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Indonesia Strengthens its Arbitration Framework: A Look at PERMA Number 3 of 2023

Arbitration Framework

Indonesia has strengthened its arbitration framework with Supreme Court Regulation No. 3 of 2023, or PERMA 3/2023. This is a response to the need for efficient dispute resolution in today’s rapidly evolving commercial landscape. PERMA 3/2023 expands the jurisdiction for enforcing international arbitral awards, clarifies the definition of “public policy,” and facilitates electronic registration and enforcement. It also establishes clear timelines and introduces partial enforcement options. Overall, PERMA 3/2023 streamlines the enforcement process, and that promotes arbitration as a preferred method for resolving international trade disputes, which signals Indonesia’s commitment to an investment-friendly climate.

The vast and rapid technological developments have impacted the world’s commercial landscape. As a result, corporations need alternative dispute resolution that is more time efficient, neutral and less complicated. One alternative used globally is arbitration, which is frequently preferred due to its international feature, and worldwide recognition and enforceability of its awards.

Arbitration in Indonesia is generally governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Law 30/1999“). Indonesia is also a signatory to the 1958 New York Convention (New York Convention on the Recognition and Enforcement of International Arbitral Awards). Therefore, international arbitral awards are recognized and enforceable in Indonesia. However, It is important to note that Law No. 30 of 1999 does not adopt the UNCITRAL Model Law on International Commercial Arbitration of 1985.

Arbitration Framework

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In a recently issued Supreme Court Regulation No. 3 of 2023 or Peraturan Mahkamah Agung (“PERMA 3/2023“), the Supreme Court provides for, among other things, clarification and further details on the procedures for enforcing international arbitral awards in Indonesia. The regulation introduces new provisions as the following:

  1. International Sharia Arbitral Awards rendered by sharia-based arbitration. Enforcement of such awards should be through the Central Jakarta Religious Courts (Pengadilan Agama Jakarta Pusat). Provisions in this Perma supplements Law 30/1999, which previously gave the authority only to the Central Jakarta District Court (Pengadilan Negeri Jakarta Pusat) to deal with the enforcement of international arbitral awards.
  2. Definition of “public policy”. While it remains quite broad, “public policy” now refers to the fundamental principles necessary for the functioning of Indonesia’s legal system, economic system, and socio-cultural system.
  3. Electronic process. International Arbitral Awards or International Sharia Arbitration Awards can now be registered electronically through the Court Information System (Sistem Informasi Pengadilan / “SIP“) of the Central Jakarta District Court or Central Jakarta Religious Court. Similarly, a request for enforcement of the awards can also be submitted electronically through the SIP of the relevant court.
  4. Enforcement timeline. The new PERMA gives more clarity to the procedural timeline that is not provided for in Law 30/1999. Now, court registrars are required to complete the registration process within 14 calendar days after receiving a complete application for both International Arbitral Awards and International Sharia Arbitral Awards. In a case where a request for enforcement is filed, within 30 calendar days thereof, the relevant court must rule on whether or not an exequatur will be granted.
  5. Partial enforcement. The PERMA allows the applicant to request the relevant court to partially enforce an international arbitral award. This is quite a breakthrough as Law 30/1999 is silent on this matter.

In conclusion, PERMA 3/2023 ushers in a more streamlined (and modernized) enforcement process for international awards. This improved process presents a favorable opportunity for businesses, encouraging arbitration as a preferred and efficient method for resolving international trade disputes. This initiative underscores Indonesia’s commitment to fostering an investment-friendly climate and supporting businesses. With PERMA 3/2023 in effect, the international arbitration landscape in Indonesia is witnessing increased procedural clarity and enhanced legal protections for parties involved. While acknowledging the need for continued attention to certain areas, this development signifies a positive stride towards smoother and more effective dispute resolution processes.


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