The arbitration system in Indonesia, as an integral part of commercial dispute resolution, has provided an effective and efficient alternative outside the conventional judicial system in its implementation over the years. The development of the arbitration system in Indonesia has been further strengthened since the Supreme Court (“SC“) issued Supreme Court Regulation Number 3 of 2023 on the Procedure for the Appointment of Arbitrator by the Court, Right to Challenge, Examination of Application for Execution, and Annulment of Arbitral Award (“SC Regulation 3/2023“) enacted on 17 October 2023. The SC enacted SC Regulation 3/2023 to further regulate the provisions of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution (“Arbitration and ADR Law“), especially provisions in Chapters III, VI, and VII.
- Competence (Art. 2-3)
In this Regulation, the Religion Court/Islamic Court is designated to have authority in handling application for the annulment and enforcement of sharia arbitral award. This expands on the previous Arbitration and ADR Law, which solely addressed the jurisdiction of the District Court.
- Appointment of Arbitrator and Right to Challenge (Art. 4-5)
Appointment of Arbitrator (Art. 4)
In cases of disagreement regarding the appointment of an arbitrator, the parties/one of the parties may apply to the Chairman of the court to appoint an arbitrator/panel of arbitrators. The Chairman is obligated to appoint an arbitrator/panel of arbitrators within 14 days after receipt of the application, in the form of a determination.
Against the Chairman’s determination, a challenge can be made within 14 days if there are sufficient reasons and authentic evidence casting doubt on the arbitrator’s independence. The challenge is acknowledged if proven that there is a relation of: (i) familial, (ii) financial, or (iii) employment, with one of the parties or their attorneys. The Chairman will examine the challenge by hearing the parties and further issue a determination on the challenge no later than 14 days after the challenge is received.
Right to Challenge (Art. 5)
In other circumstances, the provisions regarding the right to challenge are also regulated as stipulated in the Arbitration and ADR Law. If a right to challenge raised by one party is not accepted by the other party, and the arbitrator in question is unwilling to withdraw, the parties may make an application to the Chairman. The Chairman will conduct a hearing involving the parties, along with the reasons for their disagreement.
The Chairman will issue a decision within 14 days after receipt of such application but without the possibility of any legal remedy. If approved by the Chairman, a replacement arbitrator must be appointed following the procedures outlined in the Arbitration and ADR Law. If rejected, the arbitrator will continue his or her duties.
- Registration and Enforcement of Arbitral Award (Art. 6-23)
Registration of Arbitral Award (Art. 6-7)
This Regulation also introduces new provisions regarding the electronic registration of an arbitral award. Within 30 days of the arbitral award, the national/sharia national arbitral award must be submitted and registered by the arbitrator or their attorney at the clerk. This can be done through the Court Information System (“SIP”).
If the arbitrator is appointed by an arbitration institution/sharia arbitration institution, the registration is done by the institution’s manager or its attorney. Failure to register within 30 days renders the award unable to be registered in court.
Whereas, for an international arbitral award/sharia international arbitral award, it must be submitted and registered with the clerk of the District Court (“DC”)/clerk of the Religious Court (“RC”) of Central Jakarta by the arbitrator or his or her attorney. The registration process must include:
- the original/authentic copy of the international arbitral award/sharia international arbitral award;
- the original/authentic copy of the underlying agreement of the international arbitral award/sharia international arbitral award; and
- a statement from the diplomatic representative of the Republic of Indonesia in the country where the award was made, declaring that Indonesia is bound by the bilateral/multilateral agreement with the Applicant Country.
The provisions regarding electronic registration and registration by arbitration institution/sharia arbitration institution for arbitral award/sharia national arbitral award also apply to international arbitral award/sharia international arbitral award. Importantly, the time limit for registering national/sharia national arbitral award does not apply to the registration of International arbitral award/sharia international arbitral award in court.
Enforcement of Arbitral Award (Art. 8-23)
National Arbitral Award/Sharia National Arbitral Award (Art. 8-15)
Applications for enforcement of both national and international arbitral awards can be submitted manually or electronically, either for the entire award or part of it.
The Chairman of the court considers the application, provided the arbitral award meets the requirements set forth under Article 4 and Article 5 of the Arbitration and ADR Law and does not violate morality/public order. This Regulation further defines public order as all fundamental elements necessary for the continuity of the legal, economic, social, and cultural systems of the Indonesian people.
If the application is rejected, the Chairman issues a final rejection determination, without any possible legal remedy. The Chairman’s order must be written in the original sheet and an authentic copy of the national/sharia national arbitral award. In situations where annulment and enforcement applications are filed simultaneously, the enforcement of the arbitral award is postponed until the first-instance court decision trying the annulment application has declared that the application is declined or inadmissible.
International Arbitral Award/Sharia International Arbitral Award (Art. 16-23)
The same procedures apply to international arbitral award, where either party can submit an enforcement application to the Chairman of the DC/RC of Central Jakarta manually or electronically through SIP. The enforcement application can be made for the entire or part of the award.
The Chairman reviews and decides on the enforcement application within 14 days of its registration. The Chairman assesses and follows Article 66 of the Arbitration and ADR Law in giving his decision.
Furthermore, if the Chairman deems the arbitral award does not meet the specified conditions, a rejection decision is issued. If the application is approved, the exequatur is included in the original sheet and authentic copy of the arbitral award, while for a rejection of the exequatur on the recognition and enforcement of an international arbitral award, a petition of cassation is possible.
In addition, an international arbitral award related to disputes involving the Republic of Indonesia can only be enforced after obtaining an exequatur from the SC. The SC decides within 14 days after receipt of the application, either refusing or granting exequatur, by assessing and complying with the provisions of Article 66 of the Arbitration and ADR Law. The Chairman will enforce the international arbitral award under civil procedural rules.
The court decision approving the recognition and enforcement of the international arbitration agreement is final without any legal remedy. However, if the application is rejected, the aggrieved party can file a cassation. The Decision of the SC must be made within a 30-day time frame.
- Annulment of Arbitration/Sharia Arbitral Award (Art. 24-28)
Registration of Application (Art. 24)
Annulment application for arbitral award/sharia arbitral award must be submitted in writing, either manually or electronically within a maximum of 30 days from the delivery and registration of the award. Application exceeding this time limit is considered not to meet the formal requirements. After registration, the application must be immediately notified to the disputing parties no later than 3 days.
An annulment application can be made if there are suspicions of:
- letters/documents submitted during the examination, after the award is issued, being recognized as false or declared as false;
- after the award is issued, decisive documents hidden by the opposing party are discovered; or
- the award is obtained as a result of deceit by one of the parties in the dispute.
These elements must be included in the application, accompanied by relevant documents/evidence. It is crucial to note that an arbitrator and/or arbitration institution/sharia arbitration institution should not be included as part of the application for the annulment of an arbitral award. This error has been frequently occurring and this stipulation should be praised. The inclusion of an arbitration institution may lead to the rejection of an annulment application.
Examination of Annulment Application (Art. 25-26)
The decision on the annulment application is pronounced no later than 30 days after the application is read in court. Regarding the absence of the parties, the following provisions apply:
- If the applicant is absent from the first hearing without a valid reason, the application is forfeited;
- If the respondent is absent from the first hearing without a valid reason, the hearing will proceed with the reading of the application;
- If the respondent is absent from the second hearing, it is considered that they waived their right to respond.
In the evidentiary process, each party is given one opportunity to present evidence. If there is no evidence, it is considered that the party did not exercise their right in the evidentiary process.
Legal Remedy for Annulment Decision (Art. 27-28)
Against a court decision that grants the annulment of an arbitration/sharia arbitral award, the aggrieved party can file an appeal, either manually or electronically, to the SC at the first and final level. However, against a decision that rejects the annulment of an arbitration/sharia arbitral award, there is no legal remedy.
Appeal application must be submitted in writing within 14 days of the decision being read/notified to the parties. The SC will then consider and decide on the appeal within 30 days of its registration. The SC’s decision is final, and there is no legal remedy.
- Attachment (Art. 29)
One of the newest provisions introduced in this Regulation concerns the attachment provision outlined in Article 29. If the arbitrator issues a seizure award, the arbitrator/panel of arbitrators must register that determination to the court through an application. The applicant for seizure can ask the court to execute the registered seizure against the respondent’s assets.
In conclusion, SC Regulation 3/2023 further solidifies the legal foundation of arbitration in Indonesia, which began with the promulgation of the Arbitration and ADR Law. This SC Regulation clarifies aspects related to the registration, implementation, and annulment of arbitral award. Provisions regarding the electronic system in the arbitration process at the court and the provision on attachment are also among the novelties that strengthen the relationship between arbitration and the procedural process in the courts of Indonesia. With these changes, it is hoped that Indonesia can create a more responsive legal system in dispute resolution, particularly in the field of trade.
Sang Rafi Syuja