Financial Services Authority: New Developments in Alternative Dispute Resolution

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In December 2020, the Financial Services Authority (the FSA or in Indonesian, Otoritas Jasa Keuangan), issued  Regulation 61* relating to alternative dispute resolution institutions in the financial services sector (ADR Institutions, or in Indonesian, Lembaga Alternatif Penyelesaian Sengketa Sektor Jasa Keuangan). Regulation 61 revokes previous regulations on the topic.**

Before Regulation 61, Indonesia had six ADR Institutions. Each ADR Institution had its own specialist area, for example, insurance, capital markets, pension funds, etc. Consequently, each had its own standards and procedures for resolving disputes and parties were not able to use these institutions to resolve cross-sector disputes in the financial services sector.

Regulation 61 establishes a single institution for alternative dispute resolution across all financial services sectors. The new ADR Institution began operations on 1 January 2021. Dispute resolution via the new ADR Institution is carried out by a mediator or an arbitrator either in person or via electronic media. All dispute resolutions are confidential.

Regulation 61 states that disputes that meet the following criteria may be submitted to the new ADR Institution for resolution, those that:

  • cause loss and/or potential loss for consumers due to breach of agreements;
  • have not been solved despite the efforts of both or either party;
  • are not already the subject of a proceeding in court or some other institution; and
  • are civil in nature.

In addition, the new ADR Institution may be given jurisdiction by the FSA to solve disputes that fall outside the criteria.

The six existing ADR Institutions will be merged into the new ADR Institution. However, all disputes submitted to each separate institution prior to 1 January 2021 will still be dealt with by the individual institution to which it was submitted.

Under Regulation 61, any business entities in the financial services sector that are registered and supervised by the FSA must become a member of the new ADR Institution. Membership requires members to pay the membership fees; publish information about the new ADR Institution through its communication channels; and abide by the decisions of the ADR Institution.  Any members that violate these conditions may receive a written warning, a fine or have their business activities restricted or suspended.

* FSA Regulation No. 61/POJK.07/2020 concerning Institutions for Alternative Dispute Resolution in the Financial Services Sector.

** FSA Regulation No. 1/POJK.07/2014 concerning Institutions for Alternative Dispute Resolution in the Financial Services Sector.