February 18, 2015 was perhaps the most unpleasant day ever for businesses working in Indonesia's water sector, as this was the date that the country’s Constitutional Court handed down decision No. 85/PUU-XI/2013 (“Decision”), which ultimately annulled the very basic provision on water resources set out in Law No. 7 of 2004 on Water Resources (“Water-Resources Law”). As a result, the water sector was suddenly plunged into uncertainty as regards the legality of its business activities.
 
The Water-Resource Law sets out two types of rights relating to the utilization of water, namely: the right to use water (Hak Guna Pakai Air – “HGPA”), as well as the right to manage water (Hak Guna Usaha Air – “HGUA”). HGPA involves the utilization of water designated for daily consumption, while HGUA involves commercial activities. HGPA and HGUA are further regulated under Government Regulation No. 69 of 2014 on Rights for Water Use (“2014 Regulation”) and Government Regulation No. 43 of 2008 on Ground Water (“2008 Regulation”).
 
The Constitutional Court however decided that the Water-Resources Law and its implementing regulations failed to adequately reflect the role of the state as regards the control and management of water use for the greater public good, as mandated in Article 33 (2) of the 1945 Constitution. The court further ruled that HGPA and HGUA should be designated essential tools of the state, which should ultimately be in charge of controlling the utilization of the country’s water. In practice however, HGPA and HGUA have seen control over water rights being ceded to their holders, instead of  being retained by the state.
 
In order to avoid any legal uncertainties, the Constitutional Court, for the moment at least, has reenacted the law that applied prior to the introduction of the Water Resources Law, specifically Law No. 11 of 1974 on Water (“1974 Water Law”). In the final analysis though, the 1974 Water Law has been deemed insufficient to accommodate the current state of affairs, as regards Indonesia’s water resources. Moreover, the Minister of Public Works and Housing (“Minister”) recently issued Circular Letter No. 04/SE/M/2015 of 2015, which confirms that all licenses to utilize water resources that were issued prior to the Decision will remain valid until they expire.[1]
 
On 28 December 2015, the government finally issued Government Regulation No. 121 of 2015 on Water-Resource Utilization (“2015 Regulation”), which offers guidance on water-utilization activities, as well as the implementation of the obsolete 1974 Water Law. The 2015 Regulation also introduces the concept of “water utilization” as a basis for the utilization of water resources for commercial purposes, and this concept replaces that of HGUA. Furthermore, the 2015 Regulation also sets out the relevant licenses to utilize water that apply to businesses working within the water industry, as well as the various limitations that have been placed on the utilization of water. Accordingly, this week’s Indonesian Law Digest (ILD) will analyze and discuss the various issues that relate to the 2015 Regulation, and will cover: