“In accordance with the prevailing laws in Indonesia, an arbitration proceeding can be broken down into multiple steps. Such steps are essential to be understood by business actors in order to determine the forum of settlement desired should a civil dispute arise therebetween.”
In Indonesia, civil disputes can be settled through multiple ways. Generally, any civil dispute can be settled by filing a claim to the general judiciary or the district court. However, the district court shall not have any legal competence to settle the dispute if the parties have agreed to opt for another dispute resolution, e.g. arbitration.
In practice, flexibility, time manner, efficient and confidentiality is the main reason why arbitration is appealing to most business actors.
Arbitration Legal Basis in Indonesia
In Indonesia, arbitration is governed within the Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Settlements (“Indonesian Arbitration Law”). Such law defines arbitration as ‘a method for civil dispute settlement outside of general judiciary, which is based on arbitration agreement that is made in writing by both disputing parties. Subsequently, arbitration agreement refers to ‘an agreement in form of arbitration clause which is included in a written agreement that is made by both parties before the dispute occurs, or a separate arbitration agreement which is made by both parties after the dispute has occurred’.
Pursuant to the definitions of the Indonesian Arbitration Law, the difference between an ‘arbitration clause’ and an ‘arbitration agreement’ is that an arbitration clause is included in the primary agreement before the dispute occurs, whereas an arbitration agreement is a separate agreement after the dispute has occurred.
Arbitration Proceeding in Indonesia
Generally, the arbitration proceeding can be broken down into the following stages:
1. Registration of the Dispute
An arbitration proceeding is always preceded by an existence of a request of arbitration from the claimant, which is a disputing party bound by the agreement in which arbitration clause is stated, or a disputing party bound by an arbitration agreement after the dispute has occurred.
Usually, the request of arbitration requires both parties to pay certain amount of administration fee for the commencement of the arbitration proceeding. However, in practice, there are circumstances wherein the respondent fails to pay its half of the administration fee and thus the administration fee are first settled by the claimant. In this case, most claimants would request for the administration fee as mentioned to be reimbursed by respondents within the arbitral award.
2. Appointment of Arbitrators
In the event it has been agreed by the parties that the dispute shall be settled in the forum of arbitration which will be examined and decided by 3 (three) arbitrators, the arbitral hearing can only commence after the arbitral tribunal (panel of arbitrators) have been decided. This is usually conducted by the arbitral institution or ad hoc (formed together by the parties), depending on the agreement by the parties.
On the other hand, if the parties do not agree to have the dispute examined and decided by 3 (three) arbitrators, the parties can agree to have the dispute examined and decided by a sole arbitrator. If the parties agree for the dispute to be settled by an arbitration institution, the sole arbitrator shall be decided by the arbitration institution. On the other hand, if the parties agree not to have the dispute settled by an arbitration institution, the sole arbitrator can be agreed by the parties arbitrarily.
3. Arbitral Hearing
After appointment of the arbitrator(s), the arbitral hearing can be commenced based on the schedule of the arbitrator(s). In most cases, the schedule of the hearings can also be agreed by the arbitrator(s) with the disputing parties.
The arbitral hearings are conducted by the following stages:
a. Mediation Process
Should both parties attend the arbitral hearing, based on the principle of amicable settlement, the arbitrator(s) would usually advise the parties to have a mediation in effort to reach mutual understanding before the continuance of the arbitration proceeding.
b. Examination Process
If the mediation process does not reach a mutual understanding between the parties or if the arbitral hearings are only attended by 1 (one) party, the arbitral hearing usually commences straight to the examination process, in which the arbitrator(s) and the party(ies) discuss regarding the case and the party(ies) is expected to provide answers to questions from the arbitrator(s). This will also entail hearings of testimonies from witnesses and/or experts should the party(ies) wish to present any.
4. Arbitral Award
In accordance with the Indonesian Arbitration Law, an arbitration proceeding cannot exceed the period of 180 (one hundred eighty) days as of the day the arbitral tribunal or sole arbitrator have been appointed. Therefore, as of the day as mentioned, the arbitral award must have been rendered by the arbitral tribunal or the sole arbitrator.
5. Execution of the Arbitral Award
Upon rendering of the arbitral award, the arbitral award must be registered to the District Court wherein the respondent is domiciled. This is because an arbitral institution does not have the authority to impose execution of the arbitral award onto the parties. Therefore, unless the parties voluntarily execute the arbitral award, the arbitral award must be executed under the authority of the District Court.
Author: Yohana Veronica Tanjung
Gaffar & Co. is an Indonesian Boutique Law Firm which specialises and focuses on commercial law areas, e.g. Commercial Dispute Resolution, Capital Market & Financial Services, Investment Regulatory and Corporate Secretarial, Merger & Acquisition, Information & Technology, and Employment Law.
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