Public Hearing on the Indonesia International Financial Center (IIFC) Bill at Universitas Airlangga and Universitas Andalas

Surabaya & Padang - Dr. Justisiari Perdana Kusumah, S.H., M.H., who is also a member of the drafting team for the Indonesia International Financial Center (IIFC) Bill, took part in a series of public hearings on the IIFC Bill held at Universitas Airlangga (Unair), Surabaya, on 2 July 2026, and at Universitas Andalas (Unand), Padang, on 5 July 2026. The events featured discussions on the legal framework and governance of the special financial zone, which at the time was still in the form of a draft law.

The Indonesia International Financial Center (IIFC) was officially enacted into law by the Indonesian House of Representatives (DPR RI) on 21 July 2026, pursuant to the mandate of Article 248A of Law No. 4 of 2026 on the Development and Strengthening of the Financial Sector (the "P2SK Law"). Under Article 1(1) of the IIFC Law, the IIFC is defined as a zone with financial and administrative autonomy and a specific legal regime that adopts and aligns itself with international principles and standards. In other words, the IIFC is designed as a special financial zone with its own governance and legal framework, while remaining within Indonesia's legal system.

A Brief Overview of the IIFC

The establishment of the IIFC is driven by intense global competition for capital, with investors demanding legal certainty and ease of doing business across borders. A number of countries have already established similar financial centers, such as the Dubai International Financial Centre (DIFC), the Square Mile (City of London), the Singapore Financial Centre, and the Astana International Financial Centre (AIFC). Through the IIFC, the government hopes to attract global investment and financial market players, as well as strengthen the financial sector's contribution to the Indonesian economy.

As an illustration of the success of similar models, the Dubai International Financial Centre (DIFC), established in 2004 on approximately 110 hectares of land, now hosts more than 10,000 companies and has become a leading financial hub in the Middle East, supported by an independent common-law-based court, an independent regulator, a digital ecosystem, and corporate and personal income tax incentives.

Status and Institutional Structure of the IIFC

In Indonesia, the IIFC may be located within a Special Economic Zone (SEZ), potentially allowing it to benefit from the incentives applicable in such zones. In addition, the IIFC may also be developed in more than one location within Indonesian territory.

The IIFC's governance is carried out by the IIFC Council, which reports directly to the President and holds special (sui generis) authority to grant investment licenses, business facilitation, and special facilities to business actors within the zone. Beneath the Council are two main institutions:

• IIFC Management Body (LP PFII) is a legal entity with initial capital of IDR 30 trillion sourced from the State Budget (APBN), tasked with managing the IIFC's operations and assets, including the authority to borrow and lend, with exemptions from bankruptcy proceedings and special asset protection.

• IIFC Financial Services Supervisory Authority (LPJK PFII) is an independent regulator responsible for regulating and supervising all financial services activities within the IIFC, with initial capital sourced from the IIFC Management Body.

Business Activities within the IIFC

Business activities permitted to operate within the IIFC include the financial sector (universal banking, insurance and Islamic finance, capital markets, pension funds, bullion, as well as family offices and trusts), financial support services (public accountants, appraisal services, notaries, legal and financial consultants), and other zone ecosystem support sectors. The establishment of the IIFC also opens the door for business activities that do not yet have a specific legal framework in Indonesia, such as family offices and trusts.

Legal Distinctiveness within the IIFC

One of the key distinguishing features of the IIFC is the use of English as the official language for regulations, contracts, court proceedings, and judgments applicable within the zone. Nevertheless, the IIFC remains within Indonesia's legal framework. Special treatment is primarily granted in certain areas of civil and commercial law as determined by the IIFC Council, including the possible adoption of common law principles, equity, and international commercial law practices. In terms of transactions, the use of foreign currency is permitted to support cross-border activities, while the Rupiah remains in use for daily operational needs. All activities within the zone must also continue to comply with anti-money laundering and counter-terrorism financing provisions.

This distinctiveness is also reflected in the dispute resolution mechanism. The IIFC is designed to have a special court within the general judiciary that is independent and conducts proceedings in English. This court has jurisdiction to hear cases at first and final instance, meaning that, in principle, no appeal, cassation, or judicial review is available. An exception applies only to cases involving national interest, which may be brought for cassation before the Supreme Court. In addition to the court system, the IIFC Council will also establish its own arbitration institution providing arbitration, mediation, conciliation, and expert determination services, including recognition of international arbitral awards.

K&K Advocates will continue to monitor developments in the regulation of the Indonesia International Financial Center (IIFC), including its implementing regulations, given their high relevance to business actors and investors operating across jurisdictions.