Indonesia’s Arbitration Law has seen no updates for two decades. Ever since the enactment of Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution, no principal changes have been made to the governing law on arbitration in Indonesia. However, after 60 years of the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (the Apostille Convention),2 which was established in 1961, Indonesia finally ratified the multilateral agreement on 4 January 2021 through Presidential Regulation No. 2 of 2021 on the Ratification of the Convention Abolishing the Requirement to Legalize Foreign Public Documents (PR 2/2021).3 This Convention took effect on 4 June 2022 through the Regulation of the Minister of Law and Human Rights Regulation No. 6 of 2022 on Apostille Legalization Services in Public Documents (MLHR Reg 6/2022).4 Although the Apostille Convention does not directly impact on the arbitration process, the Convention may indirectly affect arbitration, which may make the universal arbitration process less challenging. This is because the Apostille Convention can streamline the document authentication process,5 increasing trust in document authenticity6 and promoting international cooperation.7 Most importantly, the Convention can facilitate the cross-border exchange of documents and evidence in international arbitration proceedings. Overall, Indonesia is still struggling to catch up in the development of the international arbitration area.
i The structure of Indonesian courts (including any specialist tribunals)
Law No. 48 of 2009 on Judicial Power (the Judicial Power Act) states that judicial power is the power of the state independent to administer the judiciary and uphold law and justice based on Pancasila and the Constitution of the Republic of Indonesia 1945, for the sake of the implementation of the rule of law of the Republic of Indonesia. Indonesia has two judicial powers – namely, the Supreme Court and the Constitutional Court.8 In addition, the Judicial Power Act specifies the existence of the Judicial Commission. The Judicial Commission has the authority to recommend the appointment of Supreme Court judges and other powers to safeguard and uphold judges’ honour, dignity and conduct.
The Supreme Court
The Supreme Court of Indonesia is the highest court in the nation and occupies the highest position in the hierarchy of courts. The final court of appeal for civil, criminal, administrative, and religious cases and judgments is the Supreme Court. The Supreme Court has the authority to adjudicate at the cassation level and examine the law (judex juris) and has other powers granted by law.9 The Supreme Court has several chambers, including the public courts, religious courts,10 military courts11 and state administrative courts.12
Public courts in the nation have the authority to hear civil, criminal and commercial matters involving Indonesian and foreign persons. While the other courts are self-explanatory through their name, the public courts, which consist of the district courts at the first level and the high courts at the appeal level, have specialist tribunals. There are several specialist tribunals in the structure of Indonesia’s courts. These tribunals are designed to handle specific types of cases and provide more focused expertise and resources to resolve disputes. In respect of the specialist tribunals,13 there are juvenile courts,14 commercial courts,15 human rights courts,16 industrial relations courts,17 anti-corruption courts18 and fisheries courts.19 Another specialist tribunal is the tax court,20 which is under the state administrative court jurisdiction.
The Constitutional Court
The Constitutional Court21 has the authority to adjudicate at the first and final levels where decisions are final and to review laws against the Constitution, decide on disputes over the authority of state institutions whose powers are granted by the Constitution, decide on the dissolution of political parties and decide on disputes over election results.22
ii The structure of arbitration law in Indonesia
The structure of arbitration law in Indonesia consists of several key legal instruments at both domestic and international levels. The primary legal instrument governing arbitration at the domestic level is Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (the AADR Law). The AADR Law sets out the basic framework for conducting arbitration proceedings in Indonesia, including the requirements for an enforceable arbitration agreement, the rules governing the conduct of arbitration and the process for enforcing arbitral awards. In addition to the AADR Law, there are also various regulations and guidelines, such as the Indonesian National Board of Arbitration (BANI) Regulation, that provide more specific guidance on certain aspects of arbitration proceedings in Indonesia. For example, BANI has issued its own set of Arbitration Rules, which are often used in domestic and international arbitrations seated in Indonesia. At the international level, Indonesia is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.23 This means that foreign arbitral awards rendered in other countries that are parties to the Convention can be enforced in Indonesia in accordance with the Convention’s provisions. To conclude, the structure of arbitration law in Indonesia is built on a combination of domestic and international legal instruments, which provide a clear and well-established framework for conducting arbitration proceedings in the country.
iii Distinctions between international and domestic arbitration law
All arbitrations held in Indonesia are governed by the AADR Law. All of these regulations, which are regarded as domestic, govern the execution of ‘international awards’, which are those made in any other state that has ratified the New York Convention. Internationally, Indonesia has ratified the Washington Convention and the New York Convention through Law No. 5 of 1968 and Presidential Decree No. 34 of 1981, respectively. Although there are many identical clauses, Indonesia’s arbitration law is not based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the UNCITRAL Model Law).
Indonesia takes a territorial approach. Regardless of the nationalities of the parties, the location of the dispute and the applicable law, it is obvious that all arbitrations held in Indonesia are classified as ‘domestic arbitrations’, whereas all arbitrations held outside of Indonesia are referred to as ‘international arbitrations’.
The AADR Law makes no reference to applicable substantive laws and gives no direction in this regard. Some transactions are within the authority of the state, such as those involving shares in private Indonesian firms and transfer of vessels between land and sea or security interests in such transfers that can be handled only by Indonesian law. Other laws mandate that certain contracts involving resource and infrastructure projects be handled by Indonesian law. Otherwise, the parties are free to jointly agree the substantive law to be applied in interpreting and enforcing their agreement.
iv Local institutions
The foremost arbitration body in Indonesia is BANI. Previously, there were two BANI institutions in Indonesia – namely, BANI in Mampang (referred to as BANI Mampang) and BANI in the Sovereign Plaza Building (referred to as BANI Sovereign). South Jakarta Court Decision No. 210/Pdt.G/2020/PN.Jkt.Sel states that BANI, founded by the Indonesian Chamber of Commerce and Industry – namely, BANI Mampang – is legally valid.24 However, there are several other arbitral bodies that have narrower expertise in their fields, such as the National Sharia Arbitration Body (Basyarnas), the Indonesian Capital Market Arbitration Body, the Commodity Futures Trading Arbitration Board, the Indonesian Sports Arbitration Board, the Indonesian Sports Arbitration Board, the Indonesian Guarantee Company Arbitration and Mediation Board, the Indonesian Insurance Mediation and Arbitration Board, and the Indonesian Arbitration and Mediation Centre.
The year in review
i Developments affecting international arbitration
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
The choice to use arbitration as an out-of-court mechanism to resolve disputes has to be agreed in the form of an agreement. The AADR Law is the legal basis that provides legal certainty for implementing dispute settlement procedures through arbitration and makes it overt that dispute settlement through arbitration must be determined in a written agreement.25 The legislation does not regulate whether the agreement should be separate (as an attachment) or a clause in the main agreement. In practice, dispute resolution through arbitration is included in the clause agreed in the main agreement. If you choose to resolve a dispute through arbitration but a dispute has occurred, the parties must put it in a written agreement containing the following information:26
- the disputed issues;
- the full name and residence of the parties;
- the full name and residence of the arbitrator or arbitral tribunal;
- the place where the arbitrator or arbitral tribunal will make a decision;
- the full name of the secretary;
- the dispute resolution period;
- a statement of willingness from the arbitrator; and
- a statement of the willingness of the disputing parties to bear all costs necessary for the dispute settlement through arbitration.
If the parties cannot sign the written agreement to the dispute, the agreement must be stated in a notarial deed.27
Determination of arbitration tribunals
The parties that resolve disputes through arbitration may determine the selection and appointment of arbitrators or arbitral tribunals. If the parties do not reach an agreement or do not regulate the terms of the arbitration appointment, the head of the district court will appoint an arbitrator or arbitral tribunal.28 The requirements for appointing an arbitrator as stipulated in Article 12, Paragraph (1) of the AADR Law must meet the following requirements: be capable of taking legal action; be aged at least 35 years; do not have a family relationship by blood or marriage up to the second degree with one of the parties to the dispute; has no financial interest or other interest in the arbitral award; and have experience and active control in their field for at least 15 years.
The arbitrator who is appointed can be sued for refusal when there are sufficient reasons and authentic evidence to cast doubt that the arbitrator will not be able to carry out his or her duties freely and take sides in making a decision.29 The claim is proven by the existence of a family, financial or work relationship with one of the parties to the dispute or their attorney.30
Examination of disputes in arbitration is carried out in writing and can be carried out orally if agreed by the parties or deemed necessary by the arbitrator or arbitral tribunal.31 All of these dispute examinations are carried out behind closed doors and are not open for public.32 The dispute must be examined by 180 days after the arbitrator or arbitral tribunal is formed. This period of time may be extended by agreement of the parties and, if necessary, be extended by the arbitrator or arbitral tribunal following a request submitted by one of the parties regarding certain particular matters as a result of a provisional award or other interlocutory awards, or if deemed necessary by the arbitrator or arbitral tribunal for inspection purposes.33 During the examination for dispute settlement through arbitration, the district court will not interfere and will even refuse to examine a dispute that has previously been determined to be resolved by arbitration.34
Article 54 of the AADR Law explicitly regulates the structure of arbitral awards. Arbitral awards must contain information such as:
- a heading to the decision that reads ‘For the sake of Justice based on belief in the Almighty God’;
- full names and addresses of the parties;
- a brief description of the dispute;
- the establishment of the parties;
- the full name and address of the arbitrator;
- the considerations and conclusions of the arbitrator or arbitral tribunal regarding the entire dispute;
- the opinion of each arbitrator if there is a difference of opinion in the arbitral tribunal;
- the order of judgment;
- the place and date of the decision; and
- a signature of the arbitrator or arbitral tribunal.
Annulment of arbitral award
The arbitral award is final in nature, has permanent legal force and is binding on the parties based on the provisions of Article 60 of the AADR Law. However, an application for annulment of the arbitration award can also be submitted to the registrar of the district court if the decision is suspected of containing one of the following elements:35 a letter or document submitted for examination after the verdict has been rendered that is recognised as fake or declared fake; after the decision is made, decisive documents are found that were hidden by the opposing party; or the decision was taken as the result of a ruse carried out by one of the parties in the examination of the dispute.
Application to enforce an international arbitral award
The original award or an authentic copy of the arbitration award must be submitted and registered by the arbitrator or his or her proxy to the registrar of the district court within 30 days of the date the decision was pronounced.36 The arbitral award can be enforced only if this provision is met.37 As for international arbitral awards, their recognition and implementation must be submitted and registered by the arbitrator or his or her proxy to the registrar of the Central Jakarta District Court38 with the following conditions set out in Article 66 of the AADR Law for recognition and implementation: the decision was handed down in a country with bilateral or multilateral relations with Indonesia regarding recognising and enforcing international arbitral awards; the decision was limited to decisions that, according to the provisions of Indonesian law, are included in the scope of commercial law; is not contrary to public order; has obtained an executive order from the chair of the Central Jakarta District Court; and decisions involving the Republic of Indonesia as one of the parties to the dispute are carried out after obtaining an executive order from the Supreme Court of the Republic of Indonesia, which is then delegated to the Central Jakarta District Court.
Arbitration costs and fees
The AADR Law does not clearly restrict the expenses associated with arbitrating disputes. BANI Mampang has a website that outlines one of the expenses associated with settling disputes via arbitration.
The Indonesian Civil Code
Requirements of an agreement
An agreement to arbitrate is the basis for arbitration, and parties must expressly agree to settle disputes through arbitration. This is not far from the general rules regarding the requirements for a valid agreement regulated in the Indonesian Civil Code (ICC). Article 1313 of the ICC stipulates that an agreement is an act by which one or more people bind themselves to one or more other people. This is also inseparable from the provisions regarding the legal requirements of an agreement:39 the agreement of those who bind themselves, the ability to make an engagement, a specific subject matter and a cause that is not forbidden. Non-fulfilment of the agreement requirements may render the agreement voidable. The absence of a proper principle and an unlawful cause will render the agreement null and void.
An agreement cannot be justified if it is obtained through negligence, coercion or fraud.40 Article 1329 of the ICC stipulates that everyone can make agreements unless those persons are declared incompetent. Incompetent persons under Article 1330 of the ICC are as follows: an immature child;41 people who are placed under guardianship; women who are married in matters determined by the law;42 and, in general, all persons who are prohibited by law from making certain agreements.
ii Court rules and practices
The role of district courts in an ad hoc arbitration is specifically regulated in the AADR Law as follows.
- The head of the district court appoints an arbitrator or arbitral tribunal if the parties cannot reach an agreement.43
- The head of the district court shall accept an application for the appointment of one or several arbitrators in an ad hoc arbitration.44
- The head of the district court appoints a sole arbitrator based on a list of names submitted by the parties or a list of names from the organisation or arbitral institution.45
- At the request of one of the arbitrators appointed by each party, the head of the district court may appoint a third arbitrator in the event that the two appointed arbitrators fail to appoint a third arbitrator.46
- The head of the district court grants the arbitrator a discharge in the event that the parties do not approve the resignation.47
- The head of the district court accepts the right of refusal submitted by an arbitrator appointed by the head of the district court.48
- The head of the district court accepts and decides on a challenge filed by one of the parties, but the other party does not approve it and the arbitrator concerned is not willing to resign.49
- The hearing of witnesses and expert witnesses before the arbitrator or arbitral tribunal shall be organised in accordance with provisions under the civil procedural law.50
- The registrar of the district court receives the registration, the original sheet or an authentic copy of the arbitral award, and the original sheet of appointment as arbitrator. Furthermore, the registrar of the district court records and signs at the end or on the sidelines of the decision, where the note is a registration deed.51
- At the request of the interested party, the head of the district court may appoint one or more replacement arbitrators in the event that the arbitrator dies, and the demand for refusal or dismissal of one or more arbitrators is granted in the event that the parties cannot reach an agreement within a maximum period of 30 days.52
Meanwhile, the general role of district courts in institutional arbitration and ad hoc arbitration is also regulated in the AADR Law as follows.
- The head of the district court gives an order at the request of one of the parties to the dispute in the event that the parties do not voluntarily implement the arbitral award.53
- The head of the district court examines whether the arbitral award complies with the provisions of Articles 4 and 5 of Law No. 30/1999 and does not conflict with decency and public order before giving the execution order. The head of the district court may reject the request for execution if these provisions are not met.54
- The head of the district court writes the order to implement the award on the original sheet and an authentic copy of the arbitral award is issued.55
- The Central Jakarta District Court handles the issue of recognition and implementation of international arbitration awards.56
- The head of the Central Jakarta District Court provides an exequatur for international arbitration awards so it can be implemented in Indonesia. Furthermore, the Central Jakarta District Court also has the authority to grant an exequatur in an international arbitration award involving the Republic of Indonesia as a party to the dispute, which is a delegation of duties from the Supreme Court.57
- The Central Jakarta District Court has the authority to accept an international arbitration award and its registration.58
- The head of the district court is relatively authorised to enforce the international arbitration awards in accordance with the provisions for enforcing decisions in civil cases whose decisions have permanent legal force after obtaining an order from the head of the Central Jakarta District Court.59
- The head of the district court accepts the request for annulment of the arbitral award and decides on the annulment.60
- There appears to be a lacuna in respect of whether the arbitration institution may or may not have implemented the procedure to summon and compel factual witnesses as stipulated in the ICC. Moreover, the AADR Law also does not regulate the authority of the district court to assist in the service of a summon letter to witnesses to attend the arbitration hearing.
iii Arbitration institution rules and practices
Arbitration institutions in Indonesia have a role in administering the dispute settlement by the tribunal. Each of those arbitration institutions has different sets of rules that are continuously updated to adjust to the circumstances in practice. The general matters governed in those Arbitration Rules are as below.
Constitution of an arbitral tribunal
Parties frequently specify the number of arbitrators and mechanism of appointment in their arbitration clauses. In most arbitration institutional rules in Indonesia, the parties are free to choose to have one or three arbitrators or leave it open until a dispute has occurred. In the absence of an agreement between the parties, the number of arbitrators will be determined by the arbitration institution.
Disputing parties may also appoint an arbitrator outside of the list of arbitrators in an arbitration institution. This option may arise if the nature of the dispute requires an arbitrator with specialised knowledge that is not available in the existing list of arbitrators.61 A party may file a request for the appointment of such an arbitrator to the chair of the relevant arbitral institution, outlining the justifications and information about the proposed arbitrator. If the chair of the arbitral institution believes that there is no arbitrator with the necessary expertise, they may decide to approve such an appointment in order for the dispute to be properly adjudicated. However, if the chair of the arbitration institution does not approve the designation of the unlisted arbitrator, they may recommend or designate an alternative arbitrator from the list of arbitrators in the relevant institution.
Sometimes, appointing arbitrators can be tricky because they are private judges from the private sector. They may have work involvement with many parties from various circles, including business actors, such as being a legal adviser or consultant from parties currently in dispute. This involvement will result in there being a potential conflict of interest with the parties or one of the parties. A conflict of interest with one of the parties raises doubts about impartiality and independence of the arbitrators in carrying out their duties.62 To address this potential issue and further challenge of the arbitrator or annulment of an arbitral award, the parties may consider taking the initiative in providing any previous relationships with the arbitrator(s) at the beginning of the proceeding.
After the parties have appointed their respective arbitrators and the tribunal consists of three arbitrators, there are two mechanisms to appoint the presiding arbitrator. First, the presiding arbitrator may be appointed through deliberation between the parties’ appointed arbitrators. If the parties’ appointed arbitrators do not reach any agreement, then the chair of the arbitration institution will appoint the presiding arbitrator. Second, the chair of the institution may directly appoint the presiding arbitrator without consulting the parties’ appointed arbitrators. The application of the above approach may depend on parties’ arbitration clause, the relevant arbitration institution rules and a conflict-of-interest assessment.
Hearing procedure and language
In the 2022 BANI Rules, for example, the arbitration proceeding shall be completed within a period of no longer than 180 days of the date of constitution of the tribunal. In special conditions where the dispute is of a highly complex nature, the tribunal has the authority to extend the deadline upon notice to the parties.
During the hearing, the parties may be represented by foreign adviser(s) or foreign legal adviser(s). The 2022 BANI Rules govern that such foreign adviser(s) or foreign legal adviser(s) may attend the arbitration proceedings only if they are accompanied by Indonesian adviser(s) or legal adviser(s).
Furthermore, the case examination hearing will often be conducted in Indonesian if the parties have not stipulated otherwise. However, if the arbitration tribunal considers that using English or another language is appropriate in the circumstances (such as the attendance of foreign parties or foreign arbitrators who are unable to communicate in Indonesian, or when the transaction arising from the dispute is conducted in another language), the case examination hearing may also be conducted in the other language. If the tribunal or any party requires the assistance of an interpreter during the proceeding, such an interpreter may be provided by the arbitration institution, and the fee of the interpreter shall be borne by the parties as deemed appropriate by the arbitration tribunal.63
Separately, unless it is specifically regulated under parties’ arbitration clause, the tribunal is also entitled to determine whether the parties’ original pleadings, documentary evidence and arbitral award must be provided bilingually.
Most Indonesian arbitration institutions allow the hearing to be conducted electronically if the parties agree. For example, it is regulated in the BANI Electronic Arbitration Rules that an electronic hearing may be conducted based on:64
- an urgent situation (such as a pandemic);
- exceptional circumstances, such as where one or both parties, or one or more arbitrators, are based outside the country or region and find it impossible to travel to the hearing;65 or
- the parties’ own choice.
Parties’ intention to conduct an electronic arbitration hearing must be set out in writing and must be agreed by the relevant arbitration institution (e.g., BANI) or the tribunal that is examining the case.66
One other aspect that is important in conducting electronic arbitration hearings is confidentiality. Therefore, it is important that the parties agree on several matters, including:
- that there is a guarantee between the parties that no unauthorised party is attending the hearing; and
- the parties will consistently and compliantly implement the relevant arbitration institution rules, including applicable laws and regulations, and strive to maintain confidentiality.
iv Arbitration developments in local courts
Interpretation and enforcement of arbitration clauses
According to Indonesian law, an agreement is a law to the parties that create it.67 Moreover, the arbitration clause interpretation procedure in Indonesia is often artificially shortened to determine whether it exists, since Indonesian legislation on arbitration stipulates that Indonesian courts may act in certain instances only if an arbitration clause exists.68 Consequently, if an agreement contains a provision for resolving conflicts by arbitration, the parties may settle the dispute only through arbitration that has been agreed on.
If one of the parties files a settlement agreement to the district court, the panel of judges reviewing the case will often reject the plaintiff’s claim. This is because the parties’ agreement does not designate a district court as the authorised place to decide the issue. In line with the requirements of the AADR Law, a new district court may review the case if the parties have used arbitration to resolve their disagreement. However, the district court may review only in instances involving the enforcement or annulment of an arbitral judgment.
Qualifications of and challenges to arbitrators
As arbitrators, they will confront several obstacles, including the following:69
- a reason for contest: unbeknownst to one party, an arbitrator (or several arbitrators) may have a predisposition towards one party’s arguments based not on the underlying case but on past connections or information;
- the mechanics: there are instances in which relevant regulations may be interpreted differently in practice. Arbitrators must be familiar with the local customs where the arbitration matter will be determined;
- importance of transparency: arbitrators are obligated to disclose client information and must be able to evaluate what information may be made public in order to prevail in the arbitration;
- the facts: typically, instances in dispute settlement via arbitration vary. In the context of the caseload figures we have examined, formal challenges against arbitrators are uncommon and have a low success rate; and
- argument for change: every arbitrator must be able to think creatively and provide alternative arguments, which positively affects the expansion of the field of arbitration.
Judicial assistance in evidence-gathering for arbitration proceedings
The AADR Law and BANI Arbitration Rules provide the possibility for arbitral tribunals to summon a factual witness to give testimony at an arbitration hearing. However, both regulations are silent on further procedures to summon or compel a witness if the witness is not willing to attend – making the nature of the summon by arbitral tribunal not imperative.
Further, the AADR Law does not regulate the district courts’ authority in assisting in the service of a summon letter to the witness in favour of arbitration. According to our contact at BANI and a civil cases clerk at the Central Jakarta District Court, courts’ assistance in compelling a witness in favour of arbitration seems unlikely. The main reason is the absence of regulation on this issue. The courts would declare no authority to aid regardless that there is also no restriction for them to do so. Moreover, it would also heavily depend on whether the arbitral tribunal is willing to attempt to request the court’s assistance for this purpose. As there is no precedent on this matter, it seems almost unlikely that the BANI arbitral tribunal would go through this option. In the event that it would, there also seems to be a small likelihood for the court to grant such an application considering that its common approach is to reject handling any case relating to arbitration.
Enforcement or annulment of awards
In 2022, in Indonesia, many arbitral awards were presented to the district court for an annulment, albeit not all were granted. Several of the following arbitral awards were brought to the district court for annulment:
- Decision No. 694/Pdt.G.Sus-BANI/2022/PN Jkt.Utr of the North Jakarta District Court (PT Lily Maritim Indonesia (Plaintiff) v. 1. PT Abuki Jaya Stainless Indonesia & PT Feni Haltim (respondent) and 2. BANI (co-respondent)): on the basis of Article 70c of the AADR Law, the plaintiff requested the annulment of BANI Decision No. 42080/XII-ARB-BANI/2019. Based on Article 71 of the AADR Law, as of 20 October 2022, the panel of judges denied the annulment since the petition for annulment of the arbitral ruling had lapsed more than 30 days before.
- East Jakarta District Court Decision Number 283/Pdt.G/2022/PN Jkt.Tim (PT Indraco v. 1. PT Wijaya Karya Gedung Gedung Tbk; 2. Hartini Mochtar Kasran; 3. Basoeki; and 4. Y. Sogar Simamora): on the basis of Article 70c of the AADR Law, the plaintiff filed for the annulment of BANI Surabaya Decision No. 56/ARB/BANI-SBY-V/2021, dated 25 March 2022. The panel of judges annulled the arbitration ruling because the defendant engaged in a deception, with the principal reason being the plaintiff’s need to pay late fees.
- Decision No. 173/PDT.Sus-Arbt/2021/PN Cbi of the Bogor District Court (PT Daehan Global v. PT Ace Engineering & Construction): the plaintiff requested the annulment of Arbitration Award 43041/VII/ARB-BANI/2020 based on Article 70 of the AADR Law. The panel of judges annulled the arbitration ruling.
v Investor–state disputes
Cases, pending or decided, involving the local state as a party
A quick perusal of the International Centre for Settlement of Investment Disputes material reveals that no new cases have been filed by or against Indonesia in the past year. There are zero pending arbitrations involving investors and Indonesia.
Cases decided locally involving investors and other states
Consequently, there have been no cases domestically on the issue of investor–state disputes.
Outlook and conclusions
In summation, the Republic of Indonesia has not exhibited noteworthy advancements in the realm of arbitration jurisprudence, even though recent highlights have been predominantly manifested by the ratification of the Hague Convention in 2021 and the nation’s unwavering commitment to the esteemed 1958 New York Convention. The nation’s arbitration legislation, governed by the AADR Law, furnishes a lucid framework for efficaciously resolving disputes via arbitration, encompassing domestic and international entities. Pivotal legal apparatuses, including public courts, specialist tribunals and the Constitutional Court, contribute to an all-encompassing and robust legal infrastructure.
Indigenous institutions such as BANI play an indispensable role in the arbitration mechanism, ascertaining legal certainty and proficient dispute resolution. The AADR Law, in conjunction with pertinent ICC provisions, delineates the quintessential prerequisites for the arbitration process. These requirements encompass the appointment of arbitrators, submission of unambiguous written agreements and the requisite registration of arbitral awards.
The esteemed head of the district court assumes a paramount role in supervising the arbitration process, safeguarding adherence to legal stipulations and preserving public order. Notwithstanding the substantial progress attained thus far, the Republic of Indonesia continues to grapple with formidable challenges in developing its arbitration domain. Consequently, assiduous efforts are indispensable to enhance and streamline the arbitration proceedings in Indonesia, ultimately bolstering the efficacy and reliability of this vital mechanism for dispute resolution.
1 Setyawati Fitrianggraeni is managing partner, Hary Elias is general counsel, Keshia Bucha is associate and Sri Purnama is legal research analyst at Anggraeni and Partners.
2 For documents issued within the Indonesian territory and intended for use in other signatory states to the Apostille Convention, an Apostille application may be submitted by a person or their representative. The obligation to get the documents legalised by diplomatic representation is replaced by the apostille certificate. In Indonesia, the Ministry of Law and Human Rights is the competent authority. The Directorate General of Public Law Administration offers the service.
3 Presidential Regulation No. 2 of 2021 on the Ratification of the Convention Abolishing the Requirement to Legalize Foreign Public Documents, State Gazette Number 3 of 2021.
4 Regulation of the Minister of Law and Human Rights No. 6 of 2022 on Apostille Legalization Services in Public Documents, Official Gazette Number 98 of 2022.
5 In international arbitration, the parties often need to submit various documents, including the arbitration agreement and the arbitral award itself, to courts in other countries for recognition and enforcement purposes. The Apostille Convention simplifies the authentication process for these public documents by eliminating the need for additional legalisation or consular authentication, which can be time-consuming and costly. As a result, the process of recognising and enforcing foreign arbitral awards becomes more efficient and less burdensome.
6 By providing a standardised and internationally recognised method of authenticating public documents, the Apostille Convention increases the level of trust and confidence in the authenticity of documents submitted in the recognition and enforcement process. This can help courts in Indonesia and other countries to expedite the examination and acceptance of arbitral awards, reducing potential delays or complications arising from questions about document authenticity.
7 Promoting international cooperation. Ratification of the Apostille Convention demonstrates a country’s commitment to international cooperation and legal harmonisation. This can have a positive impact on the overall perception of the country’s arbitration environment, making it more attractive for international parties to engage in arbitration and increasing the likelihood of foreign arbitral awards being recognised and enforced.
8 Article 24, Paragraph (2) of the Constitution of the Republic of Indonesia 1945.
9 Article 24A, Paragraph (1) of the Constitution of the Republic of Indonesia 1945.
10 Muslim residents can address issues including marriage, property and inheritance through religious tribunals.
11 These courts deal with disputes involving active-duty military personnel.
12 These courts make decisions in cases involving regional and central government officials or other state bodies. State administrative courts are specialised courts that have jurisdiction over disputes relating to state administrative matters, such as disputes relating to state land and state assets. There are also tax courts as special tribunals under state administrative courts.
13 Article 1, No. 8 of Law No. 48 of 2009 on Judicial Power; Article 27, Paragraph (1) of Law No. 48 of 2009 on Judicial Power; Elucidation of Article 27, Paragraph (1) of Law No. 48 of 2009 on Judicial Power.
14 This court is established by Law No. 11 of 2012 on the Juvenile Court System. Children between the ages of 12 and 18 can be prosecuted in juvenile courts, which fall under the jurisdiction of general jurisdiction courts. To guarantee the confidentiality of the proceedings and to safeguard the children’s identity, everyone is heard in a closed courtroom.
15 This court is authorised to resolve disputes relating to bankruptcy as regulated under Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payments, Law No. 24 of 2004 concerning Deposit Insurance Corporation, and intellectual property rights disputes. A specialised commercial court is located in the Central Jakarta District Court that has jurisdiction over commercial disputes such as bankruptcy and intellectual property cases.
16 These courts were established by Law No. 26 of 2000 on the Human Rights Court. Only serious human rights breaches such as genocide and crimes against humanity fall under the purview of these courts.
17 These courts were established by Law No. 13 of 2003 on Employment in conjunction with Law No. 11 of 2020 on Job Creation and Law No. 2 of 2004 concerning Settlement of Industrial Relations Disputes. All problems involving employment are resolved by these courts. Industrial relations courts are specialised courts that handle labour disputes such as disputes relating to labour contracts and employment termination.
18 These courts were established by Law No. 46 of 2009 on Criminal Corruption Courts. Criminal corruption courts are the only courts in Indonesia with the ability to investigate, prosecute and render judgments in criminal corruption matters, as can be seen on Article 5 of Law No. 46 of 2009 on Criminal Corruption Courts.
19 These courts were established by Law No. 31 of 2004 on Fishery, as amended by Law No. 45 of 2009, which is further governed by Supreme Court Regulation No. 1 of 2007 on the Fishery Court. Fisheries courts have the ability to decide on offences such as the export or import of fish without a health certificate, the use of explosives and chemicals in fishing, and the use of improper fishing equipment.
20 Tax courts are specialised courts that have jurisdiction over tax disputes, including disputes relating to tax assessments and tax collections.
21 Article 7B, Paragraph (1) of the Constitution of the Republic of Indonesia 1945.
22 Article 24C, Paragraph (1) of the Constitution of the Republic of Indonesia 1945.
23 Presidential Decree No. 34 of 1981, Official Gazette No. 40 of 1981.
24 BANI Arbitration Rules referred to in this draft are the rules of BANI Mampang.
25 Article 1, Paragraph (1), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
26 Article 9, Paragraphs (1) and (3), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
27 Article 9, Paragraph (2), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
28 Article 13, Paragraph (1), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
29 Article 22, Paragraph (1), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
30 Article 22, Paragraph (2), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
31 Article 36, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
32 Article 27, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
33 Articles 48 and 33, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
34 Article 11, Paragraph (2), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
35 Articles 70 and 71 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
36 Article 59, Paragraph (1), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
37 Article 59, Paragraph (3), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
38 Article 67, Paragraph (1), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
39 Article 1320 of the Indonesian Civil Code.
40 Article 1321 of the Indonesian Civil Code.
41 Article 330 of the Indonesian Civil Code regulates that maturity means a person who is 21 years old or older.
42 This has been deleted through Law No. 1 of 1974 Concerning Marriage.
43 Article 13, Paragraph (1) and Article 14, Paragraph (3) of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
44 Article 13, Paragraph (2) of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
45 Article 14, Paragraph (4) of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
46 Article 15, Paragraph (4) of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
47 Article 19, Paragraph (4) of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
48 Article 23 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
49 Article 25 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
50 Article 37, Paragraph (3) of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
51 Article 59 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
52 Article 75 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
53 Article 61 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
54 Article 62 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
55 Article 63 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
56 Article 65 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
57 Article 66 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
58 Article 67 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
59 Article 69 in conjunction with Article 64 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
60 Article 72 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
61 Article 10, Paragraph (2), BANI Arbitration Rules 2022 and Article 5, Paragraph (5), Basyarnas Rules 2021.
62 Frans Hendra Winarta, Prinsip Proses Dan Praktik Arbitrase Di Indonesia Yang Perlu Diselaraskan Dengan Kaidah Internasional, Selisik, Vol. 1, No. 1, Juni 2015, p. 14.
63 Article 15, Paragraph (3), 2022 BANI Rules.
64 Article 1(5) of the BANI Electronic Arbitration Rules.
65 Article 1(9) of the BANI Electronic Arbitration Rules.
66 Article 1(6) of the BANI Electronic Arbitration Rules.
67 Article 1338(1) of the Indonesian Civil Code.
68 Article 11(2), Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolutions.
69 Ekaterina Finkel and Louise Oakley, Arbitrator challenges: a practical guide, accessed on https://www.globalarbitrationnews.com/2020/12/03/arbitrator-challenges-a-practical-guide/ (accessed 26 March 2023).