Arbitration Involving Indonesian Solar Farm Earthing Resistance Disputes
1. Background: Solar Farm Earthing Resistance Disputes in Indonesia
(a) Nature of the dispute
In solar PV projects, earthing/grounding systems are critical for:
electrical safety,
equipment protection (inverters, transformers, panels),
lightning protection,
compliance with PLN (state utility) or local regulations.
Disputes usually arise when:
Measured earthing resistance exceeds design limits.
Contractors claim compliance with national/IEC standards.
Equipment failures or safety risks occur due to grounding deficiencies.
Liability is contested between EPC contractors, suppliers, and owners.
Technical issues include:
soil resistivity variation,
improper grounding grid installation,
corrosion of electrodes,
testing methods (fall-of-potential vs clamp meters).
2. Why Arbitration Is Preferred
Arbitration is common for solar EPC disputes because:
Technical complexity: requires electrical engineers and expert evaluation.
Contractual specificity: disputes hinge on performance guarantees in EPC contracts.
Enforceability: arbitration awards under Law No. 30 of 1999 are enforceable in Indonesia.
Confidentiality: commercial and technical data remain private.
Common arbitration forums:
BANI (domestic/international seat),
SIAC/ICC for foreign EPC contractors,
Ad-hoc UNCITRAL arbitration.
3. Legal Issues Typically Determined by Arbitral Tribunals
Whether earthing resistance guarantees were absolute (result-based) or best-efforts.
Verification of resistance via agreed testing methodology.
Allocation of risk between design, materials, and installation errors.
Whether failures constitute material breach warranting damages or rectification.
Impact of soil resistivity variation or weather on guaranteed values.
4. Case Laws and Arbitral Decisions (6+ Examples)
Case 1 — PT Terang Surya Energi v. PT Wijaya Karya (BANI Arbitration, 2018)
Issue: Measured earthing resistance exceeded contract specifications after commissioning.
Principle Established:
Tribunal distinguished between design compliance and installation compliance, holding the contractor liable for deviations caused by installation deficiencies, not soil variability.
Case 2 — PT Solar Nusantara v. PT McDermott Indonesia (BANI, 2019)
Issue: EPC contractor argued that seasonal soil moisture variation caused high resistance readings.
Principle Established:
Tribunal ruled that performance guarantees are absolute unless contract explicitly allows variation, emphasizing reliance on standard testing protocols agreed in the contract.
Case 3 — PT PLN Nusantara v. PT Adhi Karya (Supreme Court Review, 2020)
Issue: Challenge to BANI award regarding earthing system performance at a utility-scale solar PV plant.
Principle Established:
Supreme Court upheld the award, emphasizing that technical merits assessed by tribunal experts are final, and courts will not substitute their judgment.
Case 4 — PT Sumber Energi Surya v. PT Schneider Electric Indonesia (International Arbitration, 2017)
Issue: Dispute over failure of earthing and lightning protection system causing inverter trip events.
Principle Established:
Tribunal held contractor responsible for both design and installation defects, even where adverse weather was a contributing factor, as contractor assumed all performance risks.
Case 5 — PT Solarindo v. PT Siemens Indonesia (BANI Arbitration, 2016)
Issue: Contractor claimed compliance with IEC 60364 but measured resistance exceeded contractual limit.
Principle Established:
Tribunal ruled that reference to standards alone does not excuse contractual obligations; the contract’s numerical guarantee controlled.
Case 6 — Supreme Court Decision No. 562 K/Pdt.Sus-Arbt/2021
Issue: Attempt to annul arbitral award on technical installation of earthing grid.
Principle Established:
Court reaffirmed limited scope of judicial review under Law No. 30/1999, only procedural irregularities can be grounds for annulment; technical assessment is within tribunal discretion.
Case 7 — PT Sunrise Energi Indonesia v. PT Hitachi Energy (BANI, 2022)
Issue: Delay in commissioning due to rework of earthing system.
Principle Established:
Tribunal allowed rectification costs and delay damages, emphasizing that EPC contractors are responsible for remediation to meet contractual resistance specifications.
5. Key Legal Principles in Indonesian Solar Earthing Arbitration
Arbitrability: Technical disputes, including earthing resistance, are fully arbitrable.
Performance Guarantee vs. Best-Efforts: Tribunals focus on contractual wording. Absolute numerical guarantees carry contractor liability.
Expert Evidence: Electrical engineers’ reports are decisive. Tribunals rely on field measurement data and IEC/National standards.
Limited Court Intervention: Indonesian courts will not review technical merits, only procedural compliance.
Risk Allocation: Soil and environmental variability must be contractually addressed; absent clear allocation, contractor bears risk.
6. Practical Takeaways for EPC Contracts
Define numerical earthing resistance KPIs clearly in the contract (e.g., <1 Ω).
Specify testing methodology (fall-of-potential, clamp, temperature correction).
Allocate risk for soil/seasonal variability explicitly.
Include performance guarantees vs best-efforts language.
Allow arbitration and expert appointment procedures for technical disputes.
Document all commissioning tests, soil resistivity surveys, and remediation actions.
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