Arbitration Law in Indonesia

Legal Sources, Principles and Procedures

By Eddy Leks, SH., ACIArb

Legal Sources
Article 615-651 of Rv, Article 377 HIR or Article 705 RBG (this has been revoked upon issuance of arbitration law of Indonesia); Law Number 5 of 1968 on Approval of Convention on Settlement of Investment Disputes Between States and National of Other States; Presidential Decree Number 34 of 1981 on Legalization of Convention on the Recognition and Enforcement of Foreign Arbitral Award (New York Convention 1958); UNCITRAL Arbitration Rules of 1976 and revised in 2010.
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Legal Sources contd

Article 58 of Law Number 48 of 2009 on Judicial Powers which states: Settlement of civil dispute may be performed out of state court through arbitration or alternative dispute settlement And many various sources from many other laws.

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What is Arbitration?
Under Law Number 30 of 1999 on Arbitration and Alternative Disputes Resolution (Arbitration Law), arbitration means mechanism of settlement of civil dispute out of general court based on arbitration agreement that is made in writing by the disputed parties.

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Exclusivity
District Court is not authorized to examine case by the parties who are bound to arbitration agreement. District Court means a district court where its legal territory includes the domicile of respondent. Any legal issues? Please refer to Art 11

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Scope of Arbitration
Only disputes on commercial in nature; and Right which according to law and prevailing regulations, is wholly controlled by the disputed party; The dispute that cannot be settled in a peaceful manner, cannot be tried through arbitration; Examples of commercial are trading, banking, investment, finance, industry, and intellectual property right.
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Arbitration Agreement
May be made before or after the dispute; If it is made after the dispute, it has to be made in writing and signed by the parties; There are minimum contents of arbitration agreement (see Art 9 (3)); If the minimum contents are not fulfilled, then it will be null and void.

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Arbitration Agreement Contd

The arbitration agreement shall not terminate under these circumstances: Dead of one of the parties; Bankruptcy of one of the parties; Novation; Insolvency; Inheritance; The fulfillment of requirements of termination of contract; If it is assigned to third party with the approval of the assignor; or Expiry or termination of principal agreement.
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Arbitration Agreement Contd

Can one party request panel of arbitrators where the other party is bankrupt? Art 303 of Law Number 37 of 2004 on Bankruptcy and Postponement of Obligation to Pay Debt states that: The court is authorized to try and settle a bankruptcy request from the parties that are bound to arbitration clause, so long as the debt of bankruptcy request has already fulfilled the bankruptcy laws terms. Meaning?
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Arbitrators
The parties may agree on one arbitrator or panel of arbitrators; If the parties do not reach settlement in appointing arbitrator, the Chief of District Court will appoint arbitrator or panel of arbitrators; If two arbitrators are appointed, these two arbitrators may appoint the third arbitrator, where he or she will act as the Chairman.
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Arbitrators Requirement
Refer to Art 12 to understand the requirements to be appointed as arbitrator

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Arbitration Procedure
Tried closely; In Indonesian language, unless agreed otherwise by the parties; Can be represented by proxy. Is it has to be licensed lawyer or any party? Read the elucidation of Art 29 (2); Third party can join in the dispute if there is related interest and approved by the disputed parties and arbitrators; The parties are free to choose their arbitration procedure; www.lekslawyer.com

Arbitration Procedure Contd

Dispute can be settled through national or international arbitration institution. The procedures will follow appointed arbitration institutions procedure, unless agreed otherwise; The place for arbitration is determined by arbitrators, unless it has been determined by the parties; Examination of witness and expert witness adhere to civil procedure law; Arbitrators may perform location examination (pemeriksaan setempat);
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Arbitration Procedure Contd

Within a specified period of time as set out by arbitrator or panel of arbitrators, the claimant has to submit their claim. See Art 38 (3) to see the minimum contents of claim; The arbitrators will send the claim to respondent with the instruction that the respondent has to give their answer in writing the latest 14 days after receipt; Arbitrators will invite the parties to come to the trial at the latest 14 days as of the date of instruction;

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Arbitration Procedure Contd

In their answer or at the latest on the first trial, the respondent may submit a counter claim to the claimant; If on the first trial, the claimant does not come, the claim is void by law; If at the latest 10 days after the second summons has been received by the respondent and the respondent has still not come with no valid reasons, the examination will be continued and the claim will be granted for all, unless the claim is unreasonable or has no legal basis;
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Arbitration Procedure Contd

Arbitrators will firstly persuade the disputed parties to reach settlement; If it is successful, then arbitrators prepare a settlement deed which is final and binding to all parties; Arbitrators have the right to request the parties to give additional information in writing, document or other evidences that are necessary within a specified period of time determined by arbitrators;
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Arbitration Procedure Contd

Before there is an answer from the respondent, the claimant may revoke the claim; If there is already an answer by respondent, the change or addition of claim is only allowed with the approval of respondent so long as the changes or additions are related only on facts and do not relate the basis of claim; The proceeding has to be completed within 180 days unless agreed by the parties to be extended.
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Provisional Decision
By the request of one party, arbitrator or panel of arbitrators can issue provisional decision or other interlocutory decision including seizure, consignation to third party, or sell goods that are easily destructible.

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Binding Opinion
Parties in the agreement are entitled to request a binding opinion by arbitration body in relation to the definite legal relationship in the agreement; On that binding opinion, no legal action can be performed; Examples for the binding opinion, see elucidation of Art 52.

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Arbitration Award
The contents of arbitration award, see Art 54 (1); Arbitrators issue decision based on laws, or justice and proper principle; See elucidation of Art 56 (1); The parties are entitled to choose the prevailing law for the settlement of dispute that may arise between them.

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Execution of Arbitration Award

At the latest 30 days after award was announced, original copy of award is delivered and registered by arbitrators to the Clerk of District Court; If it is not implemented, the arbitration award cannot be implemented; The arbitration award is final and binding to all parties. This means that it cannot be requested for an appeal, cassation or judicial review; If the parties do not perform the award voluntarily, the award is implemented based on Chief of District Courts instruction by the request of one of the disputed parties; www.lekslawyer.com

Execution Contd
The instruction to implement the award has to be given within 30 days after the execution request has been registered; Prior to granting an execution instruction, the Chief has to examine the arbitration award according to Art 4, 5 and whether the award is against morality and public order; If the Chief declines the execution request, there is no legal action can be performed; Chief will not examine the arguments or legal consideration of the award;
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Execution Contd
The Chiefs instruction is written in the original copy of arbitration award; The arbitration award with Chiefs instruction can be performed in accordance with the civil decision which already has permanent power. For the detailed mechanism of submission of cancellation request, please refer to Art 72.

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Cancellation of Arbitration Award

The parties may submit cancellation of arbitration award if it contains the following elements: Letter or document that was submitted in the trial, after the award was decided, was acknowledged fake or stated as fake; After the award was issued, a material document was found that was hidden by the counter party; The award was issued based on fraud conducted by one of the parties in the dispute. See elucidation of Art 70.
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Cancellation Contd
The cancellation request must be submitted in writing within 30 days since the delivery date and registration date of arbitration award to the Clerk of District Court

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THANK YOU

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