SWILU Ed. 7 LATEST PROVISION ON ARBITRATION in PERMA No. 03/2023

LATEST PROVISION ON ARBITRATION in PERMA No. 03/2023

Definition of Arbitration

According to Article 1 number 1 of Law Number 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration Law“), arbitration is a method of resolving civil cases outside the general court system, based on an arbitration agreement made in writing by the disputing parties. Furthermore, Article 1 number 3 clarifies that an arbitration agreement is an agreement in the form of an arbitration clause within a written contract made by the parties before the dispute arises, or a separate arbitration agreement made by the parties after the dispute arises.

Procedures and Flow of Examination of Arbitration Disputes

Article 1 number 8 of the Arbitration Law states that an Arbitration Institution is a body chosen by the parties to a dispute to render a ruling on a particular dispute. The institution can also provide a binding opinion on a certain legal relationship if a dispute has not yet arisen.

The Indonesian National Arbitration Board (BANI), as one of the Arbitration Institution also regulates in detail how the flow of the proceedings of the Arbitration are conducted. In Chapter III, Article 6 of the BANI Arbitration Rules and Procedures, the stages of an arbitration application are outlined, as follows:

1. Registration. The arbitration process begins with the registration and submission of the request for arbitration by the Applicant to the BANI Secretariat.
   
2. Request for Arbitration. The application must include the names and addresses of the parties, information about the facts and legal basis of the arbitration application, details of the issue; and the demands and/or the value of the claims requested.
   
3. Documents. The application must be accompanied by a copy of the relevant agreement containing the arbitration clause or arbitration agreement and may also attach other documents that the Applicant deems relevant.
   
4. Respondent’s Response. The respondent can provide a response within 14 (fourteen) days and give a counterclaim/reply.
   
5. Trial process.
   
6. Reading of the verdict.
   

Regarding the appointment of arbitrators, the applicant may appoint an arbitrator no later than 14 (fourteen) days from the date the arbitration application is registered with the BANI Secretariat or submit the appointment to the Chairman of BANI. If within the time limit the Applicant does not appoint an arbitrator, then the appointment of the absolute arbitrator has been submitted to the Chairman of BANI.

When registering, the Chairman of BANI is authorized to extend the time for the appointment of arbitrators by the Applicant if accompanied by valid reasons, provided that the extension of time shall not exceed 14 (fourteen) days. Regarding fees, the applicant will get financing information as required.

The Secretariat shall register such application in the BANI register as mentioned in Chapter III Article 7 of the Arbitration Rules and Procedures. Then, the BANI Board of Trustees will examine the Application to determine whether the arbitration agreement or arbitration clause in the contract has sufficiently provided a basis for BANI to examine the dispute and then appoint a secretary of the tribunal to assist in the administrative work of the arbitration case.

Characteristics of Arbitration Different from the General Court

• Disputes that can be resolved through arbitration are only disputes in the field of commerce and regarding rights that according to laws and regulations are fully controlled by the parties. (Article 5 paragraph (1) of the Arbitration Law);
  
• The examination of the dispute may be conducted orally if agreed by all parties or deemed necessary by the arbitrator (Article 36 paragraph (2) of the Arbitration Law);
  
• Arbitration hearings are closed in contrast to civil disputes which are generally open to the public (Article 27 of the Arbitration Law);
  
• The Arbitration Tribunal may use a foreign language if agreed upon by the parties, while the General Court shall only use Indonesian (Article 28 of the Arbitration Law).
  

What are the advantaged of arbitration? 

• The arbitrator who becomes the dispute arbiter is an expert person who has at least 15 years of experience in his field so that he can give a ruling that is beneficial to the parties (Article 12 paragraph (1) point e of the Arbitration Law);
  
• The closed nature of the arbitration benefits the parties, especially if the dispute is related to trade secrets or data that can be detrimental to the Company if it is known to the public (Article 27 of the Arbitration Law);
  
• The Arbitration Tribunal is more flexible and efficient in determining the location, agenda and schedule of the meeting (Article 37 of the Arbitration Law);
  
• The dispute resolution time is shorter than that of the general court (Article 48 of the Arbitration Law);
  
• The Arbitral Award is final without going through the appeal process (Article 60 of the Arbitration Law).
  

Updated Provisions on Arbitration

Latest Provisions on Arbitration Regulation of the Supreme Court of the Republic of Indonesia Number 3 of 2023 on Procedures for Appointment of Arbitrators by Courts, Right of Denial, Examination of Applications for Enforcement and Annulment of Arbitral Awards (PERMA No. 03/2023).

• BANI IS NOT A PARTY TO THE ANNULMENT OF THE ARBITRAL AWARD
  

Article 24 paragraph (6) of PERMA No. 03/2023 “In the event of an application for annulment of an Arbitration / Sharia Arbitration award, the Arbitrator and/or the Arbitration Institution/Sharia Arbitration Institution is not a party.” Previously, the BANI Institution could still be filed as a Defendant in a dispute over the Cancellation of an Arbitral Award.

• APPOINTMENT PERIOD
  

Article 4 paragraph (3) of PERMA No. 03/2023 “The Chief Justice of the Court appoints an Arbitrator or Arbitral tribunal as referred to in paragraph (1) no later than 14 (fourteen) days after the application is submitted in the form of determination.” The term for appointment of arbitrators is set out in more detail in the provisions of this regulation.

• ELECTRONIC PROCESSES
  

Article 6 paragraph (3) of PERMA No. 03/2023 “Registration as referred to in paragraph (2) can be done electronically through SIP.” The entire arbitration process can be filed through an integrated electronic system.

• DETERMINATION OF BAIL CONFISCATION
  

Through PERMA No. 03/2023 Article 29 paragraph (1) “In the event that the Arbitrator issues a determination of security seizure during the Arbitration examination process, the Arbitrator/Arbitrator panel registers the determination of seizure to the Court.” The mechanism and procedure for Bail Confiscation are more specifically regulated in the provisions of this regulation so that it can guarantee legal certainty for the parties in dispute through arbitration.

CONCLUSION

Dispute resolution through an Arbitration Institution facilitates the resolution of commercial disputes in a relatively short time than the general courts, handled by arbitrators who are experts in bidding, and without worrying about the confidentiality of the Company in dispute being published or known to the general public. Through PERMA No. 03/2023, dispute resolution through Arbitration Institutions is more guaranteed and integrated.

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