Construction LawLegal UpdatesPublicationsConstruction Disputes and Their Settlement in Indonesia

Construction is one sector that has an important role in realizing national development goals. This sector is responsible for developing the construction of facilities and infrastructure that has a function to support community activities and economic growth of a country. The government is committed to creating an ‘equitable construction sector’ by issuing Law No. 2 of 2017 on Construction Services (“Construction Law”) as a legal instrument that guides the implementation of construction services in Indonesia.

Users and providers of construction services also play a crucial role as the main ‘actor’ in realizing those goals. For this reason, their relationship must be regulated in a Construction Work Contract. The Contract is carried out based on the principles of equality, balance, harmony and expediency. Construction Work Contracts also have a function as technical guidelines that outline the duties, rights, and obligations of each party. Although legal relations between the parties have been regulated in detail on the Construction Work Contract, along with the implementation of the project,  disputes between the parties are often inevitable. A construction dispute can be the outcome of various factors. Delays in projects, failure to comply with the pre-set project standards, and exceeding cost can be very good reasons for a project dispute to arise. The lack of precision in the contract description can be the source of this problem.

 

Resolving the Dispute

When a disagreement like the ones above appears, this has a serious impact on the whole life-cycle of a project. For the project to be able to proceed, every single dispute has to be resolved. Otherwise, there is a danger that every process and task around the project will freeze up. An “on-hold” situation can lead a project to start bleeding the money due to a serious delay. In order to solve these disputes, the Construction Law has arranged a mechanism for resolving the disputes. Under its provision, the Construction Law encourages that any disputes be settled by deliberation to reach consensus. When consensus cannot be reached, the Parties can follow the dispute settlement procedures as stated in the Construction Work Contract. The settlement procedures can be through mediation, conciliation, arbitration, and even settlement in court.

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ADCO Law earns the trust to represent clients from multinational companies to emerging entities across a wide range of industries to achieve their business objectives in Indonesia.

By combining commercial sensibilities and legal expertise, ADCO as a Law Firm Jakarta assists the clients to structure, organize and implement their business ventures and investments, including structuring, financing and securing investments as well as establishing new foreign companies in Indonesia. Should you have more queries regarding this matter, please do not hesitate to contact us.

Dendi Adisuryo
dendi.adisuryo@adcolaw.com

Liza Mashita
liza@adcolaw.com

@2020 ADCO Law. All rights reserved.
This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.

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