Islamic Finance Dynamics: Sukuk Dispute Resolution in Indonesia

Imam Baihaki

Introduction

Indonesia has become one of the key regular sovereign sukuk issuers since entering the market in 2008 and enacting Law Number 19 of 2008 on State Syariah Securities. Since then, Indonesia has participated in both domestic and international markets. Over time, this consistent issuance has significantly expanded sukuk’s role as a mainstream source of sovereign financing, with cumulative issuance reaching approximately IDR 2,524 trillion by 2023, underscoring its growing importance in funding the state budget and infrastructure development. Together with Malaysia, Indonesia has remained one of the dominant jurisdictions for sovereign and quasi-sovereign sukuk issuance, accounting for approximately 65 percent of such issuances in 2016.

The Financial Services Authority (Otoritas Jasa Keuangan/OJK) has also enacted regulatory frameworks to facilitate corporate and private sukuk financing, particularly through POJK Number 18/POJK.04/2015 concerning the issuance and requirements of sukuk. This regulation establishes the legal and procedural standards for sukuk issuance, including mandatory underlying assets, disclosure obligations, Syariah compliance requirements, and the role of trustees in representing investor interests.

According to OJK, sukuk is defined as “Syariah securities in the form of certificates or proof of ownership of equal value representing undivided ownership shares in the underlying assets.” This definition emphasizes that sukuk represents proportional ownership in underlying assets rather than a debt obligation, thereby distinguishing it fundamentally from conventional bonds and positioning it as an asset-based Islamic financial instrument.

Sukuk Associated Risk

Sukuk investors face not only conventional financial risks—such as credit, market, and liquidity risk—but also specific legal and Syariah-compliance risks, which require strong regulatory clarity and enforceability to maintain trust. Furthermore, the adequacy of legal protection for sukuk holders in Indonesia has been questioned, particularly in cases involving issuer distress or default, indicating that regulatory frameworks may not yet fully guarantee investor security.

For both sovereign (Surat Berharga Syariah Negara/SBSN) and corporate sukuk, a trustee is mandatory. The trustee’s responsibilities extend beyond fund management or oversight of the underlying assets; they also have a fiduciary duty to represent investors’ interests in legal proceedings. Investors themselves cannot directly pursue a legal claim, as their rights to act are mediated through the sukuk trustee agreement (kontrak perwaliamanatan). This arrangement aligns with the provisions of POJK Number 18/POJK.04/2015, which explicitly outlines the trustee’s role in safeguarding investor rights, and is further reinforced by Law Number 19 of 2008 on State Syariah Securities, which underpins the asset-based and fiduciary framework of sukuk issuance in Indonesia.

Syariah Dispute and Choice of Forum

Under Indonesian law, disputes arising from Syariah economic transactions are principally placed within the jurisdiction of the Religious Courts. This jurisdiction is grounded in Law Number 3 of 2006 on Religious Courts, particularly Article 49, which extends the competence of Religious Courts to matters of Syariah economy. The Constitutional Court Decision Number 93/PUU-X/2012 and PERMA Number 14 of 2016 further strengthened this position by solidifying that Syariah disputes fall under the authority of the Religious Courts.

Nevertheless, litigation before the Religious Court is not the only available mechanism. Parties to a sukuk transaction may agree to resolve disputes through arbitration, provided that such a choice is clearly stipulated in the relevant contract, including the sukuk trustee agreement. For financial services disputes, POJK Number 61/POJK.07/2020 also establishes Alternative Dispute Resolution Institution for the Financial Services Sector (Lembaga Alternatif Penyelesaian Sengketa Sektor Jasa Keuangan/LAPS SJK) as an alternative dispute resolution institution for the financial services sector, including both conventional and Syariah-based financial services.

Therefore, if the dispute is brought to court, the Religious Court is the prevailing forum for Syariah economic disputes. If the parties have inserted a valid arbitration clause, the dispute may instead be resolved through arbitration or LAPS SJK, subject to the scope of the dispute and the parties involved. This structure provides sukuk investors with a formal enforcement mechanism. Still, it underscores the importance of drafting the trustee agreement, because unclear dispute-resolution clauses may pose a risk to investor protection.