Friday, April 19, 2024

How-to understand arbitration rules in Indonesia

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In an agreement between parties or a business relationship, there is always the possibility of a dispute. In Indonesia, in the process of resolving disputes between disputed parties, there are several ways that can usually be chosen, among others, through litigation (courts) or non-litigation channels (mediation, negotiation, conciliation, consultation, expert judgment and arbitration). Talking about arbitration or arbitration institutions, in Indonesia arbitration is already known by the public as an alternative dispute resolution through non-litigation channels. The important point that distinguishes court and arbitration is if the court uses a permanent court or standing court, while arbitration uses a tribunal forum that is specially formed for this activity.

Governing laws and regulations

  • Indonesian Civil Code (KUH Perdata)
  • Law No. 30/1999 concerning Arbitration and Alternative Dispute Resolution
  • Law No. 14/1970 concerning the Basics of Judicial Power


Arbitration is the settlement of civil issues or disputes out of court. As stated in Article 1 paragraph 1 of Law No. 30/1999, arbitration is a method of resolving a dispute outside a general court based on a written arbitration agreement by the disputing parties. To resolve a dispute through an arbitration mechanism, an agreement is required between the two disputing parties (which can be done before or after the dispute occurs). For this reason, a written agreement must be made by both parties prior to arbitration. In Indonesia, there are several specialized bodies that facilitate arbitration proceedings, namely the National Arbitration Center (BANI), the Indonesian Capital Market Arbitration Board (BAPMI), the Bali International Arbitration & Mediation Center (BIAMC), the Commodity Futures Trading Arbitration Board (BAKTI), the National Sharia Arbitration Board (Basyarnas), the Intellectual Property Rights Arbitration and Mediation Board (BAM HKI), etc. In principle, each arbitration institution has its own procedure in regulating the mechanism of proceedings in the arbitration concerned or known as the “rule of arbitration” although in practice each arbitration institution is open to using other procedures agreed upon by the parties.

Agreement and application of arbitration clauses 

An arbitration agreement is a contract either as part of a contract or as a separate contract. According to Law No. 30/1999, the arbitration agreement can be realized in the form of an agreement in the form of: 

  • Pactum de compromittendo which the arbitration clause contained in the agreement made by the parties before the dispute arises, or 
  • Akta kompromis (deed of compromise), a separate agreement made by the parties after a dispute arises. 

The arbitration agreement is made in writing, meaning that the arbitration clause in a contract or arbitration agreement is signed by the parties or stated in correspondence. The existence of this written agreement can bind the rights of the parties to submit a dispute resolution or difference of opinion contained in the agreement only to the arbitration institution. The arbitration agreement is not a conditional agreement, so its implementation does not depend on a certain event at a later date. This agreement does not question the problem of implementing the agreement but only questions the way and the authorized institution to resolve disputes that occur between the parties. The arbitration agreement is in addition to the main agreement that is the accessor. Its existence in no way affects the fulfillment of the agreement. This means that without an arbitration clause, the fulfillment of the main agreement will not be hindered. On the other hand, in the absence of a principal agreement, the parties do not enter into an arbitration agreement.  

Implementation of arbitration award

The execution of the arbitral award is carried out in accordance with the provisions of the procedural law applicable in the court, in the territory of the country where the request for execution is submitted. The arbitration award is final and has permanent legal force and is binding on the parties. Final here means that the arbitral award cannot be appealed, appealed, or reviewed. In the case of the implementation of the award, this must be carried out within a maximum period of 30 days from the date of the award, in which the original sheet or an authentic copy of the arbitration award is submitted and registered by the arbitrator or his proxy to the clerk of the district court and the clerk is given a note which is a deed. registration. The execution of the arbitration award will only be carried out if the arbitration award is in accordance with the arbitration agreement and fulfills the requirements in Law No. 30/1999 and does not conflict with decency and public order.

Cancellation of arbitration award

The arbitration award may also be annulled by the disputing parties by asking the district court for either part or all of the contents of the award, if it is suspected that it contains the following elements:

  • The letter or document submitted in the examination, after the decision is rendered, is admitted to be false or declared false.
  • After the decision was made, decisive documents were found, which were hidden by the opposing party.
  • Decisions are taken from the results of deception carried out by one of the parties in the examination of the dispute.

The reasons for submitting an application for the cancellation of the arbitral award are alternative, meaning that each reason can be used as a basis for submitting a request for annulment of the arbitral award.

Execution of foreign arbitration award in Indonesia 

According to Law No. 30/1999, a foreign arbitral award may be recognized and enforced in Indonesia, if:

  • The foreign arbitration award is handed down by the arbitrator or arbitral tribunal in a country in which Indonesia is bound by an agreement, both bilaterally and multilaterally, regarding the recognition and implementation of international arbitral awards.
  • The international arbitration award which according to Indonesian law is included in the scope of trade law which includes commerce, banking, finance, investment, industry and intellectual property rights.
  • The foreign arbitration award does not conflict with public order.
  • The arbitration award has obtained an executor from the Central Jakarta District Court.
  • An arbitration award involving the Republic of Indonesia as a party can be recognized and implemented if it has obtained an executor from the Supreme Court which is then delegated to the Central Jakarta District Court.

Through Law No. 30/1999 stipulates that the authority to handle the recognition and implementation of foreign arbitral awards is the Central Jakarta District Court. The application for implementation of the decision is made after the decision is submitted and registered at the Central Jakarta District Court, by attaching:

  • The original sheet or an authentic copy of the decision agreement and its official translation in the Indonesian language.
  • The original or authentic copy of the agreement on which the decision is based and its official translation in Indonesian.
  • Information from the Indonesian Diplomatic Representative in the country where the award is made, which states that the applicant country is bound by bilateral and multilateral agreements with the Republic of Indonesia regarding the recognition and implementation of foreign arbitral awards.

After the Chairman of the Central Jakarta District Court gives an order for execution, the next execution is delegated to the Head of the District Court who is relatively authorized to carry it out

Application for Arbitration Process

In general, the procedure to be followed for an application for arbitration is as follows:

  1. Registration. As an initial stage, the applicant may submit a registration of the application for arbitration by the party initiating the arbitration process to the Secretariat of the Arbitration Institution selected by the parties.
  2. Request for Arbitration. In submitting the application, the applicant must include the following information:
    • Names and addresses of parties
    • Arbitration agreement between the disputing parties
    • The facts and legal basis of arbitration cases
    • Problem details
    • Claim or claim value
  1. Documents. The applicant must attach an authentic copy related to the dispute in question and an authentic copy of the arbitration agreement, and other relevant documents. If there are documents that will follow, the applicant must confirm the following documents.
  2. Appointment of Arbitrators. The applicant appoints an arbitrator as a neutral third party no later than 30 days after the application is registered. If the applicant is unable to appoint an arbitrator, then the absolute appointment has been submitted to the selected Arbitration Institution. The Chair of the Arbitration Institution has the authority to request to extend the time for the appointment of an arbitrator for valid reasons not to exceed 14 (days).
  3. Arbitration Fee. The application for Arbitration must be accompanied by payment of a registration fee. The registration fee is paid when making an application of IDR 2,000,000. Meanwhile, the administrative costs vary depending on the size of the demands. The following is a list of administrative costs according to the type of claim.
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