*Sonal Okhade and Carol (Xinyu) Liu

I INTRODUCTION

Mediation plays an important role in the world of dispute resolution. The fact that mediation is preferred over litigation in some circumstances cannot be separated from its quick, cheap and effective process, as well as its inherent purpose to achieve a mutually acceptable win-win outcome.[1] This paper will firstly examine the main legislative developments for mediation in Indonesia. Based on these updates and issues with implementation, this paper will accordingly examine possible improvements; including the introduction of mediation into tax dispute settlements and the enrichment of the mediator’s training curriculum to advance mediation implementation and facilitate alternative dispute resolution (ADR) in Indonesia.

II LEGISLATION UPDATE

In Indonesia, if disputes are to be resolved through ADR, mediation is optional and depends on the parties’ agreement; while if the dispute is subject to litigation, mediation is a mandatory process to resolve the dispute, with limited exceptions. Thus, there are two kinds of mediation in Indonesia; voluntary mediation and court-annexed mediation, both of which have a legal basis. The former is regulated by the Arbitration and Dispute resolution Act (Law No. 30 of 1999) which stipulates detailed stages that the two parties should follow, such as when two parties should have a direct meeting, when they may engage the assistance of an expert advisor or a mediator, and when they may request arbitration or an appointed mediator by the ADR institution.

Court-annexed mediation was introduced in 2003 and is regulated by the Supreme Court Regulation No. 1 of 2016 (‘2016 Regulation’) from the Supreme Court Regulation No. 1 of 2008.[2] The updated Regulations mainly added timeline and conduct requirements. For example, under the 2016 Regulation, the parties are required to submit their case summaries, including the case facts and proposed solutions, to the opposing party and mediator within 5 days of appointing the mediator. This step assists the parties and the mediator to have a general view of settlement proposals and determine mutual interests as they seek a win-win solution. It can also reflect mediation in Indonesia as having a settlement focus, with its main aim to realise a compromise by the parties.[3]

Moreover, the 2016 Regulation requires the parties to complete the mediation within 30 days, although it can be extended for a further maximum of 30 days, with the approval of the judge. When compared with the litigation period, which is usually several years, the mediation timeline seems consistent with its aim to be a simple, fast, and easy way to settle down disputes. However, it can be argued that a complicated case possibly cannot be settled within 60 days, thus resulting in a unsatisfactory outcome from mediation. This is likely to be a factor contributing to the low success rate of mediation. This paper holds the view that Indonesian judges be allowed more discretion to meet the parties’ request for more time.

Thus, the 2016 Regulation provides more detailed guidance to manage court-annexed mediation, making the process more feasible in practice. However, the successful rate of court-annexed mediation is still low, coming off a base of just 15% in 2017.[4] In focusing on how to improve the success rate, the following part of this paper will discuss possible reform in two main areas; tax dispute settlements and the training curriculum for mediators.

III TAX DISPUTE SETTLEMENT

To extend the benefits of mediation, the tax dispute settlement system in Indonesia appears in need of reform:

  1. With the increasing awareness and understanding of tax obligations and the self-assessment system, more disputes have arisen between taxpayers and tax collectors.[5] Based on the 2020 data, the Tax Court received 16,454 cases.[6] The workload of the courts in dealing with tax issues has increased by some 20% in the past three years. [7]
  2. The Law of the Republic of Indonesia No.14/2002 provides for only one Tax Court in the country. It is located in the capital city and has jurisdiction for all tax disputes throughout Indonesia.[8] Thus, mediation costs are high for taxpayers as they first have to pay the tax they owe when they raise an objection, or half the tax when they appeal, and are then faced with travel costs to attend their appeal at the only Tax Court.[9]
  3. To maintain the national budget and the long-term relationships with international and domestic investors, not only should the tax payment and information should be transparent, but also the tax dispute settlements should embrace open communication.[10] Heru Ratno Hadi suggests the establishment of a dispute settlement and tax mediation agency.[11]

In Indonesia, mediation mainly plays a role in private law rather than public law areas such as taxation. Traditional methods of dealing with disputes between taxpayers and the tax collector mean that the relationship remains confrontational rather than collaborative.[12] Mediation can be seen as a tailored method to resolve this issue by creating open communication opportunities for the parties, and a transparent process to settle the disputes. Nevertheless, when contextualising mediation in tax disputes, other issues, such as the requirement for adequate knowledge of current taxation legislation and case law by mediators should also be noted.

When considering the long-term benefits of mediation, including the ability to alleviate the court backlog, making justice more accessible to disputing parties, and attracting and retaining more investors, there appears to be a real opportunity for mediation to be introduced to help resolve tax disputes in Indonesia.

IV TRAINING CURRICULUM FOR MEDIATORS

To improve the positive impacts of court-annexed mediation, and allow vulnerable groups such as women and children to have access to justice, there are opportunities for mediators’ training curriculum to be enriched by adding specific topics e.g. the effects of the patriarchy and domestic violence on women and children.[13]

Indonesia is a patriarchal society, resulting in a dominant gendered discourse and imbalanced social status and resources between males and females. For example, in some courts, especially those dealing with land and heritage issues, women have no right to attend the mediation but are represented by a male in the family.[14] These cultural norms will imperceptibly influence the court-annexed mediators when they deal with family disputes. Against that background, in 2018, gender issues were covered under the training curriculum but took up only two PowerPoint slides and with little room for discussion and no opportunities for role play.[15]

In advancing mediation in Indonesia, it is essential that mediators effectively serve the specific needs of the Indonesian community. By enriching the mediator training curriculum e.g. gender and power imbalance issues in Indonesia, mediators can be equipped with the knowledge and skill to best meet the needs of the parties.[16]

V CONCLUSION

The revision of the 2016 regulation makes court-annexed mediation more feasible and more structurally guided. However, in practice, its success rate is still low. In order to use mediation to successfully resolve more disputes in Indonesia, taxation disputes present as one area of opportunity. With mediation being a compulsory process in private areas, the training curriculum for mediators could be optimised to raise the mediators’ awareness of the effect of cultural norms, particularly their impact on women and children.

[1] Salsabila Fakhriyyah Arraidah, ‘Comparative Study of Alternative Settlements in Indonesia and Timur Leste’ (2021) 5(2) Journal of Private and Commercial Law167, 168.

[2] Ramdani Wahyu Sururie, et. al., ‘Problems and Prospects of Mediation in the Justice System in Indonesia’ (2017) Vol.1 2nd International Conference on Sociology Education 591, 591. (‘Problems and Prospects’)

[3] Ibid 593.

[4] Fatahillah Abdul Syukur and Dale Bagshaw, ‘Gender, Power, and Court-Annexed Meditation in Indonesia’ (2020) 37(4) Conflict Resolution Quarterly 277, 279. (‘Gender’)

[5] Khoirul Hidayah, et. al., ‘Mediation for Indonesian Tax Disputes: Is It a Potential Alternative Strategy for Resolving Indonesian Tax Disputes’ (2018) 8(2) Indonesia Law Review 154, 155. (‘Alternative Strategy’)

[6] Ibid.

[7] David Hamzah Damian and Ganda Christian Tobing, ‘In review: the tax courts and tribunals in Indonesia’ (Webpage, 23 February 2022) Lexology

[8] Ibid (n 5).

[9] Heru Ratno Had, et.al., ‘Reformulation of Tax Dispute Resolution in Indonesia’ (2017) Vol.61 Journal of law, Policy and Globalization 67, 67.

[10] Alternative Strategy (n 5) 161.

[11] Ibid 157.

[12] Ibid 160.

[13] Ibid161.

[14] Gender (n 4) 278.

[15] Ibid 279.

[16] Ibid 284.