Arbitration versus Litigation: Perceptions of Effectiveness in Resolving Construction Disputes in Indonesia

Dispute resolution plays an essential role in maintaining project continuity and legal certainty in the construction industry, where high-value contracts and technical complexities frequently lead to disagreements. In Indonesia, two primary mechanisms are available for resolving such disputes: litigation and arbitration. While arbitration is increasingly favored for its procedural flexibility and perceived neutrality, its actual effectiveness in the construction context—compared to litigation—remains underexplored in empirical research. This study aims to evaluate the effectiveness of arbitration as a dispute resolution method in Indonesia’s construction sector, particularly in comparison to litigation. It also seeks to identify the underlying factors that influence arbitration’s effectiveness and to examine the key challenges that hinder its optimal implementation. The research employs a mixed-methods approach, combining quantitative analysis of validated arbitration effectiveness indicators with qualitative insights from open-ended expert responses. Data were collected through structured questionnaires distributed to selected professionals in the construction industry, including lawyers, engineers, and contract administrators, who have experience both as claimants in arbitration proceedings and as observers or participants in court-based dispute resolution. These respondents are considered representative of stakeholders capable of assessing arbitration and litigation with informed judgment. The results indicate that arbitration is generally perceived as more effective than litigation, especially in terms of decision objectivity, procedural flexibility, and international enforceability. However, significant challenges remain, such as high arbitration costs, lengthy resolution times in complex cases, and limited public trust in arbitrator impartiality. These findings underscore the need for institutional improvements to enhance arbitration’s credibility and accessibility in Indonesia’s construction industry.