Arbitration procedures and practice in Indonesia: overview

A Q&A guide to arbitration law and practice in Indonesia.

The country-specific Q&A guide provides a structured overview of the key practical issues concerning arbitration in this jurisdiction, including any mandatory provisions and default rules applicable under local law, confidentiality, local courts' willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.

To compare answers across multiple jurisdictions visit the Arbitration procedures and practice Country Q&A Tool.

This Q&A is part of the global guide to arbitration. For a full list of jurisdictional Q&As visit www.practicallaw.com/arbitration-guide.

Timur Sukirno, Ferry Aritonang and William Muliawan, Hadiputranto Hadinoto & Partners
Contents

Use of arbitration and recent trends

1. How is commercial arbitration used and what are the recent trends?

Use of commercial arbitration

Arbitration in Indonesia is governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law). The Arbitration Law defines arbitration as a method of settling a civil dispute outside the general court, based on an arbitration agreement made in writing by the disputing parties. The district courts do not have jurisdiction to hear disputes between parties that are bound by an arbitration agreement (Article 3, Arbitration Law).

The Arbitration Law prescribes the arbitration process in Indonesia, such as the:

  • Appointment of arbitrator(s) by the parties (see Question 18).

  • Confidentiality of the proceedings (see Question 23).

  • Final and binding nature of the arbitral award (see Question 28).

Recent trends

Many large commercial disputes (especially those of an international nature) are settled by arbitration. However, to the best of the authors' knowledge, the proportion of commercial disputes settled through arbitration in Indonesia is still less than the proportion of commercial disputes settled through court proceedings. The most commonly arbitrated cases are:

  • Insurance disputes.

  • Construction disputes.

  • Trade disputes.

  • Disputes regarding the termination of agency agreements or commercial leases.

  • Disputes between or among oil, gas or mining contractors.

  • Other general contractual claims.

Arbitration is increasingly used to resolve disputes in certain industries, such as the oil and gas industry. In fact, the rules of BPMIGAS (Badan Pelaksana Kegiatan Usaha Hulu Minyak Dan Gas Bumi), the Upstream Oil and Gas Supervisory Agency, stipulate that a co-operation agreement for the procurement of services and goods in the oil and gas industry, must contain an arbitration clause and designate Indonesia as the seat of arbitration under the Indonesian National Board of Arbitration (Badan Arbitrase Nasional Indonesia) (BANI) Rules (see box, Main arbitration organisations). Under BANI Rules, when an arbitration clause designates BANI as the arbitral institution, the arbitration will be settled under the BANI Rules.

Due to the demand for arbitration in the construction industries, the Indonesia Construction Dispute Arbitration and Alternative Dispute Resolution Centre (Badan Arbitrase dan Alternatif Penyelesaian Sengketa Konstruksi Indonesia (BADAPSKI)) was established in 2014. The establishment of BADAPSKI intended to provide a more efficient and productive arbitration procedure for the disputing parties. The arbitrators in BADAPSKI are very familiar with the construction industry and are therefore well-informed to assess disputes of this nature.

Advantages/disadvantages

There are some advantages of using arbitration as a dispute settlement mechanism, such as:

  • Allowing parties to nominate "judges" (arbitrators) who are specialised in the case between the parties and who can therefore give a more in-depth analysis of the dispute in the judgment. Judges in Indonesian civil courts are usually not specialised.

  • Arbitration proceedings are relatively short, compared to final and binding court judgments. The Arbitration Law provides that the examination of a case must not take longer than 180 days starting from when the arbitration tribunal is formed.

  • More time and cost effective. In contrast, civil proceedings require a large amount of time and will give rise to significant legal expenses.

  • Unlike in civil proceedings that are usually open to the public, arbitration proceedings are confidential.

  • The arbitration award can be implemented in any of the parties' jurisdictions, as long as those parties have ratified the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention).

The disadvantage of using arbitration arises when it comes to the execution of arbitration awards. Arbitration awards, whether domestic or international, must be registered with the courts in Indonesia and require the involvement of the court to issue an exequatur and writ of execution. Awards can also be challenged by the opposing party on the grounds of decency or public order. Therefore, it may take longer to effectively execute the award.

 

Legislative framework

Applicable legislation

2. What legislation applies to arbitration? To what extent has your jurisdiction adopted the UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Law)?

The legislation that applies to arbitration in Indonesia is the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law). It replaced the Dutch colonial legislation that regulated the procedure of alternative dispute resolution.

The Arbitration Law does not adopt the UNCITRAL Model Law on International Commercial Arbitration 1985.

 

Mandatory legislative provisions

3. Are there any mandatory legislative provisions? What is their effect?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) contains the following mandatory legislative provisions:

  • The use of arbitration. Arbitration can only be used if it is firmly agreed by the parties in writing. Once it has been agreed, the parties in dispute have no rights to bring the claim to the district courts (Article 2, paragraph 1 and Article 4, paragraph 11, Arbitration Law).

  • The appointment of arbitrators. Arbitrators must (Article 12, Arbitration Law):

    • have the ability to act under the law;

    • be at least 35 years old;

    • not have any family relationship with the parties to a dispute;

    • not have any financial or other interests in the arbitration award; and

    • have 15 years of experience and knowledge in the area of the matters being disputed.

    An arbitrator that has been requested to sit on an arbitration panel must inform the parties in dispute of the matters that may affect its impartiality (Article 18, paragraph 1, Arbitration Law). In addition, the parties can challenge the appointment of the arbitrators if there is sufficient cause and authentic evidence which give doubt to an arbitrator being impartial in rendering the award (Article 22, paragraph 1, Arbitration Law).

  • Arbitration award. An arbitration award must contain the following (Article 54, Arbitration Law):

    • the head of the award, which must read "For the Sake of Justice according to the Almighty";

    • the full names and addresses of the parties;

    • a brief description of the dispute;

    • the position/standing of each party;

    • the full names and addresses of the arbitrators;

    • the consideration and conclusion of the arbitrators or arbitration panel on the dispute in its entirety;

    • the opinion of each arbitrator if there is a dissenting opinion in the arbitration panel;

    • the ruling;

    • the place and date of the award; and

    • the signature of the arbitrators of the arbitration panel.

    The Arbitration Law also stipulates the form and delivery of arbitral awards.

  • The rules of arbitration. If the parties elect to use a national or international arbitration institution to settle their dispute, the rules and procedures of that institution applies, unless the parties decide otherwise (Article 34, Arbitration Law).

  • The execution of arbitration awards. Arbitration awards (domestic and international) can only be enforced by the respective district court. To enforce a domestic award, it must be registered with the district court. To enforce an international arbitration award, it must be registered with the district court and a request for exequatur must be made to the Chairman of the Central Jakarta District Court.

 
4. Does the law prohibit any types of disputes from being resolved via arbitration?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution provides that the only disputes that can be settled by arbitration are:

  • Commercial disputes.

  • Disputes related to rights, which according to law and statutory regulations, are fully controlled by the disputing parties.

 

Limitation

5. Does the law of limitation apply to arbitration proceedings?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution does not specify limitation periods. However, if the parties choose Indonesian law as the governing law of the dispute, all legal claims (commercial or individual) will expire after 30 years (Indonesia Civil Code). An individual who invokes this limitation period is not required to provide any document of entitlement, and invoking a limitation period cannot be challenged on the grounds of good faith.

 

Arbitration organisations

6. Which arbitration organisations are commonly used to resolve large commercial disputes in your jurisdiction?

There are a number of arbitration institutes in Indonesia, such as the:

  • Indonesian National Board of Arbitration (Badan Arbitrase Nasional Indonesia) (BANI).

  • Indonesian Capital Market Arbitration Board (Badan Arbitrase Pasar Modal Indonesia) (BAPMI).

  • National Sharia Arbitration Board (Badan Arbitrase Sharia Nasional) (Basyarnas).

  • Arbitration institution to settle disputes in futures exchange (Badan Arbitrase Perdagangan Berjangka Komoditi) (BAKTI).

  • The Arbitration Board of Indonesian Sportsmanship (Badan Arbitrase Keolahragaan Indonesia) (BAKI).

  • Arbitration Board of Indonesian Sports (Badan Arbitrase Olahraga Indonesia) (BAORI).

BANI has the longest track record and is the most active. BANI establishes its own rules and procedures known as the BANI Rules. BANI handles both domestic and international disputes. The other institutions are not widely used in practice.

For more information, see box, Main arbitration organisations.

 
7. What remedies are available where one party denies that the tribunal has jurisdiction to determine the dispute(s)? Does your jurisdiction recognise the concept of kompetenz-kompetenz? Does the tribunal or the local court determine issues of jurisdiction?

There is no express provision in the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) that recognises the concept of kompetenz-kompetenz. However, it can be argued that this principle is implicitly adopted under Articles 3 and 11 of the Arbitration Law, which state that the:

  • District courts are not authorised to adjudicate disputes of parties bound by arbitration agreements.

  • Existence of an arbitration agreement removes the rights of the parties to submit a dispute to the district courts.

Therefore, only the arbitral tribunal has the jurisdiction to determine all matters from the parties that are bound by an arbitration agreement, including the issues that arise from the principle of kompetenz-kompetenz.

At the request of one of the parties, the arbitrator or arbitration panel can make a provisional award or other interlocutory decisions to regulate the arbitration procedure. This can be used by the arbitral tribunal to determine its own jurisdiction. It is also common practice for the parties of a dispute to deny that the tribunal has jurisdiction to determine the dispute.

In addition, if the parties agree to use the BANI Rules as the arbitration procedure, the concept of kompetenz-kompetenz is adopted under Article 18.

 

Arbitration agreements

Validity requirements

8. What are the requirements for an arbitration agreement to be enforceable?

Substantive/formal requirements

Disputes can only be arbitrated if the parties to a dispute have agreed to settlement through arbitration. Generally, an agreement to arbitrate must be in writing and comply with the general requirements for the validity of a contract, that is, the (Article 1320, Indonesia Civil Code):

  • Contract is concluded by mutual consent between the parties.

  • Parties are competent to enter into the contract.

  • Contract has a definite object.

  • Contract has a permissible cause.

If a dispute arises, the claimant must notify the defendant by an approved means (see Question 15).

An arbitration agreement can also be executed after a dispute arises, in which case the parties must enter into a notarial deed. The written agreement to arbitrate must contain:

  • The matter under dispute.

  • The full names and addresses of the parties.

  • The full names and addresses of the arbitrators or arbitration panel.

  • The place where the arbitrators or arbitration panel will give the award.

  • The full name of the secretary (who is in charge of managing administrative matters for the arbitration, for example, writing the summons letter and arranging the arbitration schedule).

  • The period in which the dispute must be settled.

  • A statement of willingness from the arbitrator to convene the hearing of the dispute.

  • A statement of willingness from the disputing parties to bear all expenses required to settle the dispute through arbitration.

The arbitration agreement will be void if it does not contain this information, in which case the dispute can be referred to the courts.

Separate arbitration agreement

An arbitration agreement can be a clause in the main contract or a separate agreement. If the dispute has already occurred and the parties intend to arbitrate, the parties can enter into a separate arbitration agreement (see above, Substantive/formal requirements).

An arbitration clause that is incorporated in contract, only by reference to another document, is enforceable to resolve disputes arising under the contract.

 
9. Are unilateral or optional clauses, where one party has the right to choose arbitration, enforceable?

Unilateral or optional clauses, where one party has the right to choose arbitration, are not enforceable under the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law). The parties must agree in writing to settle disputes through arbitration (Article 2, Arbitration Law).

 
10. In what circumstances can a third party that did not sign the contract incorporating the arbitral clause in question be compelled to arbitrate disputes relating to the contract in question?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) is silent on whether a party to an arbitration agreement can compel a third party to join the arbitration. However, a third party can voluntarily intervene and join the arbitration dispute if all of the following applies, the (Article 30, Arbitration Law):

  • Third party has an interest in the arbitration dispute.

  • Contracting parties agree for the third party to join the arbitration dispute.

  • Presiding arbitrator or panel of arbitrators agrees for the third party to join the arbitration dispute.

In addition to the above, a non-contracting party can also be drawn to join the arbitration dispute if the contracting parties add the non-contacting party as a co-defendant. In this case, the non-contracting party is deemed related to the merits of the dispute and will therefore be required to join the arbitration proceeding. The co-defendant will also be bound by the arbitration award.

 
11. In what circumstances is a third party that did not sign the contract incorporating the arbitral clause in question entitled to compel a party that did sign the contract to arbitrate disputes relating to the contract?

Indonesia adopts the principle of "privity of contract" under which a contract cannot confer rights or impose obligations arising under it on any person or party except the parties to the contract. Therefore as a general principle, an arbitration agreement can only be binding on its contracting parties.

 

Separability

12. Does the applicable law recognise the separability of arbitration agreements?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) states that an arbitration agreement cannot be revoked on the termination of the main agreement. Therefore, the Arbitration Law recognises the separability principle.

 

Breach of an arbitration agreement

13. What remedies are available where a party starts court proceedings in breach of an arbitration agreement, or initiates arbitration in breach of a valid jurisdiction clause?

Court proceedings in breach of an arbitration agreement

The district courts have no authority to hear disputes where the parties are bound by an arbitration agreement. Therefore, if court proceedings are commenced in breach of an arbitration agreement, the other party can file an objection to the district court on the grounds of absolute competence (which determines whether a court has the authority and jurisdiction to adjudicate a particular case). The district court will declare that it has no authority to try the case and the case should be settled in accordance with the arbitration agreement.

Arbitration in breach of a valid jurisdiction clause

Arbitration proceedings can only commence if the parties agree to settle the dispute by arbitration. Therefore, if the disputing parties have no agreement to settle the dispute through arbitration, the arbitration institution must decline to hear the dispute (Article 7, paragraph 2, Indonesian National Board of Arbitration (BANI)Rules). In these circumstances BANI will review and determine whether the disputing parties have a basis to settle the dispute through arbitration.

 
14. Will the local courts grant an injunction to restrain proceedings started overseas in breach of an arbitration agreement?

Local courts have no jurisdiction and authority to grant an injunction to restrain proceedings started overseas in breach of an arbitration agreement.

 

Joinder of third parties

15. In what circumstances can a third party be joined to an arbitration, or otherwise be bound by an arbitration award?

In principle, the arbitration award will only bind the parties to the dispute. However, third parties to the arbitration agreement can be joined to an arbitration, or otherwise be bound by an arbitration award if both:

  • They have an interest in the proceedings.

  • The disputing parties and the arbitrator or arbitral panel approve their participation.

 

Arbitrators

Number and qualifications/characteristics

16. Are there any legal requirements relating to the number and qualifications/characteristics of arbitrators? Must an arbitrator be a national of, or licensed to practice in, your jurisdiction in order to serve as an arbitrator there?

As a general rule, the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) states that arbitrators must:

  • Be capable to take legal actions.

  • Be at least 35 years old.

  • Have no family ties up to the second degree in direct line as well as collateral line with one of the disputing parties.

  • Have no active financial interest or other interests in the arbitration award.

  • Have experience and have actively mastered their fields of expertise for at least 15 years.

  • Not already be a court judge, public prosecutor, clerk or another judicial official.

In addition, the Arbitration Law provides procedures to use a sole arbitrator or three arbitrators for the arbitration panel.

If the parties choose arbitration based on the Indonesian National Board of Arbitration (BANI) Rules, their arbitrator(s) must be listed in BANI's list of arbitrators (BANI List) or must have arbitration/alternative dispute resolution certificates acknowledged by BANI. Currently, BANI has more than 100 arbitrators with various professional backgrounds, about 40% of whom are foreign persons.

However, if a party requires an arbitrator with a specific qualification, he must make a request to the Chairman of BANI. The party's request must state why a specialist arbitrator (External Arbitrator) is required, and must attach the External Arbitrator's complete resume. If the Chairman considers that there is no arbitrator on the BANI List with the required professional qualifications, he can approve the appointment of the External Arbitrator. However, the External Arbitrator must still have an arbitration/alternative dispute resolution certificate acknowledged by BANI and must satisfy the requirements in the Arbitration Law.

If the Chairman rejects the application, he must recommend an alternative arbitrator chosen from the BANI List or an expert meeting the requirements in the required field who is not registered in the BANI List. He can also consider an acknowledged foreign arbitrator if the foreign arbitrator has the qualifications and is prepared to comply with the BANI Rules. Under the BANI Rules, the party who appoints the foreign arbitrator is obliged to bear the travel, accommodation and other expenses related to the appointment of the foreign arbitrator.

 

Independence/impartiality

17. Are there any requirements relating to arbitrators' independence and/or impartiality?

See Question 16.

In addition, parties can challenge the appointment of an arbitrator if there are sufficient reasons and authentic evidence to doubt whether the arbitrator will perform his tasks honestly and will make impartial decisions (Article 22,Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law)). An appointment can also be challenged if the party can prove that the arbitrator has a family, financial or work relationship with one of the parties or their attorneys.

Parties can object to the appointment of an arbitrator within 14 days of its appointment. A written objection must be filed to the other party and to the arbitrator concerned, stating the reason for the claim. If a claim by one party is approved by the other party, the arbitrator must resign and his replacement will be appointed under the Arbitration Law procedures. If a claim is not approved by the other party or the arbitrator is not prepared to resign, the objecting party can ask the chairman of the respective district court to make a ruling on the impartiality of the arbitrator. Such a decision is binding on both parties and cannot be challenged.

 
18. Does the law contain default provisions relating to the appointment and/or removal of arbitrators?

Appointment of arbitrators

Parties to the arbitration can appoint arbitrator(s) to hear their dispute, provided that they fulfil the requirements under the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) (see Question 16).

Under the Arbitration Law, if the parties have agreed to appoint a sole arbitrator, the parties must agree to appoint the sole arbitrator. If the parties cannot determine the sole arbitrator, the chairman of the relevant district court can appoint the sole arbitrator. If three arbitrators are to be appointed, each of the parties will appoint one arbitrator and the two arbitrators must appoint a third arbitrator. If they fail to do so, the chairman of the relevant district court can appoint the third arbitrator.

If the arbitration is governed by the Indonesian National Board of Arbitration (BANI) Rules, the Chairman of BANI must approve the appointment of arbitrators.

Removal of arbitrators

The parties and the relevant district court can remove an arbitrator if the arbitrator is not impartial (see Question 17). Arbitrators can also be dismissed if it can be proved by legal proceedings that they behaved dishonestly. The arbitrator's authority is not terminated by his death, and will continue by his replacement. In addition, the death of one of the parties will not lead to the removal of the arbitrator appointed by that party.

 

Commencement of arbitral proceedings

19. Does the law provide default rules governing the commencement of arbitral proceedings?

The parties must agree that the dispute between them is to be settled through arbitration. If a dispute arises, the claimant must notify the defendant by registered letter, telegram, telex, facsimile, e-mail or private dispatch that the dispute is to be submitted to arbitration (Article 8, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law)). This notification must clearly state:

  • The name and address of the parties.

  • A reference to an applicable arbitration clause or agreement.

  • The disputed agreement or matter.

  • The basis of the claim and the amount claimed, if any.

  • The desired method of settlement.

  • The agreement made by the parties on the number of arbitrators. If no agreement has been made, the person notifying can make proposals on the number of the desired arbitrators, as long as they are in odd numbers.

An arbitration agreement can also be executed after the dispute arises (see Question 8). The parties must either appoint the arbitrators or request the chairman of the district court to appoint the arbitrators for the dispute (see Question 18).

The parties can:

  • Agree on their own procedural rules, to the extent that they are not contrary to the rules of the Arbitration Law.

  • Use the default rules of the Arbitration Law.

  • Use the rules of a national or international arbitral tribunal.

If the parties have agreed on their own rules, the time limit and place of the arbitration contained in the agreement must be approved by the parties. If the time limit and place of arbitration are not agreed, the arbitrator or arbitral panel will determine them.

 

Applicable rules

20. What procedural rules are arbitrators likely to follow? Can the parties determine the procedural rules that apply? Does the law provide any default rules governing procedure?

Applicable procedural rules

The parties can agree on the procedural rules of the arbitration by written agreement, provided these rules are not contrary to the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law). If the parties do not determine the arbitration process, the Arbitration Law procedures will apply. If an arbitration is conducted in Indonesia under the rules of a national or international arbitral institution, the rules and procedures of that institution will apply, unless the parties agree otherwise (see Question 3).

Default rules

See above, Applicable procedural rules.

 

Arbitrator's powers

21. What procedural powers does the arbitrator have under the applicable law? If there is no express agreement, can the arbitrator order disclosure of documents and attendance of witnesses (factual or expert)?

The arbitrators can extend the time they adjudicate the case, in the following ways (Article 33, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution Law (Arbitration Law)):

  • When a request is submitted by one party concerning a certain special matter.

  • As a consequence of a provisional award or other interlocutory judgments.

  • When deemed necessary by the arbitrator or the arbitration panel for the sake of examination.

Arbitrators can also:

  • Instruct that every document submitted to them must be accompanied with a translation using a language determined by the arbitrators (Article 35, Arbitration Law).

  • Determine that the arbitration proceedings (such as the examination of witness) are conducted verbally if agreed by the parties (Article 36, Arbitration Law).

  • Determine the place for arbitration, unless determined by the parties (Article 37, Arbitration Law).

  • Use their discretion to hear the testimony of a witness or to hold a meeting at a certain place outside the place where the arbitration is held (Article 37, Arbitration Law).

  • Locally examine the goods in dispute or other matters related to the dispute being examined, and if deemed necessary, summon the parties to be present at the examination (Article 37, Arbitration Law).

  • Request the assistance of one or more experts to give written information on a special matter related to the dispute (Article 49, Arbitration Law).

 

Evidence

22. What documents must the parties disclose to the other parties and/or the arbitrator? How, in practice, does the scope of disclosure in arbitrations compare with disclosure in domestic court litigation? Can the parties set the rules on disclosure by agreement?

Scope of disclosure

In Indonesia, a party must present its own evidence to prove its case and the concept of discovery is therefore not generally recognised. The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) does not stipulate a certain level of disclosure of evidence.

However, the arbitrators can request that the parties provide additional information in writing, documents or other evidence necessary, within a period determined by the arbitrators. The arbitrators can draw their own conclusions on the dispute and rule on the basis of the evidence provided to the tribunal. However, a party can apply to revoke an arbitration award if, after the award is passed, the party finds that decisive documents have been concealed by the other side.

Parties' choice

The Arbitration Law is silent on whether the parties can determine the rules on disclosure. Indonesia has no law on privacy or disclosure of documents. Therefore, parties wishing to maintain confidentiality of any information or documentation must specifically agree to this.

 

Confidentiality

23. Is arbitration confidential? If so, what is the scope of that confidentiality and who is subject to the obligation (parties, arbitrators, institutions and so on)?

Arbitration proceedings are carried out in a session closed to the public, to ensure the confidentiality of the arbitration process (Article 27, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution Law (Arbitration Law)).

Generally, the Arbitration Law guarantees the confidentiality of the dispute. However, the Arbitration Law does not expressly state that the final arbitration award is confidential.

In addition, the Indonesian National Board of Arbitration Rules (BANI) specifically provides that (except to the extent required by law):

  • All proceedings must be closed to the public.

  • All matters related to the arbitration are to be kept in strict confidence among the parties, the arbitrators and BANI, except as otherwise agreed by all parties to the dispute. These matters include:

    • documents;

    • reports or notes of sessions;

    • the testimony of witnesses; and

    • awards.

 

Courts and arbitration

24. Will the local courts intervene to assist arbitration proceedings seated in its jurisdiction?

Local courts cannot intervene in arbitration proceedings (see Question 13, Court proceedings in breach of an arbitration agreement). In addition, district courts do not have the right to examine the reasons behind the arbitration award.

However, in certain cases, where there are difficulties over issues such as the appointment of arbitrators or the execution of an arbitration award, the courts can intervene to (see Question 13):

  • Resolve disputes between the parties.

  • Assist the arbitration to continue.

  • Enforce an award.

 
25. What is the risk of a local court intervening to frustrate an arbitration seated in its jurisdiction? Can a party delay proceedings by frequent court applications?

Risk of court intervention

Generally, the jurisdictions of the court and arbitral tribunals are kept separate. The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) provides that the district court cannot involve itself with the settlement of a dispute through arbitration (except in certain cases) (see Question 24).

Delaying proceedings

It is not possible to delay arbitration proceedings by frequent court applications (see above, Risk of court intervention).

However, in some cases, pending insolvency proceedings can delay arbitration proceedings. Where a debtor has been declared bankrupt, legal proceedings initiated by the debtor can, at the defendant's request, be suspended to give the liquidator the opportunity to assume control of the proceedings and decide whether to continue them (Article 31, Bankruptcy Law). If the claimant's claim can be satisfied from the assets of the debtor (defendant), the proceedings will terminate on the debtor being declared bankrupt.

Although this does not expressly apply to arbitration proceedings under the Arbitration Law, there is a risk that the Indonesian court can apply this rule to the arbitration proceedings as well.

 

Remedies

26. What interim remedies are available from the tribunal?

Security

Indonesia does not recognise the concept of an interim remedy of security for costs.

Other interim measures

The tribunal can issue both provisional and interlocutory awards, including (Article 32, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution Law):

  • Security attachments.

  • Deposit of goods with third parties.

  • Sale of perishable goods.

However, only a district court can execute such an order.

 
27. What final remedies are available from the tribunal?

Final remedies are not prescribed in the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution or the Indonesian National Board of Arbitration Rules. Final remedies are based on what the parties request and commonly include damages, declarations, costs and interest.

Indonesian law does not recognise punitive or exemplary damages. Interest is not assumed, but can be awarded if:

  • Provided for in the underlying contract.

  • Ordered by the governing law if not Indonesian law.

 

Appeals

28. Can arbitration proceedings and awards be appealed or challenged in the local courts? What are the grounds and procedure? Can parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitral clause itself)?

Rights of appeal/challenge

The arbitration award is final and binding on the parties. There is no right of appeal to the court, but parties can request the revocation of the arbitration award (see below, Grounds and procedure).

Grounds and procedure

A party can request revocation of an arbitral award by petition if (Article 70, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution ( Arbitration Law)):

  • After the award is issued, a party finds that the letters or documents submitted in the proceedings are false, or they are declared to be false.

  • After the award is issued, it is discovered that the other party concealed decisive documents.

  • The award is issued as a result of fraud by one of the parties.

The petition must be filed in writing within 30 days of the date of delivery and registration of the arbitration award with the clerk of the respective district court. The petition must be filed with the chairman of the respective district court who must make a decision within 30 days of receiving the petition. If the petition is granted, the chairman of the respective district court must determine the consequences of revocation for the whole or part of the arbitration award.

An appeal of the revocation of an award can be filed with the Supreme Court, which must consider and decide on the appeal within 30 days of receiving the request.

Excluding rights of appeal

There is no provision under the Arbitration Law enabling the parties to exclude any rights of appeal, as the arbitration award is final and binding. However, the parties can exclude the right to apply for the revocation of an arbitration award.

 
29. What is the limitations period applicable to actions to vacate or challenge an international arbitration award rendered?

There is no statutory limitation period for challenging the enforcement of international arbitration awards. However, any petition for the cancellation of domestic awards must be filed in writing within 30 days from the date of registration of the arbitration award (Article 71, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution Law). Therefore, this provision could also be applied to international arbitration awards.

 

Costs

30. What legal fee structures can be used? Are fees fixed by law?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution does not determine the legal fee structures in arbitration proceedings. However, Indonesian National Board of Arbitration (BANI) Rules provide that in general, the costs of legal representation of each party must be borne by the respective parties. Although the authors are not aware of arbitration tribunals deviating from this rule, in practice, the tribunal can award one party to pay the other party's legal costs if either:

  • A claim is frivolous.

  • The party has caused innumerable difficulties or delays in the progress of the arbitral reference.

The prevailing jurisprudence in Indonesia states that lawyers' fees cannot be claimed because the Civil Procedural Law does not require a party to be represented by its lawyers. The party can choose not to engage a lawyer to represent it and therefore, lawyers' fees are costs that are not considered necessary costs of a dispute.

 
31. Does the unsuccessful party have to pay the successful party's costs? How does the tribunal usually calculate any costs award and what factors does it consider?

Cost allocation

Legal costs are generally borne by the respective parties (see Question 30). Other arbitration costs are usually borne by the losing party (Article 77, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law)) (National Board of Arbitration (BANI) Rules). However, if the claims are only partially granted, the arbitration costs will be imposed on the parties proportionately. As there is no further guidance in the Arbitration Law, the tribunal has the discretion to request payment in any manner that it deems appropriate, such as requiring a deposit or that a substantial portion of the fees be paid in advance.

Cost calculation

Costs are determined by the arbitrators, who can apportion the costs of the parties proportionally in accordance with the arbitral award (see above, Cost allocation). In calculating costs the arbitrators will consider:

  • The arbitrator's fees.

  • Travelling and other expenses incurred by the arbitrator.

  • Witness' and/or expert witness' expenses required in examining the dispute.

  • Administration expenses.

  • Less frequently, legal costs (see Question 30).

Factors considered

See Questions 30 and 31.

 

Enforcement of an award

Domestic awards

32. To what extent is an arbitration award made in your jurisdiction enforceable in the local courts?

An original or authentic copy of the arbitration award must be delivered and registered by the arbitrator or his attorney with the clerk of the respective district court within 30 days of the date of the award. The failure to submit the award in a timely manner will mean that the award cannot be enforced.

Before enforcing the award, the chairman of the respective district court, must check whether the award:

  • Complies with the Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law).

  • Is not contrary to ethics and public order.

The chairman's instruction must be written on the issued original and authentic copies of the arbitration award and must be enforced as if it were a final and binding judgment in a civil case (Article 63, Arbitration Law).

 

Foreign awards

33. Is your jurisdiction party to international treaties relating to recognition and enforcement of foreign arbitration awards, such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention)?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution is silent on whether an arbitration award in Indonesia is enforceable in other jurisdictions.

However, Indonesia is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). Therefore, an arbitration award in Indonesia is recognised and could be enforced in other jurisdictions that are party to the New York Convention, such as the UK and US.

 
34. To what extent is a foreign arbitration award enforceable?

Generally, international arbitral awards are enforceable in Indonesia, unless:

  • The award is rendered in a state that is not bound by a bilateral or multilateral convention or treaty on the recognition and enforcement of foreign arbitral awards to which Indonesia is a party.

  • The legal relationship on which the award was based cannot be considered to be commercial under Indonesian law.

  • The recognition or enforcement of the award would be contrary to public policy.

The Central Jakarta District Court has jurisdiction to issue exequatur to enforce international arbitral awards, unless the Republic of Indonesia itself is a party to the arbitrated dispute (Article 66 paragraph (e) , Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution Law). However, the Indonesian courts must not enforce the arbitral award (including attaching or auctioning the debtor's assets to satisfy the award) without a request to do so.

The process to enforce foreign arbitral awards involves four main steps:

  • Registration of the award by the tribunal or a representative at the Central Jakarta District Court.

  • Application for an exequatur at the Central Jakarta District Court to enforce the award as if it was a court judgment (that is, the award will have the same effect as if it was a final and binding judgment issued by a court, and therefore become enforceable).

  • Application for a writ of execution (if the losing party refuses to voluntarily comply with the award) at the relevant court where the losing party is domiciled.

  • Enforcement of the arbitration award, (for example, the sale of the losing party's assets to recover the amount payable to the winning party).

 
35. What is the limitations period applicable to actions to enforce international arbitration awards rendered outside your jurisdiction?

The Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution is silent on the time limits for registering international arbitration awards in the Central Jakarta District Court.

 

Length of enforcement proceedings

36. How long do enforcement proceedings in the local court take, from the date of filing the application to the date when the first instance court makes its final order? Is there an expedited procedure?

Strictly speaking, there is no statutory time frame for registering international arbitration awards in the Central Jakarta District Court. However, domestic awards must be registered for enforcement purposes within 30 days of the date of the award (see Question 32). Therefore, this provision could also be applied to international arbitration awards.

However, in practice, Indonesian courts have granted an exequatur when applications for registration of international arbitration awards were made after the 30-day time limit had passed.

Although the issue of an exequatur can be reasonably quick, there can be considerable delay, depending on the nature and location of the assets to be seized and sold and if enforcement is challenged by the other party.

 

Reform

37. Are any changes to the law currently under consideration or being proposed?

To the best of the authors' knowledge, the legal framework of Indonesian arbitration proceedings is not likely to change in the next decade.

 

Main arbitration organisations

Indonesian National Board of Arbitration (Badan Arbitrase Nasional Indonesia) (BANI)

Main activities. BANI handles both domestic and international disputes.

W www.bani-arb.org

Indonesian Muamalah Board of Arbitration (Badan Arbitrase Muamalat Indonesia) (BAMUI)

Main activities. BAMUI handles settlement of disputes arising from business transactions primarily among Muslims, or Islamic transactions.

Indonesian Capital Market Arbitration (Badan Arbitrase Pasar Modal Indonesia) (BAPMI)

Main activities. BAPMI handles specialised arbitrations exclusively on capital market issues.

W www.bapmi.org



Contributor profiles

Timur Sukirno, Senior Partner, Head of the Dispute Resolution Practice group

Hadiputranto, Hadinoto & Partners

ia

T +62 21 2960 8500
E timur.sukirno@bakernet.com
W www.hhp.co.id

Professional qualifications. Indonesia

Areas of practice. Commercial disputes; debt restructuring; arbitration; bankruptcy; banking; finance; major projects.

Non-professional qualifications. BA Law, University of Indonesia, 1987; LLM in International Finance, Morin Centre Boston University, 1991

Recent transactions

  • Representing Cabot Corporation, PT Cabot Indonesia, Cabot S.A., and Cabot Malaysia SDN. BHD. in civil disputes against another shareholder in Indonesian courts.
  • Representing Karma Developments Pte Ltd in relation to a civil claim for breach of contract filed by its customers.
  • Representing PT PAM Lyonnaise Jaya (Palyja) in its dispute against the Jakarta PDAM.
  • Representing a luxury goods conglomerate in various disputes with its exclusive local distributor in Indonesia. The matters involve SIAC arbitration in Singapore (using Singaporean law), civil court litigations, administrative court litigations and enforcement of SIAC arbitration awards in Indonesia.

Professional associations/memberships.

  • Founding member and first Chairman of the Indonesian Receivers and Administrators Association.
  • Member of the Higher Education of Law Committee at the Department of Education.
  • Member of the Sub-committee on the Development of Law in the Framework of Economic Recovery.

Ferry Aritonang, Associate

Hadiputranto, Hadinoto & Partners

T +62 21 2960 8528
E ferry.aritonang@bakernet.com
W www.hhp.co.id

Professional qualifications. Indonesia

Areas of practice. Commercial dispute resolution; criminal litigation.

Non-professional qualifications. BA Law, University of Padjadjaran, 2010

Recent transactions

  • Representing Cabot Corporation, PT Cabot Indonesia, Cabot S.A., and Cabot Malaysia SDN. BHD. in civil disputes against another shareholder in Indonesian courts.
  • Representing PT PAM Lyonnaise Jaya in a citizen lawsuit in Indonesia. This is a high profile citizen lawsuit case where the client's underlying agreement for operating in Indonesia is at stake.
  • Representing a major state-owned mining company in a civil dispute before the Supreme Court.
  • Advising a foreign company in a compliance matter with regard to possible criminal issues in an international trade transaction.

William Muliawan, Associate

Hadiputranto, Hadinoto & Partners

T +62 21 2960 8606
E william.muliawan@bakernet.com
W www.hhp.co.id

Professional qualifications. Indonesia

Areas of practice. Commercial dispute resolution; commercial litigation.

Non-professional qualifications. BA Law, University of Indonesia, 2013; BSc Economics, Santa Clara University, 2010

Recent transactions

  • Assisting an energy company in engaging acquisition.
  • Assisting foreign companies on anti-corruption matters.
  • Assisting a pharmaceutical company in a settlement process.

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