The business climate in Indonesia is characterised by a multitude of complexities and diverse business sectors with promising growth. As commercial disputes inevitably arise, there are primarily two settlement pathways: out-of-court settlements (Cession (Assignment), novation and subrogation) and court settlements (breach of contract lawsuit, bankruptcy and suspension of debt payment obligation, enforcement and arbitration). This article will look at the key features.

OUT OF COURT

Indonesian law permits the transfer of receivables or debt renewal. There are several means, listed below.
Cession (Assignment) is a transfer of rights over intangible movable property, predominantly as receivables for one party to another party. The validity of transferring rights to claim through cession (assignment) relies on the existence of an authentic or private deed, which the debtor becomes obligated to honour once they are informed of the specific transfers, or upon their acceptance of the cession (assignment). Legal remedies available to a party aggrieved by cession (assignment) include filing a lawsuit, terminating the agreement or resolving the matter through mediation and negotiation.
Novation refers to the process of renewing a debt, which can be accomplished through three distinct methods:

• Replacement of an existing obligation with a new obligation for the lenders (objective novation);
• Appointment of a new debtor to replace the existing debtor (subjective passive novation); and
• An event in which a new creditor is appointed to replace the existing creditor (subjective active novation).

Legal remedies available for novation include the annulment of the novation agreement or filing a lawsuit to court.

Subrogation is the transfer of a creditor’s rights to a third party who compensates the creditor. The third party is distinct from both the debtor and the creditor. There are two conditions:

• Whether the creditor, upon receiving payment from a third party, concludes that the third party will exercise the creditor’s rights in his/her stead; and
• Whether the debtor takes out a loan to repay his/her debt and determines that the third party will assume the creditor’s rights.

The legal remedy for subrogation is the annulment of the subrogation agreement itself.

COURT SETTLEMENTS

Breach of contract. This type of lawsuit arises when a party to a formally constituted agreement fails to comply with its provisions. Claims for breach of contract can be pursued through out-of-court settlement or litigation. Negotiation, mediation or arbitration are all examples of out-of-court settlement. On the other hand, the litigation procedure involves filing a lawsuit to court to seek redress under law.
Breach of contract. This type of lawsuit arises when a party to a formally constituted agreement fails to comply with its provisions. Claims for breach of contract can be pursued through out-of-court settlement or litigation. Negotiation, mediation or arbitration are all examples of out-of-court settlement. On the other hand, the litigation procedure involves filing a lawsuit to court to seek redress under law.

The pros of this course of action are:

• The litigation process serves as a legal recourse for parties;
• The litigation process can be used to obtain restitution for incurred losses; and
• Filing a breach of contract lawsuit is a basic legal remedy that can be taken by anyone to protect their rights under a contract.

The cons are:

• Litigation takes time due to complex steps and slow trial scheduling;
• The inability to substantiate a breach of contract could result in the dismissal of the case, causing time and pecuniary losses;
• The inability to substantiate a breach of contract could result in the dismissal of the case, causing time and pecuniary losses;
• The litigation processes can incur exorbitant costs.

Bankruptcy. There are two routes available under Indonesian Bankruptcy Law – suspension of debt payment (PKPU), and bankruptcy.
PKPU is a court-supervised debt restructuring that allows debtors to propose a settlement plan to their creditors. The plan will be enforced by a court-ratified settlement agreement if accepted, or the debtor will be declared bankrupt if rejected.
If the debtor or creditor decides to initiate bankruptcy rather than pursue a PKPU, there will be a complete seizure of all the debtor’s assets. These assets will be managed and liquidated by a receiver under the oversight of a supervisory judge.

PKPU and bankruptcy share similar prerequisites for filing a petition:

• At least two creditors; and
• The debtor has failed to pay at least one due and payable debt.

What differentiates the two is whether the petitioner is a debtor or a creditor. The petition should be submitted to one of Indonesia’s five commercial courts.

Sumber