JAKARTA — Indonesia's parliament passed a bill Tuesday that dilutes the powers of the special Corrupt Crimes Court, a move critics called a step backwards for the graft-plagued nation's efforts to weed out corruption.
The Court was set up in 2003 to try graft cases and has sent scores of people to prison, including politicians, central bank officials and regional governors. President Susilo Bambang Yudhoyono, who first took office in 2004, has won praise at home and abroad for battling graft, a problem which has seriously dented foreign investor confidence in Indonesia over the past decade.
But some lawmakers and police have argued the powers of the Court and its sister body, the Anticorruption Commission, are too broad and could lead to abuses. Anticorruption advocates say some politicians fear the dragnet will move their way and want to hobble the campaign before it reaches them.
The Commission has broad powers to investigate and prosecute corruption cases, including wiretapping without a warrant. The Court has a reputation for handing down harsher sentences than Indonesia's regular justice system, which has been cited by Transparency International as one of the nation's most graft-ridden institutions.
The bill passed Tuesday allows the Court's staff of judges to include a majority from the regular justice system. Previously, the Court had to be staffed by a majority of non-career judges recruited from among practicing lawyers, university professors and retired prosecutors—a rule set because such a panel was seen to be more independent.
"The reputation of career judges for corruption cases in Indonesia is not good," said Eryanto Nugroho, a researcher at the Center for Indonesian Law and Policy Studies, an independent legal advocacy group.
The decision follows an effort by President Yudhoyono, after attending the Group of 20 summit in Pittsburgh, to drum up U.S. investment in Indonesia, one of the few economies expected to post positive economic growth this year.
Mr. Yudhoyono met business people in Boston over the weekend before giving a speech at Harvard University's John F. Kennedy School of Government. Trade Minister Mari Pangestu hosts an event Wednesday at Johns Hopkins University featuring presentations from senior Indonesian government officials and business figures.
Investors generally have grown more favorable toward Indonesia over the past year amid signs the nation is finally getting a handle on some of its biggest problems, including corruption and terrorism.
Any backtracking on those successes could curtail investor interest at a time when other Asian economies are recovering from the worst effects of the global economic slowdown. A spokesman for Mr. Yudhoyono wasn't immediately available for comment.
The bill was drafted by Indonesia's Ministry of Law and Human Rights and then debated in a parliamentary committee whose meetings aren't open to the public. All parties voted to pass the bill, but no politician has publicly taken credit for the bill, and no politician or party representative has acknowledged supporting the legislation.
Some politicians attempted to insert a clause into the bill that would have stripped the Commission of its power to prosecute graft cases at the Court, according to Nursyahbani Katjasungkana, a politician from the Islamic-based National Awakening Party, which is part of Mr. Yudhoyono's broad coalition government. She said her party and the Prosperous Justice Party, another Islamic-based coalition member, opposed the moves and that the clause was dropped. It wasn't possible to confirm her account.
The bill passed Tuesday also stipulated that all provinces must have corrupt-crimes courts within two years. Antigraft advocates say the deadline will be impossible to achieve without lowering standards, and fear that opponents of the anticorruption measures will use this as an opportunity to attack the special court system.
The system took another blow on Sept. 15, when Indonesian police named two senior officials of the Anticorruption Commission as suspects in a bribery case. Neither has been charged of a crime and both deny any wrongdoing. One of the two, Chandra Hamzah, a former litigation lawyer, is widely viewed as the driving force behind much of the Commission's successful work in recent years.
Police have confirmed the two are suspects but haven't made further comments about the case.
Tensions between the police and the Commission intensified in July after the Commission wiretappped the national police's head of criminal investigations, Susno Duadji, according to people familiar with the matter.
Write to Tom Wright at tom.wright@wsj.com
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