Dispute Resolution in Indonesia

By Mohamed Idwan (‘Kiki’) Ganie

Posted: 9th August 2013 09:35

In the post-1998 era, corruption has been reduced in the Indonesian court system; so the parties can now rely on disputes being determined on the respective merits.  Consequently, any consideration in the past to declare Indonesia a “non-convenient” forum based on such concerns, would therefore no longer apply.
 
Court Process
 
The dispute resolution process in Indonesian civil proceedings follows the Dutch civil law tradition.  There are no discovery proceedings and the principle of “stare decisis” does not apply.  The principle is that both the winning and the losing party have to bear their own legal costs except if otherwise contractually agreed by the disputing parties.  Actual court fees are nominal.  Injunctive measures are possible but, except for so-called security attachments, extremely rate.
 
For the entire process through the three levels from District Court (first instance), High Court (second instance) and Supreme Court (third and last instance) approximately three years should be budgeted.  There are no particular legal obstacles to go through the full three instances of court proceedings, enabling the losing party to appeal and then apply for Cassation at the Supreme Court, and this is therefore almost the rule in commercial disputes.
 
Indonesian courts, especially district courts, in the past have faced a negative reputation caused by corruption and an insufficient sophistication of the judges.  Whilst the Government through the Corruption Eradication Commission (KPK) and related agencies (Judicial Commission) is putting an end to the corrupt practices, the sophistication of judges has increased generally and is traditionally higher at the High Court and Supreme Court level.  It is therefore common, and it must be anticipated by disputing parties, that an appeal or Cassation might be necessary to attain a reasoned decision on the merits.
 
Court Specialisation
 
Among the specialist courts there are so-called Commercial Courts within the District Courts, which are among others charged with bankruptcy matters.  The District Courts are now also charged with the challenge of decisions issued by the Indonesian Antitrust Supervisory Commission (KPPU).  Decisions of the district courts relating to antitrust proceedings can be further challenged with the Supreme Court through Cassation and in addition through Case Review.  District Courts are also charged with the enforcement of foreign arbitral awards.  Indonesia also has a special Administrative Court tailored after the Dutch/French system pursuant to which both foreign and domestic plaintiffs can challenge administrative decisions of an Indonesian government instrumentality.  Finally, there are labour courts handling employment law matters, and religious courts handling certain family law matters.
 
Mandatory Mediation
 
Pure civil disputes (i.e. except for antitrust, trademark, labour, and certain other disputes) are subject to a mandatory round of mediation proceedings supervised by the court.  Proceedings on the merits will only commence once the mandatory round of mediation has failed.  In practice, however, the mandatory mediation stage has in many cases resulted in amicable settlements.
 
Arbitration
 
Whilst each civil litigation case is subject to a mandatory round of mediation proceedings supervised by the court, Indonesia has a special arbitration act that enables arbitration proceedings and mediated settlements to be enforced through Indonesian District Courts.  In recent times there has been an increase of confidence that in case of breach of an arbitration award and mediated settlement, remedies are now enforceable through Indonesian courts which in the past remained a crucial question mark.
 
Evidence and Witnesses
 
Documentary evidence is the one most frequently used.  The parties are however free to submit various forms of other permitted types of evidence, which support their positions.  The parties may for example submit expert testimony, which can provide evidence to the judicial panel on matters that are technically complicated, and may be subjected to cross-examination.
 
Indonesian courts do not recognize a “pre-trial discovery procedure.”  However, the rules of civil procedure permit the parties to obtain specific evidence submitted by the opposing parties.  If the opposing parties disregard these orders, then a court may draw the conclusion that such items of evidence are not favourable to the parties who disregard such orders.  The possibility exists to question the origins and legality of written evidence submitted by the opposing parties, and based on this procedure, courts may examine and determine whether the documents, the legality of which is being questioned, may or may not be used as evidence.  Indonesian courts also have the power to summon witnesses to give testimony in court or to order the submission of certain documents to be entered as evidence.
 
Appeal, Cassation and Case Review
 
Appeal can be filed by a party whose interest is harmed as a result of a first-instance decision.  An appeal is a legal effort against a decision, which is available after a court of first instance has rendered its final decision.  An appeal process is essentially a re-examination of the first-instance court decision and will cover the factual and evidentiary issues as well as questions of law.  At the appeal process, the parties may present new evidence and submit a new memorandum/counter-memorandum.  Note, however, that the High Court is not compelled to consider the appeal memoranda.
 
Cassation to the Supreme Court is the third stage of the judicial process.  In the context of civil procedure, the Supreme Court is competent only to examine cases falling within general civil matters.  Unlike appeal at High Court level, Supreme Court’s competence in a Cassation is limited to ensuring that the material and procedural laws are applied consistently.  As such, the Court will not entertain evidentiary questions and will focus on the application of the law by the lower courts, including resolving unsettled questions of law.
 
Case Review is the re-examination of a decision by the Supreme Court and is available to the appellant after a decision on Cassation has been rendered.  There are several grounds available to apply for case review: fraud, new evidence, award beyond what was requested, lack of basis, contradiction, and judicial error.
 
Enforcements of Judicial Decisions
 
A Judicial decision may only enforced if such decision is either (1) of a “final and binding” or (2) if by virtue of court order the decision may be executed notwithstanding appeals or other legal process.
A decision is considered as final and binding if the parties do not appeal such decision or available appeal avenues (appeal to high court and Cassation before Supreme Court) are exhausted.  Note that the fact that a party has not resorted to Case Review does not prevent a decision from being executed.
 
Notwithstanding pending appeals, certain categories of decisions may be enforced immediately if, as part of the decision, the court so orders.  Note that the court’s discretion to order immediate enforcement is limited; and if upon appeal or Cassation the lower court decision is reversed, then all of the acts conducted pursuant to and legal consequences arising out of the enforcement of these decisions may also be reversed.
 
Mohamed Idwan (‘Kiki’) Ganie is the Managing Partner of Lubis Ganie Surowidjojo (LGS).  He graduated from the Faculty of Law of the University of Indonesia and holds a PhD in Law from the University of Hamburg, Germany.  Dr. Ganie has more than 30 years of legal experience, and specializes in commercial transactions and commercial litigation, including alternative dispute resolution and has acted as an expert in a number court and arbitration proceedings.  His expertise covers general corporate/company law, banking law, finance, bankruptcy and restructuring, mining, investment, acquisitions, infrastructure projects/project finance, antitrust, and shipping/aviation, with a particular focus on corporate governance and compliance.
 
Dr. Mohamed Idwan Ganie can be contacted by phone on +62 21 831-5005, 831-5025 or alternatively via email at ganie@lgslaw.co.id

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