Can an Arbitral Award be Corrected by the Court: Exploring the Possibilities

The final and binding nature of an arbitral award often raises questions about whether it can still be corrected by the court. This article explores the boundaries between correction and annulment of an arbitral award under Indonesian arbitration law.

Annulment of an Arbitral Award

An arbitral award rendered by an arbitral institution may be subject to an application for annulment filed to the Chief of District Court within a period no later than 30 (thirty) days as of the delivery and registration of the arbitral award with the Court Registrar.

Article 70 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration and ADR Law”) jo. Article 24 paragraph (4) 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”) has specifically stipulated, elements that may result in an arbitral award being subject to annulment, namely if it is alleged of containing one of the following elements:

• Letters or documents filed in the hearings which are admitted to be forged or are declared to be forgeries after the award has been rendered;
• After the award has been rendered documents are founded which are decisive in nature and were deliberately concealed by the opposing party; or
• The award was rendered as a result of fraud (tipu muslihat) committed by one of the parties to the dispute.

The panel of judges’ authority in examining an application for annulment of an arbitral award is essentially limited to the three elements mentioned above. The panel of judges may no longer examine the merits of the case in the arbitral dispute. Consequently, the panel of judges should also no longer have the authority to assess or review the legal considerations adopted by the arbitral tribunal in rendering the arbitral award.

Read Also: Beyond Arbitration: When Public Order Decisively Trumps Arbitral Awards

However, what happens when in a dispute concerning an application for annulment of an arbitral award, the panel of judges instead issues a decision by making correction to the arbitral award? Whereas, essentially, the nature an arbitral award is final, has permanent legal force, and is binding upon the parties.

Correction of Arbitral Award

In fact, making corrections and/or amendments to an arbitral award is not entirely impossible. This has in fact been specifically regulated under the Arbitration and ADR Law. As stipulated through Article 58 of the Arbitration and ADR Law along with its Elucidation, the parties may file a petition to perform correction against any administrative errors and/or add or eliminate a claim from the award. Such application shall be addressed to the arbitrator or arbitral tribunal within no later than 14 (fourteen) days after the acceptance of the award.

In its Elucidation, it was further specified in detail, that:

“‘Correction against any administrative errors’ refers to correction against matters such as typo or errors in writing names, addresses of both parties or arbitrators and so-forth, which do not change the substance of the award.”

“‘Add or eliminate a claim’ refers to a condition where one of the parties may express objection against the award if the award:

• has granted something which is not claimed by the opposing party;
• does not contain one or more matters which are invoked to be judged; or
• contains binding provisions which are in contradiction with one another.”

Nevertheless, it is clear in this regard that a correction of an arbitral award is not to be filed and/or carried out simultaneously with an annulment of the arbitral award before the court.

PT. Aneka Bina Lestari v. Cristian Handoko, Jurisprudence Number 44 PK/PDT.SUS/2011 jo. 65 K/PDT.SUS/2010 jo. 02/P/PEMBATALAN ARBITRASE/2009/PN.JKT.PST.

In this case, an arbitral award was challenged for an annulment to the court. The Decision has been issued with one of the rulings ordering the Respondent to pay a coercive fine in the amount of Rp1.000.000 (one million rupiah) per day if the Respondent fails to enforce the decision in this case once it has become final and binding.

Whereas the legal relationship between the two parties arises from the sale and purchase transaction of an apartment that was still under construction by PT Aneka Bina Lestari (“Claimant”). In this matter, Cristian Handoko (“Respondent”) has made a partial payment (in installments). Nevertheless, it was later discovered that there was a delay in the construction of the apartment, upon which the Respondent demanded a refund. The Claimant subsequently rejected such demand and stated that the Claimant would complete the construction of the apartment, on the condition that the Respondent gives an additional payment in the form of a participation fee. In response, the Respondent filed a request for arbitration before the Indonesian National Board of Arbitration (“Badan Arbitrase Nasional Indonesia/BANI”).

Read Also: Indonesia: Interpreting ‘International’: Reassessing the Definition of Arbitral Awards in Indonesia

The annulment claim was filed on the grounds of fraud (tipu muslihat) and on the grounds that the arbitral award was rendered without legal foundation, including, among others, a violation of jurisprudence regarding coercive fine and that the Arbitral Tribunal had exceeded its authority in imposing such coercive fine.

The claim was granted, and the arbitral award was subsequently annuled by the Central Jakarta District Court. Among the considerations of the Judex Facti in assessing and upholding the arbitral award concerning the imposition of coercive fine (dwangsom), was based on Article 606 a and b of the Reglement op de Rechtsvordering (“Rv”) and the Supreme Court Jurisprudence Number 792 K/SIP/1972 dated 6 December 1972.

An appeal over the said decision was subsequently filed to the Supreme Court. The appeal petition essentially stated that the Judex Facti had misapplied the law, as the legal basis used by the Judex Facti in imposing the coercive fine was no longer valid, and there was also misapplication of the jurisprudence.

Judex Juris in its legal consideration in the Decision Number 65 K/Pdt.Sus/2010 essentially argued that an arbitral award could only be filed for an annulment if it fulfills the requirements under Article 70 of the Arbitration and ADR Law.

Whereas, the Judex Juris concluded, a contested arbitral award for annulment did not contain any of the elements (of the Article 70). Judex Juris upheld the arbitral award.

Nevertheless, in regards to the coercive fine (dwangsom), this was subsequently corrected by the Supreme Court. Judex Juris considered:

“That concerning the coercive fine (dwangsom) to the Appellee… in the amount of 1 (one) million rupiah per day… cannot be justified because in accordance with the provision on Article 606a and 606b Rv which stipulates that the payment of coercive fine (dwangsom) is unapplicable for an order to pay a sum of money.”

Subsequently, Judex Juris considers, “… correcting the award… insofar concerning dwangsom is annulled…”

Furthermore, the Supreme Court adjudicated the case independently and annuled the decision on the dwangsom which previously imposed by the Arbitration Tribunal. Despite correcting the award, what the Judex Juris did was based on elucidation of Article 72 of Arbitration and ADR Law which explicitly allows partial annulment.

However, in fact, the correction made by the Supreme Court was not in the context of executing the arbitral award, but rather in the context of annulment proceedings. The application for annulment was rejected, yet the Supreme Court nevertheless proceed to correct the arbitral award by essentially partial annulment.

Thus, it shows that the legal basis used by the Supreme Court in correcting the arbitral award was unclear. Moreover, in regard to this petition, a petition for the Judicial Reconsideration (Peninjauan Kembali) was also filed. Although a petition for an annulment of an arbitral award cannot be filed for a judicial reconsideration (as referred to Article 72 paragraph (4) of the Arbitration and ADR Law), however the Panel of Judges in the Judicial Reconsideration Decision merely stated that the Supreme Court Decision at the Appellate level, did not render a decision beyond its authority.

PT. PLN (Persero) v. PT. Sumsel Energi Gemilang, Jurisprudence Number 470 B/Pdt.Sus-Arbt/2022 jo. 555/Pdt.Sus-Arbt/2021/PN JKT.SEL

In this case, Judex Juris corrected the award awarding damages to one of the parties by reducing the amount awarded by the Arbitration Tribunal by 50%, even though it considered that the request to annul the arbitration award was unproven.

Previously, the Claimant filed a petition for annulment of an arbitral award, which, among other things, ruled that PT PLN (Persero) (“Claimant”) must pay a sum of money to PT Sumsel Energi Gemilang (“Respondent”) as a result of its default. The Claimant in this regard based its petition on Article 70 letter b and c of the Arbitration and ADR Law, arguing that there were documents that were concealed and decisive, that was discovered after the arbitral award was rendered, and that there was a fraud (tipu muslihat) in rendering the arbitral award.

Read Also: Recognition and Enforcement of International Arbitral Award in Indonesia

Judex Facti subsequently decided to grant the Claimant’s petition and annul the relevant arbitral award. The case was appealed to the Supreme Court by the Respondent.

Nevertheless, in this case, Judex Juris revised the amount due for the following reasons:

“… it is necessary to consider the impact on the Appellant’s ability as a business entity tasked with providing electrical energy, an essential product needed for the smooth running of economic activities and the wider community (public goods) during the economic recovery period following the non-natural disaster of Covid-19;

… under the current circumstances, the amount due in this case is quite substantial and will certainly disrupt the Appellant’s performance in fulfilling its obligation to provide essential products for national economic recovery;

That, based on the above considerations, it is deemed fair and prudent to adjust the amount due by the Appellant to Appellant I to half (50%) of the amount stipulated by Appellant II, which can be paid in installments and in full within a maximum period of 10 (ten) years from the date of filing the application to annul Appellant II’s decision.”

The arbitration award had ordered a cash payment. However, Judex Juris, in addition to changing the nominal amount of damages, also changed the payment method from cash to 10-year installments. Then, based on these legal considerations, Judex Juris corrected the arbitration award by “adjudicating” the arbitration award itself.

Judex Juris‘s legal considerations and the correction of the award are an anomaly. The main question is, does Judex Juris have the authority to correct an award? The reasons Judex Juris used were “justice” and “prudence,” as well as considerations of “public goods.” However, the authority to correct an award based on these three elements does not appear to be regulated by the Arbitration and ADR Law.

Correction over an Arbitral Award

While it has been stated previously, that under certain stipulations, it is possible to file a petition of correction towards the arbitral award. However, it is a principle of law that the court cannot examine the legal consideration of an arbitral award. This principle is visible under Article 62 paragraph (4) of the Arbitration and ADR Law which stipulates that the Chief of District Court, in giving an exequatur, did not examine the reasoning or consideration of an arbitral award. Moreover, the same article also stipulates that, what is being examined by the Chief of District Court is whether the arbitral award complies with the provisions under Article 4 (the existence of the arbitration agreement), Article 5 (scope of trade), and whether the arbitral award conflicts with morality and public order.

When referring to both jurisprudences discussed above, although it can be said that both have corrected the arbitral award, however, the nature of the correction and decision given by the Judex Juris remains distinct. In fact, the ‘correction’ made by the Judex Juris in PT Aneka Bina Lestari v. Cristian Handoko, is essentially merely a partial annulment decision rendered based on its authority granted under Article 72 of the Arbitral and ADR Law.

In contrast, the correction made by the Judex Juris in PT. PLN (Persero) v. PT Sumsel Energi Gemilang, was by revising the amount of cost to be paid by one of the parties and its payment procedure.

Ultimately, besides the condition of a partial annulment of an arbitral award by the court, as a matter of law, the panel of judges would not be able to change and/or correct an arbitral award, despite having the authority to assess the annulment of an arbitral award. This is in line with the nature of an arbitral award, which is final and binding. Therefore, the case of PT. PLN (Persero) v. PT. Sumsel Energi Gemilang remains a unique case for the arbitration practitioners.

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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 Decision Number 44 PK/PDT.SUS/2011.
• Supreme Court Decision Number 65 K/PDT.SUS/2010.
• Supreme Court Decision Number 470 B/Pdt.Sus-Arbt/2022.
• Central Jakarta District Court Decision Number 02/P/PEMBATALAN ARBITRASE/2009/PN.JKT.PST.
• South Jakarta District Court Decision Number 555/Pdt.Sus-Arbt/2021/PN JKT.SEL.