ASPECTS OF INDONESIAN ARBITRATION LAW AND PRACTICE IN LIGHT OF INTERNATIONAL STANDARDS: A CRITICAL EVALUATION

In 1997 the alarming economic crisis renewed calls for fundamental reform of the country’s arbitration laws. The original idea for arbitration reform in Indonesia came from the IMF which suggested that a reform would make the country “a more investment-friendly environment.” The result was Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution (hereinafter the 1999 Arbitration Law), which comprises 82 articles as opposed to 36 articles in the UNCITRAL Model Law. The extensive scope implies that the drafters may have intended to accommodate domestic and international arbitration rules into a single framework.

The paper attempts to examine the extent to which certain aspects of Indonesia’s arbitration law and practice conform to international standards. There are some problems found in the 1999 Arbitration Law. For instance, the Law does not address the scope of arbitrator’s jurisdiction (Kompetenz-Kompetenz) in broad terms. This is unfortunate since disputes concerning the jurisdiction of an arbitral tribunal will finally end up in Indonesian courts. The involvement of Indonesian judges in this matter is a serious impediment for Indonesia’s arbitration since the Indonesian judiciary suffers from rampant corruption, the judges’ lack of competence, an overload of cases, and an absence of adequate technological support.

Another problem relates to the procedures for the recognition and enforcement of foreign arbitral awards, which are provided for in Articles 65 through 69 of the Law. These provisions also possess some potential problems since, for example, there are no procedures and timeline for registration of foreign arbitral awards. While a timeline for the winning party to apply for the exequatur for enforcement of foreign arbitral award does not exist, the Jakarta District Court (as the only authoritative institution dealing with international awards) does not have any timeline to grant such an exequatur either. The lack of such provisions may cause uncertainty and confusion. And, this can also be grounds for delay that results in frustration.

A significant improvement is that the 1999 Arbitration Law expressly recognizes the principle of separability. Notwithstanding the acceptance of the separability principle, the Indonesian courts are often reluctant to apply it as evidenced by several well-known cases. The attitude of Indonesian courts to accept lawsuits, while an arbitration agreement between the parties exists, has become one of the major concerns of the international community about the operation of the Indonesian legal system.

The paper concludes that if the government intends to achieve a more predictable arbitration regime, it may consider adopting the UNCITRAL Model Law. Besides, even if the 1999 Arbitration Law were perfect, however, its effective implementation would constantly rely on a well-working, independent judiciary. Unfortunately, this is as yet not available in the country. As such, the government should take judicial reform more seriously so as to restore the much damaged reputation of the Indonesian courts.