Commercial mediation in Indonesia

In the case of disputes subject to litigation, mediation is mandatory, subject to limited exceptions. The court has powers and obligations to support mediation, including a requirement that the judge postpone court proceedings and explain mediation procedures to the parties. A court litigant who fails to mediate is required to bear the ‘Mediation Fee’, essentially the costs of mediation. Mediations are confidential unless the parties “require otherwise”. Settlement agreements are enforceable as contracts and parties can submit the settlement agreement to the court to be recorded as a court decision. Before doing so, the court will review the agreement having regard to public policy, third party interests and enforceability, and the court can order the parties to bring the agreement into compliance if required.

What is the status of mediation in this jurisdiction?

Indonesia has laws concerning mediation in respect of disputes which are subject to alternative dispute resolution (i.e. resolution outside the courts by consultation, negotiation, mediation, conciliation or expert assessment) and in respect of disputes subject to litigation. In respect of disputes subject to alternative dispute resolution, the possibility of mediation is statutorily provided but mediation is optional. In respect of disputes subject to court proceedings, mediation is mandatory subject to limited exceptions. There are no laws addressing mediation in the specific context of arbitration proceedings.

How is a mediation conducted?

In mediations arising from alternative dispute resolution, the Arbitration and Dispute Resolution Act – Law No. 30 of 1999 (“Act”) imposes a staged mediation sequence with increasing third party intervention. Upon an agreement to mediate, there shall be a direct meeting between parties within 14 days. In the event that the dispute remains unresolved after the direct meeting, the parties may engage the assistance of one or more expert advisors or a mediator. If the dispute remains unresolved after 14 days despite such external assistance, parties may request an arbitration or alternative dispute resolution institution to appoint a mediator. The mediation is required to be commenced within seven days after the appointment of the mediator by such arbitration or alternative dispute resolution institution, although the parties are free to fashion proceedings subject to any mediation rules adopted.

In mediations arising from court proceedings, the Supreme Court Regulation No. 1 of 2016 (“Regulation”) imposes certain requirements on timelines and also stipulates conduct. Within five days of the appointment of the mediator, parties are required to deliver their respective case summaries (a document drawn up by the respective parties setting out the facts of the case and their settlement proposal) to counter-parties and the mediator.

The mediation is required to be completed within 30 days, but this is extendable upon the parties’ agreement for a further maximum of 30 days. Further extensions require the approval of the judge having oversight of the case. The matters permitted to be raised in mediation are not to be limited to the facts of the case and relief sought. Provided that the parties first agree on whether the expert’s assessment is to be binding or non-binding, they may agree that resort may be had to experts during the mediation.

Is there any obligation on litigants to mediate?

There is no obligation on parties undergoing alternative dispute resolution to mediate. Neither is there a general obligation on parties in arbitration to mediate.

However, litigants subject to court proceedings are obliged to mediate, subject to limited exceptions. The exceptions are in relation to disputes which are subject to express timelines for their disposal, notably those relating to liquidation / bankruptcy, employment, annulment of arbitration awards and objections to decisions of the competition, consumer and information regulators. In general, in cases commenced in the District Court (where most commercial claims will be), the judge having oversight of the case is tasked with requiring parties to undertake mediation and, if mediation has not been undergone, the appellate courts are required to order the District Court to see that mediation is carried out.

Does the court have powers to support a mediation?

In addition to a court’s power to require parties to undergo mediation described above, the courts have several other powers to support court-annexed mediation of civil disputes under the Regulation. In particular, the Regulation:

  • empowers the court to appoint a judicial officer to act as mediator if the parties cannot agree on an appointment;
  • obliges a judge to postpone court proceedings to give the parties a chance to undergo mediation;
  • obliges a judge to explain mediation procedures to the parties;
  • requires a judge to try to encourage the parties to pursue settlement, at any time before judgment is pronounced;
  • requires that a judge state in his or her decision that an attempt at settlement via mediation had been made in the case and provide the name of the mediator.

Does failure to mediate attract adverse cost consequences?

A failure to mediate does not attract adverse consequences where the costs of the substantive proceedings are concerned. A court litigant who fails to mediate, however, is required to bear the “Mediation Fee”, which is defined to mean “costs incurred in the mediation process as part of case fee, among others, including fee for the summons of the parties, travel expenses of either parties based on real expenditure, meeting cost, expert costs, and/or other costs required in the mediation process”.

Are mediations confidential?

Mediations are confidential where they arise from alternative dispute resolution. Article 6(6) of the Act provide that “Efforts to resolve disputes or differences of opinion through mediation... shall be undertaken in confidentiality”.

For mediations arising from court proceedings, mediations are confidential unless the parties “require otherwise”. Article 5(1) of the Regulation states,“Basically, the mediation process shall be of a closed nature unless the parties require otherwise”. While the definition of “require otherwise” is not statutorily provided (e.g. whether disclosure of the mediation must be pursuant to unanimous agreement and/ or is subject to the demonstration of legitimate reasons justifying disclosure), negotiations during mediation are meant to be “without prejudice” and should not be used to influence any eventual court proceedings. In that sense, there is a presumption in favour of confidentiality. Thus, the Regulation requires that parties’ statements in the mediation are to be inadmissible as evidence in court proceedings, the mediator’s notes are to be destroyed at the end of the mediation and the mediator is prohibited from acting as a witness in the ensuing court proceedings.

In mediations conducted under the auspices of the Indonesian Mediation Centre (Pusat Mediasi Nasional) and subject to its rules, there is also a general requirement of confidentiality.

How are settlement agreements enforced?

Settlement agreements are enforceable as a contract binding on parties.

In addition, parties also have the option of submitting, through the mediator, the settlement agreement to the court to be recorded as a court decision. Before the court records the agreement as a court decision, it will review the settlement agreement having regard to public policy, third party interests and enforceability concerns and may instruct the mediator and parties to bring the agreement into compliance if it is not.

Unless the settlement agreement expressly includes the revocation of the claim already settled, the settlement agreement is required to be submitted to court for recording as a court decision.

Is there a system of accreditation and/or regulatory body for mediators?

The Indonesian Supreme Court is the statutory regulator for mediators and retains general oversight. It has accredited, among others, the Indonesian Mediation Centre and Indonesian Institute for Conflict Transformation to provide training and accreditation for mediators.