Tips for handling a complaint before the court of law based on breach of contract in Indonesia

Are you a businessman engaging in business in Indonesia? I am sure that your deal with your Indonesian partners is based on a contract. As long as your business is running well, there should be no legal problem.

But if you have established an Indonesian company and the company is involved in a legal dispute based on a breach of contract with its business partner, based on which your company's opponent has filed a complaint with the court and the court has issued summons to your company to appear before the court, the following tips may be useful for you.

The first step you have to do is to open the contract and go to the paragraph on settlement of dispute stipulated therein.

If in the contract it is stipulated that any disputes arising out in this contract should be settled based on arbitration, then you should tell your lawyer that in his Defense, he should forward an allegation called "Eksepsi Dalam Kompetensi Absolut" (Exception in Absolute Comptence).

It is because under the Article 1338 of the the Indone Civil Code, it is stipulated that a contract should apply as the law for those who has entered therein, causing that the court of justice who adjudicates the case, should declare itself absolutely not competent to adjudicate the case.

The same you should do if your Indonesian company intends to file a complaint before the court of law based on breach of contract. You should tell your lawyer to draw his attention on the article stipulating the settlement of dispute. It is very important, because if you file a complaint before a dictrict court based on breach of contract, whereas in the contract it has been agreed that any dispute arising from the contract should be settled by a panel of arbitration, your opponent in his defense will easily make your complaint dropped by forwarding an allegation named Eksepsi dalam Kompetensi Absolut (Exception in Absolute Competence), under which the court of justice adjudicating the case shall declare itself absolutely not competence to adjudicate the case, and your complaint shall be declared "unacceptable" (Bahasa : "tidak dapat diterima").

It is true that you can file another complaint, but it means that you have to start the process from the very beginning. The situation will be worse if your opponent, even it has won the case, files an appeal against the decision of the district court to the court of appeal, and then to the cassation stage, which menas that you have to wait until the decision of the cassation stage formally received through the district court adjudicating the case in the first instance court, which probably takes time more than three years, at least.

You should also be noted that, even your opponent did not file a defense based on the absolute comptence, the court, if it knows that based on the provision of the contract, the dispute shall be settled before an arbitration panel, shall ex-officio declare itself not competent.

Wish this tips is useful for you. See you in the next tips.

Kota Depok, January 15, 2009

Wenceslaus La Rangka