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03 October 2019
In general, the methods used to resolve commercial disputes in Indonesia are:
The resolution of commercial disputes through arbitration or ADR (eg, mediation) is generally governed by the Law Concerning Arbitration and ADR (30/1999) (Arbitration Law). The Arbitration Law recognises the principle of competence under which the district courts have no jurisdiction to try disputes between parties bound by an arbitration agreement. Further, the principle of separability applies, under which an arbitration agreement does not become null and void if the main contract expires or becomes void. In principle, parties must agree to resort to arbitration or ADR.
In Indonesia, international arbitration is governed by the Arbitration Law, which is not based on the United Nations Commission on International Trade Law Model Law. Under the Arbitration Law, any award handed down outside Indonesia (eg, in Singapore or London) is classified as an international arbitration award. International arbitral awards include all awards issued by arbitration institutions or in ad hoc arbitration which are deemed to be international arbitration awards under Indonesian law. All other types of award are classified as domestic arbitration awards.
The Arbitration Law provides the procedure and requirements for enforcing international arbitration awards. The New York Convention was ratified by Indonesia on 5 August 1981 under Presidential Decree 34/1981 and has been in force since 5 January 1982. Therefore, foreign arbitration awards can be enforced in Indonesia. Aside from the New York Convention, Indonesia has signed no other treaties on the recognition and enforcement of arbitration awards.
The Central Jakarta District Court (CJDC) is the only court authorised to enforce international arbitration awards. An international arbitration award can be enforced in Indonesia provided that:
For an international arbitration award to be enforced in Indonesia, it must first be registered with the CJDC by the arbitrators or their proxies. For registration, the following documents must be submitted to the court:
If the above requirements are satisfied, the CJDC registrar will issue a deed on the registration of the international arbitration award. Following registration, if the respondent does not voluntarily comply with the international arbitration award, the procedure for enforcing the international arbitration award in Indonesia is as follows:
The above procedure is subject to the Civil Procedural Law. Further, the Arbitration Law imposes no specific time limit for enforcing an international arbitration award in Indonesia. Therefore, the whole process often takes a long time, especially if the respondent's assets are difficult to identify or located in various places throughout Indonesia.
The Arbitration Law is silent on the enforcement of an international arbitration award which has been set aside by a court in the seat of arbitration. Since Indonesia has ratified the New York Convention, under Article V(1) thereof, the chair of the CJDC cannot issue a writ of execution if an international arbitration award has been set aside; therefore, such awards cannot be enforced in Indonesia.
However, claimants can file an appeal with the Supreme Court.
A few international arbitration bodies have a presence in Indonesia, such as the International Chamber of Commerce and a chapter of the Chartered Institute of Arbitrators.
The Arbitration Law recognises mediation, consultation, negotiation, mediation and conciliation as forms of ADR. If settlement cannot be reached through negotiation, the most common forms of ADR are mediation and conciliation, in which the parties request the involvement of an impartial third party to hear both sides.
In certain areas, ADR is mandatory and overseen by specific government agencies. For example, in:
The enforcement of an ADR or mediation settlement generally requires prior registration of the award or settlement agreement with the district court with jurisdiction. Indonesian law acknowledges that a registered mediation settlement has the same weight as a final and binding court decision.
Indonesia also has an independent mediation centre (the Indonesian Mediation Centre), which permits professional or licensed mediators to handle out-of-court mediation or mediation under court supervision.
The government has established several bodies to handle disputes relating to consumer and business affairs, such as the BPSK and the Supervisory Commission on Business Competition (KPPU). However, there have been no significant changes to any related Indonesian laws in this regard.
The BPSK must issue its decision on a dispute between a consumer and a business within 21 days of the claim being submitted. Within seven days of the issuance of the BPSK's decision, the business must comply with the decision. Failure to do so may lead to a full investigation because BPSK's decisions constitute sufficient preliminary evidence for such an investigation. However, the consumer or business can object to the BPSK's decision in the Indonesian courts. If the business does not object to the BPSK's decision, the consumer can request its enforcement by the Indonesian courts.
The KPPU's functions include:
The KPPU is also entitled to handle and rule on complaints relating to the above issues and issue a decision. KPPU decisions may be challenged by a business through the Indonesian courts. In such cases, the panel of judges must issue its ruling on the objection within 30 days of the commencement of the trial. If a business is found to be in violation of the law, the penalties imposed may be:
For further information on this topic please contact Alexandra Gerungan, Lia Alizia or Rudy Andreas Halomoan Sitorus at Makarim & Taira S by telephone (+62 21 252 1272) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Makarim & Taira S website can be accessed at www.makarim.com.
An earlier version of this article was published in Global Legal Insights.
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