Arbitration Costs: A Critical Examination of Jurisprudence

Arbitration costs often become a decisive factor in dispute resolution, influencing both parties’ strategies and willingness to proceed. This article critically examines how Indonesian arbitration tribunals allocate such costs, exploring relevant jurisprudence and the interplay between BANI regulations and the Arbitration and ADR Law.

Arbitration Costs

Every dispute that is intended to be resolved through arbitration must be set forth in a written agreement. Referring to Article 9 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration and ADR Law”), such agreement must, among other things, may contain a statement of willingness from the disputing parties to bear any expenses that are necessary for the dispute settlement through arbitration.     

Article 77 of the Arbitration and ADR Law stipulates that arbitration costs are borne by the losing party, and if the claim is partially granted, the arbitration costs are borne by the parties equally.

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These legal norms may be regulated differently in the arbitration regulations and procedures of an institution. For example, in Article 36 of the Indonesian National Board of Arbitration (“Badan Arbitrase Nasional Indonesia/BANI”) Arbitration Regulations and Procedures 2022 and 2025, it is essentially stipulated that the tribunal has the authority to determine which party is responsible for paying or making a refund to the other party, which must be stated in the decision.

In regulating the dispute resolution process, the tribunal under BANI rules may determine the arbitration costs differently than what has been stipulated under the Arbitration and ADR Law.  Such provision may be different in other arbitral institutional rules. Nevertheless, this article will focus on the provisions of BANI rules and its correlation with the Arbitration and ADR Law.

The tribunal is, in essence, responsible for determining the arbitration costs. Can arbitration costs be determined separately by the arbitration institution based on its regulations, or must arbitration costs follow the legal norms of the Arbitration and ADR Law?

Scope of Arbitration Costs

Before further addressing such matters, it should first be understood what is meant by arbitration costs in this context. Referring to the BANI official website, arbitration costs include administrative fees, examination fees, and arbitrator’s fees. The Arbitration and ADR Law, under Article 76 paragraph (2), further provides that such costs shall include, among others:

• Arbitrator’s honorarium;
• Travel expenses and other expenses which are expended by the arbitrator;
• Fees relating to witness and or expert witness which are required in the proceeding; and
• Administrative fees.

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Nonetheless, referring on the BANI official website along with the provision under Arbitration and ADR Law, the following shall not be considered as arbitration costs:

• The cost of summons, transportation and honorarium of witnesses and/or experts. As also stipulated under Article 49 paragraph (2) of the Arbitration and ADR Law, these costs are borne by the proposing party.
• Transportation costs, accommodation and other costs, for arbitrators residing outside the venue of the hearing.
• The costs of the hearing which is conducted in a place other than provided by BANI.
• The cost of site visit will be calculated by BANI.
• Cost of registering the arbitration award in the district court.

Notwithstanding these provisions, in order to answer the earlier question concerning whether the tribunal must strictly adhere to the Arbitration and ADR Law in determining arbitration costs, such matter will be examined through the following jurisprudence.

Dr. Sumarni, Sp., RM., v. PT. Philips Indonesia and BANI, Jurisprudence Number 323 B/Pdt.Sus-Arbit/2019 jo. 127/Pdt.Sus-Arbt/2018/PN Plg

In this case, the Claimant filed a petition for annulment of the arbitral award before the Palembang District Court. The first instance court’s decision essentially annulled the arbitral award and ordered the Respondent to pay certain costs arising from the a quo case. The Respondents subsequently filed an appeal petition to the Supreme Court.

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In its consideration, the Judex Juris held that Judex Facti had erred in applying the law and therefore annulled the first-level court’s decision. The Supreme Court stated that Judex Facti had provided legal considerations on matters that were never raised or addressed by the Claimant, either in the award annulment proceedings or in the underlying arbitration proceeding, particularly concerning the allocation of arbitration costs, where the Judex Facti previously stated that, the case fees (biaya perkara) imposed on the parties in the arbitral award, shall be divided equally and borne by each party.

In this regard, Judex Juris in Decision No. 323 B/Pdt.Sus-Arbt/2019 considered:

“… the determination of the court costs charged to the parties… has been regulated in the BANI Procedural Regulations.”

The legal considerations in the decision also emphasize that the arbitration award does not need to follow the format of a court decision but is subject to the format regulated in the relevant arbitration regulations and procedures.

Affirming Allocation of Arbitration Costs

This jurisprudence essentially reaffirms that, despite the Arbitration and ADR Law indeed regulating arbitration costs, such costs, however, may be independently determined by the tribunal in an arbitration proceeding pursuant to the applicable provision, without being necessarily bound by the provisions under the Arbitration and ADR Law. Thus, the tribunal is not bound to the provisions on arbitration costs as stipulated in Article 77 of the Arbitration Law and ADR.

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Sources:

• Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution.
• Supreme Court Decision Number 323 B/Pdt.Sus-Arbit/2019;
• Palembang District Court Decision Number 127/Pdt.Sus-Arbt/2018/PN Plg;
• BANI Arbitration Regulations and Procedures
• BANI. Biaya Arbitrase BANI. baniarbitration.org. 2023.