Litigation 2026 - Trends And Developments

Introduction

Indonesia's legal landscape in 2025 is marked by transformative judicial and institutional developments that redefine the country's dispute resolution framework. A series of landmark Constitutional and Supreme Court decisions – coupled with the release of new arbitration rules by BANI – have clarified long-standing ambiguities in arbitration law, strengthened judicial impartiality standards, and modernised the treatment of defamation and employment disputes.

These developments collectively reflect Indonesia's drive to enhance legal certainty, align domestic practice with international standards, and reinforce public trust in the justice system. For businesses and practitioners alike, the changes carry far-reaching practical consequences – affecting contract drafting, enforcement strategies, and litigation risk management. This article highlights four key milestones:

• the Constitutional Court's ruling eliminating the "deemed to be" clause from the Arbitration Law;
• BANI's adoption of modern procedural tools to streamline arbitral practice;
• the Supreme Court's conflict-of-interest framework ensuring judicial neutrality; and
• the Constitutional Court's narrowing of criminal defamation and hate speech provisions as well as its clarification of employment dispute time limits.

Together, these reforms underscore Indonesia's commitment to procedural fairness, transparency, and global best practice – establishing a clearer foundation for both domestic and cross-border dispute resolution.

Clarifying the Scope of International Arbitration – The Constitutional Court's Landmark Decision in Arbitration

Arbitration has long been an important mechanism for dispute resolution in Indonesia, particularly in commercial and cross-border contexts. However, questions about the definition of "international" arbitral awards have plagued practitioners and clients for years. Article 1(9) of the Arbitration Law contained the phrase "deemed to be", which created a pathway for certain awards rendered in Indonesia to be treated as international. This ambiguity created unpredictability in enforcement proceedings and allowed parties to engage in jurisdictional manoeuvring.

The concern for businesses was straightforward: uncertainty about whether a domestic award might be treated as international created enforcement risks. Some parties deliberately drafted arbitration clauses hoping to exploit the ambiguity, while others were caught by surprise when their awards faced challenges in enforcement proceedings.

In January 2025, the Constitutional Court issued Decision No 100/PUU-XXII/2024, striking out the "deemed to be" phrase. The Court affirmed the principle of territorial jurisdiction: an award is only international if it is rendered outside Indonesia. Domestic awards, regardless of the nationality of the parties or the governing law of the contract, remain domestic.

For clients, the practical consequences are significant:

• Greater Clarity: The decision provides certainty for drafting arbitration clauses. Parties now know that only awards seated abroad will be considered international.
• Reduced Flexibility: Parties lose the option of treating certain Indonesian-seated awards as international, limiting creative structuring but ensuring consistency.
• Alignment with Global Practice: The decision aligns Indonesia more closely with international standards under the 1958 New York Convention, reducing potential conflicts with foreign jurisdictions.

Businesses entering cross-border contracts should review existing arbitration clauses and ensure that the chosen arbitral seat aligns with their enforcement objectives.

The decision is expected to reduce litigation over the classification of awards and align Indonesia more closely with international standards such as the 1985 New York Convention. It also reinforces the importance of choosing a foreign arbitral seat where cross-border enforcement may be required.

New Arbitration Rules at BANI

The Indonesian National Arbitration Board (Badan Arbitrase Nasional Indonesia or BANI) has long been the country's most prominent arbitration institution. However, its rules had lagged behind those of leading arbitral centres such as SIAC, HKIAC, and ICC. Users criticised BANI for limited procedural tools and inconsistent efficiency. In response, BANI issued its new arbitration rules in April 2025.

Key innovations include:

• Emergency Arbitration: Parties can now seek urgent interim relief before a tribunal is fully constituted. The rules impose strict timelines for the appointment of emergency arbitrators and for rendering decisions. This feature aligns BANI with leading arbitral institutions worldwide and provides a tool for parties needing immediate protection of assets or evidence.
• Multiparty and Multicontract Arbitration: The new rules expressly allow for consolidated proceedings involving multiple contracts or parties. Given that Indonesian commercial projects often involve complex webs of contracts, such as infrastructure, energy, and financing deals – this reform reduces the risk of inconsistent awards and parallel proceedings.
• Mandatory Indonesian Co-Counsel: The rules require any party represented by foreign counsel to also appoint Indonesian co-counsel, regardless of the governing law of the contract. This ensures local legal expertise is integrated into proceedings and strengthens the legitimacy of awards within Indonesia's judicial system.

For multinational companies and investors, these reforms present both opportunities and challenges:

• Emergency arbitration enhances protection of rights and assets in fast-moving disputes.
• Consolidation rules reduce costs and improve efficiency in complex, multiparty projects.
• The co-counsel requirement increases compliance costs but provides valuable local expertise that can prevent enforcement hurdles later.

Some sector-specific impacts that should be considered are as follows:

• Infrastructure and Construction: Contractors, subcontractors, and financiers frequently appear in related disputes. Multiparty arbitration will help avoid contradictory results.
• Financial Services: Banks and investors may use emergency arbitrators to secure interim measures on collateral.
• Energy and Resources: Joint ventures and production sharing contracts often involve overlapping parties. Consolidation will simplify resolution.

These changes bring Indonesia closer to international best practices, but clients must plan for the practical realities. Emergency arbitration in BANI, while promising, will depend heavily on judicial co-operation for enforcement. Companies seeking interim relief, such as freezing assets or stopping ongoing breaches, must be ready to act swiftly and co-ordinate closely with Indonesian counsel.

The consolidation provisions also have far-reaching consequences. In public–private partnership (PPP) projects, disputes may arise across concession agreements, financing contracts, and construction subcontracts. Under the new rules, parties could potentially consolidate into one arbitration, saving time but also increasing complexity. In such cases, early contract mapping and consistent dispute resolution clauses across related contracts become critical.

Overall, the new BANI rules mark a decisive step toward making Indonesia a more credible and competitive arbitration hub.

Supreme Court Issues Conflict-of-Interest Rules to Safeguard Judicial Impartiality

To reinforce impartiality and transparency in the judicial process, Indonesia's Supreme Court (Mahkamah Agung or MA) has enacted Decree No 15/KMA/SK.HK2/II/2025 ("Decree 15/2025") on Guidelines for the Prevention and Management of Conflicts of Interest. Effective since February 2025, this decree establishes a comprehensive framework to prevent judges' personal, familial, or financial interests from affecting court decisions.

Serving as an implementation of Law No 48 of 2009 on Judicial Authority, the decree upholds every litigant's right to an impartial trial and to challenge any judge who may have a conflict of interest. Under these new rules, a judge must recuse themself if they have family ties up to the third degree or a past marriage connection with any party involved in a case – such as a prosecutor, lawyer, or court clerk. Judges and clerks are also forbidden from handling cases in which they hold direct or indirect financial interests.

To ensure full transparency, all Supreme Court judges are now required to submit formal disclosures of relationships or affiliations that could create potential conflicts. These disclosures, detailed in Appendix II of Decree 15/2025, must be made through a standardised form and updated whenever a change occurs.

If a potential conflict arises, the decree mandates that the judge must voluntarily withdraw from the case. Upon verification, the Chief Justice will appoint a replacement unconnected to the matter. The Chief Justice's decision on such resignations is final and binding.

Constitutional Court Limits Scope of Defamation and Hate Speech Provisions Under EIT Law

In Decision No 105/PUU-XXII/2024, the Indonesian Constitutional Court (Mahkamah Konstitusi – MK) reviewed provisions under Law No 1 of 2024 – the Second Amendment to Law No 11 of 2008 on the Electronic Information and Transactions Law ("EIT Law") – following a petition filed on 6 August 2024. The petitioners argued that several articles criminalising online defamation and hate speech violated constitutional guarantees of legal certainty and freedom of expression under the 1945 Constitution.

The challenge focused on two key provisions:

• Articles 27A and 45(4), which impose criminal sanctions for defamation through electronic means; and
• Articles 28(2) and 45A(2), which criminalise the electronic dissemination of hate-inciting content.

Rather than seeking annulment, the petitioners requested the Court to clarify vague phrases within these provisions – particularly those that could allow arbitrary interpretation and potential misuse against free speech.

Under Article 27A, defamation is defined as any act of intentionally attacking another's honour or reputation through public dissemination via electronic media, punishable by up to two years' imprisonment or a fine of IDR400 million. The petitioners highlighted the ambiguity of the phrase "other people", noting that it could be interpreted to include not only individuals but also entities such as corporations or government bodies.

Comparing the EIT Law with the Criminal Code (KUHP), the Court found inconsistencies in how the phrase "other people" was defined. To prevent overreach, the MK ruled that only individual persons can be considered victims of defamation under the EIT Law. Consequently, state institutions, corporations, professions, and groups with specific identities are excluded from filing defamation complaints. The Court deemed the relevant provisions conditionally unconstitutional unless interpreted within these boundaries.

The petitioners also questioned Article 28(2), arguing that its wording – criminalising electronic content that "incites hatred or hostility" – was overly broad. The MK agreed that the absence of clear limitations could enable arbitrary enforcement. The Court clarified that the provision constitutes a material offence – meaning actual harm or provable consequence must occur for liability to arise.

The MK thus restricted its application to content that intentionally and publicly spreads hatred based on identity factors (eg, ethnicity, religion, race, or social group) and that poses a real risk of discrimination, hostility, or violence. This narrowed interpretation ensures the law targets genuine hate speech without curbing legitimate expression.

Through Decision 105/2024, the MK reaffirmed the protection of free expression while maintaining accountability for personal defamation and hate speech. It made clear that only individuals, not institutions or corporations, can be defamation victims, and that hate speech offences must meet strict criteria of intent, content, and consequence to qualify as criminal acts.

Indonesia Constitutional Court Ruling Clarifies Statute of Limitations for Employment Termination Disputes

On 17 September 2025, the Constitutional Court of the Republic of Indonesia issued Decision No 132/PUU-XXIII/2025, which reinterprets the statute of limitations applicable to termination of employment disputes.

Under Article 82 of Law No 2 of 2004 on the Settlement of Industrial Relations Disputes ("Law No 2/2004"), lawsuits related to termination of employment must be filed within one year from the date the termination decision is received by the employee or notified by the employer. This provision – previously amended by Constitutional Court Decision No 94/PUU-XXI/2023 – was challenged by an employee who argued that it created legal uncertainty and unfairness, violating the 1945 Constitution.

The Constitutional Court agreed and clarified that the mandatory pre-litigation stage, which includes mediation or conciliation before the local labour office, must be factored into calculating the filing deadline. The Court therefore reinterpreted Article 82 to read as follows:

"Employees' lawsuits regarding termination of employment may only be filed within one year from the date an agreement is not reached through mediation or conciliation."

This ruling effectively resets the commencement of the one-year limitation period to the date when the pre-litigation process concludes without settlement, rather than from the date of termination itself.

For employers, this decision underscores the importance of actively participating in dispute resolution mechanisms. Employers should promptly initiate bipartite meetings and, if unresolved, request mediation or conciliation through the local labour office. The statute of limitations does not begin to run until these mandatory steps are completed, making diligent compliance with pre-litigation procedures more crucial than ever.

Conclusion

The 2025 judicial and regulatory reforms represent a decisive shift toward a more coherent and predictable legal order in Indonesia. Through key Constitutional and Supreme Court rulings, Indonesia has clarified the scope of arbitration, strengthened judicial ethics, and narrowed the boundaries of criminal liability under the EIT Law – all while ensuring stronger protection for employees' procedural rights in industrial relations disputes.

For businesses and investors, these reforms provide clearer rules of engagement: arbitral awards rendered in Indonesia are now unambiguously domestic, BANI's new rules enhance procedural flexibility and enforcement confidence, and judicial transparency mechanisms bolster perceptions of integrity in the courts. The refined defamation and employment provisions further signal a balanced approach to protecting rights without stifling legitimate expression or access to justice.

As Indonesia continues to modernise its legal architecture, 2025 stands as a pivotal year of alignment – with international arbitration norms, due process safeguards, and transparency principles. The result is a legal environment that not only mitigates risk but also fosters a more stable and credible forum for resolving commercial and employment disputes. Businesses that proactively adapt their contractual, compliance, and dispute management strategies to these developments will be best positioned to navigate Indonesia's evolving legal landscape.

Originally published by Chambers & Partners.