PROCEDURE OF CONSTRUCTION DISPUTE SETTLEMENT AFTER THE ISSUANCE OF CONSTRUCTION SERVICE LAW NO. 2 YEAR 2017

 In Korporasi

“Dispute settlement in construction work agreement may be made through amicable settlement, mediation, arbitration, or the court.”

Construction is one of the most complex industry due to the multi-disciplinary sciences used in the construction project and dealing with many people who have their own interest. These conditions also open the possibility of a larger dispute.

Referring to the data issued by Indonesian National Arbitration Board (BANI), construction dispute dominates the cases handled by BANI. From 1999 to 2016, there were 470 cases, which 30,8% of it were the construction dispute cases handled by BANI.

After the issuance of Law No. 2 Year 2017 concerning Construction Service (Law No. 2/2017) in lieu of Law No. 18 Year 1999 concerning Construction Service, construction dispute settlement process has been changed.

Construction dispute now shall be firstly resolved through amicable settlement. If the parties in dispute do not reach an amicable settlement, the dispute shall be resolved through the method stipulated in construction work agreement. If there is no such method stipulated in the construction work agreement, the parties in dispute shall determine the dispute settlement process in written agreement.

The stages of dispute settlement according to the Law No. 2/2017 are:

  1. The parties in dispute shall firstly do an amicable agreement;
  2. If no amicable agreement has been reached, the dispute settlement method shall be determined based on the construction work agreement;
  3. If there is dispute settlement method listed in the aforesaid agreement, it shall be conducted through the following stages:
    • Mediation;
    • Conciliation; and
    • Arbitration.
  4. If there is no such dispute settlement method listed in the aforesaid agreement, the parties in dispute shall determine the dispute settlement process.

The construction dispute settlement mechanism among the parties emphasizes the out-of-court dispute settlement. This cannot be separated from the benefits of arbitration and alternative dispute resolution, namely:

Firstly, the confidentiality. Confidentiality is an advantage that can be obtained when using the out-of-court dispute settlement. This is because the process from hearing to the arbitral award is not made public. This advantage will certainly have implication to the good relationships between the parties, so the works can be continued.

Second, the dispute is resolved by the mediator (mediator, conciliator, arbitration) who is an expert in construction matter. The parties in dispute can freely choose the mediator which will decide or provide advices related to the dispute. This means that the parties can choose a mediator who is an expert in construction. This cannot be separated from the nature of construction dispute that is technical, so the mediator can decide or provide advices correctly.

Third, the period is relatively short. Arbitration and Alternative Dispute Resolution have a timely advantage in resolving dispute. This means that dispute can be resolved quickly rather than through the court. This will certainly have implication to the certainty which will be received by the parties in dispute, such as: certainty on the work continuation, work payment. This condition is favorable, wherein the dispute can be resolved by not threatening the continuation of the work and the good relationship between the parties.

We hope this article is useful.

BP Lawyers can assist you
BP Lawyers can assist you in providing the best solution in drafting and preparing all document required for construction dispute settlement through arbitration forum in Indonesian National Arbitration Board. You can contact us via:

Contact us:

Email: bpl@smartlegal.id
Phone: +62821-1234-1235

Author :
Dalmy Nasution, S.H.

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