CHANGING DISPUTE RESOLUTION MECHANISMS FROM AD HOC TO STANDING DISPUTE BOARDS IN CONTRACT CLAUSES : A CASE STUDY OF ASAHAN 3 HEPP (2 X 87 MW)

Abstract

This study examines the transition from an Ad Hoc Dispute Board (DB) to a Standing Dispute Board in the contract clauses of the Asahan 3 Hydroelectric Project (2x87 MW) in Sumatra, Indonesia. The project, governed by FIDIC Multilateral Development Bank (MDB) 2010 standards, initially adopted an Ad Hoc DB. Initially governed by an Ad Hoc DB, the project faced 25 contractor claims within 20 months, reflecting systemic risks in dispute resolution mechanisms under Indonesia’s construction contract management framework. Driven by JICA’s 2012 Dispute Board Manual, which prioritizes proactive dispute prevention, Employer’s (PLN) amended the contract to adopt a Standing DB. This shift aligns with FIDIC’s post-2010 provisions that mandate Standing DBs for long-term infrastructure projects to mitigate arbitration risks (reduced from 14.05% to 0.53%) and ensure contractual compliance. The amendment required budgetary reallocations (IDR 14.43 billion excluding VAT), procedural revisions to Clause 20.2, and adherence to construction law principles such as risk allocation and stakeholder accountability. The case underscores the legal and operational necessity of integrating Standing DBs into infrastructure projects to enhance transparency, enforce dispute resolution efficiency, and align with global construction contract standards.