1 Legal framework
1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
Arbitration practice in Indonesia is governed by Law 30/1999 on Alternative Dispute Resolution and Arbitration. Under Law 30/1999, an arbitration agreement must be in writing and must clearly state the forum, law and procedural law that will be used in the arbitration.
1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?
Yes, Law 30/1999 differentiates between domestic arbitration and international arbitration, based on where the arbitration award is rendered. Under Article 1 of Law 30/1999, an international arbitration award is an arbitration award rendered by an arbitration institution or arbitral tribunal outside the jurisdiction of Indonesia, or an award rendered by an arbitration institution or arbitral tribunal that is deemed an international arbitration award based on Indonesian law.
1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?
1.4 Are all provisions of the legislation in your jurisdiction mandatory?
Yes, all provisions of Law 30/1999 are mandatory.
1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?
There are no current plans to amend Law 30/1999.
1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?
Yes, Indonesia is a signatory to the New York Convention and reservations have been made under Presidential Decree 34/1981.
1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?
Indonesia is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1966 and several other bilateral investment treaties and multilateral investment treaties.
2 Arbitrability and restrictions on arbitration
2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?
Based on Article 5 of Law 30/1999, only disputes of a commercial nature and disputes concerning rights which, under Indonesian law and regulations, fall within the full legal authority of the disputing parties may be settled through arbitration.
Disputes that cannot be resolved through amicable settlement based on the law are not arbitrable.
2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?
No, there is no restriction on the choice of seat of arbitration for certain disputes under Law 30/1999.
3 Arbitration agreement
3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?
Essentially, all agreements governed by Indonesian law must fulfil the following requirements stipulated in Article 1320 of the Indonesian Civil Code:
- consent of the parties;
- capacity of the parties;
- relationship to specific objects; and
- justifiable cause.
An agreement, including an arbitration agreement, will be deemed valid if it fulfils the above requirements.
If the arbitration agreement is entered into after a dispute has arisen, then under Article 9 of Law 30/1999, it must be concluded in writing before an Indonesian notary in the form of a notarial deed and include:
- the subject matter of the dispute;
- the full names and addresses of the parties;
- the full names and addresses of the arbitrators;
- the full name of the secretary of the arbitral tribunal (while Law 30/1999 does not provide any further explanation of who the ‘secretary' is, we understand this to be the secretary of the arbitral tribunal);
- the timeframe within which the dispute will be resolved;
- a statement of acceptance by the arbitrators; and
- a statement of acceptance by the disputing parties to bear all necessary costs of resolving the dispute through arbitration.
3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?
Based on Article 10 of Law 30/1999, an arbitration agreement will not become null or void under any of the following circumstances:
- the death of one of the disputing parties;
- the bankruptcy of one of the disputing parties;
- novation by one of the disputing parties;
- the insolvency of one of the disputing parties;
- fulfilment of the requirements for cancellation of the main contract;
- transfer of the underlying contract to one or more third parties based on the consent of the disputing parties; or
- the expiration or voidance of the underlying contract.
3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?
On the seat of the arbitration, Law 30/1999 is silent if there is no agreement between the parties in this regard. However, Article 31 of Law 30/1999 provides that if the parties have not themselves determined the procedures to be applied, and the arbitrators have been appointed in accordance with Law 30/1999, then all disputes that have been referred to the arbitrators will be heard and decided upon in accordance with Law 30/1999.
On the language of the arbitration, Article 28 of Law 30/1999 requires that the Indonesian language be used as the language of the arbitration, unless the parties have agreed otherwise.
4 Objections to jurisdiction
4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?
Law 30/1999 is silent on the procedure for objecting to the jurisdiction of the tribunal. However, in practice, the Indonesian Civil Procedural Law will apply in this regard.
Under the Indonesian Civil Procedural Law, an objection to the jurisdiction of the tribunal must be submitted in the demurrer.
4.2 Can a tribunal rule on its own jurisdiction?
Yes, an arbitration tribunal can rule on its own jurisdiction. Although Law 30/1999 does not explicitly recognise the principle of kompetenz-kompetenz, it does provide that the courts do not have and may not assume jurisdiction over disputes if the disputing parties have agreed to resolve their disputes by arbitration.
4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?
As stated above, Articles 3 and 11 of Law 30/1999 clearly stipulate that if the parties have agreed to resolve their disputes by arbitration, the courts do not have and may not assume jurisdiction over such disputes. Thus, no party can apply to the court of the seat to issue a ruling on the jurisdiction of the tribunal.
5 The parties
5.1 Are there any restrictions on who can be a party to an arbitration agreement?
There are no restrictions on who can be a party to an arbitration agreement.
5.2 Are the parties under any duties in relation to the arbitration?
The parties have a duty to maintain the confidentiality of the arbitration proceedings. The parties to an arbitration agreement are also obliged not to bring the dispute before the domestic courts.
5.3 Are there any provisions of law which deal with multi-party disputes?
Law 30/1999 is silent on multi-party disputes and imposes no limits on the number of parties to an arbitration agreement.
6 Applicable law issues
6.1 How is the law of the arbitration agreement determined in your jurisdiction?
The law of the arbitration agreement is determined based on the law chosen in the underlying agreement.
6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?
In principle, Indonesian law recognises the doctrines of freedom of contract and pacta sunct servanda. These doctrines are reflected in Article 1338 of the Indonesian Civil Code, which confirms that the parties to a contract are free to include any provision subject only to the mandatory provisions of Indonesian law. Such agreements are also binding on the parties as law and must be upheld by the parties. Based on this, the arbitrator will also uphold the agreement between the parties, including their agreement on the substantive law of the dispute.
If the agreement is silent on the substantive law of the dispute, then under Article 56 of Law 30/1999, the applicable law is the law of the place where the arbitration is conducted.
7 Consolidation and third parties
7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?
Law 30/1999 is silent on this issue. However, the arbitration rules of the Indonesian National Arbitration Board (BANI) allow for separate arbitrations to be consolidated into a single arbitration proceeding.
Article 9 of the BANI Rules provides that the chairman of BANI may, at the request of a party, consolidate two or more arbitrations under the BANI Rules into a single arbitration if:
- the parties have agreed to the consolidation and the arbitration disputes arise from the same legal relationship;
- the request for arbitration is made under several agreements involving the same parties and BANI has been chosen as the arbitration institution; or
- the request for arbitration is made under several agreements where one of parties is the same and BANI has been chosen as the arbitration institution.
7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?
Under Article 30 of Law 30/1999, a third party outside an arbitration agreement may participate in an arbitration if it has related interests and if the disputing parties and the arbitration tribunal agree to its participation.
7.3 Does an arbitration agreement bind assignees or other third parties?
No. As under Law 30/1999, an arbitration must be based on a written agreement between the disputing parties, such agreement is binding only on the parties thereto.
8 The tribunal
8.1 How is the tribunal appointed?
In line with the freedom of contract provision in Article 1338 of the Indonesian Civil Code, the parties may determine the number of arbitrator(s) to decide the dispute (ie, a sole arbitrator or a three-member tribunal). The appointment of arbitrators is regulated under Articles 13 to 17 of Law 30/1999.
Article 13 of Law 30/1999 provides that if the parties cannot agree on the choice of arbitrators, or if the underlying agreement contains no provisions on the appointment of arbitrators, then the chairman of the district court is authorised to appoint the arbitrators.
If the parties have agreed that the dispute will be examined by a three-member tribunal, the parties may each appoint an arbitrator and the two party-appointed arbitrators will subsequently appoint the third arbitrator, who will act as the chair. If the two arbitrators cannot agree on the appointment of the third arbitrator, the chairman of the district court will appoint the third arbitrator.
If one party has appointed an arbitrator and the other party fails to appoint an arbitrator within the stipulated timeframe, the arbitrator chosen by the first party will act as the sole arbitrator.
8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
Under Article 8(f) of Law 30/1999, there must be an odd number of arbitrators. As regards the qualification of the arbitrators, Article 12 of Law 30/1999 provides that in order to be an arbitrator, a person must:
- be authorised or competent to perform legal actions;
- be at least 35 years old;
- not have any family relationship by blood or by marriage up to the second degree with one of the disputing parties;
- not have any financial or other interest in the arbitration award; and
- have at least 15 years' experience and possess a mastery of the issues under dispute.
8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
Yes, under Article 22 of Law 30/1999, an arbitrator may be challenged on the following grounds:
- There is sufficient cause and authentic evidence giving rise to doubts that the arbitrator can perform his or her duties independently or will not be biased in rendering an award; or
- There is a proven family, financial or employment relationship between the arbitrator and one of the disputing parties or its legal representatives.
A challenge against an arbitrator based on any of the above grounds must be submitted within 14 days of such ground becoming known. If a party intends to object to the appointment of an arbitrator, it must also submit a challenge within 14 days of the arbitrator's appointment.
8.4 If a challenge is successful, how is the arbitrator replaced?
Under Article 75 of Law 30/1999, the parties must appoint a replacement arbitrator. If the parties are unable to reach agreement on the appointment of a replacement arbitrator, one of them can submit a request to the chairman of the district court within 30 days to appoint one or more replacement arbitrators.
8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?
Under Law 30/1999, the arbitrators are subject to the following duties:
- to disclose any facts that may raise doubts as to his or her impartiality;
- to maintain the confidentiality of the arbitration;
- to render an arbitral award within 180 days of the establishment of the arbitration tribunal. This timeframe may be extended based on the parties' approval. If the award is not rendered within 180 days, the tribunal may be ordered to compensate the parties for any losses caused by the delay;
- to include its consideration for the dispute in the final arbitral award, which must be signed and in writing; and
- to register the award in the district court.
8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
(a) Procedure, including evidence?
Under Article 46(3) of Law 30/1999, the arbitrators may request the parties to submit additional briefs, documents and evidence that they deem necessary within a timeframe stipulated by the arbitrators.
(b) Interim relief?
Under Article 32 of Law 30/1999, the arbitrators may grant interim relief at the request of one of the parties. Such interim relief may include orders on how the examination of the case will proceed, including ordering a security attachment, the deposit of goods to third parties or the sale of perishable goods.
(c) Parties which do not comply with its orders?
Once an order or award is registered with the district court, the winning party can apply for the court's assistance with enforcement if the losing party fails to comply with such order or award.
(d) Issuing partial final awards?
Law 30/1999 does not regulate the issuance of partial final awards.
(e) The remedies it can grant in a final award?
Under Article 56 of Law 30/1999, the arbitrators must render their award based on the relevant provisions of law or based on justice and fairness (ex aequo et bono). As a basic principle, the parties can agree on whether the arbitrators may render the award ex aequo et bono.
If the arbitrators are empowered to render their award ex aequo et bono, then the provisions of law may be ruled out, unless they are mandatory provisions whose application cannot be ruled out by the arbitrators(s). Otherwise, the arbitrators must render their award based on the material rules of law. In conclusion, unless the arbitrators have the freedom to render their award ex aequo et bono, their award is limited to the relief requested in the prayer for relief.
In principle, there are three types of verdicts in Indonesia:
- declaratoir vonnis, in which the arbitrators declare their position on the disputed issues;
- constitutief vonnis, in which the arbitrators negate or affirm the state of law; and
- condemnatoir vonnis, in which the arbitrators issue an order against the defaulting party, which may range from specific performance to compensation for the non-defaulting party.
One arbitral award may contain a combination of all three types of verdicts.
The arbitrators can grant interest in the award only if this has been specifically requested by the parties.
8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
If the claimant does not participate in the first hearing for no reason, then under Article 43 of Law 30/1999, its statement of claim will be declared null and void and the mandate of the arbitral tribunal will be deemed to have been completed.
If the respondent does not participate in the first hearing for no valid reason, then under Article 44(1) of Law 30/1999, the arbitral tribunal can deliver a second summons to the defendant. If the respondent fails to appear at the hearing within 10 days of receiving the second summons, then the arbitration will continue without the presence of the respondent and the claimant's claim will be granted in its entirety, unless it is unfounded or contrary to the law.
8.8 Are arbitrators immune from liability?
Yes. Article 21 of Law 30/1999 protects arbitrators from being held legally responsible for any actions taken in carrying out the function of an arbitrator during the proceedings, unless it can be proven that such actions were taken in bad faith.
9 The role of the court during an arbitration
9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?
Yes. Under Article 3 of Law 30/1999, the courts have no jurisdiction to hear a dispute between parties that are bound by an arbitration agreement.
9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?
The Indonesian courts have certain powers in both domestic and international arbitration.
In domestic arbitration, the Indonesian courts have the power to enforce an arbitral award once it has been registered with the relevant district court by the arbitrators or their legal representative. Likewise, an application to annul a domestic arbitration award must be submitted to the district court. In addition, Law 30/1999 grants the chairman of the district court certain powers relating to the appointment and replacement of an arbitrator. For example, Article 13 of Law 30/1999 stipulates that if the parties cannot reach agreement on the choice of arbitrators or if no terms have been set concerning the appointment of arbitrators, then the chairman of the district court has the power to appoint an arbitrator or establish the composition of the arbitration tribunal. In ad hoc arbitration, the parties may request the chairman of the district court to appoint one or more arbitrators to resolve a dispute if there is any disagreement between the parties with regard to the appointment of the arbitrators.
In international arbitration, the Indonesian courts have the power to enforce an arbitral award once it has been registered with the relevant district court by the arbitrators or their legal representative.
9.3 Can the parties exclude the court's powers by agreement?
No. The parties cannot exclude the court's powers by agreement.
10.1 How will the tribunal approach the issue of costs?
Based on Article 77 of Law 30/1999, the arbitration fees will be charged to the losing party. If the claim is only partially granted, the arbitration fees will be charged to the parties equally.
10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?
There are no restrictions on what the parties can agree in terms of costs in an arbitration.
11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?
Law 30/1999 does not regulate third-party funding. However, based on the elucidation of Article 27 of Law 30/1999, arbitration proceedings are confidential; there is therefore a risk that third-party funding might violate this provision.
12.1 What procedural and substantive requirements must be met by an award?
With regard to the procedural and substantive requirements, Article 57 of Law 30/1999 states that an award must contain:
- a heading containing the words "DEMI KEADILAN BERDASARKAN KETUHANAN YANG MAHA ESA" (FOR THE SAKE OF JUSTICE BASED ON BELIEF IN THE ALMIGHTY GOD);
- the full names and addresses of the disputing parties;
- a brief description of the matter in dispute;
- the respective position of each party;
- the full names and addresses of the arbitrators;
- the considerations and conclusions of the arbitrators concerning the dispute as a whole;
- the opinion of each arbitrator, if there is any difference of opinion within the tribunal;
- the order of the award;
- the place and date of the award; and
- the signatures of the arbitrators.
The arbitrators must further render their award based on the relevant provisions of law or based on justice and fairness. The content of the award must not be contradictory. The award should also resolve all disputes submitted by the parties.
12.2 Must the award be produced within a certain timeframe?
Yes, under Article 57 of Law 30/1999, the award must be rendered within 30 days of the conclusion of the arbitration proceedings.
13 Enforcement of awards
13.1 Are awards enforced in your jurisdiction? Under what procedure?
Yes. The following procedures apply:
- If an award is rendered in Indonesia, then under Article 59 of Law 30/1999, the original or an authentic copy of the award must be submitted for registration to the clerk at the relevant district court by the arbitrators or their legal representative.
- If an award is rendered outside of Indonesia, it must be registered with the Central Jakarta District Court by the arbitrators or their legal representative. Following registration, an exequatur order should also be obtained from the chairman of the Central Jakarta District Court.
14 Grounds for challenging an award
14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?
In Indonesia, an arbitration award cannot be challenged or appealed, as under Article 60 of Law 30/1999, an arbitration award is final and binding on the disputing parties. However, under Article 70 of Law 30/1999, an arbitration award may be annulled if any of the following conditions is proved:
- A letter or document submitted during the proceedings is acknowledged to be false or forged, or is declared to be a forgery after the award has been rendered;
- A decisive document that was deliberately concealed by one of the disputing parties is discovered after the award has been rendered; or
- The award was rendered as a result of fraud on the part of one of the disputing parties.
14.2 Are there are any time limits and/or other requirements to bring a challenge?
Under Article 71 of Law 30/1999, an application to set aside an arbitration award must be submitted in writing within 30 days of the date on which the arbitration award was submitted for registration to the clerk of the district court. The application to annul an arbitration award must be submitted to the chairman of the applicable district court.
14.3 Are parties permitted to exclude any rights of challenge or appeal?
No, parties cannot exclude the right to challenge an arbitration award, as this is a remedy provided under the law.
15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?
Yes, Article 27 of Law 30/1999 stipulates that all hearings in an arbitration dispute will be closed to the public.
15.2 Are there any exceptions to confidentiality?
Law 30/1999 provides no exceptions to confidentiality.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.