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IN COURT MEDIATION IN INDONESIA - ANOTHER OVERHYPED “SUPERHEROES MOVIES”?


The date was 4 February 2016, the Supreme Court of the Republic of Indonesia had just issued a new regulation relating to in-court mediation procedure (Supreme Court Regulation No. 1 of 2016 (“In-Court Mediation Rules”) with the aim to promote out-of-court settlements and to aggressively lower the number of full-blown litigation. There was a real hope that this regulation could finally solve one lingering problem, the “main villain” in the Indonesian civil litigation process: inefficiency.


At that time, many cheered the perceived progressiveness of the Supreme Court by issuing a regulation that requires the principals in the dispute to directly appear and negotiate at mediation hearings (sorry lawyers!! you are not needed). The aim was clear, in the in-court mediation process commercial matters shall prevail, while legal matters must take a back-seat.


In addition, there are penalties. Since in-court mediation sessions must be held prior to the court hearings, the court may reject the claim if the plaintiff’s principal fails to attend the mediation process. Meanwhile, if the failure to appear is on the part of the defendant, the court may rule that the defendant bear all mediation costs.


So, at a glance, disputing parties seeking a resolution felt that they finally have an epic tool to beat the “main villain”. Although it was not as epic as the tools that Batman had in the Justice League movie (the Zack Snyder one, of course), the optimistic feeling was somehow close to that.


..and then it died (sort of)..


Fast forward five years. The year is now 2021, civil case proceedings are as inefficient as before, and mediation appears to have failed in reducing the number of all-out litigation; the “main villain” is still there. So, what went wrong?


Classic Issues


Full disclosure here. No scientific research has been done, but we will try our best to describe the issues based on our professional experience.


So here are the issues:


1. Somehow, legal matters still prevail.


As mentioned earlier, in a mediation process commercial matters should take precedence. In reality, however, commercial matters are rarely discussed as through as they should be. Most of the time disputing parties still end up arguing who is wrong and who is right, and this kind of discussion should be avoided as much as possible.


2. Lack of adequate commercial understanding.


Many mediation forums fail due to the fact that the disputing parties (or mostly its representative) do not have adequate understanding of the commercial aspects of the dispute. Ideally, commercial issues such as: (i) how much discount should be applied, (ii) should the contract be continued, or (iii) what are the alternative commercial structures, should be thoroughly discussed and explored during mediation meetings. Therefore, it is really important to have sufficient understanding on the commercial side of the dispute.


3. No alternative commercial solutions.


Imagine this: someone submits a claim against you. You are willing to settle with alternative commercial structures since the contract still looks good. But eventually the claimant persists to use the “pay or else” approach. What happens next is common, the mediation fails and the disputing parties would spend the next three to four years to finally settle the dispute in court. Such a scenario could be avoided if only the claimant is willing to explore alternative commercial solutions to the dispute rather than stick to the “pay or else” approach (even if the payment amount is reduced).


4. Lack of encouragement.


How the mediator runs the forum is really important. If the mediator fails to encourage the party to use their best effort to reach an amicable settlement, usually the mediation would break down. Unfortunately, this situation tends to happen in in-court mediations. The court mediator (usually also a judge) frequently only follows the disputing parties’ “mood” as to whether they are willing to reach a settlement or not. Such handling should be avoided since it could lead to a situation where in-court mediation is treated as an administrative requirement for the proceeding to proceed.


5. The “lawyers-know-all” approach.


Lawyers do know the law. But in a mediation process, where the disputing parties must look closely for commercial settlement, the “lawyers-know-all” approach does not help. The disputing parties (and their lawyers) must remember that, although the mediation meeting takes place at the courthouse, it is still a commercial forum. Hence, lawyers need to wear their “advisory hat” and back off a bit, while principals need to step up.


Time for a resurrection


In the below points, we lay out several tips which hopefully could resurrect in-court mediation back to life.


1. Willingness to settle.


Let’s face it, out-of-court settlement is the most efficient way to settle a dispute. If your advisers say otherwise, fired (that was a joke by the way). On a serious note, the bit regarding amicable settlement being the most efficient way to settle a dispute is true, and to achieve it the disputing parties must have a willingness to settle the dispute in an amicable manner.


2. Again, commercial matters must prevail.


Commercial matters need to be discussed in a thorough manner, and the disputing parties should cease to discuss legal matters, including trying to determine who is wrong and who is right. Remember, your aim is to find a middle ground. If the disputing parties start to discuss legal matters, you could expect the mediation process to fail.


3. Achievable target and alternative commercial options.


Don’t forget to set achievable targets and alternative commercial options. Even if you are the claimant, you should be prepared for these. To stick with the claim in the mediation process, almost certainly leads to the failure of the mediation process.


4. Lawyers are advisors.


Since in-court mediation process is in fact a commercial negotiation, lawyers are positioned as advisors. This means that the clients (principals) take the lead, while lawyers and their other advisors (such as financial or tax advisor) merely render their advice so the principals could achieve a mutually beneficial settlement.


Conclusion


Although in-court mediation now could be said to be in a state of apparent death, it is still possible to be resurrected if disputing parties are willing to go by commercial considerations rather than legal considerations.


If this approach is being utilized by the majority, the aim of the In-Court Mediation Rules is likely to manifest itself and the hype surrounding its introduction could be lived up to. In the end, we all hope that the In-Court Mediation Rules can really work and will not share the same fate as overhyped superheroes movies, the kind that was really promising but eventually failed to meet people’s expectations.


(Written by Emir Z. Pohan and Gevin Garcia Anfa Putera)


Key Contacts:

  1. Emir Z. Pohan, S.H., LL.M. (email: emir.pohan@eplaw.id)

  2. Gevin Garcia, S.H. (gevin.garcia@eplaw.id)



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