Arbitration Specifics in Indonesia

If you encounter a situation when you need to resolve a commercial dispute in Indonesia, you need to be aware that arbitration proceedings in this jurisdiction can be initiated before or during the dispute. Another fact you should not miss is that arbitration disputes in Indonesia are settled in accordance with the local Arbitration Act, which is not adopted by the UNCITRAL Model Law.

Before you start

Сommercial conflicts arise in the course of the company's economic activities. Most often they concern disagreements connected with contracts such as violation of terms, change of separate points, early termination, refusal of performance, etc. However, commercial disputes do not always concern contracts - they may consist of debt collection, damage, recognition of property rights, etc.

The main factor in the protection of the counterparty's rights and legitimate interests in concluding a trade agreement is the choice of a competent authority capable of resolving the conflict.

Errors in its determination may prevent contractors from avoiding risks due to possible ignorance of the procedure, costs (for example, inability to engage a foreign solicitor), the term of disputes, etc.

An important component of any arbitration agreement in Indonesia is a statement of readiness to pay all costs incurred during the whole arbitration process.

Select the right arbitrator

If you have decided to initiate arbitration proceedings in Indonesia, you must review the agreement clause regarding the appointment of an arbitrator. If there is no such provision, the district court will do it for you. 

Any party has the right to remove an arbitrator if reliable evidence is found that the arbitrator is not performing his or her duties independently.

The process step-by-step:

• request for arbitration;
• answer;
• challenge;
• first meeting;
• dispute consideration;
• review of evidence; 
• award.

If there are no claims, the dispute will be considered by the tribunal in the prescribed manner. During the hearings, the court will review the evidence provided by both parties, examine the documents and issue a verdict - to satisfy or not the plaintiff's claim.

The problem of the timing of arbitration in Indonesia

For businesses involved in arbitration, the timing of the proceedings in the arbitral tribunal is crucial, as they can greatly affect their current business activities. The rules for calculating procedural time limits in arbitration proceedings create a situation in which the real (physical) terms of consideration of the case and procedural terms will be quite different.

The temporary factor acquires special significance for dynamic economic activity because unfulfilled contracts and funds not received on time can impose great restrictions on business. Therefore, procedural deadlines are of great importance for business. However, it should be borne in mind that shortening the period of consideration of the case reduces the amount of information available to the court to decide the case, and is fraught with the fact that judges make compromise decisions.

The specifics of arbitral awards in Indonesia is that they cannot be appealed in any court - they are ultimate and binding for all parties involved.