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Indonesian Government’s Struggle to Save Budget: A Legal Perspective
By: Wawan Santoso, SH., LL.M.
Rapid growths of free trade era along with globalizations all over the world have increased the cross-border traffic flow of goods and services. From legal aspect, these will raise various questions regarding the method of the dispute resolution among cross-border transactions which are subjected to their own state’s law and regulation.
Since such business entities are bound to different jurisdiction, commonly they will point a neutral jurisdiction for legal domicile and dispute resolution, and therefore, foreign or international arbitration is generally chosen.
The legal basis of foreign or international arbitration in Indonesia are as follows:
a. President decree of Republic of Indonesia No. 34 Year 1981 concerning the Ratification of Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention 1958) which was published on August 5, 1981;
b. Supreme Court Decision No. 1 Year 1990 concerning the Execution of Decision of Foreign Arbitration which was published on March 1, 1990;
c. Law No. 30 Year 1999 concerning Arbitration and Alternative Dispute Resolution, which was enacted on August 12, 1999.
Essentially, the international arbitration awards according to aforementioned regulations are the awards conducted by an arbitration entity or organization outside Indonesian jurisdiction, or awards of arbitration organization or an arbitrator considered as a foreign or international arbitration decision based on Indonesian Law. As an example of foreign or international arbitrations are Court of Arbitration of the International Chamber of Commerce (ICC) and United Nations Commission on International Trade (UNCITRAL) Law Arbitration Rules.
Common inquiry regarding this matter would be the existence of limitation or specific requirements to execute such awards. The further inquiry would be whether such awards might be executed automatically in Indonesia. Regarding to this matter, article 66 of Law No. 30 Year 1999 states that International Arbitration Awards can only be enforced in Indonesian jurisdiction if they comply to these requirements:
a. The international arbitration award must have been rendered by an arbitrator or arbitration tribunal in a country which, together with the Republic of Indonesia, is a party to a bilateral or multilateral treaty on the recognition and enforcement of international arbitration awards.
b. International arbitration awards, as contemplated in item (a), above, are limited to awards which, under the provisions of Indonesian law, fall within the scope of commercial law.
c. International arbitration awards, as contemplated in item (a), above, may only be enforced in Indonesia if they do not violate public order.
d. An international arbitration award may be enforced in Indonesia only after obtaining an order of exequatur from the chief judge of the District Court of Central Jakarta.
e. An international arbitration award, as contemplated in item (a), in which the Republic of Indonesia is one of the parties to the dispute, may only be enforced after obtaining an order of exequatur from the Supreme Court of the Republic of Indonesia, which order is then delegated to the District Court of Central Jakarta for execution.
From the above regulations, it is clear that international arbitration awards will not be automatically enforced of executed in Indonesia, and has to be requested the confirmation and execution from District Court of Central Jakarta.
With the existence of a proper regulation on the execution of international arbitration awards in Indonesia, hopefully will provide a legal certainty to foreign business entities in interacting and doing businesses with Indonesian business entity so that it further will increase the cross-border traffic flows.