Dispute Resolution Indonesia – Arbitration Agreements

Pursuant to article 1 of the Arbitration Law (Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolution), an arbitration agreement must be made in writing. It may be in the form of an arbitration clause within a written contract or, if the arbitration agreement is concluded after a dispute has arisen, in a separate written agreement to arbitrate.

In cases where the parties cannot sign the separate written agreement, the arbitration agreement must be executed in notarial deed form (article 9(2) of the Arbitration Law). Article 9(3) of the Arbitration Law imposes formal requirements for a separate written agreement to arbitrate, which must contain:

• the issue or issues in dispute;
• the full names and places of residence of the parties;
• the full name and place of residence of the arbitrator or arbitral tribunal;
• the place where the arbitrator or arbitral tribunal will make decisions;
• the full name of the tribunal secretary;
• the time limit of dispute resolution;
• a statement of intent from the arbitrator; and
• a statement of intent of the disputing parties to bear all costs required for dispute resolution through arbitration.

Failure to fulfil the above formal requirements shall render the arbitration agreement null and void. There is no similar formal requirement with respect to an arbitration clause.

Choice of Arbitrator

In the absence of an agreement on the number and method of appointing arbitrators in the arbitration agreement or the arbitration rules, article 13 of the Arbitration Law provides for the chief of the relevant district court to appoint the arbitrator or tribunal.

The Arbitration Law provides the default mechanism to appoint a sole arbitrator or the three arbitrators constituting a tribunal. In practice at the Indonesian National Arbitration Board (BANI), if the number of arbitrators is not regulated in the arbitration agreement, the claimant, in its request for arbitration, may propose the number of the arbitrators, which must be agreed by the respondent.

For arbitration agreements providing for a sole arbitrator, the chief of the relevant district court can appoint the sole arbitrator if the parties are unable to designate the person within 14 days of the claimant notifying the respondent of the dispute. If the arbitration agreement provides for three arbitrators, each of the parties will appoint one arbitrator and the two arbitrators must appoint a third and presiding arbitrator. If they fail to do so, the chief of the relevant district court can appoint the third arbitrator.

Appointment of an arbitrator can only be challenged within 14 days of his or her appointment by way of a written objection filed to the other party and to the arbitrator concerned. Article 22 of the Arbitration Law provides that the appointment of an arbitrator can be challenged based on sufficient reasons and authentic evidence giving rise to justifiable doubts as to the arbitrator's independence or impartiality. An appointment can also be challenged if a party can prove that the arbitrator has a family, financial or work relationship with the other party or its attorneys. There is no restriction on the right to challenge an arbitrator appointment.

Excerpted from Lexology Panoramic: Dispute Resolution 2024, published by Law Business Research.

Find the Indonesia chapter of Lexology Panoramic: Dispute Resolution 2024 here.

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