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Arbitration Law in IndonesiaLegal Sources, Principles and Procedures

By Eddy Leks, SH., ACIArb


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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(this has been revoked upon issuance of arbitration law of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 willbe 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 Bankruptcyand Postponement of Obligation to Pay Debt statesthat:

The court is authorized to try and settle a bankruptcyrequest from the parties that are bound to arbitrationclause, so long as the debt of bankruptcy request hasalready 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 arbitratorsmay 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 arbit-

ration procedure;


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Arbitration Procedure Contd

Dispute can be settled through national orinternational arbitration institution. The procedures

will follow appointed arbitration institutionsprocedure, 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 tocivil 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 thelatest 14 days as of the date of instruction;


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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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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 changeor addition of claim is only allowed with the approvalof respondent so long as the changes or additions arerelated 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 ofArt 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 betweenthem.


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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;


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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 toexamine 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 ofcancellation 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 fakeor 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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