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Enforcement of International Arbitral Award in Indonesia

International Arbitral

Arbitration as an Alternative Dispute Resolution in Indonesia

The vast and rapid technological developments have impacted the world’s commercial landscape. As a result, corporations need more time-efficient, more neutral and less complicated dispute resolution alternatives. One globally used alternative is arbitration, which is frequently preferred due to its international recognition feature and an arbitral award can be enforced in various jurisdictions.

International Arbitral

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Enforcement of International Arbitral Awards in Indonesia  

Arbitration in Indonesia is generally regulated in Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Law No. 30 of 1999”), and Indonesia is a signatory to the 1958 United Nations Convention on the Recognition and Enforcement of International Arbitral Awards (“1958 New York Convention”). Hence, international arbitral awards are recognized and enforceable in Indonesia. Law No. 30 of 1999 did not, however, adopt the UNCITRAL Model Law on International Commercial Arbitration 1985.

Under Law No. 30 of 1999, enforcement of international arbitral awards in Indonesia can only be sought through the Central Jakarta District Court (or the Supreme Court if the Republic of Indonesia is a party to the arbitration). An international arbitral award must be compliant with these following provisions if they are to be enforced in Indonesia:

  1. The award must be issued by a tribunal or arbitrator in a nation with which Indonesia is a party to a bilateral or multilateral agreement on the recognition and enforcement of international arbitral awards;
  2. The award falls under the scope of commercial law; and
  3. The award does not violate Indonesia’s public policy or public order.

If the provisions above are fulfilled, the Chairman of Central Jakarta District Court may issue an exequatur (an order permitting enforcement of an international arbitral award).

According to Law No. 30 of 1999, there are 3 (three) general stages for enforcing international arbitral awards in Indonesia:

  1. Registration. The arbitrator or a proxy to register the award by submitting an application for registration with supporting documents (including the original or authentic copy of the award and the arbitration agreement) to the Central Jakarta District Court to obtain a Deed of Registration.
  2. Exequatur. The winning party to request for an exequatur by submitting an application therefore to the Central Jakarta District Court. The Chairman of the court will review it and then stipulate whether an exequatur can be granted.
  3. Enforcement. Following issuance of the exequatur, the party is required to submit to the Central Jakarta District Court an application for enforcement of the award. After the Chairman of the Central Jakarta District Court issues a writ of execution, enforcement process will be performed by the competent district court as per the Indonesian civil procedural law.

Currently, the number of international arbitral awards being enforced in Indonesia is showing a steady trend. In a study held between 2000-2018, the number of international arbitral awards enforcement in Indonesia have increased with an average of 8-10 cases per year (?) in recent years compared to 0-4 cases in the early 2000s. These cases also come from a variety of international arbitration forums with most cases are regarding arbitral awards issued by the Singapore International Arbitration Centre (“SIAC”) followed by the Indian Council of Arbitration (“ICA”) and International Chamber of Commerce (“ICC”). Between 2000-2018, there has been a total of 133 cases with 69 cases already receiving an exequatur by the Charmain of the Central Jakarta District Court with the remaining cases mostly pending issuance of the exequatur. Although not the most recent, these statistics provide assurance for business actors who use international arbitration forums to resolve disputes to not worry about enforcement of the award in Indonesia.

International Arbitral

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Problems Faced in the Enforcement of International Arbitral Awards

While the statistic displays an increasing tendency and continues to prove that Indonesia has become a more arbitration friendly jurisdiction, there are a few concerns by business actors regarding the procedure.

The first concern is regarding the time spent for the enforcement proceedings in Indonesia, as no certain timeframe is specified in Law No.30 of 1999. In practice, the first two stages (registration and application of an exequatur) would commonly take two to six months. The length of time of the third stage (enforcement through the competent court) may vary subject to, among other things, domicile of the respondent and location of the assets. These would imply that enforcement can take an indefinite amount of time, which in turn could negatively impact business sustainability and relationships between business actors as there is no certainty of when the dispute can be settled, or losses can be recovered.

The second one is regarding the ‘public order’ restriction. It is not clearly defined in Law No.30 of 1999, while Article 4 of Supreme Court Regulation Number 1 of 1990 on Procedure for the enforcement of International Arbitral Awards defines public order very broadly as the basic principles of the legal system and society in Indonesia. As there is no definite definition of what constitutes a violation of public order in Indonesia, the interpretation of this issue would heavily rely on the discretion of the judges in the Central Jakarta District Court. One of the most well-known case where violation of public order was used as grounds for refusing to enforce international arbitral awards is the case of Astro All Asia Network Plc. In this case, Astro All Asia Network Plc. (“AAAN”) sought enforcement of an arbitral award issued by SIAC. In the award, SIAC ordered, among other things, AAAN’s shareholder companies to stop any court proceedings in Indonesia relating to its businesses. In brief, the judges, both in Central Jakarta District Court and Supreme Court, considered this as violation to the principle of sovereignty of the Republic of Indonesia as no foreign power can interfere with legal process in Indonesia. As such, enforcement of the SIAC award was refused due to violation of public order in Indonesia.

Conclusion

In light of the above, it is often advisable to have a well-structured enforcement plan and strategy, including acquiring initial information of the respondent’s assets and properties (such as their location and value) and whether negotiating a mutually agreed settlement would be a more reasonable (and time- and cost- efficient) option. All in all, despite some concerns regarding the enforcement process, Indonesian courts are showing signs of a more accepting environment for enforcing international arbitral awards. This brings a breath of fresh air and hope for business actors for resorting to (international) arbitration as a dispute settlement alternative.

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Disclaimer: This article has been prepared for scientific reading and marketing purposes only from ADCO Law. Accordingly, all the writings contained herein do not constitute the formal legal opinion of ADCO Law. Therefore, ADCO Law should be held harmless of and/or cannot be held responsible for anything performed by entities who use this writing outside the purposes of ADCO Law.