1. Arbitration Law in Indonesia
Legal Sources, Principles and Procedures
By Eddy Leks, SH., ACIArb
2. 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(this has been revoked upon issuance of arbitration law of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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3. Legal Sources – cont’d
• 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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4. 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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5. 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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6. 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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7. 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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8. Arbitration Agreement – Cont’d
• 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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9. Arbitration Agreement – Cont’d
• 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 law’s terms.
• Meaning?
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10. 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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11. Arbitrators – Requirement
• Refer to Art 12 to understand the requirements to be
appointed as arbitrator
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12. 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; www.lekslawyer.com
13. Arbitration Procedure – Cont’d
• Dispute can be settled through national or
international arbitration institution. The procedures
will follow appointed arbitration institution’s
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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14. Arbitration Procedure – Cont’d
• 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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15. Arbitration Procedure – Cont’d
• 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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16. Arbitration Procedure – Cont’d
• 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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17. Arbitration Procedure – Cont’d
• 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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18. 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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19. 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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20. 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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21. 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 Court’s
instruction by the request of one of the disputed
parties; www.lekslawyer.com
22. Execution – Cont’d
• 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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23. Execution – Cont’d
• The Chief’s instruction is written in the original copy
of arbitration award;
• The arbitration award with Chief’s 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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24. 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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25. Cancellation – Cont’d
• 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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