ALTERNATIVE DISPUTE RESOLUTION IN HYDROELECTRIC POWER PLANT CONSTRUCTION THROUGH A STANDING DISPUTE BOARD : A CASE STUDY OF ASAHAN 3 HEPP (2 X 87 MW)

Abstract

Infrastructure construction projects frequently experience disputes between various involved parties, including project owners, contractors, and third parties. An example like Hydropower construction projects often encounter disputes due to their technical complexity and involvement of multiple stakeholders. Asahan No. 3 HEPP (2 x 87 MW), a national priority project in Indonesia, The construction of the Asahan 3 Hydropower Plant (2x87 MW) is intended to meet the electricity demand in Sumatra, supplying 1,477 GWh/year. The project comprises several lots, including: Lot I – Civil Works, Lot II – Mechanical Works, Lot III – Electromechanical Works, Lot IV – Transmission Works. The contract for Lot I - Civil Works was signed on January 15, 2019, under an FIDIC-based agreement, with a project duration of 48 months starting from the commencement date of March 3, 2019, and concluding on March 3, 2023. The execution of Lot I - Civil Works is managed by the Shimizu – Adhi Karya Joint Operation. During its implementation, it was noted that the Dispute Board adopted for the Lot I: Civil Works contract is an Ad-hoc Dispute Board. However, the contract for Lot I: Civil Works of the Asahan 3 Hydropower Plant follows the FIDIC Multilateral Development Bank (MDB) 2010 edition, which prescribes the use of a Standing Dispute Board for dispute resolution. Additionally, in accordance with the JICA Dispute Board Manual 2012, JICA strongly discourages the use of an Ad-hoc Dispute Board and recommends implementing a Standing Dispute Board. Data from the Dispute Resolution Board Foundation (2018) highlights that adopting a Standing Dispute Board significantly reduces the likelihood of disputes escalating to arbitration, with only 0.53% of disputes ending in arbitration compared to 14.05% for Ad-hoc Dispute Boards. Furthermore, the high frequency of contractor claims also supports the consideration of a Standing Dispute Board for Lot I: Civil Works of the Asahan 3 Hydropower Plant project.