Agus Brotosusilo, 2011.

LEGAL CULTURE AND FREE TRADE: THE INDONESIA EXPERIENCE*

By: Agus Brotosusilo**

Introduction

Genuine free trade law, institution, and practice are Indonesia’s culture substantial
contributions to the early formation of modern international law at the beginning of
the seventeenth century. Free trade as a daily practice in the country’s area is a
foundation of Hugo Grotius’s “mare liberum” legal doctrine. The doctrine not only
influenced the law of the sea establishment, but it also determined the formation of
international trade law, including the WTO rule.

* This study is presented at the International Conference on Law and Culture in South East Asia, in
cooperation between Hankuk University of Foreign Studies – Faculty of Law University of Indonesia , Jakarta,
July 13, 2011.

** Since 1982, Agus Brotosusilo has taught various courses at the University of Indonesia, University of
Gajahmada Graduate School of Law, and IPPM-MBA Program, including courses in Philosophy of Law, Legal
Theory, Sociology of Law, Consumer Protection Law, Anti-Monopoly Law, Business Law, International Trade:
Law and Policy, TRIM’S and Investment in Indonesia, Private International Law, Legal Research, Legal Writing,
and Legal Drafting. His practicing lawyer experiences, among others, was as an off-counsel for "Ali
Budiardjo-Nugroho-Reksodiputro/ABNR, Legal Counsellor"; a Staff of Treaties Ratification Department, Legal
Bureau - Secretary of State; and a writer for expose to the Indonesian Cabinet on the success-story of
Indonesia’s team fight for Archipelagic State Principle in the UN Conference on the Law of the Sea/UNCLOS,
1982. As a Team Leader researching the Impact of the WTO Agreement and its ratification by Indonesia from
1994 to 1995 (in cooperation between the Graduate Program University of Indonesia and the Ministry of Trade),
he has gained substantial insight into the full range of Indonesian trade law issues. He has drafted laws for
many Indonesian institutions, including the Supreme Court, Ministry of Trade, Ministry of Defense, and the
Ministry of Industry and Trade. Legal drafting work that he has been involved with includes the draft of:
Indonesia Trade Law (1996; 2003), Partnership Law(1993), Competition Law (1992); Consumer Protection Law
(1991); Domestic Trade in Goods and Services Law (2002); Drug and Food Regulation (2005), Supreme Court
Regulation on Consumer Protection Law, State Secrecy Law, Defense Industry Law and National Security Law.
He has also presented papers in a national as well as an international seminar on these subjects, as well as
other areas such as Competition Law, Trade in Services Law, Foreign Investment, Ratification of International
Trade Agreements, WTO Dispute Settlement, the WTO TRIPS Agreement, Corporate Law, Contract Law,
Labor Law, International Business Transactions, and National Security matters. He has also conducted
research, including USAID-CLIR project funded research on Trade Liberalization in Indonesia. Other topics of
his research have included: Corporate Registration Law and Policy, the ASEAN Free Trade Area, Copyright &
Trademark & Trade Secret Law, Comparative Antidumping Law, International Trade Law and Policy, The
Implication of Multilateral, Regional, and Bilateral Trade Agreement for Indonesia, The Inter-Regional and Intra-
Regional Free Trade Agreement, National Security Law, and other topics. He is an adviser for Indonesian
Corruption Watch/ICW on Methodology and Substantive Analysis, in the Research on “Judiciary Mafia” (the
Report was published as Menyingkap Tabir Mafia Peradilan/The Disclosure the Secret of Judiciary Mafia,
Jakarta: ICW, 2002). He is also an author of several books, among others are: Penulisan Hukum (Legal
Writing), 1994; Masyarakat dan Kekuasaan (Society and Power), 1986; Sistem Hukum Indonesia (Indonesia's
Legal System), 1986; Ilmu Sosial Dasar (Basic Social Sciences), 1985; and Sendi- sendi Hukum Perdata
Internasional (Principles of Private International Law), 1982. Based on the Presidential Decree No. 156/M year
2006, he has been appointed as an Adviser for the Minister of Defense on Ideology and Political matters, as
well as coordinator of the Adviser for the Minister of Defense. He was also a senior Trade Lawyer for the
Indonesia Trade Assistance Project (ITAP) for the Ministry of Trade, under the auspices of USAID; an adviser
for the Partnership-UNDP Program on Corruption Eradication in Papua, and an adviser for Ministry of Health-
ADB Program on Food Security. Brotosusilo was educated in both Indonesia and the United States (Brown
University). He completed his Doctorate in international law.

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Despite Indonesia cultural heritage had a significant role in the early formation of
the modern international trade law; however, most of the Indonesian people
recently have been acted against the WTO rule, since in its evolution the idea and
practice of free trade have been polluted by the ideological values which is contrary
to Indonesia’s culture values.

This study is structured as follows. Part I illustrates the background of the

establishment of the law of the sea legal regime and a substantial contribution of
Indonesia’s institutional and legal culture to international law. 1 Part II delves deeper
into the ideological struggle in the development of free trade institutional and legal
doctrine, Part III takes into account of Indonesia’s experience as a member of the
multilateral trade arrangement/WTO and how the recent multilateral trade law has
been criminalized Indonesian people.

I argue that despite genuine Indonesia’s legal and institutional culture substantial
contribution to the idea of free trade in the formation of international law; however,
its people –as part of developing and less developed countries people--, has been
remaining victimized as a “criminal” in the multilateral trade forum by the developed
countries interests oriented legal regime.

Contribution of Indonesia’s Institutions and Legal Culture to International

Law

It is beyond the reasonable doubt that the status of independence and the
existence of sovereignty among the East Indian community is the main determining
factor on the struggle between Grotius’s doctrine of “mare liberum” and Freitas’s
“mare clausum” in the formation of modern the law of nations in the early

1
Lawrence M. Friedman defines a legal culture –one among three elements of legal system--, as:
people’s attitude toward law and legal system –their beliefs, values, ideas and expectations.
The others elements of the legal system are structure (the persistent, long term pattern, skeleton or
frame work of the system) and substance (the actual rules, norms, behaviour patterns of people
inside the system). See, Lawrence M. Friedman, American Law, New York: W.W. Norton &
Company, Inc, First Edition, 1984, p. 5-6.
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seventeenth century.2 In his treaties, Grotius stated the existence of organizes

political entities in the East Indies which he considers as independent and
sovereign. He wrote:

“These Islands of which we speak, now have and always have had their own
Kings, their own government, their own laws, and their own legal systems.” 3
The prevailing doctrine --“mare liberum” --, leads the way to the establishment of
freedom of navigation and trade, and advancement of free trade practice into the
legal doctrine.4 It is clear that the free trade regime was not Grotius legal invention,
but it was his declaration of the real cultural circumstances in the East Indies
region.5 It was the daily life practice in the region, especially among the Indonesian
islands –the area that not only rich of natural resources but also wide export
markets--, which has been contributed to the establishment of the Grotius as “the
father of the international law”.

The ideological struggle in the establishment of free trade doctrine

The Free Trade regime as a daily life practice in the East Indies region, especially
among the Indonesian islands, was the real cultural phenomenon. The social as
well as the legal relationship among the population --bind by the customary law
(hukum adat)--, has been conducted base on social harmony. Research by
Soepomo (the drafter of the Indonesian Constitution of 1945) validated that the
harmony among the Indonesian customary law exists in the legal culture which
more appreciated communalism than individualism values.6 The research also
revealed that the customary law is more attached to romanticism than rationalism
values. Brenner’s’ research on Modernization in Solo (Central Java) confirmed the
2
C.H. Alexandrowicz, An Introduction to the History of the Law of Nations in the East Indies (16 th, 17th and 18th
Centuries), Clarendon Press, Oxford, 1967, pp. 43-45.
3
In the original treatise, De Jure Praedae, Hugo Grotius stated: ‘Habent insulae istae quas dicimus et simper
habuerunt suos reges, suam rempublicam, suas leges, suas iura ...’ (ch. Ii).
4
Ibid, p.44.
5
In his treatise Mare Liberum Sive de Jure Quod Batavis Competit Ad Indicana Commercia Dissertatio
(Freedom of the Seas or the Right which Belong to the Dutch to Take Part in the East Indian Trade), Grotius
reference of “East Indian” is made particularly to Java, Ceylon and Moluccas.

6
See Soepomo: Hukum Adat Indonesia.
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common knowledge that the Indonesian legal culture more adheres to spiritualism
than materialism values.7 On the contrary, Grotius’s ideology --strongly influenced
by Arminianism which raised the specter of individual ability and free will--, coloring
the western as well as international law legal culture which more respected
individualism than communalism values.8 The ideology also dominated by
Socinianism --that extinguished the conception of authority as derived from
transcendence and revelation--, which more praised rationalism than romanticism
values.9 The ideology also deeply dominated by protestant virtue which more
appreciated materialism than spiritualism values. In Grotius treatise, the
transformation of oriental free trade customary practice into the (western
international law) legal doctrine involves the act of converting the source of the law
from the popular oriental legal culture value system into the liberal western one.
More dramatically, Max Weber accused that protestant ethics –which is the main
root of western legal culture--, is the foundation of capitalism. 10 Capitalism is a
system of exploitation.

The exploitation nature in the formation of the international trade law has been a
multitude in the establishment of the WTO rule. So far, the WTO rule has been
claimed as a “free trade” legal regime. However, Dani Rodrik denied this claim and
stressed that if WTO is about free trade, it does not need so many paragraphs of
regulation, but only five words:

'There shall be free trade'.11

In his comment to The Sutherland Report, Joost Pauwelyn emphasized:

7
See Suzanne April Brenner: The Domestication of Desire, Women, Wealth and Modernity in Java. Princeton
University Press, 1998.
8
See P. Schaff: The Creeds of Christendom, pp.545-49 (1919). See also, P. De Jong ed.: Crisis in the Reformed
Churches pp. 207-09(1968).
9
See H. McLachlan: Socinianism in Seventeenth Century England (1951).
10
Max Weber: The Protestant Ethics and the Spirit of Capitalism (Talcott Parson, Trans.), New York: Scribner’s
(Original work published 1904 – 1905).

11
Dani Rodrik: “Feasible Globalizations”. National Bureau of Economic Research, Working Paper No. 9129,
2002, p. 18.
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“... the (Sutherland) report then equates the WTO with liberal trade.
The reality, however, is that the WTO is as much about protectionism
as it is about free trade.”12

The protectionism in the WTO rule resulted in a quite severe impact to the
developing and less developed countries. Contrary to its main principle --the “non-
discrimination principle”--, the rule has been drafted and applied in discriminated
manner: the trade liberation has been exercised only to the most competitive
products of the developed countries --Trade on (Non-Agricultural) Goods, Trade in
Services, Trade-Related Intellectual Property Rights/TRIP’s and Trade-Related on
Investment/TRIM’s--, but it excluded the most competitive products of the
developing and less developed countries, that is an agriculture products.
Concerning to this unjust multilateral trade arrangement, Pauwelyn underlines:

“... the greatest benefit that developing countries stand to reap from
the world trade system will not result from special treatment –less
free trade—but rather from equal liberalization –freer trade-- in the
export sectors of the most interest to them, particularly agriculture
and textiles.”13

In the “Symposium: WTO Negotiator Meet the Academic-- Challenge to the

Legitimacy and Efficiency of the World Trading System” by The Robert Schuman
Centre for Advanced Studies of the European University Institute (EUI) at Florence,
Italy, --the place of birth of Machiavelli--, Professor Petersmann condemned the
policy formation in the WTO/Uruguay Round as “Machiavellianism”.14

Indonesia’s Experience: Criminalization in the Multilateral Trade

Arrangement
Despite none of the Indonesian people dare to state that he/she will not break the
law on copy right15 -- as part of WTO rule on TRIP’S--, however, it is not fully their
12
Joost Pauwelyn. “The Shuterland Report: A Missed Opportunity for Genuine Debate on Trade, Globalization
and Reforming the WTO “. Journal of Economic and Law, Vol. 8 No. 2, 2005, p. 331.
13
Joost Pauwelyn: “Just Trade”. George Washington International Law Review, Vol. 37, 2005, p.568.
14
Ernst-Ulrich Petersmann: “Challenges to the Legitimacy and Efficiency of the World Trading System:
Democratic Governance and Competition Culture in WTO”. Journal of International Economic Law, Volume 7,
2004, p. 589.
15
Undang-Undang Republik Indonesia Nomor 19 Tahun 2002 Tentang Hak Cipta.
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fault at all. Their cultural heritage is consists of a value system that has been more
appreciated communalism, romanticism, and spiritualism values. On the contrary,
the law on copy right has been much more dominated by individualism, rationalism,
and materialism values. It is very difficult –almost impossible--, to the Indonesian
people to act in a manner that contradicts their legal culture. No wonder, the culture
has been socialized, even institutionalized for generations. Unfortunately, since
they act according to their legal culture, they have been condemned as criminal
before the copyright law, under the TRIP’s/WTO rule. This condemnation justified
when Indonesia ratified its membership in the WTO forum. By this act, Indonesian
people have been trapped in an “anomie” situation: a confusion, whether they
should behave according to their genuine legal culture, or according to western
originated copyright law as an implementation of TRIP’s/WTO rule. There has been
existed a “dualism” in Indonesia legal system: the genuine legal system, and the
transplanted one.16

The genuine Indonesian legal system –which is manifested in adat/customary law--,

is the legal system which is based on oriental non-liberal value system condensed
in Pancasila (Indonesian State Ideology), which are more appreciated
communalism than individualism, more attached to romanticism than rationalism,
and more adhere to spiritualism than materialism values. On the contrary, the
transplanted legal system –which is manifested in western liberal law, and strongly
influenced international law--, more respected individualism than communalism,
more praised rationalism than romanticism, more appreciated materialism than
spiritualism values.17

The struggle between the Pancasila values and the transplanted western liberal law
one reflected in the 4 (fourth)-time amendment on Undang-Undang Dasar/UUD
1945, the Indonesian constitution. In the fourth amendment, the word “efficiency” is

16
“Dualism” in this legal sense is different with Boeke’s “Indonesian economic dualism” (1920).
17
A more deeper elaboration on the impact of contravention between the two legal system see: Agus
Brotosusilo: “Legal Base, Sociological Point of View, and Economical Considerations of Agreement
Establishing the World Trade Organization Ratification by Republic of Indonesia”, An Article in
"Majalah Hukum dan Pembangunan (Law and Development Journal), Vol. 4/XXVI, 1996.
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slipped in the 4th (fourth) paragraph of article 33 of UUD 1945. 18 The consequence
of this amendment is that the liberal ideology has been infiltrated the Indonesian
constitution. It was common knowledge that foreign interest played a significant role
in the recent formation of the Indonesia law and amendment process of the UUD
1945.19

Unfortunately, the Government of Indonesia leaves its people in confusion, without

any clear guidance, since their country has no clear trade policy. To date, Indonesia
has no integral and comprehensive trade law. The Ministry of Trade carried out its
business base on an ad-hock, a temporary policy. It is tragic, in this modern era the
foundation of Indonesian trade-related law is still the Dutch heritage,
Bedrifsreglementerings Ordonantie Stbl. 1934 (BRO, 1934).

Conclusion

Recently, Indonesian people have been faced a crucial problem. They have been
criminalized in the WTO-base multilateral trade arrangement, only because they act
according to their cultural heritage. There are several ways to overcome the
problem, among others is to fight it out for a more just multilateral trade law. The
just international law should be able to accommodate the interest of western as well
as eastern communities. If the just, free trade, international law is to be achieved,
its norm should be able to absorb the Indonesia’s originated legal culture values,
from where the original free trade institution and daily practice came from.

Bibliography:

18
Efficiency is the key word for The Economic Analysis of Law perspective. This perspective has
criticised by Baker in Philosophy and Public Affairs (1975) not only as reflection of free market
orientation, but also as capitalist ideology. Teleologically, Ronald Dworkin questioned whether
efficiency is a legal purpose.
19
Eva Sundari, the member of the House of Representative (Dewan Perwakilan Rakyat) stated that
about 70 (seventy) Indonesian laws (Undang-Undang) drafting was funded by foreigners. Siti
Fadilah Supari, Former Minister of Health, stated that the Draft Law on Social Security (BPJS) was
ordered by foreigners (Running Text, TV One, July 12, 2011, 06.05 PM).
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 Agus Brotosusilo, 2011.

Agus Brotosusilo, et. al.,: “Research on the Legal, Economical, and

Sociological Impact of “Agreement Establishing the World Trade
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Program - University of Indonesia, 1994-1995.

Agus Brotosusilo: “WTO, Regional and Bilateral Trade Liberalization and Its
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