By: Ryan Mandela, Siti Intan Sekarieva and Faiza Naira Yuliarsa

A. Background

Arbitration, as an alternative dispute resolution agreed upon by the relevant parties, has become a common practice in the business transactions. Besides its neutrality nature, it also offers effective and efficient mechanism to resolve disputes for cross-border transactions by the issuance of international arbitration awards. However, the enforcement of these awards encounter various challenges in its enforcement due to jurisdiction and other legal aspects in Indonesia.

In 5 August 1981, Government of Indonesia ratified the Convention on the Recognition and Enforcement of Foreign Arbitration Awards through Presidential Decree Number 34 of 1981 regarding Ratification on Recognition and Enforcement of International Arbitral Awards, for which it acknowledges the validity and enforcement of international arbitration awards issued by the countries participated to such convention.

On the other hand, Indonesian government has been proactive in establishing the legal framework to support the enforcement of international arbitration award by the enactment of Law Number 30 of 1999 regarding Arbitration and Alternative Dispute Resolution (“Law 30/1999”). However, this regulation has frequently arisen many negative concerns from foreign investor especially to the status of arbitration award itself as a final and binding decision. Many foreign investors see it as a ‘loop hole’ for the losing party to avoid the decision when it comes to an enforcement within the territory of Republic of Indonesia.

For accommodating such concerns, the Supreme Court of Republic of Indonesia issued the Supreme Court Regulation (Perma) Number 3 of 2023 regarding the Procedure of Arbitrator Appointment by Court, Right of Challenge (Hak Ingkar) and Examination of Requests for Enforcement and Annulment of Arbitration Awards (“SCR 3/2023”) which introduce a new paradigm encompassing procedural and administrative aspects for the enforcement of international arbitration awards in Indonesia, as further explained below.

B. International Arbitration Awards From Indonesian Legal Perspective

Basically, Law 30/1999 grants the authority for the party in an agreement to resolve their dispute through alternative dispute settlement rather than trial or court proceedings, such as arbitration process. Accordingly, the relevant parties are allowed to determine the procedure, location and period of arbitration process in the contract agreed by them.

An arbitration award is recognized and enforceable within the territory of Indonesia upon the fulfilment of the following aspects:

1. It is resolved by an arbitrator or arbitration panel (majelis arbitrase) in a country who has bilateral or multilateral agreement with Indonesia regarding the acknowledgement and enforcement of international arbitration award;
2. The content falls within the scope of business/trade transactions law in Indonesia; and
3. The object and decision are not contradictive with public order (ketertiban umum); and
4. It has obtained a forceful enforcement status (eksekuatur), specific only for the case related to the state interest. 

C. Voluntary Enforcement

SCR 3/2023 acknowledges a voluntary enforcement to international arbitration award, except for the case related to the state interest. In order for achieving so, the international arbitrator or its attorney is required to register such award to the Central Jakarta District Court. No specific limitation period for conducting this registration.

All the registration processes are done through online and solely based on self-assessment of Central Jakarta District Court against documents completeness. Thus, no trial (persidangan) requiring the attendance of relevant parties, said by Ms. Ina as the Legal Clerk of Central Jakarta District Court for this process.

The overall registration process takes 14 days since the required documents are declared as complete. If the registration is accepted, then the Central Jakarta District Court  issues the Registration Certificate of Arbitration Award (Akta Pendaftaran Putusan Arbitrase).

D. Forceful Enforcement

As expressly stated under SCR 3/2023, the winning party may file a petition for a forceful enforcement status (eksekuatur) to the registered international arbitration award if it is not voluntarily complied by the losing party.

This petition must be submitted to the Central Jakarta District Court in person or through online, and it takes 30 days since the required documents are declared as complete. Similar to the voluntary enforcement, no trial (persidangan) requiring the attendance of relevant parties and it is solely based on self-assessment against public order (ketertiban umum) and classification of business/trade transaction.

If the petition is granted by the Central Jakarta District Court, then such forceful enforcement (eksekuatur) is written in the original copy of international arbitration award. Such decision is final and binding without giving a chance for a party to appeal to the higher level of court.

Meanwhile, if the petition is rejected by the Central Jakarta District Court, then the winning party may appeal to the higher level of court for rectifying such decision. In that case, any decision made by such higher level of court is final and binding.

E. Annulment Application

SCR 3/2023 sets the grounds for annulment towards a part or whole of international arbitration award, as follows:

1. The letter or document submitted during the arbitration process is admitted or declared as fake after the issuance of arbitration award;
2. The existence of crucial document after the issuance of arbitration award; or
3. The arbitration award is made based on the deceit/manipulation of a party during the arbitration process.

SCR 3/2022 limits the period of filing annulment petition for 30 (thirty) days after the registration date of relevant international arbitration awards. This petition must be submitted in person or through online.

Differs to the voluntary and forceful enforcements, the annulment requires a trial (persidangan) with the following sequences:

1. Recitation of petition (pembacaan permohonan);
2. Submission of appellee’s reply (tanggapan termohon);
3. Interlocutory decision (putusan sela) (if any);
4. Evidentiary stage (pembuktian); and
5. Recitation to the court judgement (pembacaan putusan).

The overall sequences above must be completed within 30 (thirty) days since the annulment petition be registered. In order to maintain the principle of equality before the law, SCR 3/2023 opens up the opportunity for the relevant party to appeal to the higher level of court within 14 days since the issuance of decision and the appeal process itself takes place for 30 days.