The annulment of an arbitral award raises complex questions regarding the availability and limits of legal remedies in Indonesia. This article explores how the Supreme Court has shaped Arbitral Award Annulment Jurisprudence, providing clarity on its role within Arbitration Jurisprudence Indonesia.
Regulatory Framework on Arbitral Award Annulment
“In Indonesia, an appeal application only applies to the cancellation of an arbitral award, meaning that if a district court rejects an annulment petition, no further legal remedy, including appeal, is available. ”
Arbitral award which rendered by the Arbitral Tribunal is final in nature and binding upon the parties. Article 60 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration and ADR Law”), stated “Arbitral award shall be final and has permanent legal force and bind both parties.” Furthermore, its Elucidation also stipulated, that “Arbitral award is a final award and thus, no appeal, cassation or reconsideration that may be filed.” Consequently, parties involved in an arbitration dispute, must comply with and implement such award, without any further legal remedies available.
Nonetheless, against an arbitral award, a legal remedy in the form of annulment may still be submitted through the district court. Whereas due to its final and binding nature, annulment of the award cannot be carried out on the grounds of substantive matters of the disputed case in the arbitration. The annulment of an arbitral award shall only be limited to the aspects regarding the procedural validity of the award.
Article 72 of the Arbitration and ADR Law stipulates that petition for the annulment of arbitral award must be submitted to the Chief of District Court. The Chief of District Court further determine the effect of the whole or partial annulment of the arbitral award. Against such district court decision an appeal may be filled before the Supreme Court which will decides at the first and final level.
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In addition, such appeals may be filed against court decisions at the first instance that grants the relevant arbitral award’s annulment petition. Article 27 paragraph (1) of the Supreme Court Regulation Number 3 of 2023 on the Appointment of Arbitrator by Court, Repudiation Rights, Examination on the Enforcement and Annulment Petition of Arbitral Awards (“Supreme Court Reg. on Arbitration”), stated that the court decision granting the petition for annulment of the arbitral award, an appeal may be filed to the Supreme Court. However, what if such petition is denied? Can an appeal against a district court decision be filed when the court decision does not decide to annul an arbitration award?
Limits of Appeal on Arbitral Award Annulment Petition
Unlike appeals in the general disputes which are submitted to the High Court, an appeal in the petition for annulment of an arbitral award dispute is submitted to the Supreme Court, which shall decide at the first and final level. However, it should be understood that not all court decisions regarding annulment petition of an arbitral award can subsequently be appealed.
The Elucidation of Article 72 of the Arbitration and ADR Law stated, “appeal” refers only to the annulment of arbitral award over the 3 (three) grounds as referred to under Article 70, namely the existence of a false documents, after the award was rendered, it is found that there is a decisive document which was buried by the opposing party and the award is rendered based on fraud (tipu muslihat) of one of the parties.
“Unlike appeals in the general disputes which are submitted to the High Court, an appeal in the petition for annulment of an arbitral award dispute is submitted to the Supreme Court, which shall decide at the first and final level.”
However, not only that, as has been stated above, the Supreme Court Reg. on Arbitration has in fact indicated that the requirement for filing an appeal in this matter, applies only to court decisions that grant the annulment petition. Moreover, under the Supreme Court Circular Letter Number 4 of 2016, has expressly stated:
“In accordance with the provisions of Article 72 paragraph (4) of Law Number 30 of 1999 on Arbitration and its elucidation, against a district court decision that rejects an application for annulment of an arbitral award, no legal remedy is available, either appeal or a judicial reconsideration (peninjauan kembali).
In the event that a district court decision annuls an arbitral award, a legal remedy of appeal to the Supreme Court is available, and with respect to such appellate decision the Supreme Court decides at the first and final level so that no legal remedy of a judicial reconsideration is available.”
When considering the aforementioned provisions, therefore, it is indeed clear that when a court decision rejects a petition for annulment of an arbitral award, it is not possible to file an appeal over that decision. In practice, however, it is not uncommon for the parties whose applications have been rejected to nevertheless file an appeal to the Supreme Court.
Read More: Beyond Arbitration: When Public Order Decisively Trumps Arbitral Awards
Therefore, how then does Judex Juris assess this matter in practice? Are their considerations in line with the existing provisions? To further understand how the Judex Juris provide their assessments and considerations, several jurisprudences will be provided below which will demonstrate their legal reasoning against a petition of appeal where it was filed after the rejection of the submitted petition at the first level.
PT. Krakatau Engineering v. BANI and PT. Krakatau Posco, Jurisprudence Number 286 B/Pdt.Sus- Arbt/2016
Judex Juris in its legal considerations in Decision Number 286 B/Pdt.Sus-Arbt/2016 said:
“That according to Article 72 paragraph (4) of Law Number 30 of 1999, against an annulment of an arbitral award by the District Court may be filed for appeal before the Supreme Court which decides in the final level, whereas under its elucidation stated that what is meant by ‘appeal’ is only against an annulment of arbitral award as referred to under Article 70 of Law Number 30 of 1999. Therefore, what is being examined in this case is an application for annulment of an arbitration award, the Supreme Court will examine this case at the final level.”
The legal considerations above confirm the authority of the Supreme Court to examine appeal cases that will be examined and decided at the final level against the annulment of an arbitral award.
PT. Marga Setiapuritama v. Indonesian National Board of Arbitration (“Badan Arbitrase Nasional Indonesia/BANI”), Jurisprudence Number 9 B/Pdt.Sus-Arbt/2018
Judex Juris in legal considerations in Decision Number 9 B/Pdt.Sus-Arbt/2018 said:
“That in accordance with the explanation of Article 72 paragraph (4) of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution, it is determined that an appeal can only be made against the annulment of an arbitral award as referred to under Article 70 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution and upheld by the Civil Chamber Formulation (Indonesian Supreme Court Circular Letter Number 4 of 2016): “against a District Court decision that does not annul the arbitral award, an appeal legal remedy (cassation) may not be submitted to the Supreme Court.”
Judex Juris’ legal considerations as above are made consistently by Judex Juris as seen in other legal cases with an appeal without cancellation of an arbitration award, as will be reviewed in several subsequent jurisprudence.
“Against a District Court decision that does not annul the arbitral award, an appeal legal remedy (cassation) may not be submitted to the Supreme Court.”
Marine-Andema-Tidarmarine v. Wika-Hutama Joint Operation, Jurisprudence Number 465 B/Pdt.Sus-Arbt/2020
Judex Juris in its legal considerations in Decision Number 465 B/Pdt.Sus-Arbt/2020 said:
“That in accordance with the Provisions of Article 72 paragraph (4) of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution and Circular Letter of the Supreme Court Number 4 of 2016 it is emphasized that there is no legal remedy available for a District Court decision that rejects a request to annul an arbitration award.”
The legal considerations above state from the opposite point of view, that only an annulment of an arbitration award can be appealed. If the district court decision does not annul the arbitration award, then the decision cannot be appealed.
PT. Berdikari Insurance v. BANI and PT. Biru & Sons, Jurisprudence Number 709 B/Pdt.Sus-Arbt/2020
Judex Juris in its legal considerations in Decision Number 709 B/Pdt.Sus-Arbt/2020 said:
“That in accordance with the Provisions of Article 72 paragraph (4) of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution and Circular Letter of the Supreme Court Number 4 of 2016, it is emphasized that against the decision of the District Court that rejects the application for annulment of the arbitration award, there is no legal remedy, either Appeal or Judicial Reconsideration.”
“That considering the Semarang District Court Decision… rejects the Annulment Petition of the BANI Award… therefore a legal remedy filed by the Claimant must be denied.”
This Judex Juris’ considerations, did not just merely emphasized the non-existence of an appeal legal remedy, but also the non-existence of the judicial reconsideration (peninjauan kembali) legal remedy if there is no annulment of the arbitral award.
Kantor Hukum Bertiga, Firma Diana, Wiyanto, Hafid Consulting v. BANI and PT. Indonesia Asahan Alumunium (Persero), Jurisprudence Number 1033 B/Pdt.Sus-Arbt/2020
Judex Juris in its legal considerations in Decision Number 1033 B/Pdt.Sus-Arbt/2020 said:
“… however, in its explanation/elucidation of Article 72 paragraph (4) it is explained that what is meant by an appeal is only against the decision to cancel the arbitration so that against the decision of the District Court which rejects the request to cancel the arbitration award, there is no legal remedy available.”
“That it turns out that the decision of the judex facti submitted for appeal in the a quo case is not in the form of an annulment of the arbitration award, therefore the appeal must be declared inadmissible.”
The Judex Juris’ consideration has clearly reaffirmed that a petition for annulment of an arbitral award which was rejected at the first level, cannot be submitted for appeal before the Supreme Court.
Consistency on Appealed Decision
Various laws and regulations have provided a clear provision regarding the conditions under which a court decision on a petition for annulment of an arbitral award may be appealed to the Supreme Court. In addition to the conditions provided under Article 70 and Article 72 of the Arbitration and ADR Law, relevant laws and regulations has explicitly stipulated that a petition for annulment of an arbitral award that has been rejected at the first instance, cannot be subject to any legal remedies, including an appeal. Yet in practice, to date, parties involved in an arbitration cases are still often continue to file an appeal, regardless of the existing provisions.
Read More: Appealling Decisions on Award Annulment without Memorandum: A Strategic Jurisprudential Analysis
Ultimately, when referring to the Judex Juris’ considerations in the jurisprudences provided above, it is evident that they have provided a fairly consistent assessment regarding such matter. By considering the applicable provisions, it is affirmed, that while the Supreme Court does indeed have the authority to hear appeals against court decisions which annuls the arbitral award, an appeal against an annulment petition that was rejected at the first level cannot be brought before the Supreme Court under any circumstances.
Author
Dr Eddy Marek Leks, FCIArb, FSIArb, is the founder and managing partner of Leks&Co. He has obtained his doctorate degree in philosophy (Jurisprudence) and has been practising law for more than 20 years and is a registered arbitrator of BANI Arbitration Centre, Singapore Institute of Arbitrators, and APIAC. Aside to his practice, the author and editor of several legal books. He led the contribution on the ICLG Construction and Engineering Law 2023 and ICLG International Arbitration 2024 as well as Construction Arbitration by Global Arbitration Review. He was requested as a legal expert on contract/commercial law and real estate law before the court.
Co-authored
Miskah Banafsaj is an associate at Leks&Co. She holds a law degree from Universitas Indonesia. Throughout her studies, she was actively involved in student organizations and participated in various law competitions. She has also previously worked as an intern at several reputable law firms. At this firm, she is involved in doing legal research, case preparation, and assists with ongoing matters.
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Sources:
- Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution.
- Supreme Court Regulation Number 3 of 2023 on the Appointment of Arbitrator by Court, Repudiation Rights, Examination on the Enforcement and Annulment Petition of Arbitral Awards.
- Supreme Court Circular Letter Number 4 of 2016 on the Implementation of the Supreme Court Chamber’s 2016 Pleno
- Meeting Result as a Guidance of Court Work.
- Supreme Court Decision Number 286 B/Pdt.Sus-Arbt/2016.
- Supreme Court Decision Number 9 B/Pdt.Sus-Arbt/2018.
- Supreme Court Decision Number 465 B/Pdt.Sus-Arbt/2020.
- Supreme Court Decision Number 709 B/Pdt.Sus-Arbt/2020.
- Supreme Court Decision Number 1033 B/Pdt.Sus-Arbt/2020.
