Indonesia-India International Arbitration Comparative Guide

This arbitration comparative guide was prepared in collaboration with Shinghania&Partners LLP, a prominent full-service law firm in India. The firm is recommended by reputed legal directories such as Chambers and Partners, Legal500, Indian Business Law Journal, Benchmark Litigation, and Asialaw Profiles across practice areas including Arbitration-Litigation, Corporate-M&A, Banking & Finance, Projects and Energy, Intellectual Property, and Employment practice. You can access the complete Comparative Guide on International Arbitration here.

Indonesia

A. General Legal Framework of International Arbitration

1. What are the relevant legislation on arbitration in your jurisdiction?

In Indonesia, Arbitration is generally governed under Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution, partially amended in 2014 under Constitutional Court (Mahkamah Konstitusi) Decision No. 15/PUU-XII/2014 on the judicial review over elucidation of Article 70 of the Arbitration Law on the application for annulment that can only be filed against an arbitration award that has been registered in court (together, “Arbitration Law”).

2. Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?

The Arbitration Law governs all domestic and foreign arbitrations recognized under Indonesian law. The law provides distinctions between arbitral awards rendered by domestic arbitration bodies and those rendered by foreign arbitration ones. Each is defined as follows:

  1. Domestic Arbitration Awards: all awards conferred by the Indonesian arbitration body (i.e., Badan Arbitrase Nasional Indonesia or “BANI”), or arbitrators based in Indonesia;
  2. Foreign Arbitration Awards: all awards conferred by foreign arbitration bodies or arbitrators, under the Indonesian prevailing laws and regulations (i.e., arbitrations done outside the Indonesian territory regardless of the parties' nationalities, governing laws, or locations of the subjects of dispute).

3. Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?

No. Indonesia’s Arbitration Law is not based on the UNCITRAL Model Law on International Commercial Arbitration.

4. Are there any current plans to amend the arbitration legislation in your jurisdiction?

No. According to Indonesia's priority national legislation program (Program Legislasi Nasional/ Prolegnas), there are no plans to amend Arbitration Law. On the other hand, BANI, as an independent institution that provides a variety of services related to arbitration, continues to issue arbitration regulations on the applicable arbitration mechanism.

5. Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?

Yes. Indonesia has ratified the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) enacted into Presidential Decree No. 34 of 1981 on Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

6. Is your jurisdiction a signatory to any other treaties relevant to arbitration?

Yes. Indonesia has ratified the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”) and other bilateral and multilateral treaties including the ASEAN Charter, which stipulates arbitration as a dispute resolution mechanism in Southeast Asian countries in its protocol. With regard to ICSID Convention, Indonesia has limited the jurisdiction of ICSID through the issuance of Presidential Decree No. 31 of 2012 (“PD 31/2012”), which excludes settlement by ICSID of any dispute arising from state administrative decrees issued by regency governments.

B. Arbitrability and Restrictions on Arbitration

7. How is it determined whether a dispute is arbitrable in your jurisdiction?

Pursuant to Article 5 of the Arbitration Law, only disputes that are commercial in nature, or those involving rights which according to laws and regulations, are within the full legal authority of the disputing parties, can be resolved through arbitration. Furthermore, disputes that cannot be resolved through arbitration are those, which can be settled amicably. Settlements that can be deemed to have permanent legal force shall be considered not arbitrable.

8. Are there any restrictions on the choice of the seat of arbitration for certain disputes?

No, based on the Arbitration Law, there are no restrictions on the choice of the seat of arbitration for any arbitration disputes.

C. Arbitration Agreement

9. What are the validity requirements for an arbitration agreement in your jurisdiction?

An arbitration agreement shall be considered valid if the disputing parties have agreed in writing to resolve the dispute exclusively through arbitration, this would usually be stipulated in one of the clauses of the relevant agreement (“Arbitration Agreement”). The Arbitration Agreement must also meet the requirements stipulated under the prevailing laws and regulations, such as (i) Law Number 24 of 2009 on the Flag, Language, State Emblem, and National Anthem, and (ii) fulfill the basic requirements of Article 1320 of the Civil Code, which are:

  1. the parties agree to be bound by a contract;
  2. the parties are competent to enter the relevant agreement;
  3. the contract has a specific object; and
  4. the subject matter of the agreement is permitted under Indonesian law.

Article 9 of Arbitration Law also stipulates additional formal requirements for parties resolving their dispute through arbitration but have no arbitration agreement to commence the proceeding in the form of a notarial deed drawn by a Notary Public in Indonesia.

10. How is the law of the arbitration agreement determined in your jurisdiction?

The law of the Arbitration Agreement shall be determined based on the jurisdiction stipulated in the agreement.

11. Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?

Yes. The principle of separability is provided in Article 10 of Arbitration Law, which reads, “an arbitration agreement shall not become null or void due to the following circumstances: …(h) expiration or non-applicability of the principal agreement”.

12. Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?

In the absence of the agreement, or the seat and/or language of the arbitration procedure between the disputing parties, Article 31 paragraph 2 of Arbitration Law stipulates that all disputes whose resolutions are submitted to the arbitrators or arbitral tribunals will be examined and decided according to the provisions of Arbitration Law. Furthermore, Article 28 of Arbitration Law provides that Bahasa Indonesia shall be used as the language of the arbitration unless the parties have agreed otherwise. Please note that this provision generally refers to domestic arbitrations.

D. Objections to Jurisdiction

13. When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?

Arbitration Law does not regulate the procedure for objections to court jurisdiction. However, Indonesian civil laws can practically challenge the jurisdiction through the delivery of demurrer. The jurisdiction and legal choice are determined based on the agreement of the parties. The principle of freedom of contract (Pacta Sun Servanda) is applied here as regulated in the Indonesian Civil Code.

14. Can a tribunal rule on its own jurisdiction?

Yes, the tribunal can rule on its own jurisdiction. However, Arbitration Law does not explicitly recognize kompetenz-kompetenz principles to implicitly adhere with Articles 3 and 11 of Arbitration Law, which stipulates that the District Court is not authorized to conduct the proceeding of any dispute between parties bound by an arbitration agreement; and the existence of an arbitration agreement eliminates the rights of the parties to submit disputes to the District Court.

15. Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? If “yes”, in what circumstances?

No party can apply to the court of the seat to issue a ruling on the jurisdiction of the tribunal if the parties have agreed to resolve their disputes through arbitration proceedings.

E. The Parties of Arbitration

16. Are there any restrictions on the parties that can enter an arbitration agreement?

No. According to Arbitration Law, there is no restriction on which parties can enter an arbitration agreement.

17. Are there any specific provisions of law which deal with multi-party disputes?

Arbitration Law does not provide any provision on multi-party disputes. However, Article 9 (1) of BANI Arbitration Rules 2022 (“BANI Rules”) allows consolidation of arbitration proceedings if:

  1. the parties have agreed on the consolidation and arbitration disputes arising from the same legal relations;
  2. the demand for arbitration is based on several agreements involving the same parties and BANI has been chosen as an arbitration institution; or
  3. the arbitration claim is based on several agreements, which include one of the same parties of the said arbitration proceeding, and BANI has also been chosen as the arbitration institution in the other agreements.

F. Consolidation and Third Parties

18. Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?

Arbitration Law has no provisions on this matter. However, BANI Rules allow a separate arbitration to be consolidated into one arbitration as stipulated in point 17 above.

Based on Article 9 (2) of BANI Rules, the consolidation of a third party is permitted by the Chair of BANI in the following circumstances:

  1. If a third party outside the arbitration agreement participates and joins in the dispute resolution process through arbitration, the third party can be charged to pay the administration, examination, and arbitrator fees in connection with his participation; and
  2. A third party may join an arbitration case as long as permitted by law.

19. Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?

According to Article 30 of Arbitration Law, the third party outside an arbitration agreement may participate as additional party(ies) in the arbitration proceeding. Provided that, the relevant third parties have related interests in such ongoing arbitration proceeding and if the disputing parties and the arbitration tribunal agree to include the third party(ies) as an additional party in the arbitration proceeding.

20. Does an arbitration agreement bind assignees or other third parties?

No. According to Arbitration Law, an arbitration must be based on a written agreement between the disputing parties, and therefore, the Arbitration Agreement shall only be binding to parties of such Arbitration Agreement.

G. The Tribunal

21. How is the tribunal appointed?

The Parties may determine the number of arbitrator(s) (i.e., sole or three members tribunal), which should be incorporated into the clause of the Arbitration Agreement.

Article 6 paragraph (4) of BANI Rules regulates the mechanism on the appointment of Arbitrators:

  1. The applicant may appoint an arbitrator no later than 14 (fourteen) days after the application for arbitration is registered at BANI Secretariat, or the appointment is submitted to the Chairman of BANI. If the arbitrator is not appointed within the time limit, the appointment of the arbitrators shall be done by the Chairman of BANI.
  2. The Chairman of BANI, at the request of the applicant for valid reasons, has the authority to extend the time for the appointment of the arbitrator by the applicant, provided the extension is not more than 14 (fourteen) days.

22. Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?

Based on Article 12 of Arbitration Law, the appointed or designated arbitrators must meet the following requirements:

  1. They are competent to perform the legal actions;
  2. They are, at least, 35 years of age;
  3. They have no family relationship by blood or marriage up to the third degree, with either of the disputing parties;
  4. They have no financial or other interests in the arbitration award; and
  5. They have, at least, 15 years of experience and active mastery in the field.

23. Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?

Yes. According to Article 22 of Arbitration Law, an arbitrator can be challenged and subsequently recused if, (i) there are sufficient reasons and authentic evidence to raise doubts that the arbitrator can carry out his/her duties independently or will not be biased in giving an award; or (ii) there is a proven family, financial, or employment relationship between the arbitrator and a party of the dispute or his/her legal representative.

Challenges against the arbitrator based on any of the above grounds must be submitted within 14 (fourteen) days as of the reason being known. If either party intends to refuse the appointment of an arbitrator, it must also file an objection within 14 (fourteen) days as of the appointment of the arbitrator.

24. If a challenge is successful, how is the arbitrator replaced?

According to Article 75 of Arbitration Law, if one of the arbitrators passes away, or a demand for recusal or dismissal of one or more arbitrators is granted, the parties must appoint the replacement arbitrator. If the parties are unable to reach an agreement on the replacement, one of the parties can submit a request to the appointed Judge of the district court within 30 (thirty) days to appoint one or more replacement arbitrators. The replacing arbitrators shall have the duty to continue the resolution of the dispute. based on the most recent conclusions drawn by the preceding arbitrator(s).

25. What duties are imposed on arbitrators? Are these all imposed by legislation?

The Arbitrators’ imposed duties based on Arbitration Law are as follows:

  1. render an arbitral award within 180 days of establishing the arbitral tribunal;
  2. input their consideration of the dispute in the final arbitral award, which must be signed and in writing;
  3. disclose any facts that may cast doubt on their impartiality;
  4. maintain the confidentiality of the arbitration; and
  5. register the arbitral award to the district court.

26. What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?

  1. Procedure, including evidence. According to Article 46(3) of Arbitration Law, the arbitrator may provide supplementary written submissions of explanations, documentary, or other evidence as may be deemed necessary, within time limits as determined by the arbitrator or arbitration tribunal.
  2. Interim relief. Article 32 of Arbitration Law stipulates that the arbitrators can grant temporary relief at the request of one of the parties. Such temporary relief may include orders on how the investigation of the case will proceed, including orders on security attachments, deposit of goods with third parties, or sale of perishable goods.
  3. Parties who do not comply with the orders. Once the order or award is registered with the district court, the winning party may apply for court assistance for law enforcement if the losing party fails to comply with the order or award (Art. 64 of Arbitration Law).
  4. Issuing a partial final award. Arbitration Law does not regulate the issuance of partial final awards.
  5. The remedies arbitrators can grant in a final award. According to Article 56 of Arbitration Law, the arbitrators must render their decision based on the provisions of the relevant law, or based on justice and propriety (ex aequo et bono). The parties can agree on whether the arbitrators can render an ex aequo et bono award as a basic principle.
  6. Interest. the arbitrators may grant an interest in the award only if the parties have specifically requested it.

27. How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?

If the claimant does not participate in the first hearing for no reason, Article 43 of Arbitration Law states that the party’s statement of claim shall be declared null and void and the mandate of the arbitral tribunal will be deemed to have been completed. Furthermore, if the respondent does not participate in the first hearing for no valid reason, Article 44(1) of Arbitration Law stipulates that the arbitral tribunal can deliver a second summons to the defendant. If the respondent fails to appear at the hearing within 10 days after receiving the second summons, the arbitration proceeding will continue without the presence of such respondent and the claimant’s claim will be granted in its entirety, unless it is unfounded or found to be in contrary to the prevailing laws and regulations.

28. Are arbitrators immune from liability?

Yes. Pursuant to Article 21 of Arbitration Law, the arbitrator or arbitration tribunal may not be held legally responsible for any action during the proceedings in the function of arbitrator or arbitration tribunal unless there is a proven bad faith in the action.

H. The Role of the Court during an Arbitration Proceeding

29. Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?

Yes, Article 3 of Arbitration Law also implies that the district courts have no jurisdiction to hear a dispute between parties that are bound by an arbitration agreement.

30. Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?

Yes, Indonesia’s courts have specific powers to exercise arbitration inside and outside Indonesia’s jurisdiction. Inside the jurisdiction, Indonesia’s civil courts have powers to enforce arbitration awards and/or annul domestic arbitral awards. The courts also have other powers, such as settling the choice of arbitration in which there is no agreement between the parties to choose the composition of arbitration (Art. 13 of Arbitration Law). Outside the jurisdiction or in international jurisdiction, the civil courts may enforce an arbitration award after the relevant award has been registered with the relevant district court by the arbitrators or their legal representatives within 30 (thirty) days since the award being rendered by the arbitrators.

31. Can the parties exclude the court's powers by agreement?

No. The Arbitration Law does not allow the parties to exclude the court’s powers by an agreement.

I. Costs

32. How will the tribunal approach the issue of costs?

Article 77 of Arbitration Law provides that the arbitration costs shall be borne by the losing party. In case a claim is partially granted, the arbitration fees shall be borne by the parties equally.

33. Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?

No, there is no applicable restrictions on what the parties can agree in terms of costs in an arbitration.

J. Award

34. What procedural and substantive requirements must be met by an award? Must the award be produced within a certain timeframe?

The procedural and substantive requirement is regulated under Article 54 of Arbitration Law, which shall include:

  1. A heading to the award containing the words “Demi Keadilan Berdasarkan Ketuhanan Yang Maha Esa” (In the name Justice based on the belief in the Almighty God);
  2. The full names and addresses of the disputing parties;
  3. A brief description of the matter in dispute;
  4. The respective position of each of the parties;
  5. The full names and addresses of the arbitrators;
  6. The considerations and conclusions of the arbitrators or arbitration tribunal concerning the dispute as a whole;
  7. (g) The opinion of each arbitrator in the event of any difference of opinion within the arbitration tribunal;
  8. (h) The order of the award;
  9. (i) The place and date of the award; and
  10. (j) The signature(s) of the arbitrator(s) or arbitration tribunal.

The arbitrators shall also render their award in accordance with the relevant provisions of law or based on justice and fairness. The content of the award should not be in contravention with the prevailing laws and regulations in Indonesia. It should also settle the dispute of the parties. Article 57 of Arbitration Law further provides that the award shall be rendered no later than 30 (thirty) days after the conclusion of hearings.

K. Enforcement of Arbitral Awards

35. Are arbitral awards (both local and foreign arbitrations) enforceable in your jurisdiction?

Please refer to our response in Point 30 above.

36. Are there any specific procedures for the enforcement of an arbitral award? Especially for foreign arbitral awards.

Suppose an arbitral award is rendered in Indonesia, Article 59 of Arbitration Law states that the original or authentic copy of the decision must be submitted for registration to the clerk at the district court by the arbitrators or their legal representatives. If a decision is rendered outside Indonesia (international arbitral award), the arbitrators or their legal representatives must register the relevant arbitral award with the Central Jakarta District Court. After registration, an exequatur warrant must be obtained from the appointed Judge of Central Jakarta District Court.

L. Grounds for Challenging an Award

37. What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction? 

In Indonesia, an arbitral award cannot be contested or appealed because it is final and binding on both parties to the dispute (Article 60 of Arbitration Law). However, Article 70 of Arbitration Law stipulates that an arbitration award can be annulled due to the following conditions:

  1. the letters or documents submitted in the hearings are acknowledged to be false or forged, or are declared to be forgeries after the award has been rendered;
  2. after the award has been rendered, the documents are founded to be decisive in nature, which is deliberately concealed by the opposing party; or
  3. the award is rendered as a result of fraud committed by one of the parties to the dispute.

38. Are there are any time limits and/or other requirements to bring a challenge?

According to Article 71 of Arbitration Law, an application for annulment of an arbitration award must be submitted in writing not more than 30 (thirty) days as of the date of registration of the award to the Clerk to the District Court.

M. Confidentiality

39. Is arbitration seated in your jurisdiction confidential? Are there any exceptions to confidentiality?

Yes, according to Article 27 of Arbitration Law, all hearings of arbitration disputes shall be closed to the public. This means the arbitration proceedings shall be confidential.

N. Miscellaneous

40. Are there any other important issues to note regarding arbitration in your jurisdiction?

Due to the COVID-19 pandemic, BANI issued a Decree No 20.015/V/SK-BANI/HU dated 28 May 2020 and BAPMI Decree No Per-01/BAPMI/03/2020 dated 30 March 2020 to promote the use of online arbitration proceedings. Therefore, Indonesia’s arbitration is now can be held virtually, through online, offline, and hybrid (online and offline) proceedings. Further, Article 4 paragraph (3) of BANI Rules stipulates that Notices of the parties may be delivered in person, by courier, facsimile, or e-mail, and shall be deemed effective on the date it was received, or, if the date of receipt cannot be determined, on the day following the said submission.