“While BANI Arbitral Award is legally executable upon rendering, there are multiple instances wherein the parties fail to execute the arbitral award voluntarily. Should this be the case, the arbitral award can be requested to be executed by the competent District Court.”
Legal Basis of Arbitration in Indonesia
Pursuant to Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Settlements (“Indonesian Arbitration Law”), arbitration is defined 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.
Based on the Indonesian Arbitration Law, the existence of an arbitration agreement entails the loss of the parties’ right to submit the settlement of the parties’ dispute to the District Court. In which case, the District Court must reject and not be involved in the settlement as mentioned. However, this only applies to civil dispute cases. Should the case involve any criminal conduct, or any matter related to the public welfare, such disputes cannot be settled in the forum of arbitration.
Official Arbitration Institution in Indonesia
As has been elaborated, in case of a civil dispute, the dispute can be brought to the forum of arbitration based on an arbitration agreement of the disputing parties. This arbitration agreement can be in the form of an arbitration clause in the agreement between the disputing parties or made subsequently after a civil dispute arises.
Within the arbitration agreement, the parties can choose whether the arbitration should be conducted by an arbitration institution or whether the arbitration should be conducted by an ad hoc arbitration. In arbitration institution, the arbitrators should be chosen from the list of arbitrators registered in the arbitration institution. Whereas, for ad hoc arbitration, the arbitrators can be chosen by the parties without having to select from an arbitrator registered in any arbitration institution. Furthermore, the parties can choose whether certain arbitration rules would apply to the arbitration proceeding.
In general, most arbitration institutions have its own set of procedural rules which governs the arbitration proceeding. These procedural rules are to be distinguished from what is called arbitration law, which governs the substantive matters of an arbitration proceeding or the law which governs the substantive matters of the dispute.
For the general civil disputes, the official arbitration institution in Indonesia is Indonesian National Arbitration Board (Badan Arbitrase Nasional Indonesia or “BANI”). As most arbitration institutions, BANI also has certain procedural rules which govern how the arbitration proceeding commences.
Legal Enforceability of BANI Arbitral Award
Pursuant to Article 60 of the Indonesian Arbitration Law, an arbitral award is final, legally executable, and binding to the disputing parties. This provision applies to all arbitration proceeding, either conducted by an arbitration institution or ad hoc arbitration. Therefore, once an arbitral award has been rendered, it is immediately executable by the disputing parties without any necessity for an execution process by court order.
Considering how an arbitral award is final, it means that as an arbitral award, BANI Arbitral Award cannot be challenged to a higher jurisdiction to be contested. However, it is possible for a disputing party to challenge BANI Arbitral Award if the contesting party has grounds to claim that the arbitration proceeding involves an unlawful procedure, e.g., falsification of facts or forged documents. Nevertheless, BANI Arbitral Award cannot be challenged in substantive matters by any jurisdiction.
Procedure of Executing BANI Arbitral Award
While BANI Arbitral Award is final and binding to the disputing parties, there are multiple events wherein the disputing parties do not execute BANI Arbitral Award voluntarily. This means that there needs to be an execution process of BANI Arbitral Award.
Due to the Indonesian Arbitration Law, any arbitral award must be registered to the District Court wherein the losing party is domiciled. This jurisdiction can also be stipulated within the arbitration agreement between the disputing parties, in which the parties can choose a District Court wherein the arbitration award should be registered.
While an arbitral award is legally executable, the Indonesian Arbitration Law stipulates that the arbitral award must be registered to the competent District Court within 30 (thirty) days as of the rendering. If the arbitration award is not registered to the competent District Court, the arbitral award would lose its executability and thus cannot be executed by the competent District Court if the parties fail to execute the arbitral award voluntarily.
In Indonesia, the execution of BANI Arbitral Award is subject to the same procedure of execution of a court decision, namely:
1. Legal Notice from the District Court (Aanmaning)
If the disputing parties fail to execute BANI Arbitral Award, the winning party can request for a legal notice from District Court to be made to the losing party. This means that the District Court can order the losing party to execute the arbitration award.
2. Execution Process by the District Court
If the losing party fails to execute the arbitration award after the legal notice from the District Court, the winning party can submit a request to the District Court for an execution order. This can entail a seizure of the assets of the losing party, which can only be conducted by the competent District Court. The process of seizure is preceded by a request from the winning party by presenting the assets owned by the losing party to be encumbered by lien. Should the losing party fail to execute the arbitration award after a seizure is encumbered to its assets, the assets as mentioned can be sold by order of the court.
Author: Yohana Veronica Tanjung
Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. Commercial Dispute.
For further queries and information, contact us:
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