FUTURE ROLE OF DISPUTE BOARD IN INDONESIA A PERSPECTIVE POINT OF VIEW Chaidir Anwar Makarim THE BACKGROUND Figure 1 shows practice of Dispute Board in countries around the world since 1982 with USA comes first. The famous phrase is: “... all dispute had first to be solved by the engineer before they could go to arbitration” Dispute Boards in Practice Figure 1. DB Projects through 2014 (cumulative figures since 1982) (Source: DRBF) Indonesia is known as a big country consisted of 17,504 islands with population of about 265 million. As shown on the graph (figure 2) in year 2032 predicted population growth will reach 300 million. The needs and concerns on housing, schools, and infrastructure to support their activities is a big matter as always happened in every developing country. As population increases, enormous projects will be built everywhere in any different island/cities to connect people’s economic and social activities. Therefore, infrastructure development and economic growth is considered as vital and urgent to keep the country integrated politically. 1
Indonesia Population Growth Based on 2010 Projection Figure 2. Projection of Indonesian Population through years (Source: https://www.bps.go.id/) The connection between one island to another is a problem. Most of the times, it is shorter to reach other countries such as Singapore, Malaysia, Australia, China or even Japan than to reach remote places from for example the capital city of Jakarta to Papua island - either by air, not to mention by boat/road. Therefore, development of government infrastructure construction projects with all its cost and risk could not be avoided. Toll roads, bridges, airport, mass rapid transit (MRT), train, etc, and tall building for government office, tours/tourist facilities had been and will be growing so fast as shown on this graph: Figure 3. Infrastructure Expenditure allocation of Indonesia’s Government (Source: https://www.indonesia-investments.com/id/bisnis/risiko/infrastruktur/item381?) 2
Infrastructure Budget 2007 – 2013 Figure 4. Development of State Budget Allocation in Infrastructure development sector from 2007 to 2013 (Source: https://kajianstrategishms.wordpress.com/2014/09/25/tantangan-pembiayaan-pembangunan-infrastruktur- indonesia/) The first construction law was introduced on May 7th 1999, i.e: Law No. 18 of 1999. At that time construction dispute will be solved through non-litigation such as mediation, conciliation, and arbitration, or through litigation (Criminal or Civil Law). It addresses potential construction failures due to to four related parties i.e.: The Owner, The Designer, The Contractor, and the management construction with the consequences cases could be brought to Civil/Criminal Law. Parties could also get involved for other reason under the potential “state lost” (kerugian negara). In this case, criminal law/misdemeanor could not be avoided, where responsible party will be brought to justice through litigation. In the new law no government agent should be involved since dispute will be solved amicably through mediation, conciliation, Dispute Board or arbitration. The new law was issued in 12 January 2017 i.e. Indonesia Construction Law No.2 of 2017 on Construction Services, addressed solving disputes through mediation, conciliation, arbitration, as well as through Dispute Adjudication Board. The latest is a completely new thing for Indonesia. When FIDIC published the “Red Book”, it includes the traditional English system for the pre-arbitral resolution of disputes by the engineer this practice is well adopted in common law countries – but unknown in civil law Countries (Indonesia is a Civil Law Country). 3
THE STORY BEHIND The Indonesia new construction law is like a new switch of dissatisfaction to the old law, as explained below: Table 1. The differences on approach to dispute resolution between The Old Law and The New Law (Source: After Directorate General of Bina Konstruksi – Ministry of General Works and Public Housing) The Old Law (Indonesia Construction The New Law (Indonesia Construction No. Law No. 18 of 1999 of Construction Law No. 2 of 2017 of Construction Service) Service) Disputes solved through “musyawarah” The decision should be agreed by both 1 (Indonesia local wisdom of solving parties (final and binding) conflict) agreed by both parties Disputes solved through: -Musyawarah (Discussion Forum) 2 Litigation (Criminal or Civil Law) -Mediation -Litigation -Arbitration Outside court: -Mediation Non-Litigation (possible help through 3rd 3 -Conciliation party) -Arbitration -Dispute Board Based on the old law, construction or building failures could be caused by faulty design, faulty function, faulty construction, and faulty management. Investigation related to construction failure (during construction process) or building failure (after construction completed) is the typical work done by government personel including police and expert. In government as well as in privately owned construction facilities, police has the right to investigate and bring the case to the court. Investigation is done by the help of certified forensic expert. Most of the time, fault was punished in front of court, for proven mismanagement, which could bring people to jail as one of the punishment, or bring the case to arbitration. 4
THE SONG AND THE SINGER Different then in Australia where Dispute Board concept was first introduced in 1987, or USA since 1926, Indonesia construction law has just adopted principle of solving dispute through Dispute Board recently, in 2017. In the above mentioned two countries data of construction failures or dispute was a lot less than in Indonesia. In Australia, collaborative forms of contracting were promoted since 1990 where “No blame/no dispute culture were inter-reliant in alliancing contract. 1 The reason of using Dispute Board concept was based on the following reason: • Industry dissatisfaction with the traditional method of solving the disputes • More and more conflicts around the world weren’t satisfied in using DAB especially in USA • The growing activities of dispute resolution board in facilitating training and promotion of the use of Dispute Board It is worth quoted that in some countries like Australia, Dispute Board processes are more popular and had been chosen more than arbitration and litigation. In this country, efficiency is number one. They even have proven that Dispute Board was successful not only solving the dispute problem, but also avoided and hereby resolved the paralel dispute problems with most no record of crystallizing into formal dispute. The followings are tips on how the successful procedures of Dispute Board methods was implemented in Australia 1 : • Dispute Board is formed at the time the project contract is signed. Dispute Board meeting could start after that. • Dispute Board workshop and education was optionally provided for the participant who is unknown to Dispute Boards procedure. On the other hand, the training will learn to shorten the Dispute Board meeting to avoid dispute within the project itself. • Contract and procedure of related Dispute Board’s role were discussed in shorten the agreed solution whenever practical disputes arise. • Dispute Board meetings and communication are confidential/“without prejudice” and has the privileged from disclosure to any subsequent arbitration or litigation. • Senior offsite executives, from both sides could attend regular Dispute Board meetings beside site representatives. Of course, the beautiful and successful “Dispute Board song” practiced by our Australia colleagues could be adopted by the so called Indonesia Dispute Resolution Board Foundation (DRBF). However, since Dispute Board practice is something new for Indonesia, intensive training and procedures and communication should be well introduced by professional association – including practicing in a short course case study. A Value Engineering model of group case study could also be added. This is the task of the Indonesia DRB Foundation. As far as the 1 Donald Charret, (2012), Dispute Board in Australia-Build Law Issue No.15 5
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