Indonesia, located in the epicentre of the Maritime Route of the Belt & Road Initiative (BRI), numerous new investments, construction, loan facilities, and trade agreements have been signed in Indonesia since 2013.
With the unprece-dented growth in infrastructure, many major projects such as Kuala Tanjung Port, Jakarta-Bandung High-Speed Rail and Batang Toru Hydro-Power Plant were introduced. Undoubtedly, the proliferation of cross-border projects and businesses in Indonesia will attract more potential for disputes.
Accordingly, it is only ﬁtting that parties anticipate and manage those potential disputes to avoid unnecessary losses in the future. To manage disputes properly, the most convenient dispute settlement mechanism is necessary.
Three important aspects must be considered;
First: Is the vehicle for dispute settlement. Commonly, arbitration is chosen for cross-border businesses such as BRI projects, as it has international enforce-ability under the New York Convention. To avoid future uncertainty and additional conﬂicts between the parties, in choosing arbitration one must also specify in the contract the venue of arbitration, the arbitration institution, the law of the arbitration (lex arbitri), and the law of the contract (lex contractus).
The key with any arbitration is the recognition and enforcement stage. In Indonesia, both international and national awards from arbitrary tribunals must be enforced through local courts. To ensure an easy path during the recognition and enforcement process, great attention must be paid to the wording of the contract, especially the arbitration clause, since it will in practice determine the enforce-ability of an award.
Nonetheless, if the assets are located in Indonesia, having the arbitration seated in Indonesia and administered by local arbitration institution is usually the safest. Therefore, being aware of the location of the assets is necessary to determine the formulation of the arbitration clause.
Second: Issue is the legal standing of the parties. As the BRI fuels unprecedented infrastructure growth in Indonesia, construction projects will proliferate. Each party must always be aware of their legal standing and ensure that they hold well-founded legal rights arising from the main contract for the projects in which they are involved. Based on the author’s ﬁrm experience, it is common for construction disputes to arise from uncertainties in the legal relationships between the employer, the contractor, and the sub-contractors.
Third: Issue is the dispute related clauses. There have been numerous international precedents, including Indonesia, that nulliﬁed contracts due to a clause preventing the parties from exercising their rights to submit a lawsuit (i.e. non-litigation clause that prohibits court lawsuit). Although Indonesia does not adopt the stare decisive system, this matter must be taken into account to ensure ease of settling disputes.
Conclusively: It is essential for all parties involved in BRI projects in Indonesia to consult at the beginning of the process and throughout its progress with counsels having strong local and international presence and expertise to obtain strategic advice as to dispute resolution strategies and the client’s legal standing in relation to the project’s contracts and the other parties involved.