This report is compiled by Hyang I. Mihardja S.H., M.B.A.
in affiliation with EYR Center for Legal Studies
and Indonesia Mediation Center
- Written by: Hyang I. Mihardja S.H., M.B.A., Yulianti Utami, S.H., LL.M. and Amartha Christine, S.H.
- Edited by: Hyang I. Mihardja S.H., M.B.A.
Mediation Practice in Indonesia – Current Trend
As a nation, Indonesia consists of more than 1.340 ethnic groups, each with their own cultures, and customs1Sebaran Jumlah Suku di Indonesia, https://indonesia.go.id/mediapublik/detail/2071. These are believed to have made Indonesia unique in terms of conflict management. Moreover, Indonesia is an archipelagic state consisting of 17.001 islands with 275.773.800 inhabitants2BPS-Statistic Indonesia, “Statistical Year Book of Indonesia 2023” page 11 and page 92.. Hence, dispute is common within society with such a diverse background.
The Supreme Court of the Republic of Indonesia, is always swamped by cases. As a reference, in 2022, there are 28.284 cases that need to be tried, distributed between 47 judges3Asep Nursobah, “Sepanjang Tahun 2022, Setiap Hakim Agung Rata-Rata Menerima Alokasi 1.805 berkas”. Mei 2023. https://kepaniteraan.mahkamahagung.go.id/registry-news/. Realizing such a huge number of cases, the government of Indonesia initiated the alternative dispute settlement by enacting the Law of Number 30 Year 1999 on Arbitration and Alternative Dispute Settlement (‘Law 30/1999’) which put mediation as one of its alternatives.
Moreover, in 2002 the Supreme Court of Indonesia urged district court judges to settle private disputes through court annexed mediation4Circular Letter of the Supreme Court of the Republic of Indonesia Number 1 Year of 2002 on Empowering District Court to Utilize Peaceful Institution. before heightening the advice to mandatory action in 20035Regulation of the Supreme Court of the Republic of Indonesia Number 2 Year of 2003 on Empowering District Court to Utilize Peaceful Institution.. Court annexed mediation regulation has evolved and strengthened throughout the years since, which are marked by Supreme Court Regulation enacted first time in 2003 (SCR 2/2003), amended in2008, lastly SCR 1/2016 and in 2022, which regulate Mediation in Court Electronically (SCR 3/2022).
Today, mediation is mandatory for every civil court in the beginning of the trials6Regulation of the Supreme Court of the Republic of Indonesia Number 3 Year of 2022 on Mediation Procedure at Court.. Furthermore, the new regulation opens chances for mediation if the parties agreed to at any stage of the trial.7Ibid.
Despite its fairly new legalization on mediation, actually mediation as an alternative dispute settlement has been at the heart of Indonesian. For generations, many Indonesians have opted to settle their private disputes through a system called ‘musyawarah mufakat’, or literally means dialogue to reach consensus.8Hikmahanto Juwana, “Dispute Resolution in Indonesia”. Institute of Developing Economics (IDE-JETRO). IDE Asian Law Series No. 21. March 2003, page 41. As its name pointed out, in musyawarah mufakat, parties at dispute talk out their disagreement and negotiate a way to settle agreed by parties.
When the musyawarah mufakat failed to settle a dispute, many Indonesians would pick a respectable third party (that usually trusted and neutral, such as chief of the community) that can help them settle their dispute through dialogue.9Ibid. This is a process in this era, widely known as mediation. Even at this stage, musywarah mufakat principle is still applied, where disputants prioritize dialogue to achieve an agreement.10Ibid.
Furthermore, this deep-rooted dispute settlement system has been acknowledged by the founding fathers of Indonesia and reflected in Indonesia’s constitution.11Art. 4 of Pancasila “Kerakyatan yang dipimpin oleh Hikmat dan Kebijaksanaan dalam Permusyawaratan dan Perwakilan”, The Indonesian Constitution 1945. https://pusdik.mkri.id/uploadedfiles/materi/Materi_3.pdf.
Today, Mediation as an alternative of dispute settlement has garnered more attention. The current trend shows mediation has also been adopted by government institutions who have an out of court dispute settlement function both in private and public realms, among others LAPS SJK (The Financial Sector Alternative Dispute Settlement Institution), Ministry of Trade for consumer dispute known as BPSK, Badan Penyelesaian Sengketa Konsumen (The Consumer Dispute Settlement Agency).
In public sector mediation has also been opt by government institution such as The Center of Information Commission (“KIP”) which settle cases involving public information, The Ombudsman of the Republic of Indonesia (“Ombudsman”) which settle cases involving maladministration by public officials, The National Commission on Human Rights (“Komnas HAM”), The Ministry of Women’s Empowerment and Child Protection and BAWASLU, Badan Pengawas Pemilu (The General Election Supervisory Agency) which settle disputes on election process both general and regional election.
The vast adoption of mediation by government institutions indicates that the Government has serious concerns about the implementation of mediation as a form of consistent effort to resolve disputes in the spirit of musyawarah mufakat. This report will highlight mediation practice in the Financial Sector Authority (commercial sector) and from Bawaslu RI (public sector).
2. Mediation in the Current Situation
As previously mentioned, Mediation is now required in various government institutions, both public and private sector, due to the increasing number of disputes. The objective of mediation is to resolve these disputes without the need for court proceedings, with certified mediators managing the cases within the institution.
The Financial Sector Authority as its regulator of this sector has enacted a decision to create and appoint the Alternative Dispute Resolution Institution for Financial Services Sector (“LAPS SJK”)12Financial Services Authority Regulation Number 61/POJK.07/2020 regarding Alternative Dispute Resolution Institution for Financial Services Sector.. As its name, it oversees dispute in financial services sectors, including banks, investment banks, non-bank financial institutions, i.e. insurance and finance companies both online and offline.13Ibid.
Hence stakeholders of financial service industry have a choice to settle their dispute through mediation. LAPS SJK will mediate disputing parties to reach a win-win solution.14LAPS SJK Official Website, https://lapssjk.id/pengertian-mediasi/, (accessed Sep 25, 2023). Besides mediation, LAPS SJK also provides dispute settlement through negotiation and arbitration based on an Arbitration Agreement made in writing by the parties to the dispute.15Ibid, https://lapssjk.id/pengertian-arbitrase/, (accessed Oct 02, 2023).
LAPS SJK has increased their target to settle the dispute to worth 1 Trillion Rupiah (64.016.388 USD) by 2023, from previously 500 Billion Rupiah (32.008.194 USD) in 2022.16Results of interviews with Mr. Himanwan E Subiantoro, the Chairman of LAPS SJK, on 21 September 2023. Cases accepted from 1 January 2021 until 31 March 2023, around 50% of cases accepted by LAPS SJK are settled through mediation, with success rate of 51.3%.17Pusat Mediasi Nasional, report on Revista Brasileira de Alternative Dispute Resolution, 2023.
Dispute resolution in the financial services sector has recently been boosted by the enactment of Law Number 4 of 2023 on Development and Strengthening of the Financial Sector (“Law 4/2023”). Under Law 4/2023, LAPS SJK has gained more recognition and is now regulated by the law, where previously it was regulated by Financial Service Authority (OJK) regulations. The development is expected to provide better outcomes for mediation process in the financial services sector.18Ibid.
In this case, disputing parties can submit complaints in two options. There are two options available for resolving disputes. The first option involves using the Consumer Protection Portal Application (APPK) provided by the Financial Services Authority (OJK) for pro-bono complaints. The second option is to visit the LAPS SJK office directly (non-APPK). The head of LAPS SJK, Mr. Himawan also said regarding SJK LAPS fees, cases including retail & small claims are not subject to mediation fees. Meanwhile, a fee will be charged for commercial disputes.
One institution that has a dispute settlement function is the The General Election Supervisory Agency of the Republic of Indonesia (“Bawaslu RI”). The law mandates them to oversee election processes both general (nationally) and regionals, including its dispute settlements.19Law Number 7 Year 2017 on General Election. Since 2017, mediation has been chosen by Bawaslu RI as one of their alternative dispute settlements, before the adjudication process.
Parties are the government as the election organizers, KPU, Komisi Pemilihan Umum (General Election Commission) and election participants (including political parties, members of political party) or disputes between political party and its members on elections (general and regional elections).20Article 24 paragraph (2) of The Regulation of The General Election Supervisory Agency of the Republic of Indonesia Number 18 Year 2017 regarding Guidelines for Dispute Settlement in General Election Process which have been changed to The Regulation of The General Election Supervisory Agency of the Republic of Indonesia Number 9/2022 regarding Guidelines for Dispute Settlement in General Election Process. The Indonesian Constitution grants its citizens the freedom to gather, including forming political parties. Hence, since the 1999 era, political parties that participate in elections are often more than 10 participants, increasing chances of dispute among them.
There are 34 Bawaslu RI offices situated in each province21Bawaslu RI official website, https://www.bawaslu.go.id/id/profil/alamat-kantor-bawaslu-provinsi, (accessed Oct 02, 2023)., 514 Bawaslu offices in Kota Kabupaten nationally spread all over Indonesia Archipelago.22Results of interviews with Mr. Reki Putera Jaya, Member of Bawaslu DKI Jakarta, on 06 October 2023. These offices are known for their warm and hospitable environment, making them accessible to all citizens. Additionally, the institution’s implementation of ADR has positively influenced the relationship between the government and the community.
The Indonesian law on election mandated that public officials’ election–such as the election for President and its Vice, the election of legislative bodies both national and regional as well as the election of local leaders such as governor or mayor– is to be made directly, one person for one vote. Meaning every eligible constituent will choose the person, not the political party.
Hence with Indonesia’s geographic status, elections are a huge democratic party that are full of complexities and potential adversaries. To overcome these complexities, Bawaslu has placed three to five commissioners in every province, to oversee elections in its respected region.
Furthermore, every commissioner is trained to be mediators to help settle election disputes in its respective region, so as not to escalate disputes to court. The ability for commissioners to facilitate the dispute settlement process is vital because unlike professional mediators, commissioners have the knowledge and accessibility advantage being the dispute is in their authority.
These mediation training programs for commissioners were conducted in cooperation with The Indonesia Mediation Centre together with other organizations recognised by the Supreme Court of the Republic of Indonesia. Moreover, several professional mediators were deployed to train and provide technical assistance to the Indonesian Bawaslu Commissioners.
3. Challenges of mediation Today
a. State Owned Enterprises
Although mediation is currently on the rise for alternative dispute settlement options, yet some resistance to choose mediation can still be seen in some sectors, such as among the State Owned Enterprises (SOE). Among the SOE, court decision is still the preferred dispute settlement mechanism as it provides them with certainty. Under Indonesian law, it is said that SOE’s assets is the State’s asset.23Article 2 of The Law Number 17 Year 2003 on State Finances.
Hence, any loss of State assets is subject to audit by the State Financial Board and may be categorized as corruption,which is punishable with fine and prison.24Article 2 of the Law Number 31 Year 1999 on the Eradication of the Crime of Corruption. A decision by the Constitutional Court in 2021 stated that the Board of SOE may be dismissed from criminalization due to the loss of the company (SOE) if they can prove that they have exercised sound Business Judgment Rule. Today, it seems many SOE executives interpret a court decision as a sound Business Judgment Rule.25Constitutional Court of Indonesia Decision Number 26/PUU-XIX/2021.
However, recent development by the Minister of the State-Owned Enterprises, as its Shareholder, mentioned that he urges SOE to settle disputes among them as fast as a day. It has been reported that many disputes even among the SOE takes months, even years to solve, and he-the Minister-does not want that to happen anymore. Hopefully it is justified if we may interpret it as a beginning to alternative dispute settlement as a main choice to solve disputes among SOE, since court proceedings cannot be solved in a matter of days.
b. Unfamiliarity to the Out of Court Mediation
Another challenge in Indonesia’s current situation on mediation practice is the unfamiliarity of the general public for outside of court mediation. The general public are still unaware of mediation facilitated by professional mediators. Moreover, there was a lack of publicly available information that can point parties to available professional mediators. Yet, its efficiency is arguably proven.
As an illustration, mediation is the chosen dispute settlement process by the RoundTable for Sustainable Palm Oil (RSPO). Mediation is a procedure that can and has helped disputes between local communities involved in palm oil plantation. Mediation has opened access justice and proven its greater impact on achieving peace agreement.
In light of this, to make it easier for the public to access out-of-court mediation, our organization, the EYR Centre for Legal Studies, organizes a pro-bono law literacy programme on alternative dispute resolution, particularly mediation, and provides a consultative room on dispute resolution for the community, by establishing and promoting Chambers of Mediation and ADR. Its aim is to create easy access for the public to mediation, which has been promoted as a democratic, cost efficient and simple procedure of dispute resolution.
As mentioned above, mediation has a special place for Indonesian, as it is inline with local values and cultures. Mediation is the embodiment of structured and professional musyawarah mufakat, a value with hundreds of years practice.
This year marked 20 years since the first Supreme Court Regulation. Mediation has gone through transformation from a cultural practice to a now professional, institutionalized process. If it were to divide in phases, the first 10 years were a campaign phase. In this phase efforts were focused on a simultaneous education program to introduce mediation and provide professional mediators.
The second 10 years, mediation began to develop into part of the case management system in several institutions from various sectors in this country. While, in the next 10 years, it is hoped that out-of-court mediation will increasingly become a more familiar option for dispute resolution in the business community as well as among the general public societies.
The recent development in the increasing number of institutionalized mediation and other out of court mediation efforts shows its efficiency in settling disputes. hence it solidifies grounds for the public to choose alternative dispute settlements. On another hand, it has lessened the long piled cases at courts. However it needs further studies on how efficient alternative dispute resolution, specifically mediation, has lessen the court’s burden.(*)
This report is compiled by Hyang I. Mihardja S.H., MBA.
in affiliation with EYR Center for Legal Studies
and Indonesian Mediation Center