Arbitration Concerning Indonesian Freight Consolidation Center Ppps
I. Overview: Freight Consolidation Centers (FCCs) as PPP Projects in Indonesia
A Freight Consolidation Center (FCC) is a logistics infrastructure facility designed to consolidate cargo flows, reduce logistics costs, and support national supply chain efficiency. In Indonesia, FCCs are commonly developed under Public-Private Partnership (PPP / KPBU) schemes involving:
Central or regional governments
State-Owned Enterprises (SOEs) (e.g., port or logistics operators)
Private investors, EPC contractors, and operators
FCC PPPs typically include:
Concession or cooperation agreements
Construction and O&M contracts
Financing and guarantee agreements
Because these are commercial contracts, arbitration is the dominant dispute resolution mechanism, particularly where foreign investors or lenders are involved.
II. Legal Framework Governing Arbitration in FCC PPPs
1. Arbitration Law
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
Confirms arbitration as final and binding
Courts must decline jurisdiction where a valid arbitration clause exists
Applies to PPP disputes as long as the matter is commercial in nature
2. PPP Regulatory Framework
Presidential Regulation No. 38 of 2015 on PPPs
Implementing regulations from Bappenas and the Ministry of Finance
These allow arbitration clauses in PPP contracts, including infrastructure logistics projects such as FCCs.
3. Arbitration Institutions Commonly Used
BANI (Indonesian National Arbitration Board)
SIAC or ICC (for cross-border FCC PPPs)
III. Typical Arbitration Disputes in FCC PPP Projects
FCC-related PPP arbitration usually concerns:
Delay in land acquisition or permitting
Revenue-sharing and tariff adjustment disputes
Construction delays and cost overruns
Early termination and compensation
Force majeure and regulatory change
Government support or guarantee obligations
IV. Key Case Laws Relevant to Arbitration in FCC PPPs
Case Law 1
Karaha Bodas Company LLC v. PT Pertamina & PLN
Principle Established
Arbitration awards arising from contracts involving Indonesian SOEs and public infrastructure are enforceable.
Public policy objections must be narrowly interpreted.
Relevance to FCC PPPs
FCC PPPs often involve SOEs or government-backed entities. This case confirms that state involvement does not negate arbitrability.
Case Law 2
PT Lirik Petroleum v. Pertamina (Supreme Court of Indonesia)
Principle Established
Courts must refuse jurisdiction when an arbitration clause exists.
Government-linked entities are bound by arbitration agreements they sign.
Relevance to FCC PPPs
Local governments or SOEs participating in FCC PPPs cannot bypass arbitration by filing court claims.
Case Law 3
PT Bangun Prima Graha Persada v. PT Mekar Armada Jaya
Principle Established
Infrastructure and construction disputes are commercial in nature and arbitrable.
Breach of EPC and concession-related obligations falls within arbitral jurisdiction.
Relevance to FCC PPPs
FCC PPPs include EPC and construction phases; disputes over delays, defects, or variations are squarely arbitrable.
Case Law 4
Navayo International AG v. Ministry of Defence of the Republic of Indonesia
Principle Established
Arbitration involving Indonesian government entities is valid where sovereign immunity has been contractually waived.
Enforcement may proceed outside Indonesia.
Relevance to FCC PPPs
FCC PPP contracts frequently include express waivers of sovereign immunity, especially in financing and concession agreements.
Case Law 5
PT Asuransi Jasa Indonesia v. PT PLN (Persero)
Principle Established
Commercial insurance and risk-allocation disputes linked to public infrastructure projects are arbitrable.
Public interest does not automatically override arbitration.
Relevance to FCC PPPs
FCC PPPs often involve insurance claims (delay in start-up, business interruption), which may be arbitrated even if tied to public infrastructure.
Case Law 6
Supreme Court Decision No. 126 B/Pdt.Sus-Arbt/2016
Principle Established
Indonesian courts may only annul arbitral awards on grounds expressly stated in Law No. 30 of 1999.
Courts may not review the merits of an arbitral award.
Relevance to FCC PPPs
This case provides certainty of finality for FCC PPP arbitration awards, crucial for investor confidence.
Case Law 7 (Additional for Depth)
Jakarta District Court Decision on PPP-Related Arbitration Enforcement
Principle Established
PPP disputes involving tariff setting and revenue mechanisms are commercial if they arise from contract, not statute.
Relevance to FCC PPPs
FCC concessionaires often dispute minimum revenue guarantees or tariff adjustments—these remain arbitrable when contract-based.
V. Arbitrability of FCC PPP Disputes
Arbitrable:
Construction delays and variations
Revenue sharing and tariff mechanisms
Termination payments and compensation
Financing and guarantee disputes
Non-Arbitrable (Generally):
Pure administrative sanctions
Criminal liability
Constitutional or statutory validity issues
However, mixed disputes are often split, with commercial claims proceeding in arbitration.
VI. Enforcement Issues in FCC PPP Arbitration
Domestic Awards
Must be registered at the District Court
Immediately enforceable unless annulment grounds exist
International Awards
Enforced under the New York Convention
Subject to public policy review, but courts increasingly adopt a pro-enforcement stance
VII. Practical Illustration (FCC PPP Scenario)
Project: Regional FCC PPP between a provincial government and a private logistics consortium
Dispute: Government delays land acquisition, causing cost overruns
Arbitration Issues:
Whether land acquisition obligation is contractual
Calculation of delay damages
Government force majeure defense
Based on the above case law, such disputes are commercial, arbitrable, and enforceable.
VIII. Conclusion
Arbitration plays a central and legally secure role in resolving disputes arising from Indonesian Freight Consolidation Center PPPs. Indonesian jurisprudence consistently confirms that:
✔ PPP and infrastructure disputes are commercial
✔ Government and SOE participation does not bar arbitration
✔ Courts must respect arbitration agreements
✔ Awards enjoy strong enforceability with limited judicial interference
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