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A.         LEGISLATION AND RULES

A.1       Legislation

International arbitration in Indonesia continues to be governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution, which was not amended in 2023. Indonesia ratified the New York Convention through Presidential Decree No. 34 of 1981.

A.2       Institutions, rules and infrastructure

A.2.1    Arbitration institutions in Indonesia

Subject to the nature of the dispute, parties that choose arbitration as a dispute settlement forum in Indonesia have a number of choices on where to arbitrate. Indonesia has a number of arbitral institutions, such as:

  • Badan Arbitrase Nasional Indonesia (the Indonesian National Board of Arbitration — BANI)
  • Badan Arbitrase Syariah Indonesia (the Indonesian Sharia Arbitration Board —BASYARNAS), specializing in commercial disputes governed by Sharia law
  • Badan Arbitrase dan Penyelesaian Sengketa Konstruksi Indonesia (the Indonesian Construction Arbitration and Dispute Resolution Board — BADAPSKI), specializing in construction-related disputes
  • Lembaga Alternatif Penyelesaian Sengketa Sektor Jasa Keuangan (Alternative Dispute Settlement Institution for the Financial Services Sector — LAPS SJK), specializing in financial sector disputes (e.g., capital market, insurance, pension funds, banking, guarantees, financing and pledge, and fintech disputes)

A.2.2    The development of dispute resolution forums in the financial sector

Law No. 4 of 2023, promulgated on 12 January 2023 (“Law No. 4”), aims to develop and strengthen the financial sector, including by amending and revoking previous financial sector laws (such as on banking, capital market, insurance, pension fund, etc.) as well as adding entirely new provisions. Article 245 (5) of Law No. 4 allows the Indonesian financial services authority, Otoritas Jasa Keuangan (OJK), to force businesses in the financial sector to become a member of a dispute settlement body or institution. This obligatory membership may raise a subsequent question in relation to which dispute settlement body or institution it is referring to and whether this means that these businesses are restricted to only being able to settle disputes there. This may raise some hesitance, noting that the underlying principle of an arbitration agreement is the consent of the parties, and a party to the agreement may not necessarily want to choose the dispute settlement body or institution mandated by the OJK.

An example of this body or institution is the LAPS SJK, specializing in financial sector disputes established based on OJK Regulation No. 61/POJK.07/2020 (“OJK Reg. 61”). The LAPS SJK has been operating since 1 January 2021, and its establishment was covered in our previous yearbook. To highlight some developments of the LAPS SJK over the past year, it currently has over 1,300 members consisting of financial associations, banks, capital market businesses, insurance companies, financing companies, venture capitals, pension funds, fintech companies and others. The General Meeting of Members is the highest authority in the organizational structure of the LAPS SJK. It has its supervisory board having the main task of supervising the management board’s actions. For the first time, the appointment of the supervisory board was carried out based on an agreement among the founding members (which includes 19 associations and 3 self-regulatory organizations), but for the next time it will go through a fit and proper test process by the OJK and then be ratified in the General Meeting of Members. The management board, which currently consists of two directors and one head who passed the fit and proper test conducted by the OJK, has the duty and authority to carry out the daily operations of the LAPS SJK assisted by the employees of the LAPS SJK. LAPS SJK is legally mandated to publish its annual report no later than 31 July on its website. In addition to that, it must report to the OJK for its realization report work plan and annual budget (every six months) and period report (every three months).

The LAPS SJK provides mediation, arbitration and binding legal opinion services, either through direct submission to the LAPS SJK or through the OJK’s consumer protection portal application system channel, Aplikasi Portal Perlindungan Konsumen (APPK). In 2021 once the LAPS SJK started operating, the LAPS SJK received over 1,300 consumer complaints through the APPK and 23 from direct submission to LAPS SJK. From the amount of complaints alone, the consumer complaints through the APPK have increased by almost 8% compared to previous years. There are also over 100 complaints with a dispute value over IDR 500 million. It has issued its rules and procedures for the services it renders, as well as a list of its available mediators and arbitrators who are bound to the LAPS SJK’s code of ethics. For its services relating to a binding legal opinion, LAPS SJK will form a panel, which consists of the people from the list of the mediators and arbitrators. Out of the cases it has received in 2022, three of them are arbitration cases and specifically submitted directly to the LPAS SJK (not through the APPK).

B.         CASES

B.1       Fourth ongoing case adding to the issue on BANI duality

In 2016, another arbitration institution called Badan Arbitrase Nasional Indonesia (BANI) was established. To distinguish between the two institutions named BANI, the public now refers to them according to their locations (i.e., the original BANI is referred to as BANI Mampang and the newly established BANI is referred to as BANI Sovereign). Following the establishment of BANI Sovereign, there has been a struggle and competing jurisdiction between the two arbitration institutions, particularly in relation to which BANI is the “real” BANI. There are three court cases in relation to the dispute between BANI Mampang and BANI Sovereign, i.e., a state administrative dispute,[1] a civil dispute[2] and an intellectual property dispute,[3] as we have covered in our 2020 yearbook. Adding to this list, there is now another court case ongoing, which involves the Indonesian Chamber of Commerce and Industry or Kamar Dagang dan Industri Indonesia (KADIN), an association of business organizations in Indonesia consisting of entrepreneurs from various sectors, private-owned enterprises, cooperatives and government-owned enterprises.

In KADIN v. Arman Sidharta Tjitrosoebono, et. al. [2020],[4] KADIN filed an unlawful act against the defendants who claimed to be the heir of the founder of BANI in the previous civil dispute, which was decided in 2016 and reaffirmed by the Supreme Court in 2019. KADIN claims that BANI is not a partnership (persekutuan perdata) based on the Indonesian Civil Code, and the BANI Statute is not an agreement to establish a partnership. It is fact that BANI was established by KADIN on 30 November 1997 by Decree No. SKEP/152/DPH/1977 (“Decree”). The Decree essentially mandates that KADIN establish the Indonesian National Board of Arbitration (BANI) as an arbitration body for civil disputes arising out of national or international trade, industry and financial issues. BANI will be founded and initiated by KADIN to be an autonomous and independent organization. Based on the Decree, KADIN argues that it is the founder of BANI.

KADIN argued that the defendants’ action of claiming that they inherited the position to manage BANI from the deceased BANI founders is an unlawful act. As BANI’s aim is not a partnership to obtain profit but to act as an arbitration body, the body cannot be inherited by anyone. As a legal consequence of that notion, if any founder, figure, initiator or donor of BANI passes away, BANI’s assets are not in any way associated with their inheritance.

The defendants’ defense relied on the previous decision of the South Jakarta District Court, which is final and binding (and has been upheld until the cassation level), that the defendants are proven to be the valid heirs of BANI founders and they are therefore entitled to the ownership of BANI as well as to obtain and manage all rights and obligations arising from BANI’s establishment.

In its consideration, the court declared the following on 20 May 2021:

  1. Based on Decree No. SKEJ/152/DPH/1977 dated 30 November 1977, BANI remains the bodies and institutions of KADIN. Because of this, BANI is not construed as private property or a partnership with the aim of seeking profits. Therefore, the defendants’ actions to state otherwise and to state that they are heirs of the founders of BANI and are entitled to inherit the position to manage BANI are unlawful acts.
  2. The court concludes that the BANI established based on Decree No. SKEJ/152/DPH/1977 dated 30 November 1977 remains the bodies and institutions of KADIN and is legal according to law.

From the above, the civil court case in favor of KADIN seems to state that defendants do not have any basis to manage BANI, noting that they do not have any right to inherit the arbitration body. The South Jakarta District Court’s decision was affirmed by the High Court at the appeal level on 13 April 2022. The defendants appealed the decision to the Supreme Court at the cassation level in June 2022. The case docket is currently being reviewed. The Supreme Court’s final and binding decision of this civil claim remains to be seen.


[1] Jakarta State Administrative Court Decision No. 290/G/2016/PTUN.JKT dated 6 July 2017 as affirmed by Supreme Court Decision No. 232K/TUN/2018.

[2] South Jakarta District Court Decision No. 674/Pdt.G/2016/PN. JKT.Sel as affirmed by Jakarta High Court Decision No. 315/PDT/2018/ PT DKI and Supreme Court Decision No 1227 K/PDT/2019.

[3] Commercial Court at the Central Jakarta District Court Decision No. 34/Pdt-Sus-Merek/2017/PN.Niaga.Jkt.Pst.

[4] South Jakarta District Court Decision No. 210/Pdt.G/2020/PN.Jkt.Sel as affirmed by Jakarta High Court Decision No. 83/PDT/2022/PT DKI.

Author

Andi Yusuf Kadir is a senior partner of Hadiputranto, Hadinoto & Partners, a member firm of Baker & McKenzie International.

Author

Nabila Farhani Oegroseno is an associate of Hadiputranto, Hadinoto & Partners, a member firm of Baker & McKenzie International.