New Dispute Settlement Procedures under 2004 Law

In December 2003, Indonesia's House of Representatives passed the Industrial Disputes Settlement Act, which former President Megawati signed into law in January 2004 (Law 2/2004). The law introduced five dispute settlement procedures, namely bipartite settlement, mediation, conciliation, arbitration and an Industrial Relations Court. The new labor courts, along with other dispute resolution mechanisms, will replace the existing system of regional and central labor dispute settlement committees, which unions and employers have often criticized as costly, very time-consuming and subject to corruption.

The Industrial Relations Court, represented at both the district and Supreme Court level, will feature judges drawn from the general courts, assisted by ad hoc judges taken equally from lists submitted by trade unions and employer associations. Parties must attempt mediation or conciliation before submitting petitions to the labor court. In an effort to reduce processing time, the Act stipulates timeframes for court actions. The court will not charge parties for execution costs in suits valued below 15 million Rupiah ($1,500). The Supreme Court oversees the Industrial Relations Court and may hear appeals in "disputes of rights" and employment termination cases.

One Year Behind Schedule

The Industrial Relations Court should have commenced operations by January 2005, one year after the Act took effect. Due to lack of preparation and funding, however, the Supreme Court asked the President to postpone the establishment of the labor courts by one year. On November 16, the head of the selection committee for industrial court judges, Hanfin A. Tumpa, announced that the Government had selected 148 judges and would post them across Indonesia by January 14, 2006. Both unions and the Indonesian Employers' Association (APINDO) participated in the nomination of ad hoc judges, and have generally supported the creation of the new courts. A senior APINDO representative noted that under the new system there would be greater opportunities to resolve disputes through bipartite settlements and other mechanisms, with the Industrial Relations Court constituting a last resort.

U.S. Support via ILO

The ILO, with U.S. Department of Labor funding under the ILO/USA Declaration Project, assisted with training of new labor court judges during 2005. Most observers now believe the Industrial Relations Court indeed will start in January.

Salaries an Issue

The setting of salaries for labor court judges received some public attention, with press articles in August quoting a would-be judge that of course he would need to supplement his income through bribes if his salary were too low. The Supreme Court and the Manpower Ministry have a joint committee to determine salary levels, but have not publicized their decisions. Remuneration for judges generally, as with other Indonesian officials, remains woefully low, with a typical newly-appointed district court judge starting off with only $200 in wage and benefits per month.

Comment

Most labor experts believe Indonesia's outgoing labor dispute settlement committees constituted a major weakness in the country's industrial relations environment. They note committee judgments could take years, verdicts often appeared arbitrary, and allegations of corruption were common. Both trade unions and employers hope the new dispute resolution mechanisms, including the labor courts, will improve the situation, no small challenge given serious levels of corruption in other judicial processes.

* * *