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 (“Arbitration Law“), 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 the following:
- Badan Arbitrase Nasional Indonesia (Indonesian National Board of Arbitration — BANI)
- Badan Arbitrase Syariah Indonesia (Indonesian Sharia Arbitration Board —BASYARNAS), specializing in commercial disputes governed by Sharia
- Badan Arbitrase dan Penyelesaian Sengketa Konstruksi Indonesia (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 markets, insurance, pension funds, banking, guarantees, financing and pledge, and fintech disputes)
A.2.2 New Supreme Court regulation on enforcement and annulment of arbitral awards
In the last quarter of 2023, the Supreme Court issued Regulation No. 3 of 2023 regarding the Procedures of Arbitrator Appointment by Courts, Challenges against Arbitrator Appointment and Examination of Request to Enforce and Set Aside Arbitral Awards. This regulation sets out further details over types of assistance courts provide to arbitrations, both conventional and Sharia. This chapter highlights new features in the arbitration landscape of Indonesia following the issuance of this new Supreme Court regulation.
Courts’ assistance in the constitution of a tribunal
The Arbitration Law (Article 13) stipulates the courts’ roles in the appointment of arbitrator(s) in the event where (i) the parties cannot reach an agreement on the choice of arbitrators, or no terms have been made concerning the appointment of arbitrators; or (ii) in an ad hoc arbitration, the parties disagree on the appointment of one or more arbitrators. The Arbitration Law (Article 23) further provides that challenges against the appointment of an arbitrator made by the chair of a district court must be submitted to the same court.
The Supreme Court regulation provides further details on the mechanics of a request to a district court to appoint arbitrator(s) and to challenge the appointment made by the court. Most notably, the regulation requires the court to issue a decree appointing the arbitrator(s) in 14 calendar days upon receiving a request. A 14-calendar day timeline also applies for the submission of any challenges against the appointment of arbitrator made by the court (timeline starts from the issuance of the court’s decree) and for the court to issue a decision (from the receipt of submissions).
All these provisions are intended to apply in the specific circumstances set out above and should not supersede the rules of arbitrations (institutional or ad hoc) providing certain autonomous or alternative mechanics of appointment of arbitrators and challenges against the appointment of arbitrators, to which the parties have bound themselves.
Courts’ assistance to enforce conservatory attachment awards
The Arbitration Law authorizes tribunals to render interim measures, including conservatory attachment awards, during the course of arbitration proceedings. However, there is a lack of written guidelines/procedures to be followed by courts in administering requests to enforce interim measures that require courts’ assistance, and as a result, courts are typically reluctant to assist the enforcement processes. Under Indonesian laws, if enforced, a conservatory attachment should freeze ownership over the assets until a final award is obtained and thereby mitigate frustration of the enforcement of a final award/judgment by the losing party.
The Supreme Court regulation now clarifies that courts are to assist the enforcement of conservatory attachment awards. Article 29 of the regulation provides that conservatory attachment awards should be registered by the tribunal to the relevant courts, following which a party may submit a request to the court to enforce the award. It is not very clear if after the conservatory attachment award is registered at the court, the petitioner needs a declaration from the court that the award is enforceable (in the same way that a final award does) before the court proceeds with the subsequent processes of placing attachment over the relevant assets.
There is no express timeline stipulated by the Supreme Court regulation for these processes of registration and enforcement of conservatory attachment awards. The regulation is also silent on whether the provision applies for conservatory attachment awards rendered by tribunals in arbitrations seated overseas. It is also worth noting that other types of interim measures that according to the Arbitration Law may be awarded by arbitral tribunals in arbitration proceedings, such as an order to deposit disputed goods with third parties or to sell perishable goods, are not mentioned in the regulation.
Courts’ assistance to register, enforce or set aside final awards
The Supreme Court regulation stipulates the following new procedural matters:
- Registration of foreign awards must be completed within 14 calendar days upon the submission of a complete request
- In case of foreign proceedings administered by tribunals appointed by arbitral institutions, registration must be applied for by the board of the institutions or its proxy
- The 30-day timeline to register domestic awards does not apply to registration of foreign awards
- The applicant may seek to partially enforce the awards
- Courts must render an order granting or refusing exequatur over foreign awards within 14 calendar days upon the submission of a complete request
- In case a petition to set aside a domestic award is filed, courts must suspend the enforcement of domestic awards until a court decision dismissing the petition or declaring the petition inadmissible is issued in the first instance
Public policy grounds for refusal of enforcement
Another notable highlight of the Supreme Court regulation is the definition of public policy. In general, the Arbitration Law provisions require courts to examine the possibility of a public policy violation in granting or refusing to recognize and enforce domestic and foreign arbitral awards ex officio. In this regard, the Supreme Court regulation defines public policy as “everything that constitutes fundamental aspects essentially required in the operation of the legal system, economic system and socio-cultural system of the Indonesian people and nation.” A similar definition was previously used in Regulation No. 1 of 1990, a procedural guidance for the recognition and enforcement of foreign awards issued by the Supreme Court prior to the enactment of the Arbitration Law.
It is interesting to note that the Supreme Court regulation elaborates on the methods to be observed by courts in examining the possibility of a public policy violation. Articles 10 and 19 of the regulation provide that the court’s examination should take into account the request/arguments of the applicant and the contents of the awards, meaning that, strictly speaking, there is no duty to consider arguments from the counterparty. We do not think that the provision is intended to prevent any filings of objections and requests to refuse enforcement from the parties against whom enforcement is being sought. However, it may be implied by the provisions that the court is under no obligation to first assess or decide on the objections before issuing an exequatur or an order that the award is enforceable, also noting that courts are now required to quickly render an order, i.e., within 14 (for foreign awards) or 30 (domestic awards) calendar days upon complete submissions of request.
