries such as PT Pertamina Patra Niaga and PT Kilang Pertamina Internasional, PT Pertamina (Persero) as the holding company remains responsible for supervising the activities of its subsidiaries. This is because, as a State-Owned Enterprise (BUMN) holding company, Pertamina controls its subsidiaries through majority share ownership. A holding company generally does not engage in direct business activities but instead invests in subsidiaries, which conduct business operations.
Under Article 84(1) of Law No. 40 of 2007 on Limited Liability Companies (Law Number 40 of 2007 on Limited Liability Companies), each share issued by a company grants one voting right unless otherwise specified in the articles of association. As the majority shareholder with over 50% ownership or voting rights in the General Meeting of Shareholders (GMS), the holding company has the authority to direct meetings and determine strategic decisions for subsidiaries. This indirectly grants the holding company significant control over its subsidiaries.
However, legal protections also limit the liability of the holding company as a majority shareholder. The legal relationship between the holding company and its subsidiaries follows the principle of separate entities and limited liability. Article 3(1) of the Law Number 40 of 2007 on Limited Liability Companies states that shareholders, including the holding company, are not personally liable for the company’s obligations and cannot be held accountable for losses exceeding their share ownership.
Nonetheless, this principle has exceptions under the doctrine of “piercing the corporate veil,” as outlined in Article 3(2) of the Law Number 40 of 2007 on Limited Liability Companies, which states:
“The provisions of paragraph (1) do not apply if:
- The company has not or does not meet the legal entity requirements;
- The shareholder concerned, directly or indirectly, in bad faith, utilizes the company for personal gain;
- The shareholder concerned is involved in unlawful acts committed by the company; or
- The shareholder concerned, directly or indirectly, unlawfully uses the company’s assets, resulting in the company’s inability to fulfill its obligations.“
Piercing the corporate veil is a legal concept allowing courts to disregard the legal protection granted to a company as a separate legal entity from its owners. If it is proven that shareholders, including the holding company, engaged in unlawful activities, abused power, or misused the company for personal benefit, they can be held personally liable under Article 3(2) of the Law Number 40 of 2007 on Limited Liability Companies.
Furthermore, under Articles 97(1) and (2) of the Law Number 40 of 2007 on Limited Liability Companies, the Board of Directors is fully responsible for the company and must perform its duties in good faith. If the Board of Directors is found guilty of negligence or wrongdoing, they are personally liable for damages under Article 97(3) of the Law Number 40 of 2007 on Limited Liability Companies. If multiple directors are responsible, liability is shared jointly and severally. Administratively, directors found at fault can be dismissed through the GMS mechanism if they fail to act in good faith and with due diligence. However, this depends on the voting power of shareholders in the GMS.
From a criminal law perspective, if it is proven that PT Pertamina’s Board of Directors knew about or even approved these illegal practices, PT Pertamina as the holding company could also face criminal sanctions under Articles 2 and 3 of Law No. 31 of 1999 on the Eradication of Corruption (Law Number 31 of 1999 on the Eradication of Corruption) within the context of participation (deelneming) or failure to prevent the crime. Participation is regulated under Article 55(1) point 1 of the Criminal Code (KUHP), which classifies individuals as perpetrators (pleger), instigators (doenpleger), or accomplices (medepleger). However, the application of criminal sanctions depends on the extent of the Board of Directors’ involvement in the illegal blending practices carried out by their subsidiaries.
Currently, the Attorney General’s Office has named six Pertamina executives and three private sector individuals as suspects in this case. The Pertamina suspects include executives from subsidiaries, such as the President Director of PT Pertamina Patra Niaga and the Director of Feedstock and Product Optimization of PT Kilang Pertamina Internasional. Given the scale and impact of this case on the state and society, it is highly likely that the Attorney General’s Office will further investigate the role of PT Pertamina’s Board of Directors as the holding company.
Conclusion
Based on the analysis above, although a holding company is a separate legal entity with limited liability proportional to its share ownership, PT Pertamina as the parent company remains responsible for supervising its subsidiaries. If it is proven that PT Pertamina’s Board of Directors knew about or approved the illegal blending practices conducted by its subsidiaries, they can be held accountable under the principle of piercing the corporate veil, whether in civil, administrative, or criminal law.
In civil law, the Board of Directors can be held liable for damages due to negligence under Article 97(3) of the Law Number 40 of 2007 on Limited Liability Companies. Administratively, directors found guilty can be dismissed through the GMS mechanism if they fail to perform their duties in good faith and with due diligence. In criminal law, involved directors can be sanctioned under Articles 2 and 3 of the Law Number 31 of 1999 on the Eradication of Corruption if proven to have participated in or allowed the crime to occur.
This case highlights the importance of implementing Good Corporate Governance principles in State-Owned Enterprises and the need for stricter oversight of policies adopted by the Board of Directors to prevent misconduct that harms both the state and society.