In the business environment, investors often encounter various claims from vendors or business partners with relatively small values, for instance, below Rp500.000.000,00 (five hundred million rupiah). Although such amounts may not be significant compared to the overall value of an investment, resolving small claims often consumes disproportionate amounts of time, costs, and energy if pursued through conventional litigation.

To address this challenge, Indonesian law has introduced the Small Claim Court mechanism (“Small Claim Court”). This mechanism offers a dispute resolution process that is faster, less costly, and procedurally simpler than ordinary civil litigation.

What Is Small Claim Court?

Small Claim Court is regulated under Supreme Court Regulation No. 4 of 2019 concerning Amendments to Supreme Court Regulation No. 2 of 2015 on Procedures for Small Claim Court Settlement (“PERMA 4/2019”). Based on Article 1 paragraph (1) of PERMA 4/2019, this mechanism is intended to resolve simple civil cases with a maximum material claim value of IDR 500,000,000 (five hundred million rupiah).

The main characteristics of Small Claim Court are as follows:

1. Fast process: must be resolved within a maximum of 25 (twenty-five) days from the first hearing (Article 5 paragraph (3) PERMA 4/2019).
2. Low cost: compared to conventional litigation, Small Claim Court is more economical due to its simplified procedures.
3. Simplified: there are no appellate or cassation stages as in ordinary civil claims. Parties wishing to challenge the decision may only file an objection, and the Panel of Judges’ ruling on the objection is final and binding (Articles 21 and 29 PERMA 4/2019).

Benefits of Small Claim Court for Investors

For investors, the existence of Small Claim Court provides several strategic advantages, including:

1. Cost efficiency – investors do not need to allocate large budgets to settle low-value claims.
2. Legal certainty promptly – the short process helps investors maintain cash flow and ensure business continuity.
3. Reduced reputational risks – with small disputes resolved quickly, investors can remain focused on their core business without being distracted by lengthy litigation.
4. Enhanced bargaining power – by including a Small Claim Court clause in contracts, investors demonstrate their commitment to efficient dispute resolution.

Recommendation for Investors

Schinder Law Firm recommends that every contract with vendors or third parties valued below Rp500.000.000,00 (five hundred million rupiah) expressly include a dispute resolution clause through the Small Claim Court. This will provide tangible benefits in the long term, considering that the relatively low litigation costs will not burden the company’s cash flow, the shorter dispute resolution process prevents disruptions to larger business relationships, and Investors will continue to obtain legal certainty over their contractual rights.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author:
Budhi Satya Makmur