IS IT POSSIBLE TO CHOOSE ARBITRATION AS THE FORUM OF ENVIRONMENTAL DISPUTE SETTLEMENT?

 In Arbitrase

"Environmental dispute settlement may be done through third-parties services, whom it does not have the authorities to adjudicate (mediator) or have the authorities to adjudicate (arbitrator)"

Before further discussion in this article, it should be understood of what is the environmental dispute? As stated in Article 1 number 25 of Law No. 32 of 2009 on Protection and Management of Environment (Law No. 32/2009):

“Environmental dispute is a dispute between two or more parties arising from the activities which have the potential and/or have an impact to the environment.”

From the definition above, what is important to understand by businessmen is legal understanding on environmental  dispute which is a dispute arising from activities which have the potential or have an impact to the environment. This means that although the impact has not occured yet, the activities which have "potency" are included in environmental dispute.

This is a reason of the importance on deciding the proper forum to resolve the environmental dispute. Any mistake in interpreting the word "potency" may lead to the serious legal liability.

Bayangkan, apabila perusahaan Anda oleh pengadilan atau forum penyelesaian sengketa, Your company is obliged to pay compensation as it is deemed to conduct an activities which have "potency" to damage the environment, although in facts aforesaid activities do not affect the environment.

In managing environment, dispute settlement has been set since the enactment of Law No. 4 of 1982 on Basic Provisions on Environmental Management (Law No. 4/1982), as regulated in Article 20 paragraph (2):

“The procedures on filing complaint by the sufferes, the method of team research on form, type and the amount of loss as well as the procedures on lawsuit are regulated in the applicable law."

The explanation of the Law No. 4/1982 states:

"Dispute settlement in form of compensation is done by a team consists of the sufferer or its proxy, the polluter or its proxy, and officials established for each case. If necessary, an expert may be appointed as the team member. If an agreement can be reached within the determined time, the dispute shall be resolved through the District Court.

With the existence of Law No. 32/2009, the provision of environmental dispute settlement may be made through litigation and out of court method. Moreover, the choice of environmental dispute settlement method shall be done voluntarily by the parties to the dispute.

In addition, it is stipulated that the lawsuit through the Court can only be made if the out of court dispute settlement is declared unsuccessful by the parties to the dispute. 
Arbitration can be a choice of environmental dispute settlement

Further provisions on the environmental settlement outside the court can be seen in Article 85 of Law No. 32/2009:

  1. Environmental dispute outside the court is done to reach an agreement regarding:
  2. Recovery action due to the pollution and/or destruction;
  3. Specific action to make sure there is noo recurrence and/or destruction; and/or 
  4. Action to prevent negative impacts to the environment.
  5. Environmental dispute settlement outside the court is not applicable to the criminal offense as regulated in this Law;
  6. In resolving environmental dispute outside the court, may be used mediator and/or arbitrator services in assisting environmental dispute settlement.

From the provision above, it can be said that environmental dispute settlement procedure, as stated in Article 85 of Law No. 32/2009, can be done voluntarily by the sufferer, polluter, and government institutions related to the disputed matter. In addition, it can involve other parties who have a concern in environmental management.

Hence, according to the applicable law, mediator and/or arbitrator as a third party can professionaly assisting the environmental dispute settlement outside the court.

Between mediator and arbitrator, we see that it is better to resolve an environmental dispute through arbitration forum.

Mediator is a third party who facilitates mediation but does not have the authority to make a decision. Whlist arbitrators, in addition to other benefits, the most fundamental benefit is the existence of the authority to make decision based on applicable law, mainly the Arbitration Law. (Read also: Advantages of arbitration which is rarely known).

On the other hand, by choosing arbitration as a method of alternative dispute resolution, the arbitral award is final and binding upon the parties to the dispute, and it has extraterritorial effect after obtaining approval or exequatur from the Court. (Read also: Procedures on registering arbitral awards in the District Court).

As mentioned in many literatures, there are advantages of arbitration forum, such as:

  1. The dispute matters remain confidential;
  2. Arbitration institution and arbitrators are bound by confidentiality promise of all handled cases. Thus, all cases resolved through arbitration will not be known by the media and public. In business, it is an advantage. Especially for businesses related to the end customer. Disputes are very bad for their business.

  3. Arbitration hearing is on time;
  4. With punctuality, the delays caused by procedural and administrative matters can be prevented. In business, it is very valuable. There is no need to waste time and more cost-effective, especially if using lawyer service in hourly-basis.

  5. Arbitrators are not only experienced, but also expert in matter of business dispute;
  6. One of the requirements to become an arbitrator is to have at least 15 years of experience in an area of expertise. Hence, with hours of practice and focus on its expertise, an arbitrator is considered to have more qualified skills than a court judge dealing with various civil and criminal cases. Moreover, both parties may choose the arbitrator who will resolve their dispute in accordance with arbitrator’s background and expertise.

  7. The parties may determine the choice of law for the dispute resolution;
  8. Arbitration gives autonomy to the parties in determining the rule of procedure. However, the governing law shall be in accordance with the business contract that has been agreed by the parties as a guide to the parties in conducting business.

  9. The parties may determine the seat of arbitration;
  10. The seat of arbitration may be determined by the parties themselves upon agreement. It does not only have to be determined based on the domicile of the opponent party. This is clearly different from the provision of Article 180(1) HIR which stated that the lawsuit is filed in the district court having the jurisdiction in accordance with the domicile of defendant.

  11. Arbitral Award is final and binding.
  12. In general, an arbitral award will be examined and decided within six months and the award is final and binding. Thus, there will be No. Appeal nor cassation for arbitral award. Nevertheless, there is a possibility to set aside an arbitral award through distrcit court, or even to suspend the enforcement of arbitral award. 

Is it possible to resolve dispute through arbitration in absence of arbitration clause? Provisions under Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Law No. 30/1999), requires arbitration agreement, known as arbitration clause, made by the parties in agreement to resolve dispute through arbitration, in this case an environmental dispute.

This agreement is made before the dispute arises (Pactum De Compromittendo), or agreed by the parties after the dispute arises (Akta van Compromis). It is legally allowed.
To start an arbitration proceeding, for example, in Indonesia National Board of Arbitration (BANI), based on its rule of proceeding, prior to submit the request, the Petitoner shall firstly notify the Petitionee regarding the dispute and the submission of dispute settlement through BANI.

In accordance with Article 8 paragraph (1) and (2) Law No. 30/1999, the notification of the arbitration as contemplated above must clearly state:

  1. Names and addresses of the parties;
  2. Reference to the applicable arbitration clause or agreement;
  3. The agreement or problem in dispute;
  4. The basis for the claim and the amount claimed, if any;
  5. The method of resolution desired; and
  6. The agreement entered into by the parties concerning the number of arbitrators, or if no such agreement has been entered into, the claimant may submit a proposal about the odd number of arbitrators desired.

To understand more clearly in resolving dispute through arbitration, (Read also: Procedures of resolving disputes through arbitration).
We hope this article is useful.

BP Lawyers can assist you

We can assist you in providing the best solution on resolving environmental dispute of your company. You can contact us via ask@bplawyers.co.id atau +62 821 1000 4741

Author :
Iskandar D.P., SH

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