I INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK
i Structure of law
The Republic of Indonesia inherited most of its legal system from the Dutch colonies. Indonesia is a civil law country and is characterised by codified legal provisions, and that written laws and regulations are the primary sources of laws.
The formulation of laws in Indonesia is carried out in accordance with Law No. 12 of 2011 on Formulation of Laws and Regulations (Law No. 12/2011). This Law stipulates the type and hierarchy of Indonesian laws and regulations, as follows:
- the 1945 Constitution;
- the Decree of the People's Consultative Assembly;
- law, or government regulation in lieu of law;
- government regulation;
- presidential regulation;
- provincial regulation; and
- regency or municipality regulation.
The foregoing hierarchy must be understood in conjunction with the principle of lex superior derogat legi inferiori (a law higher in the hierarchy repeals the lower one). The purpose of this principle is to ensure conformity with all of the laws and regulations listed in the hierarchy.
Although Indonesia does not acknowledge the binding force of precedents, former precedents that have frequently been referred to in adjudicating similar cases are considered to have a 'persuasive power' among the judges. If the judges find such a precedent to be relevant to the case, they will refer to it in the final ruling of the case, and thus the judges have the choice of whether to follow the precedent or not.
Another aspect of precedents in Indonesia is they tend to set a trend in understanding laws and regulations. In some cases, precedents may provide a fully different interpretation of laws and regulations – compared to the one provided by the relevant laws and regulations – on the grounds of equity or public policy. This often provokes concerns on the degree of legal certainty in Indonesia. However, some precedents may also be worthy of appreciation owing to their groundbreaking legal importance.
In addition, customary laws and shariah law also influence the Indonesian legal system. The above laws are applicable with the following limitation:
- customary laws only prevail to the extent that they do not contravene prevailing written laws and regulations; and
- shariah law only prevail for:
- civil matters stipulated under the prevailing laws and regulations (e.g., marriage and inheritance for Muslims); and
- regions stipulated under the prevailing laws and regulations (i.e., the province of Nanggroe Aceh Darussalam).
ii Structure of courts
The judiciary of Indonesia comprises the Constitutional Court and the Supreme Court. The Constitutional Court holds the authority to conduct a constitutional review of laws, which may result in revocation of certain provisions or the whole law if it is found to contravene the 1945 Constitution. As for regulations having hierarchy below the laws, the Supreme Court has the authority to review whether a regulation contradicts certain laws that again may result in certain provisions or the whole regulation being annulled by the Supreme Court.
Aside from the above, the Supreme Court serves as the highest court of appeal for the following judicial bodies:
- general courts whose jurisdiction encompasses civil and criminal cases;
- state administrative courts that deal with state administrative disputes;
- religious courts that have jurisdiction over civil disputes between Muslims, for example, marriage and inheritance law, and economic shariah law; and
- military courts whose jurisdiction covers military criminal cases and military administrative cases.
Any party conducting a dispute through these Indonesian courts (unless stipulated otherwise under certain laws) should do so in the following order:
- district courts (first instance);
- high courts (appeal); then
- the Supreme Court (cassation).
Judgments rendered by district courts may be appealed to the relevant high courts, whether on the ground of legal issues or factual issues.2 The disputing parties may also file a petition for cassation against high court judgments; however, the grounds for such petition for cassation are limited to issues pertaining to the application of laws.
Save for cassation judgments, all district court judgments and high court judgments shall not be deemed as final and binding unless all available legal recourse has been exhausted. However, under the procedural laws, even a final and binding decision may also be appealed through an extraordinary legal recourse (a case review) at the Supreme Court. In this regard, the grounds for filing a case review are limitative and must be submitted within a specific time period, in accordance with the prevailing laws and regulations.
iii Framework of arbitration and alternative dispute resolution
Alternative dispute resolution (ADR) in Indonesia is mainly regulated through the Arbitration Law.3 The Arbitration Law defines ADR as an institution for the resolution of disputes or differences of opinion through procedures agreed by the parties, namely resolutions outside the courts by:
- conciliation; or
- expert assessment.
The Arbitration Law does not provide detailed rules and procedures of conducting ADR. The disputing parties are at liberty to choose ADR rules and procedures.
Although the same principle applies to virtually every ADR, rules and procedures of court-annexed mediation are strictly regulated under the Supreme Court Regulation.4
In Indonesia, the Arbitration Law also serves as lex arbitri. As such, all arbitration proceedings conducted in Indonesia must not contradict the provisions of the Arbitration Law.
Even though Indonesia has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, international arbitral awards5 are enforced in accordance with the provisions of the Arbitration Law.6
Indonesia has also become a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) since 1968. However, Indonesia excludes disputes arising from state administrative decisions issued by regencies from the types of dispute that may be settled by ICSID.7
II THE YEAR IN REVIEW
i Fugitives are prohibited from commencing pretrial proceedings
In Indonesia, any criminal suspect is entitled to commence pretrial proceedings to challenge the validity of its arrest or detention. Although pretrial proceedings basically serve as a complaint mechanism against violation of due process, recent developments show that they may also be used to challenge the naming of a suspect.
Before 2018, this legal recourse was commonly used by Indonesian fugitives to challenge the validity of their being named as a suspect while at the same time avoiding the law by going abroad.
More recently, this issue caused the Supreme Court to issue Circular Letter of Supreme Court No. 1 of 2018 on Prohibition to Commence Pretrial Proceedings for Suspect Who is Running Away or Whose Name is Listed as Fugitive (CL No. 1/2018). CL No. 1/2018 essentially states that:
- a suspect who is running away or whose name is listed as fugitive is not allowed to commence a pretrial proceeding;
- if the suspect insists on commencing a pretrial proceeding through his or her attorney or family members, the judge shall declare the petition for pretrial inadmissible; and
- the judgment shall not be subject to any legal recourse.
While there has been criticism of the above, the following compliments have been made:
- the act of running away from the law enforcers constitutes avoidance of law; and
- a person who attempts to avoid the law is not entitled to commence pretrial proceedings.
Meanwhile, criticism was given as some people see the provision of CL No. 1/2018 as a form of deprivation against human rights. Nevertheless, recent practice shows that there have already been several court decisions implementing the provision of CL No. 1/2018 to declare that a petition for pretrial is inadmissible.8
ii The hearing of suspension of debt payment must also be attended by the other creditor whose name is mentioned in the petition for suspension of debt payment
Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment (Law No. 37/2004) provides both the debtor and creditor with the right to file a petition for suspension of debt payment (PKPU) under the following requirements:
- there are two or more creditors (including the petitioner); and
- one of the creditors' debts is due and payable.
Failure to satisfy such requirements shall cause the petition to be rejected.
Regardless of the foregoing requirements, on 6 April 2018, the Commercial Court at the Central Jakarta District Court rendered a judgment that added a requirement in filing a PKPU petition. The judgment was made in relation to a PKPU petition filed by Molucca Holding Sarl (Molucca) against PT Pelita Cengkareng Paper (Pelita Cengkareng).9 In this case, Molucca argued that it is entitled to receive payment of receivables – previously owned by PT Bank Permata, Tbk – from Pelita Cengkareng. However, after the assignment of receivables was made, Molucca did not receive any payment from Pelita Cengkareng, therefore, Pelita Cengkareng has committed default.
Further, Molucca also claimed that it has satisfied the PKPU Petition requirements because there are three other creditors of Pelita Cengkareng. Nevertheless, the Commercial Court stated otherwise and rejected the PKPU petition. This is because the other creditors claimed by Molucca have never attended the hearing. Therefore, the judge could not ascertain whether Pelita Cengkareng still has any debt to these creditors.
Basically, Law No. 37/2004 does not require the petitioner to ensure the attendance of other creditors during the hearing. It only requires the petitioner to prove the existence of these creditors (through documentary evidence or witnesses). As such, it is apparent that the Commercial Court has set out an additional requirement of filing a PKPU petition. Some practitioners see that this requirement is unnecessary and may complicate PKPU proceedings. This is because the schedule for PKPU proceedings is very tight,10 and creditors (other than the petitioner) are not always available to attend the PKPU proceedings.
III COURT PROCEDURE
i Overview of court procedure
The official language to be used in the court proceedings is Indonesian. A civil court case is commenced by filing a lawsuit that is addressed to the chairman of the relevant district court – in general, the district court whose jurisdiction encompasses the defendant's domicile. The lawsuit must comprise factual grounds and legal bases, and prayer for relief (where the plaintiff describes the remedies that they seek from the court).
After the filing of lawsuit, the chairman of the district court appoints the examining panel of judges. The panel of judges determines the first hearing date and summons the defendant to appear before the court.
In the first hearing, the panel of judges verifies the parties' credentials and orders the parties to enter into a court-annexed mediation process. If the mediation process fails, the court will proceed with the pronouncement of the lawsuit and allow the defendant to produce a statement of defence consisting of a demurrer and response to the case merits. The demurrer section may contain a challenge to the court's competence, the formality of the lawsuit, or both.
At the same time, the laws also provide the defendant with the right to file a counterclaim against the plaintiff.
Afterwards, the plaintiff may file a counter plea against the defendant's statement of defence and a statement of defence against the defendant's counterclaim (if any). Subsequently, the defendant is given the right to submit a rejoinder against the plaintiff's counter plea and a counter plea against the plaintiff's statement of defence in the counterclaim (if any). For final submissions, the court gives the opportunity for the plaintiff to lodge a rejoinder against the defendant's counter plea in a counterclaim.
Before proceeding to the evidentiary process, the court shall render an interlocutory judgment over the court competence demurrer. If the court grants the court competence demurrer, then the court shall declare the lawsuit to be inadmissible. Otherwise, the court shall proceed with the evidentiary hearing.
In the evidentiary hearing, the judges will provide the widest opportunity for the parties to submit any and all evidence that the parties deem to be relevant and in support of their argument.
Subsequent to the evidentiary process, the court shall provide the opportunity for the parties to submit a written statement of conclusion. After receiving the statement of conclusion, the panel of judges will adjourn the hearing in order for the judges to prepare the judgment, usually within two to four weeks.
The laws provide the litigants with the right to file an appeal to the district court. If the litigants are not satisfied with the judgment of the appeal court, the litigants may also file a cassation petition to the Supreme Court.
ii Time frames
The Supreme Court has been encouraging the district courts to conclude their proceedings within five months; and the high courts to conclude appeal proceedings within three months.11 In practice, however, there have been cases where the district court proceedings take around six to 12 months.
For cassation and case review proceedings, the Supreme Court has determined that such proceedings shall be concluded within 250 days of when the case dossiers are received by the Supreme Court.12 Nonetheless, in practice, owing to its load of cases, it is very rare for the Supreme Court to finish case examination within that period.
iii Class actions
Class actions are permissible only if the claim satisfies the following requirements:
- there are so many group members that it would be ineffective and inefficient if the lawsuit was separately filed or jointly filed;
- there is a similarity of facts or events, legal bases, and types of prayer for relief between the representative of the group and its group members; and
- the group representative has the honesty and determination to protect the interest of its group members.
The above requirements will first be assessed by the panel of judges in order to determine whether or not the class action may proceed. Subject to fulfilment of these requirements, the plaintiff will be required to provide a proposal for the notification to the group members. The remaining procedure shall follow the prevailing civil procedural laws.
iv Representation in proceedings
In general, it is the right of the litigants to be represented by lawyers.
All representation, except for the representative in class action proceedings, must be based on power of attorney. If power of attorney is executed outside the territory of Indonesia, then it must be consularised at the embassy of Indonesia and notarised in the country where the power of attorney is executed.
v Service out of the jurisdiction and assistance to foreign courts
Indonesia is not a member of any convention pertaining to judicial assistance, and, to date, Indonesia only has mutual judicial assistance with the Kingdom of Thailand. As such, in general, when Indonesian courts are in need of judicial assistance from foreign court or the other way around, the procedure will be done through a diplomatic channel.
Up to now, there are no laws and regulations regulating the procedure of service out of the jurisdiction. The same applies to matters concerning assistance to foreign courts.
vi Recognition and enforcement of foreign court judgments
A foreign court judgment cannot be enforced in Indonesia. If a party would like to enforce its right based on a foreign court judgment then it must file a new lawsuit at a relevant Indonesian district court (relitigate the case). During the court proceedings, the plaintiff may submit the foreign court judgment to the court as documentary evidence.
vii Access to court files
Indonesian courts have adopted a case tracking system that allows the public to access information regarding ongoing or concluded cases at the relevant court. This includes:
- date of case registration;
- classification of case;
- names of the parties;
- prayer for relief;
- hearing schedule; and
- the administrative cost of the case and its disbursement report by the court.
If the case has been concluded by the first instance court, the case tracking system may publish the names of judges and the substitute registrar of the case.
Members of the public may obtain an unofficial copy of a court judgment or court decree, but court submission or pleading documents or evidence are unavailable for the public in principle.
viii Litigation funding
Any practice of litigation funding is not recognised by Indonesian laws and regulations. Some law practitioners argue that litigation funding may raise issues of ethics and may violate decency or any other source of unwritten laws in Indonesia.
IV LEGAL PRACTICE
i Conflicts of interest and Chinese walls
The Advocates Law13 does not set forth a rule on conflict of interest. However, the Indonesian Advocate Code of Ethics14 provides a basic rule that an advocate (lawyer) handling the joint interest of two parties is required to fully resign from handling such interest, if in the future there is a conflict of interest between the relevant parties.
There is no specific provision for explaining this basic rule. Some law practitioners argue that the above rule may be broadly interpreted, and it may depend on the advocate.
Indonesian legal practice does not recognise the concept of Chinese walls, and as such no set of rules provide any definition of Chinese walls.
ii Money laundering, proceeds of crime and funds related to terrorism
For some matters outside litigation or arbitration proceedings, Indonesian advocates are obliged to:
- provide a report on suspicious financial transactions15 to the Indonesian Financial Transaction Reports and Analysis Center (PPATK); and
- apply the principle of 'know your service user'.16
The matters outside litigation or arbitration proceedings are related to:
- the purchase and sale of a property;
- the management of money, stocks or other financial service products;
- the management of a checking account, savings account, deposit account or stocks account;
- the operation and the management of a company; and
- the establishment, purchase and sale of legal entities.
Advocates are obliged to apply the principle of know your service user at the following times:
- there is a business or commercial relation with its service user;
- there is a financial transaction in Indonesian rupiahs or foreign currency involving a minimal amount of or equal to 100 million rupiahs;
- there is a suspicious financial transaction relating to money laundering and terrorism funding; or
- the advocate has doubts regarding the truth of the information from its service user.
iii Data protection
The legal framework of personal data protection comprises various laws and regulations.17 The following is considered as protected personal data under Indonesian laws and regulations:
- Based on the Public Information Disclosure Law:
- the history and condition of a family member;
- the history, condition, treatment and medication of physical and psychological health;
- finances, assets, income and condition of bank account;
- the result of evaluation in connection with the capability and intellectuality recommendation; and
- records concerning the individual with regard to formal education and non-formal education.
- records on physical or mental disability;
- iris recognition;
- other data elements regarding a person that are considered unacceptable;
- citizen identification number;
- place and date of birth;
- parent names;
- home address;
- records on marriage, as well as the date and status of marriage;
- records on divorce as well as the date of divorce;
- blood type;
- records concerning children born outside of marriage;
- records on adoption;
- type of work;
- last education; and
- the ownership of deed of birth or marriage.
Government and private institutions are prohibited from making personal data public information. Specifically for personal data in electronic systems, the Indonesian Minister of Communication and Informatics has issued a regulation that specifies that the protection of personal data includes protection of the acquisition, collection, processing, analysis, storage, appearance, announcement, transmission, dissemination and destruction of personal data.
V DOCUMENTS AND THE PROTECTION OF PRIVILEGE
The Advocates Law provides that advocates have the right on confidentiality of relationship with their clients, including protection of materials and documents against seizure or examination measures, and protection against recording or tapping of electronic communications.
The Indonesian Advocates Code of Ethics further provides that letters sent by advocates to other advocates in a case may be presented before the judges unless they are made 'without prejudice'. Also, advocate-to-advocate correspondence or contents of conversations in the failed attempt of amicable settlement shall not be presented as evidence before the court.
The Advocates Law and Indonesian Advocates Code of Ethics are silent on whether its provisions may also be applied to in-house lawyers.
ii Production of documents in civil proceedings
In principle, a party asserting or rebutting a right or entitlement is obliged to prove it based on the available evidence. The law does not require the disputing parties to produce all documents or evidence relevant to the case; as such, it fully depends on the parties' strategy and possession of documents.
Indonesian civil procedure laws consider written evidence as primary evidence. To be accepted by the court, the parties must be able to present the original written evidence before the court because, under Indonesian civil procedure law, the power of written evidence lies within its originals.
Indonesian civil procedure law provides that a party may request the judges to order the opponent to submit letters or documents belonging to the disputing parties concerning matters being disputed if such letters or documents are possessed by the opponent.18 Nonetheless, in practice, the foregoing provision has rarely, if ever, been invoked by Indonesian litigants. As such, in practice, the disputing parties rely on any evidence in their possession to prove their right or to rebut the opponent's arguments.
VI ALTERNATIVES TO LITIGATION
In Indonesia, Arbitration is commonly used to resolve commercial disputes involving particular expertise (e.g., construction, capital market, insurance). Meanwhile, the major arbitral institution commonly used in Indonesia is the Indonesian National Board of Arbitration.
The Arbitration Law categorises arbitration awards according to the place where the arbitration award is rendered. If the arbitration award is rendered outside the jurisdiction of Indonesia, it shall be deemed as an international arbitration award. If it is the other way around, the arbitration award shall be deemed a domestic arbitration award.
The Arbitration Law does not recognise the right of appeal against arbitration awards. However, the district court may refuse to enforce the domestic arbitration award for the following reasons:
- the arbitration agreement is absent;
- the dispute is not allowed to be resolved through arbitration; or
- the award violates morality and public policy.
As for international arbitration awards, the Central Jakarta District Court may refuse to enforce such awards if:
- the award is not rendered by an arbitrator or arbitral tribunal in a country bound to Indonesia by a bilateral or multilateral treaty on the recognition and enforcement of international arbitration awards;
- the award does not fall within the scope of commercial law under Indonesian law; or
- the award violates public policy in Indonesia.
The grounds for refusal of recognition and enforcement of international arbitration awards under the Arbitration Law are more limited, compared to the one provided by the New York Convention.
Moreover, in Indonesia, the disputing parties are entitled to request annulment of the arbitration award on the following grounds:
- letters or documents submitted in the hearing, after the award is rendered, are acknowledged to be false or declared to be forgeries;
- discovery of documents, after the award has been rendered, which are decisive in nature and were deliberately concealed by the opposing party; and
- the award is rendered as a result of fraud committed by one of the parties in the proceedings.
The Arbitration Law does not clearly state that the grounds for annulment are applicable for domestic and international arbitration awards. However, most decisions have declared that Indonesian courts have no jurisdiction to adjudicate matters regarding annulment of international arbitration awards.
There are two types of mediation recognised under Indonesian law; namely, court-annexed mediation and voluntary mediation (non-court mediation). While court-annexed mediation has been used since the Dutch colonial era, non-court mediation was introduced in 1999 through the promulgation of the Arbitration Law.
With regard to court-annexed mediation, the Supreme Court has also issued a regulation pertaining to Procedure of Court-Annexed Mediation.19
There are two major differences between court-annexed mediation and voluntary mediation, namely:
- court-annexed mediation is mandatory in nature, thus it must be conducted at the preliminary stage of civil court proceedings. On the other hand, voluntary mediation will only be conducted upon the disputing parties' agreement; and
- rules and procedures of court-annexed mediation shall comply with the prevailing laws and regulations, while rules and procedures of voluntary mediation fully depend on the agreement between the disputing parties.
Although mediation has long been recognised by law, it has yet to be as popular as arbitration in terms of alternatives to litigation. This might be for several reasons, including:
- the disputing parties are pessimistic that mediation will result in a win-win solution, as their first attempt to negotiate has already been failed;
- the settlement agreement remains vulnerable to any violation by the disputing parties, which later ends up in court or arbitration proceedings; and
- court-annexed mediation still contains shortcomings, such as a relatively short time period for conducting mediation without considering the degree of complexity of the cases (i.e., only 30 business days with a chance to extend the period by up to another 30 business days with the parties' consent).
VII OUTLOOK AND CONCLUSIONS
The Supreme Court has made efforts to modernise Indonesian court proceedings. This is evident by many Supreme Court regulations governing particular areas in court proceedings in order to expedite the time frame and simplify the court bureaucracy. The Supreme Court has also issued regulations for Indonesian courts to apply regarding electronic filing of some court documents (e.g., lawsuit documents). However, such efforts are minimal because the core set of rules for Indonesian court proceedings mostly still derive from Dutch colonial laws, and it seems there is still no concrete plan from the government or the house of representatives for amendment of those 'old' laws. As such, we do not predict that there will be any significant changes in Indonesian court proceedings in the near future.
1 Ahmad Irfan Arifin is a litigation partner at Lubis, Santosa & Maramis. The author wishes to thank the firm associates Kristian Takasdo Simorangkir and Edgar Christian Martua Raja for their great help in the preparation of this chapter.
2 In criminal cases, judgments stating that the defendant is acquitted or discharged from all legal charges may not be appealed to the high court. The available legal recourse for such judgment is by filing for cassation to the Supreme Court. Nevertheless, filing for cassation against a judgment that acquits a criminal defendant was once prohibited by Article 244 of Indonesian Code of Criminal Procedure until the provision was amended under the ruling of Constitutional Court Judgment No. 114/PUU-X/2012 dated 28 March 2013.
3 Law No. 30 of 1999 on Arbitration and ADR.
4 Supreme Court Regulation No. 1 of 2016 on Procedure of Court-Annexed Mediation.
5 Under Article 1 Paragraph 9 of the Arbitration Law, international arbitration awards are awards rendered by an arbitration institution or ad hoc arbitration outside the legal jurisdiction of the Republic of Indonesia, or such awards are deemed as international arbitration awards under Indonesian laws and regulations.
6 Articles 65–69 of the Arbitration Law.
7 President Decree No. 31 of 2012 on Disputes Whose Settlement Shall Not Be Submitted to the Jurisdiction of International Centre for Settlement of Investment Disputes.
8 See, among others, Pekanbaru District Court Decision No. 19/Pid.Pra/2018/PN Pbr of 13 August 2018; and South Jakarta District Court Decision No. 15/Pid.Pra/2018/PN JKT.SEL of 10 April 2018.
9 See: Central Jakarta Court Decision No. 30/Pdt.Sus-PKPU/2018/PN.JktPst of 6 April 2018.
10 Under Article 225 Paragraph 3 of Law No. 37/2004, PKPU proceedings must be concluded no later than 20 days as of the registration of PKPU petition.
11 Circular Letter No. 2 of 2014 on Resolution of Case in The First Instance Court and Appeal at 4 (Four) Types of Judiciary dated 13 March 2014.
12 Decree of the Chairman of Supreme Court Number 214/KMA/SK/XII/2014 dated 31 December 2014.
13 Law No. 18 of 2003 on Advocates.
14 Indonesian Advocate Code of Ethics, ratified on 23 May 2002.
15 Article 1 Paragraph 8 of Government Regulation No. 43 of 2015 on Reporting Party in the Prevention and Eradication of Money Laundering provides that suspicious financial transaction is (1) a financial transaction that deviates from the profile, characteristic or behaviour of transaction pattern of the service user; (2) a financial transaction conducted by the service user that is reasonably considered as having the purpose of avoiding the reporting obligation of the service user under the laws and regulations pertaining to the prevention and eradication of money laundering; (3) a financial transaction that is conducted by or being cancelled to be carried out by using assets that allegedly originated from proceeds of crime; and (4) a financial transaction that is requested by the PPATK to be reported by the advocate because the transaction involves assets that allegedly originated from proceeds of crime.
16 Article 1 Paragraph 3 of PPATK Regulation No. 10 of 2017 on the Application of the Principle of Know Your Service User for Advocates provides that the principle of know your service user is the principle applied by advocates to know the profile and transaction of its service user by implementing certain obligations under the regulation.
17 Law No. 23 of 2006 on Population Administration, as amended; Law No. 14 of 2008 on Public Information Disclosure; and Government Regulation No. 37 of 2007 on Implementation of Law No. 23 of 2006.
18 Article 1886 of the Indonesian Civil Code; Article 300 of Civil Procedure Law for Regions Outside Java and Madura.
19 Supreme Court Regulation No. 1 of 2016 on Procedure of Court-Annexed Mediation.