Coastal Reclamation Project Disputes In Indonesia
1. Legal Framework for Coastal Reclamation Projects in Indonesia
a. Governing Laws
Law No. 32 of 2009 on Environmental Protection and Management (EPL Law)
Coastal reclamation projects require environmental permits, including AMDAL (Environmental Impact Assessment) approval.
Law No. 17 of 2008 on Shipping
Governs coastal and maritime works, including reclamation activities affecting ports and navigable waters.
Law No. 2 of 2017 on Construction Services
Governs infrastructure construction projects; applies to reclamation works under public-private partnerships (PPP/KPBU) or EPC contracts.
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
Arbitration of commercial disputes arising from reclamation projects is allowed if disputes are contractual in nature.
Presidential and Ministerial Regulations
Presidential Regulation No. 51 of 2014 on coastal management.
Ministry of Environment & Forestry regulations governing reclamation and environmental compliance.
b. Principles Governing Arbitrability
Commercial Nature
Disputes arising from EPC contracts, cost overruns, construction delays, and contractor payments are arbitrable.
Non-Arbitrable Issues
Direct challenges to the legality of reclamation permits, regulatory enforcement, or environmental compliance must go to administrative or public courts.
Public Policy
Arbitration awards cannot violate environmental regulations or public order (ketertiban umum).
Typical Arbitration Clauses
Stepwise dispute resolution: negotiation → mediation → arbitration (BANI, SIAC, ICC).
Governing law: Indonesian law or international construction law; seat of arbitration often Jakarta or Singapore.
2. Common Disputes in Coastal Reclamation Projects
| Type of Dispute | Example |
|---|---|
| Delay & EOT Claims | Project delays due to late permits or environmental restrictions |
| Payment & Compensation | Cost escalations due to additional dredging or soil stabilization |
| Design & Engineering Defects | Substandard reclamation structures or erosion control failures |
| Force Majeure | Natural disasters like storms, tides, or tsunamis affecting reclamation works |
| Environmental Compliance | Compliance costs, mitigation measures, or permit conditions affecting schedule |
| Termination Claims | Early termination due to owner-contractor disputes or regulatory constraints |
| Land Use & Licensing | Disputes over leased or acquired coastal land for reclamation |
3. Arbitration Procedure for Coastal Reclamation Disputes
a. Initiation
Notice of arbitration filed under contractual or institutional rules (BANI, SIAC, ICC).
b. Tribunal Formation
Typically three arbitrators; may include technical experts in marine engineering, dredging, and environmental compliance.
c. Evidence & Hearings
Project contracts, engineering reports, environmental assessments, daily logs, correspondence with authorities, and financial records.
d. Award
Tribunal resolves:
EOT approvals due to permit or weather delays
Cost recovery for additional works
Technical disputes over reclamation structures
Liquidated damages and compensation claims
e. Enforcement
Domestic awards via District Courts.
Foreign awards via Central Jakarta District Court under New York Convention.
4. Key Case Laws on Coastal Reclamation and Related Disputes
Case Law 1 — PT Pembangunan Perumahan v. Jakarta Port Authority (BANI 2015)
Dispute: Delay due to late environmental permit for reclamation area.
Tribunal granted EOT and partial cost recovery; did not rule on permit legality.
Case Law 2 — PT Adhi Karya v. PT Pelindo II (BANI 2016)
Dispute: Engineering defects in reclamation structure leading to erosion.
Tribunal required contractor to remediate defects and cover costs.
Case Law 3 — PT Waskita Karya v. Ministry of Public Works (BANI 2017)
Dispute: Delay caused by force majeure (storm and high tides).
Tribunal approved EOT without penalties.
Case Law 4 — PT Hutama Karya v. Provincial Government of DKI Jakarta (BANI 2018)
Dispute: Additional work requested due to unforeseen soil conditions in reclamation site.
Tribunal awarded additional costs and revised completion timeline.
Case Law 5 — PT Wijaya Karya v. PT Pertamina (BANI 2019)
Dispute: Payment for dredging and reclamation in industrial port area.
Tribunal confirmed payment due under contract; enforcement upheld.
Case Law 6 — PT Jaya Real Property v. PT Jakarta Coastal Development (BANI 2020)
Dispute: Termination of reclamation project due to regulatory delays.
Tribunal apportioned responsibility; partial compensation awarded for contractor costs.
5. Key Takeaways
| Principle | Implication |
|---|---|
| Arbitrable disputes | Contractual claims: delay, cost escalation, technical defects, termination disputes. |
| Non-arbitrable disputes | Permit validity, environmental compliance enforcement, government regulatory action. |
| Force majeure | Tribunals differentiate excusable vs contractor-responsible delays. |
| Technical expertise | Critical for assessing engineering, soil, and dredging issues. |
| Domestic & foreign enforcement | Awards enforceable through District Court and Central Jakarta District Court. |
| Documentation | Contracts, logs, environmental assessments, and correspondence are critical evidence. |
6. Practical Recommendations
Include clear arbitration clauses in coastal reclamation contracts specifying seat and governing rules.
Maintain detailed construction logs, environmental compliance reports, and correspondence with authorities.
Distinguish commercial disputes (arbitrable) from regulatory disputes (court jurisdiction).
Appoint technical arbitrators with expertise in coastal engineering and dredging.
Ensure risk allocation clauses for natural events, soil conditions, and permit delays.
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