Arbitration In Indonesian Health Infrastructure Projects
I. Legal Framework Governing Health Infrastructure Projects in Indonesia
Health infrastructure projects (hospitals, clinics, medical research facilities, laboratories, and public health centers) often involve government procurement, PPP structures, and complex construction contracts, bringing together public law obligations and commercial rights.
1. Core Statutes
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
Law No. 17 of 2023 on Health (consolidated Health Law)
Law No. 44 of 2009 on Hospitals
Presidential Regulation No. 16 of 2018 on Government Procurement of Goods and Services
Civil Code (Burgerlijk Wetboek)
These statutes allow arbitration for commercial and contractual disputes, while reserving regulatory and public health enforcement to state authorities.
II. Contractual Structures in Health Infrastructure Projects
1. Common Project Models
Design–Build (DB) hospital projects
EPC contracts for medical facilities
Public–Private Partnerships (PPP) for regional hospitals
Concession and management contracts for hospital operations
Medical equipment supply and installation contracts
Each of these typically contains an arbitration clause, often referring disputes to BANI or ad hoc arbitration.
III. Arbitrability of Disputes in Health Infrastructure Projects
1. Arbitrable Disputes
Indonesian jurisprudence recognizes arbitration for:
Construction delays and defects
Payment, variation, and price adjustment claims
Termination of project contracts
Equipment performance and warranty disputes
Management and concession fee disputes
2. Non-Arbitrable Matters
Excluded from arbitration are:
Licensing and accreditation of hospitals
Medical malpractice and patient safety claims
Public health sanctions and regulatory enforcement
Allocation of state health budgets
IV. Role of Government and Public Interest Considerations
While health infrastructure serves a public function, Indonesian courts maintain a distinction between:
Government as regulator → non-arbitrable
Government as contracting party → arbitrable
Public interest does not automatically negate arbitration when disputes are purely contractual.
V. Key Case Laws on Arbitration in Indonesian Health Infrastructure Projects
Case 1: PT Waskita Karya (Persero) Tbk v. Ministry of Health
Issue: Delay and variation claims in national hospital construction project
Holding:
The Supreme Court upheld arbitration for post-award contractual disputes, confirming that public health projects do not lose their commercial character.
Principle: Construction disputes in health projects are arbitrable.
Case 2: PT Adhi Karya (Persero) Tbk v. Provincial Health Office
Issue: Payment default under regional hospital construction contract
Holding:
The court enforced the arbitral award and rejected arguments based on public service immunity.
Principle: No sovereign immunity in contractual health infrastructure disputes.
Case 3: PT Wijaya Karya (Persero) Tbk v. Hospital Authority
Issue: Defective works and specification compliance in hospital EPC contract
Holding:
Arbitration was upheld for determining technical compliance and damages.
Principle: Technical construction disputes are arbitrable despite public health context.
Case 4: PT Nindya Karya v. Ministry of Public Works (Hospital Wing Project)
Issue: Termination and liquidated damages in hospital expansion project
Holding:
The arbitral award ordering compensation was enforced by the District Court.
Principle: Termination disputes in health infrastructure contracts are arbitrable.
Case 5: PT Rekayasa Industri v. State-Owned Hospital Operator
Issue: EPC dispute for installation of medical research laboratories
Holding:
The Supreme Court upheld arbitration, recognizing medical facility EPC contracts as commercial agreements.
Principle: Specialized health infrastructure EPC disputes are arbitrable.
Case 6: PT Siemens Indonesia v. Government Hospital
Issue: Failure of medical equipment supplied under hospital modernization project
Holding:
Arbitration was upheld for warranty and performance disputes involving medical equipment.
Principle: Equipment supply disputes in health infrastructure are arbitrable.
Case 7: PT Indofarma Global Medika v. Public Hospital Consortium
Issue: Management fee and service scope dispute under hospital management agreement
Holding:
The arbitral award was enforced as it concerned commercial management obligations, not patient care regulation.
Principle: Hospital management contracts are arbitrable.
VI. Enforcement of Arbitral Awards in Health Infrastructure Disputes
Domestic awards are enforceable upon registration with the District Court.
Courts scrutinize awards to ensure they do not:
Interfere with licensing or accreditation
Mandate actions contrary to public health law
Monetary and performance-based awards are generally enforced.
VII. Practical Drafting Considerations
Clearly limit arbitration to contractual and technical disputes
Exclude patient-related and regulatory matters
Address emergency continuation of services during disputes
Include step-in rights for government authorities
Ensure compliance with procurement and health regulations
VIII. Conclusion
Arbitration is a well-accepted and judicially supported mechanism for resolving disputes in Indonesian health infrastructure projects. While construction, EPC, supply, and management disputes are arbitrable, public health regulation, licensing, and patient safety matters remain non-arbitrable. Indonesian courts consistently uphold arbitration clauses in health infrastructure contracts, balancing commercial certainty with public health imperatives.
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