The Dispute Resolution Review - Indonesia

8/12/2019 The Dispute Resolution Review - Indonesia

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The dispute

resolution

Review

Law Business Research

Fifth Edition

Editor

Richard clark


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The Dispute Resolution Review

Reproduced with permission from Law Business Research Ltd.

Tis article was first published in Te Dispute Resolution Review, 5th edition

(published in February 2013 editor Richard Clark).

For further information please [email protected]


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The Dispute

Resolution

Review

Fifth Edition

Editor

R C

L B R L


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Te publisher acknowledges and thanks the following law firms for their learnedassistance throughout the preparation of this book:

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Acknowledgments

iii

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CONTENTS

Editors Preface ...................................................................................................xiRichard Clark

Chapter 1 AUSRALIA .............................................................................. 1Malcolm Quirey and Gordon Grieve

Chapter 2 AUSRIA ................................................................................. 32Helena Marko and Anna Zeitlinger

Chapter 3 BAHRAIN ............................................................................... 47Haifa Khunji, Kaashif Basit and Jessica Lang Roth

Chapter 4 BELGIUM ............................................................................... 59Geert Bogaert, Etienne Kairis, Aude Mahy andStphanie De Smedt

Chapter 5 BRAZIL.................................................................................... 80Marcus Fontes, Max Fontes and Juliana Huang

Chapter 6 BRIISH VIRGIN ISLANDS ................................................. 99Arabella di Iorio and Victoria Lord

Chapter 7 CANADA ............................................................................... 113David Morritt and Eric Morgan

Chapter 8 CAYMAN ISLANDS ............................................................. 128Aristos Galatopoulos and Caroline Moran

Chapter 9 CHILE ................................................................................... 141Enrique Urrutia and Jos Manuel Bustamante

Chapter 10 CHINA .................................................................................. 152Xiao Wei, Zou Weining and Stanley Xing Wan

Chapter 11 COLOMBIA .......................................................................... 162Bernardo Salazar and Natalia Caroprese


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Chapter 12 CZECH REPUBLIC .............................................................. 174Jan omaier and Mat Hanuliak

Chapter 13 DELAWARE .......................................................................... 190Elena C Norman and Lakshmi A Muthu

Chapter 14 DENMARK ........................................................................... 202Peter Schradieck and Peter Fogh

Chapter 15 ENGLAND & WALES .......................................................... 214Richard Clark and Damian aylor

Chapter 16 FINLAND.............................................................................. 234Jussi Lehtinen and Heidi Yildiz

Chapter 17 FRANCE ................................................................................ 246im Portwood

Chapter 18 GERMANY ............................................................................ 261Henning Blz and Carsten van de Sande

Chapter 19 GHANA ................................................................................. 279David A Asiedu and Joseph K Konadu

Chapter 20 GIBRALAR .......................................................................... 292Stephen V Catania

Chapter 21 GREECE ................................................................................ 301Konstantinos P Papadiamantis

Chapter 22 GUERNSEY ........................................................................... 312Alasdair Davidson and Jon Barclay

Chapter 23 HONG KONG ...................................................................... 323Mark Hughes

Chapter 24 HUNGARY ............................................................................ 345Zoltn Balzs Kovcs and Dvid Kerpel

Chapter 25 INDIA .................................................................................... 360Zia Mody and Shreyas Jayasimha


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Chapter 26 INDONESIA ......................................................................... 371Pheo M Hutabarat

Chapter 27 IRELAND .............................................................................. 392Andy Lenny, Claire McGrade, Gareth Murphy andSara Carpendale

Chapter 28 ISRAEL .................................................................................. 406

Shraga Schreck and Daniella Schoenker-Schreck

Chapter 29 IALY ..................................................................................... 432Monica Iacoviello, Vittorio Allavena and Paolo Di Giovanni

Chapter 30 JAPAN .................................................................................... 455atsuki Nakayama

Chapter 31 JERSEY .................................................................................. 469

David Cadin and Dina El-Gazzar

Chapter 32 KOREA .................................................................................. 481ae Yong Ahn, Nathan D McMurray and Rieu Kim

Chapter 33 KUWAI ............................................................................... 492Kaashif Basit and Basem Al-Muthafer

Chapter 34 LIHUANIA ......................................................................... 504

Ramnas Audzeviius and Mantas Juozaitis

Chapter 35 LUXEMBOURG ................................................................... 518Michel Molitor and Paulo Lopes Da Silva

Chapter 36 MALA .................................................................................. 527Marisa Azzopardi and Kristina Rapa Manch

Chapter 37 MAURIIUS ......................................................................... 540

Muhammad R C Uteem

Chapter 38 MEXICO ............................................................................... 553Miguel Angel Hernndez-Romo Valencia

Chapter 39 NEHERLANDS .................................................................. 567Ruud Hermans and Margriet de Boer


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Chapter 40 NIGERIA ............................................................................... 586Babajide Ogundipe and Lateef Omoyemi Akangbe

Chapter 41 NORWAY .............................................................................. 601Jan B Jansen and Sam E Harris

Chapter 42 PAKISAN ............................................................................. 615Ashtar Ausaf Ali, Zoya Chaudary and Nida Aftab

Chapter 43 PERU ..................................................................................... 632Claudio C Cajina and Marcello Croci G

Chapter 44 PHILIPPINES ........................................................................ 643Ben Dominic R Yap, Jesus Paolo U Protacio, Erdelyne C Goand Jess Raymund M Lopez

Chapter 45 POLAND ............................................................................... 657

Justyna Szpara and Agnieszka Kocon

Chapter 46 PORUGAL .......................................................................... 672Francisco Proena De Carvalho

Chapter 47 ROMANIA ............................................................................ 683Levana Zigmund

Chapter 48 SAUDI ARABIA .................................................................... 697

Mohammed Al-Ghamdi, John Lonsberg, Jonathan Sutcliffeand Sam Eversman

Chapter 49 SCOLAND .......................................................................... 717Jim Cormack and David Eynon

Chapter 50 SINGAPORE ......................................................................... 732Tio Shen Yi, Karen eo, Peter John Ladd and Adeline Chung

Chapter 51 SOUH AFRICA .................................................................. 745Gerhard Rudolph and Nikita Young

Chapter 52 SPAIN .................................................................................... 766Esteban Astarloa and Patricia Leandro Vieira da Costa


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Chapter 53 SWEDEN .............................................................................. 789Jakob Ragnwaldh and Niklas stenius

Chapter 54 SWIZERLAND ................................................................... 800Balz Gross, Claudio Bazzani and Julian Schwaller

Chapter 55 URKEY ................................................................................ 818Noyan Gksu

Chapter 56 UKRAINE.............................................................................. 840Sergiy Shklyar and Markian Malskyy

Chapter 57 UNIED SAES ................................................................. 851Nina M Dillon and imothy G Cameron

Chapter 58 VIENAM ............................................................................. 869Do rong Hai

Appendix 1 ABOU HE AUHORS .................................................... 885

Appendix 2 CONRIBUING LAW FIRMS CONAC DEAILS .. 925


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EDITORS PREFACE

Richard Clark

Following the success of the first four editions of this work, the fifth edition now extendsto some 58 jurisdictions and we are fortunate, once again, to have the benefit of incisiveviews and commentary from a distinguished legal practitioner in each jurisdiction. Eachchapter has been extensively updated to reflect recent events and provide a snapshot ofkey developments expected in 2013.

As foreshadowed in the preface to the previous editions, the fallout from thecredit crunch and the ensuing new world economic order has accelerated the political

will for greater international consistency, accountability and solidarity between states.Governments increasing emphasis on national and cross-border regulation particularlyin the financial sector has contributed to the proliferation of legislation and, whilesome regulators have gained more freedom through extra powers and duties, others havedisappeared or had their powers limited. Tis in turn has sparked growth in the number

of disputes as regulators and the regulated take their first steps in the new environmentin which they find themselves. As is often the case, the challenge facing the practitioneris to keep abreast of the rapidly evolving legal landscape and fashion his or her practice tothe needs of his or her client to ensure that he or she remains effective, competitive andhighly responsive to client objectives while maintaining quality.

Te challenging economic climate of the last few years has also led clients tolook increasingly outside the traditional methods of settling disputes and consider morecarefully whether the alternative methods outlined in each chapter in this book mayoffer a more economical solution. Tis trend is, in part, responsible for the decisions by

some governments and non-governmental bodies to invest in new centres for alternativedispute resolution, particularly in emerging markets across Eastern Europe and in theMiddle East and Asia.

Te past year has once again seen a steady stream of work in the areas of insurance,tax, pensions and regulatory disputes. 2012 saw regulators flex their muscles when theyhanded out massive fines to a number of global banks in relation to alleged breaches ofUN sanctions, manipulation of the LIBOR and EURIBOR rates and money-laundering


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offences. Te dark clouds hanging over the EU at the time of the last edition have liftedto some degree after the international efforts in 2012 saved the euro from immediateand catastrophic collapse, although the region continues to prepare for a period ofuncertainty and challenging circumstances. It is too early to tell what, if any, fundamental

changes will occur in the region or to the single currency, but it is clear that the currentclimate has the potential to change the political and legal landscape across the EU forthe foreseeable future and that businesses will be more reliant on their legal advisers thanever before to provide timely, effective and high-quality legal advice to help steer themthrough the uncertain times ahead.

Richard Clark

Slaughter and MayLondonFebruary 2013


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Chapter 26

INDONESIA

Pheo M Hutabarat1

I INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK

Indonesia is a unitary state that consists of 33 provinces as autonomous regions, with auniform system of laws and regulations. Te Supreme Court is vested with the power to

govern the judicial system and the same procedures for dispute resolution are applicablethroughout the country.

In Indonesia, disputes may be adjudicated through a litigation process in front ofthe relevant courts or through private alternative dispute resolution, such as arbitrationproceedings. Section VII infrafurther discusses the private forms of dispute resolutionin Indonesia. Although the use of private dispute resolution mechanisms is increasingrapidly in Indonesia, litigation still resolves the vast majority of disputes in Indonesia.If the relevant parties have not agreed to use private dispute resolution as the propermeans of reaching an agreement, the court remains the only forum that can be used to

adjudicate the dispute.Te following is a brief explanation of the structure of the courts in Indonesia.Te litigation process in Indonesia can be brought before: the general civil and

criminal court; through other special courts, such as the Administrative Court, LabourCourt or Commercial Court (the Special Courts); and other quasi-judicial powers, suchas the antitrust commission, the consumer commission, etc.

Te Administrative Court is authorised to adjudicate and to make decisions oncases related to state administrative law. In such forum, a private person (including a

company) that has suffered losses caused by an administrative decision can make a claimagainst the relevant government bodies before this Administrative Court to annul thesaid administrative decision. Te Commercial Court is part of the civil courts and is the

1 Pheo M Hutabarat is the founder and managing partner at Hutabarat Halim & Rekan.


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appropriate forum for hearing bankruptcy and intellectual property rights cases, and theLabour Court specifically deals with labour disputes.

Te litigation process in both the general civil court and the Special Courtsinvolves examination and decisions at the following levels of the court system.

i Courts of first instance

All civil cases will be brought at the first instance before the District Court. Administrativecases must be brought before the First Level of the Administrative Court, bankruptcyand intellectual property cases must be brought before the Commercial Court andlabour cases will be submitted to the Labour Court. Tese courts are of a first instance toadjudicate and decide the relevant cases. In the Commercial Court and Labour Court,any party appealing against a decision at this first instance can only submit its final

appeal to the Supreme Court, as is further explained in (iii), infra.

ii Second instance

Te High Courts form the courts of second instance at the provincial level, both for civiland administrative cases. However, the High Court for civil cases is a separate institutionfrom the High Court for administrative cases. Both the High Court for civil cases andthe Administrative Court give judgments on appeal from the judgments of the lowercourts. As the appellate court, both High Courts generally do not examine the factsand evidence submitted by the disputed parties, since these matters should have been

examined and verified by the first level of the courts. In practice, if the facts and theevidence have been taken into consideration at the first instance, the presiding judges ofthe High Courts will mostly focus their review on the legal interpretation, legal reasoningand legal basis of the decision made by the first level of the courts. Generally, there willbe no public hearing requirements to be conducted by the presiding judges of the HighCourt in making a decision on cases at this appeal stage.

iii Te Supreme Court

Once the decision of the High Court (both for civil and administrative cases) has beendecided, either party may also request a second appeal of the decision to the SupremeCourt, as the last level of the court, in order to make a final and binding decision over thecivil case and the administrative case. Te presiding judges at the Supreme Court levelmake decisions in a closed hearing to decide the relevant case. As explained supra, theSupreme Court is the last appeal instance for bankruptcy, intellectual property rights andlabour cases decided by the Commercial Court or the Labour Court (in their capacity asfirst instance courts).

iv Judicial review

Under certain limited conditions, following the final and binding decision of theSupreme Court, the losing party may use an extraordinary means to request a judicialreview in order to nullify the final and binding court judgments that have been madeby the Supreme Court over civil, administrative, bankruptcy, intellectual property rightsand labour cases. Te decision to be granted at the judicial review stage will be decidedby other members of the panel of presiding judges of the Supreme Court. If the Supreme


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Court is of the opinion that the application for judicial review could be accepted forre-examination, the presiding judges at the judicial review stage will decide either of thefollowing:a to reject the application for the judicial review by declaring that the final and

binding judgment made by the Supreme Court for which re-examination isrequested shall remain in force, by giving the legal basis for its considerations; or

b to annul the final and binding judgment of the Supreme Court for which re-examination is requested, and render a new judgment over the case.

For as long as the final and binding judgment has not been turned down or annulledby the judicial review process, the said final and binding court judgment made by theSupreme Court can be executed and enforced by the winning party.

II THE YEAR IN REVIEW

i Lippo Group v. Astro Group

Tis case relates to a refusal by the Indonesian court to accept the anti-suit jurisdiction ofan arbitration award decided by the Singapore International Arbitration Centre (SIAC).Te dispute is between Lippo Group, an Indonesian group of conglomerate companies,and Astro Group, a Malaysian-based group of conglomerate companies. Te case isrelated to a joint venture arrangement between them in an Indonesian pay-V companyknown as P Direct Vision (Kabel Vision). Lippo Group, through its subsidiarycompany (P Ayunda Prima Mitra), as a plaintiff, lodged a civil case (tort) against severalsubsidiary companies of Astro Group and its related parties before the District Court ofSouth Jakarta (theort case) on 2 September 2008, by claiming US$2,024,846,199in material and immaterial damages against Astro Group. On 6 October 2008, one

week after the registration of the ortcase, eight subsidiary companies of Astro Groupinitiated a counter action by submitting an arbitration case in front of SIAC, againstthree subsidiary companies of Lippo Group.

In the arbitration process, the SIAC tribunal issued an award on the preliminaryissues, dated 7 May 2009, which relates to an anti-suit jurisdiction arbitration award. Interalia, this award ordered Lippo Group to discontinue the Indonesian legal proceedingsin the ortcase and prohibited Lippo Group from bringing any further proceeding inIndonesia against Astro Group and its related parties. However, on 28 October 2009the chairman of the District Court of Central Jakarta issued a decision to set aside theaward on the preliminary issues and declare that the anti-suit jurisdiction award is non-enforceable (non-exequatur) in Indonesia, and therefore this award can not be enforcedin the territory of Indonesia.

An appeal has been submitted by Astro Group against this decision to refuse theenforcement of the anti-suit jurisdiction award. Te Indonesian Supreme Court, as thefinal court able to adjudicate and finally decide this matter, has reconfirmed that thedecision made by the District Court of Central Jakarta is in line with the ArbitrationLaw 30/1999. It considered that the purpose of the anti-suit jurisdiction award issuedby SIAC was merely to discontinue the trial process in Indonesia, and therefore thisarbitration award violates the principle of the sovereignty of the Republic of Indonesia


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and public policy in Indonesia, and there is no foreign power that can interfere withany existing legal process in Indonesia. Tis refusal of the international arbitrationaward on an anti-suit jurisdiction creates a new precedent in Indonesian legal practice.Furthermore, in relation to the enforcement of the final award of the same arbitration

case, on 11 September 2012, the chairman of the District Court of Central Jakarta issueda decision to set aside all final awards issued by the SIAC tribunal for the reason that thefinal awards are an inseparable and integral part of the award on the preliminary issues,and since the final awards contained an anti-suit jurisdiction these arbitration awardsviolate the principle of the sovereignty of the Republic of Indonesia and public policyin Indonesia, and therefore these final awards of the SIAC tribunal are non-enforceablein Indonesia. An appeal has been submitted by Astro Group against this decision and todate this matter is still being processed.

III COURT PROCEDURE

i Overview of court procedure

Tere are no uniform rules of civil procedure applicable in Indonesian courts. TeEmergency Law No. 1 of 19512was intended to establish a single unified court system.Prior to this Law (during the colonial period) the Dutch established a plural courtsystem. At the time Emergency Law No. 1 was enacted, it was anticipated that a newCivil Procedure Law would soon be adopted. o date, no such code has been enacted andthe provisions of Emergency Law No. 1 continue to be in force in practice. EmergencyLaw No. 1 provides for the applicability of two Dutch colonial laws relating to the civilprocedure in the courts in Indonesia. In the courts of Java and the Madura islands,the Herziene Indonesisch Reglement of 1847 (the Revised Indonesian Regulation orthe HIR) is applied, and in the other islands in Indonesia outside Java and Madura,the Rechstreglement Buitengewesten (the RBg) is applied. Te RBg essentially followsthe HIR but provides for longer terms of notice, service and limitation periods. Whenthe HIR or RBg is silent on a particular matter, the courts turn to the Reglement of de

Burgelijke Rechtsvordering voor de Rad van Justitie op Java en het Hoogerechtshof vanNederlandsh Indie, also known as the Reglement op de Rechvordering (the RV). 3Te following are brief highlights of certain important and relevant rules governing

litigation in Indonesia.

Civil law system and no stare decisisIndonesias legal system follows the tradition of the civil law system and does acknowledgethe principle of jurisprudence (stare decisisprinciple). Under Indonesian civil procedurallaws, the judges are not bound by prior decisions of the High Court or the Supreme

Court. Nevertheless, they are known to apply such decisions, whether by way of consensusamong the judges or because of the persuasive weight of such decisions. Tis, again,inevitably leads to some element of uncertainty for any litigation process in Indonesia,

2 State Gazette 1951 No. 9.

3 Staatsblad 1847 No. 52 as amended.


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since there are no official rules to govern the use of prior jurisprudence. Tis is mostlybecause the persuasive value of any one particular case to the panel of judges cannot beknown with any particular certainty.

Burden of proofIn the general civil proceedings, namely, in breaches of contract actions, tort actions andclass actions, the pleading must be proved by the plaintiff or claimant. Tis principle, in

which the party who asserts any claim to the court has the burden of proving its existence(onus of proof or burden of proof principle), is stipulated in Indonesian civil procedurallaws.4

Tere are no clear standards that determine when the burden has been satisfied ina case. However, in practice, the plaintiffs should meet the following three fundamentalkey tests in asserting their claim in the court:a the course of action of the defendants can be proven by the plaintiffs in court and

these actions have breached the relevant contract (in a breach of contract case) orviolated the prevailing laws, customary laws or prudential principles or the rightof the plaintiffs (in a tort case);

b the plaintiffs must be able to prove that as a consequence of these actionsconducted directly or indirectly by the defendants, the plaintiffs have suffereddamages; and

c the causality of points (a) and (b) supra.

If the plaintiffs are not able to prove these three fundamental factors in relation tothe case, but on the other hand, the defendants are able to prove otherwise, then thedefendants might potentially have the chance to set aside the merit of the case. Unlikethe plaintiffs position supra, the more the defendants are able to prove their positionscontrary to the plaintiffs assertions (which are supported by valid evidence, argumentsand a legal basis), the more difficult it is for the presiding judges to justify the plaintiffsclaim, and the more chance there is for the defendants to potentially win the case.

Based on the general practice of litigation in Indonesia, in representing the

defendants position and in implementing the defence strategy, the lawyers must assertand explain the arguments in relation to exceptions, that is, the motion to dismiss thecase; and the arguments in relation to the merit of the case, insofar as these assertions andarguments on the exceptions and the merits of the case are clearly and properly justifiedunder the circumstances of the case and the prevailing Indonesian laws.

In practice, the following are the general arguments that may be asserted andraised by the defendants as a basis for their request for the motion to dismiss the case:a the relevant court does not have any competence or jurisdiction to decide the

matter (absolute exception). If this argument is lodged, the presiding judges

4 Tis principle is contained in Article 1865 of the Indonesian Civil Code, Article 163 of the

HIR and Article 50 of the RV, which stipulates that the party or plaintiff who asserts any claim

has the burden of proving its existence in front of the court.


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should first decide this motion before they make a decision in relation to themerit of the case;

b the claim contains error in persona (the claim is addressed to the wrong party);5

c the list of parties to the lawsuit is incomplete (lack of parties plurium litis

consortium);6d the lawsuit is obscure (obscuur libel);7

e there exists inconsistency between the background (posita) and the petitionsrequested in the pleading;8

f the claim is invalid due to the incorrect construction of the pleading, namely, thebreach of contract claim and the tort claim have been combined in one pleading.Tese two matters should be claimed separately;9

g the claim is invalid due to too many claims being combined into a single lawsuit;10or

h the lawsuit is premature, due to the reason that the plaintiff has not fulfilled theobligations that are required under the relevant contract or the prevailing laws tobe fulfilled before it may submit the claim to the court.11

Role of judgesTe Indonesian general legal system and its court system adopt the continental system,in which the roles of the presiding judges in a trial process are generally passive. Tis isdifferent from the common law (adversarial) system. Te presiding judges have a passive

role in the examination of the case in the sense that the scope of the disputed mattersto be examined by the presiding judges will principally be determined by the disputedparties and not by the presiding judges.

In addition to the above passive role of the judges, the presiding judges who areexamining and deciding the case will also be bound to the following general principlesin making the decision:a Article 25 Paragraph (1) of Law No. 4 of 2004 regarding the Judiciary (Law No.

4/2004), stipulates the basic requirement as follows: All court decisions, besides

5 Vide the Jurisprudence No. 10/G/Pdt/1978, dated 15 January 1979, the Jurisprudence No.

195 K/AG/1994, dated 20 October 1995 and the Jurisprudence No. 205 K/Pdt/2001, dated

31 January 2003.

6 Vide the Jurisprudence No. 437 K/Sip/1973, dated 9 December 1972, the Jurisprudence No.

151 K/Sip/1975, dated 13 June 1975 and the Jurisprudence No. 878 K/Sip/1977, dated 19

June 1977.

7 Vide the Jurisprudence No. 492 K/Sip/1970, dated 16 December 1970.8 Vide the Jurisprudence No. 67.K/Sip/72, the Jurisprudence No. 565.K/Sip/1973, dated 21

August 1974 and the Jurisprudence No. 28.K/Sip/1973, dated 5 November 1975.

9 Vide the Jurisprudence No. 879.K/Pdt/1999, dated 29 January 2001 and the Jurisprudence

No. 879K/Pdt/1997.

10 Vide the Jurisprudence No. 415 K/Sip/1975, dated 20 June 1979 and the Jurisprudence No.

962 K/PD/95, dated 17 December 1995.

11 Vide the Jurisprudence No. 2743 K/Pdt/1995.


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containing reasons and the basis for the decision, must also contain certain articlesof the said laws and regulations or unwritten legal sources used as the basis for the

judgment.b In practice, any decision of the court that is not in accordance with Article 25

Paragraph (1) of Law No. 4 /2004 will be deemed as a court judgment that is notlegally motivated, and as a consequence thereof this decision must be overruledand cancelled by the appellate courts.12

c A court decision that is based on a consideration that is different or deviatesfrom the basis of the claims stated in the lawsuit must be annulled by the highercourt.13

d If a lower court has wrongly interpreted the laws, this decision is made not inaccordance with fairness and justice.14

Language barrierIn formal court proceedings in Indonesia, the foreign party may face a language barrier,

where all proceedings before the Indonesian courts must be conducted in Indonesian; allrelevant documents in English must be translated into Indonesian by a sworn translatorbefore they can be submitted to court; and all witnesses will be questioned in Indonesianand all answers must be translated into Indonesian before they enter the court records.

As a result, there is much room for error or translation problems in preparing andsubmitting the court documents and understanding the court directions or decisions.

ii Procedures and time frames

Te court of first instance (district court)Before the presiding judges commence with the formal court proceedings, based onSupreme Court Regulation No. 2 of 2003 regarding the Mediation Procedures in Court(SCR No. 2/2003) the presiding judges have the mandatory obligation to require theparties to the dispute to implement the court mediation process in an attempt to reach anamicable settlement in the case. In this court mediation process, the presiding judges willappoint a court mediator (which is usually another judge in the same court) and requestthe disputed parties to appear before this court mediator. Te mediation process shouldbe conducted within 22 working days as of the appointment of the court mediator. If theparties fail to reach an amicable settlement, the statement and acknowledgment of eachparty in the mediation process cannot be used as evidence in the court hearing of therelated lawsuit or any other lawsuit, and the court mediator must destroy all documentsreceived during the mediation process. If, during the mediation process, the parties agree

with the out-of-court settlement, the court mediator will help the parties to enter into anagreement, which inter aliamust contain the agreement to withdraw and settle the case

amicably, and this agreement may at a later stage be reinstated by the presiding judges

12 Vide Indonesian Jurisprudences No.: 443-K/Pdt/1986; No.: 2589.K /Pdt/1988, dated 26

October 1993; and No.: 638/K/Sip/1969, dated 22 July 1970.

13 Vide Indonesian Jurisprudence No.: 372 K/Sip/1970, dated 1 September 1971.

14 Vide Indonesian Jurisprudence No.: 3901 K/Pdt/1985, dated 29 November 1988.


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as a formal settlement agreement in the decision relating to this case.15If the mediationprocess fails, the court will commence the first hearing of the case with the agenda ofsubmitting the claim from the plaintiffs to the defendants.

Te legal proceedings in this first instance, especially if the claim is somewhat

complicated, will generally consist of several hearings. Each of the above hearings isnormally one or two weeks apart. Te length of time is solely at the discretion of thecourt. If the claim is somewhat simple, the parties on the day of the first hearing of thecourt may immediately bring with them all their means of evidence, written documents,if any, and the witnesses they want to be examined. In more complicated cases, it iscommon practice that only after the examination of the facts to be proven by each of theparties can the witnesses be brought before the court. Any third party having an interestin the civil proceeding may intervene in the case.

On the basis of guidance on the implementation of duties and the administrationof courts issued by the Supreme Court, the duration for a lawsuit starting from theregistration of the claim until the judge renders his or her decision shall not exceed sixmonths. However, in practice, court proceedings in the district court in a number ofcases continue much longer. In some cases, the judgment can take anything from oneto two years; this is particularly true if most of the defendants reside outside Indonesia.

Pre-judgment attachment and interim court injunctionRemedies for plaintiffs can be obtained by court order (in the general civil litigation

process) by instituting a claim through a civil lawsuit. In this civil case, any plaintiff whohas a claim may request a court attachment (pre-judgment attachment) of the particularrelated property and an interim court injunction. Both of the legal remedies may only besubmitted to the court of first instance and may only be granted by the court after theclaim is submitted by the plaintiff.

Te pre-judgment attachment is only preliminary in nature and gives the claimantsecurity until the enforcement of the claim is realised by the court. It should be noted,however, that civil proceedings to obtain a final, binding and enforceable court judgmentin Indonesia is a time-consuming process and may take years to complete, during which

the defendants may dispose their assets if the court has not granted a pre-judgmentattachment over the defendants assets. Tis would have the effect that the judgmentmade in favour of the plaintiff would not be enforced effectively if there was no priorpre-judgment attachment and, at the time of the final judgment, the defendants assets

were insufficient to cover the claims submitted by the plaintiff. Tis motion may besubmitted together with the claim or submitted before the judgment made by the courtof first instance. Based on Circular Letter of Indonesian Supreme Court No. 5 of 1975,the pre-judgment attachment may only be granted by the court of first instance after the

presiding judges have examined all evidence in relation to the case. In practice, this pre-judgment attachment may only be granted after the court hearing on the examinationof evidence has taken place.

15 In practice, this mandatory court mediation process has not effectively been used by the

disputed parties to settle the case out of court.


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Te plaintiff also may seek an interim court injunction to prevent the defendantfrom conducting any action that might hamper or jeopardise the interests of the plaintiffin submitting its claim in the court. o enable the interim court injunction to beconsidered by the presiding judges, there are some requirements to be fulfilled by the

plaintiff, which include that the submission of this application must be based onprimafacie evidence or written valid evidence to support the necessity of requesting of thismotion. In practice, the presiding judges will also reject the motion if the substanceof the matter is similar or a duplicate of the claims on the merit of the case submittedby the plaintiff in the lawsuit. If this interim court injunction is granted by the court,this judgment will be treated like a specific relief decision (i.e., a court order to director prohibit certain conduct of the defendants or the co-defendants). Based on CircularLetter of the Indonesian Supreme Court No. 3 of 2000, an interim court injunctioncan only be granted by the court after the presiding judges have examined all evidencein relation to the case. In practice, this injunction may only be granted after the courthearing on the examination of evidence has taken place.

Te second instance (High Court)Each of the disputed parties is entitled to appeal to the High Court. However, neitherparty is obliged to file a memorandum of appeal with the High Court. Even if this isdone, the High Court may, at its sole discretion, hold a hearing, request the court offirst instance to conduct a hearing, decide that no such hearing is required or order that

the files and documents of the courts of first instance are sent to the High Court forexamination and evaluation. Tere is no fixed time for the rendering of a judgment bythe High Court. Judgment may take between one and three years. Te appellant bearsthe cost of the appeal at the court registrar of the same district court that rendered thedecision.

Te highest court (Supreme Court)Once the decision of the High Court has been rendered, either party may request asecond appeal for the decision to be considered by the Supreme Court. Such request must

be in the form of a notice of cassation, which must be submitted to the Supreme Courtthrough the district court that rendered the decision within 14 days after the receipt ofthe High Court decision by the disputed parties. Te memorandum of cassation mustbe filed by the appellants within 14 days after the registration of the notice of cassation.Tis memorandum of cassation must contain reasons as to why the decision of the HighCourt is incorrect. After this memorandum of cassation has been received by the non-appellants (appellees), the appellees must submit their contra-memorandum of cassationif they would like to use their right to support the decision that has been made by the

High Court on the case.Te Supreme Court, based on the court documents (including the decisionsmade by the first level of the court and the High Court, the memorandum of cassationand the contra-memorandum of cassation), will then decide whether or not to considerthe appeal. Te presiding judges in the Supreme Courts level will make their decisionby having a closed hearing among them in deciding the case, and there is no publichearing to be made by the presiding judges in this Supreme Courts level. Each member

judge in the panel will have an authorisation to review and gives his or her opinion on


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all court documents and evidences that have been submitted by the disputed party forthis examination in this cassation stage, and there is no statutory limitation of time forthe panel of the presiding judges to make a decision on this cassation stage. Te legalprocess in this second appeal in the Supreme Court can generally take anything from

two to five years.

Te peninjauan kembaliUnder certain limited conditions, following the binding decision of the Supreme Courtbeing given, the losing party may request a peninjauan kembali (similar to a judicialreview) in order to nullify the final and binding court decisions that have been made inthe case. One of the popular legal bases for a party to make a peninjauan kembaliis thecondition that a new fact has been found after the court decisions have been made, whichis important and may affect to the case. Suchpeninjauan kembali must be submitted tothe court of first instance that first decided the case. As in the second appeal process, thepresiding judges at thispeninjauan kembali level will make a decision by having a closedhearing among them in deciding the case, and there is no public hearing to be madeby the presiding judges at this level. Te legal process of the peninjauan kembali cangenerally take anything from two to five years.

Execution of a judgmentIn order that a final and binding court judgment may be executed, the party in whose

favour judgment is given must apply to the Chairman of the court of first instance forexecution of such judgment. Te district court upon receipt of the execution order will,

within a period of time, which is entirely within the discretion of the court, call theparty against whom judgment is given to fulfil the obligations in the judgment, at thelatest within eight days thereof. If that party still fails to comply, the Chairman of thecourt may issue a written order to attach (secure) the property of that party (moveablesas well as immoveables), the value of which, according to his or her evaluation, will beadequate to fulfil the judgment debt and the execution fee. Te sale of property mustbe carried out by the State Auction Office. Te above process may take up to one year

to complete. Problems may arise if there are third-party claimants to such property whowish to contest the execution. Although such objections to executing do not in lawpostpone the execution, in practice the execution will inevitably be delayed.

iii Class actions

Class action cases are common in Indonesia. Several laws in Indonesia have alsospecifically endorsed the possibility of submitting class action petitions to the generalcivil court of the first instance.16

Te basic requirements and general procedures for submitting class actionpetitions are regulated in Indonesian Supreme Court Regulation No. 1 of 2002, dated26 April 2002 regarding the Procedures for Class Action (SC Regulation No. 1/2002).

16 Tese stipulations, among others, are clearly set forth in the law of consumer protection,

environmental law, telecommunication law and water law, etc.


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Te following are some important general requirements and procedures in submittingthe class action petition in Indonesia:a Any class action petition may be filed if: the number of class members is so large

that it is ineffective and inefficient to make an individual claim; there are common

questions of fact or situation and common questions of law that are substantial,and there are same claims among class representatives and their class members;and a class representative must fairly and seriously protect the interests of therepresented members (adequacy of representation).

b In a preliminary hearing, a judge must hear and consider whether the abovecriteria of the class action petition have been fulfilled or not. If the petition hascomplied with the above criteria, through a court order the judge will certifythe validity of the class action and order the plaintiff to submit a draft of theproposed model of a notice for the judges approval. If the judges determine thatthe petition is not valid or has not complied with the above criteria, the judges

will discontinue the proceedings by issuing a court judgment.c o represent the legal interests of class members, class representatives shall not be

required to have a special power of attorney from the class members.d Te general civil procedural laws will generally be applicable in class action court

proceedings, while some lex specialis or specific requirements need to be observed,as set forth in SC Regulation No. 1/2002.

e Te presiding judges may recommend a class representative to replace a lawyer

if the lawyer has performed acts against an obligation to defend and protect theinterests of the class members.

f Te procedures for serving notice to class members may be made through media,government officers or directly served to the class members, and this notice mustbe served promptly after the judges have declared that the class action petitionis valid, and at the stage of the settlement and distribution of damages when theclaim is granted by the court.

g Te notice must also provide the mechanism of opt-outs (i.e., the right of a classmember within a period of time to have the chance to opt out from the class

membership by submitting a specific form as provided in the attachment of SCRegulation No. 1/2002). A class member who has stated to opt out shall not belegally bound by any judgment of the class action case concerned.

h If there exist overlapping class action cases on a similar matter, pursuant towhich the same class action petitions have been lodged in several district courts bythe different plaintiffs, but representing the same class members, the IndonesianSupreme Court as the highest court in Indonesia must make a judgment to mergethese several class actions and to determine which plaintiffs have the quality,

capability and credibility to continue in representing the class members in thisclass action case.

iv Representation in proceedings

Parties to a dispute may directly appear in the court or be represented by their licensedlawyers (licensed advocates). Te Indonesian civil procedural laws do not oblige theparties to appoint lawyers in representing their interest in the legal proceedings. Te


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disputed parties may appoint a law firm that in the relevant case can be represented byone or more lawyers or appoint an individual licensed lawyer (advocate). All lawyersrepresenting the disputed parties must obtain a licence from the relevant bar associationbefore they are allowed to appear before the courts. It is a common practice that at the

first hearing, the presiding judges will examine the licence of the lawyers appointed inthe relevant case.

v Service out of the jurisdiction

If one of the defendants is a non-Indonesian national (i.e., either a non-Indonesian naturalperson or legal entity) and such party resides outwith the Indonesian jurisdiction, theIndonesian court will effectuate the service of notice to such non-Indonesian nationalsby requesting the assistance of the Ministry of Foreign Affairs to effectuate the service

of notice. Upon receipt of this request, the Ministry of Foreign Affairs will delegate thismatter and request the nearest Indonesian embassy where the non-Indonesian nationalis resided to effectuate the service of notice.

On the other hand, if any foreign court document needs to be served to Indonesiannationals who are residing in the territory of Indonesia, based on the Indonesian civilprocedural laws, the service of such foreign court document must be made by the courtbailiffs or messengers appointed by the relevant court in whose jurisdiction the documentis served. Tis mode of service applies to both local and foreign court documents to beeffectuated to Indonesian nationals resident in Indonesia.

In relation to this service of notice, please note that Indonesia is not a party tothe Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civilor Commercial Matters 1969, or any other convention relating to the service of foreignprocess, other than a bilateral agreement with Tailand.17

Terefore, if the notice of the foreign court document will be served in Indonesiaby way of regular communication without complying with the above requirement underthe Indonesian civil procedural laws, any such purported service shall not be valid andnot in accordance with Indonesian law.

vi Enforcement of foreign judgments

In choosing the foreign court as the forum for settling commercial disputes in Indonesia,please note that Indonesia is not a party to any multilateral or bilateral treaty with othercountries for the reciprocal enforcement of judgments. In the absence of an applicablebilateral or multilateral treaty, a judgment rendered by a foreign court shall not beenforced in Indonesia.

In addition to the above, the Indonesian civil procedural laws, especially Article436 of the Regulation on Civil Procedures (RV), stipulates that a foreign judgment

cannot be executed in the territory of Indonesia. Terefore, as a general rule, foreign

17 Te Convention 1969 applies in all cases, in civil or commercial matters, where there is occasion

to transmit a judicial or extrajudicial document for service abroad, and it is stipulated that each

contracting state shall be free to effect service of judicial documents upon persons abroad,

without application of any compulsion, directly through its diplomatic or consular agents.


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vii Assistance to foreign courts

o the best of our knowledge, Indonesia has only entered into a bilateral agreement withTailand on judicial cooperation (the Bilateral Judicial Cooperation Agreement).20TeBilateral Judicial Cooperation Agreement basically stipulates judicial cooperation and the

procedures for submitting court documents and obtaining documents from the relevantauthorities of each country. However, it clearly stipulates that the implementation of

judicial cooperation between the two countries under this bilateral treaty will be subjectto and must honour the national laws of each country. Other than the Bilateral JudicialCooperation Agreement, the Indonesian courts may give no general assistance to foreigncourts.

viii Access to court files

Since the independence of Indonesia to date, there has been no comprehensive andsystematic reporting of lower court decisions and binding court judgments in Indonesia.Tis is primarily due to the restrictive access in the past to the court files. Te result ofall this is that the court decisions have not been interpreted in a detailed fashion so as toallow a thorough examination of the merits of any one individual case.

Tis situation might change in the future, since in 2007 the Indonesian SupremeCourt issued Decision No. 144/KMA/SK/VIII/2007, dated 28 August 2007, on theDisclosure of Information in Court (Decision No. 144/2007). Based on this, anyparty other than the disputed parties may request any information or a copy of court

documents to the Supreme Court, particularly in relation to the final and binding courtjudgment, information on the stage of the case and data statistics of the cases.

ix Litigation funding

No specific stipulation under the laws of Indonesia exists on this particular matter. Basedon Advocate Law No. 18 of 2003 and the Indonesian Lawyers Code of Ethics 2002, theparties are free to agree on the legal fee to be paid by the client to its lawyers (freedom ofcontract). Tis agreement for the provision of the legal fees can be made either verbally

or in writing.It is not uncommon in practice that the litigation funding be facilitated by a

disinterested third party. However, there are no specific circumstances or prohibitions onconcluding funding for litigation cases. Te Advocate Law of 2003 only requires that theamount of the legal fee must be agreed based on the fairness principle, which means thatthe determination of the legal fees should consider the risk, time, capability and interestof the client. Article 4 of the Indonesian Lawyers Code of Ethics 2002 only stipulatesthat in determining the legal fee, lawyers must consider the clients ability to pay, andlawyers cannot impose unnecessary expenses on their clients.

20 An Agreement on Judicial Co-operation between the Republic of Indonesia and the Kingdom

of Tailand, dated 8 March 1978, which has been ratified by the Indonesian government based

on Presidential Decree No. 6 of 1978.


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IV LEGAL PRACTICE

i Conflicts of interest and Chinese walls

Te Indonesian Lawyers Code of Ethics 2002, particularly in Article 4, contains the

general provisions on conflicts of interest. Generally, lawyers may not represent theinterest of more than one party if such interests are in conflict or if there is real chanceof such conflict. However, this rule does not prevent lawyers from acting for two ormore clients if the clients share a common or similar interest. A lawyer who representsthe interests of more than one party with conflicts of interest must withdraw from therelevant case.

As a general rule, a lawyer is prohibited to act against a former or existingclient of his or her own or of a colleague within the same firm. In practice, conflicts ofinterest cannot be merely avoided by creating an artificial administrative separation of

representation of interests and the relevant files or Chinese walls. An exception to thisrule applies if the new client, and the former or existing client, both have given prior

written consent to the said lawyer to represent both parties in this conflicting matter, onthe basis of proper information being supplied to them. Tis mostly applies in relationto commercial transactions rather than in litigation cases.

Te conflict of interest case has been tested in Indonesian legal practice. Onefamous conflict of interest case relates to odung Mulya Lubis, an Indonesian lawyer(ML). He had been reported to the Indonesian Advocates Association (Peradi) and as

a result, Peradi issued its final decision to revoke permanently his practising or advocatelicence due to his serious violation of the Indonesian Advocate Code of Ethics relating tomatters of conflicts of interest.21

After MLs practising licence was permanently revoked by Peradi, he was theninvolved in the establishment of a new Indonesian bar association, namely the Congressof Indonesian Advocates (KAI), and was appointed as the vice president of KAI. MLsconflict of interest case was re-examined by KAI, and this new bar association imposed asanction to suspend his advocate licence for one month and 15 days only.22Recently, theSupreme Court has issued its ruling that the Supreme Court does not acknowledge the

existence of KAI, and therefore only advocates registered with Peradi are valid advocatesin Indonesia.

ii Money laundering, proceeds of crime and funds related to terrorism

Any money laundering and other related activities (including protection against dealingin the proceeds of crime or funds related to terrorism) are strictly prohibited underthe Money Laundering Act of 2002, as amended. Any person who violates the MoneyLaundering Act of 2002, including lawyers in their capacity as the attorney dealing

21 A decision of Peradi No. 036/Peradi/DKD/DKI-Jakarta/Putusan/V/08, dated 16 May 2008.

Tis matter was also widely published in the Indonesian newspapers. Peradi was initially formed

as a single Indonesian bar association and the sole self-regulatory body governing all advocates

in Indonesia under the Indonesian Advocate Act of 2003.

22 A decision of KAI No. 01/MK-DK KAI/XII/2008, dated 3 December 2008.


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with these criminal transactions, may be subject to a general criminal sanction ofimprisonment for a minimum of five years and a maximum of 15 years, and a fine of atleast 100 million rupiahs and at most 15 million rupiahs. However, no specific provisionor decree in the prevailing laws in Indonesia specifically regulates the responsibility of

lawyers to eradicate these criminal activities.Te growth in money laundering activities and terrorism financing using financial

institutions requires concrete action to eradicate these criminal activities. Te diversityof products, activities and information technology available in the commercial sector hasresulted in an increase in the use of commercial banks, financial service providers, moneychanger and money transfer companies for such activities. In an attempt to prevent suchactivities, the prevailing Indonesian laws stipulate specific responsibilities for commercialbanks, financial service providers and money changer and money transfer companiesto eradicate money laundering criminal activities or to protect against dealing in theproceeds of crime or funds related to terrorism.

V DOCUMENTS AND THE PROTECTION OF PRIVILEGE

i Privilege

Based on the applicable laws in Indonesia, the relationship between the client and itsadvocate is subject to and specifically protected by Law No. 18 Year 2003 regarding

Advocates (the Indonesian Advocate Act).As to the files and documents, and particularly documents and files submitted

by the advocate (lawyer) in the legal proceedings, the Indonesian Advocate Act hasguaranteed the strict confidentiality over the files and documents related to a case thatis being handled by the advocate for the interest of the client (attorney-privilegeddocuments). Tis matter inter alia is stipulated in Article 19 (2) of the Indonesian

Advocate Act, which states as follows: An advocate is entitled to confidentiality overhis/her relationship with his/her client, including protection on the files and documentsagainst seizure or investigation; and protection against any acts of taping on any electronic

communication made by the advocate.It is clear that the Indonesian Advocate Act itself guarantees that the attorney-privileged documents shall be excluded from any disclosure in any legal proceedings. TeIndonesian Advocate Act has also guaranteed that the attorney-privileged documentsmust be free from any attempt to seize, examine, investigate or tape them in whatsoevermanner.

No provision under Indonesias laws that gives privilege applies to in-house lawyersdocuments. However, if the in-house lawyer has a licence to practice as an advocate inIndonesia, the said in-house lawyer advocate can have privilege and protection under the

Indonesian Advocate Act on his or her documents by mentioning that, as the in-houselawyer, he or she is acting as the Indonesian advocate.

ii Production of documents

Indonesian procedural law follows the tradition of a civil law system, and it does notcommonly acknowledge the disclosure of documents and other disclosure or discovery.Tere is no mechanism to enforce any order relating to disclosure or discovery in the


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Indonesian courts. As a matter of practice, if a party requests the disclosure of documentsby the other party, and the other party refuses to disclose such documents, the presiding

judges may draw whatever inference they deem appropriate from such non-disclosure.Te general rules on evidence of civil procedure could be found in the Indonesian

Civil Procedure Law and Article 1866 up to and including Article 1993 of the Civil Code.Indonesian courts hold a strong preference for original evidence and documentation,but authenticated duplicates are acceptable. Article 1866 of the Civil Code and Article164 of the HIR define that evidence consists of written evidence (including electronicinformation or document based on Law No. 11 of 2008 regarding Information andElectronic ransaction), testimony of witnesses, inference, acknowledgements and oath.Indonesian law distinguishes between authentic written evidence and privately made

written documents. Authentic written evidence in the form as prescribed by the lawsand made before the government official is considered as the strongest evidence (primafacieevidence). Affidavits sworn outside Indonesia must be notarised and legalised by theappropriate embassy or consulate for the documents to be recognised in the Indonesiancourts.

Indonesian judges play an active role in relation to the examination of evidenceand have the discretion to call for or reject direct or expert testimony. Teir widediscretionary powers also provide for refusal of evidence as they see appropriate andindividual interpretation of evidence and arguments presented. Terefore, the abilityto require testimony and the production of documents and to examine the witnesses is

entirely within the courts discretion.Tere is no procedure for compelling the opposite side to present facts or

documents reflecting examination outside the court hearings.As explained earlier, the court retains no verbatim transcript. Te clerk takes notes

of the testimony and of any cross-examination that takes place. Frequently, these notesare incomplete and inaccurate, particularly if the subject matter is technical and new tothe appointed clerk. Tis record forms the basis of the courts decision on factual matters.Copies are not made available to counsel either during the trial or at the appellate stage.

Although counsel may review and has access to such records at the clerks office, neither

counsel nor the party to the action may officially take copies.New evidence may be presented on appeal to a High Court; however, this practice

is not generally permitted in the Supreme Court, although the Court has the discretionto admit new evidence in the interests of justice.

VI ALTERNATIVES TO LITIGATION

i Overview of alternatives to litigation

Since litigation in Indonesia is mostly still a time-consuming exercise, and there isrelatively little certainty as to the likely outcome of the case, arbitration as one of thealternatives to litigation is currently in the process of becoming the preferred methodfor settling commercial disputes in Indonesia. Tis is also driven by the enactment ofLaw No. 30 Year 1999 on Arbitration and Alternative Dispute Resolution (Indonesian

Arbitration Law of 1999). Mostly in all complex and cross-border types of the transaction


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documents, it is common that the parties will stipulate the arbitration clause as theproper forum to settle any possible future dispute arising out of such agreements.

Te following advantages may be the reasons why many business people tend tochoose arbitration proceedings rather than a formal court proceeding in Indonesia:

a since the arbitrator will mostly be an expert in the area and familiar with the issuein dispute, the parties may have more confidence as to the likely outcome of thecase;

b privacy is also one of the important factors in the arbitration proceedings, sincethe proceeding is closed to the public, and the award is presented only to thelimited parties;

c in arbitration proceedings, the parties can choose the English language as agoverning language for the whole process of the proceedings;

d appeal or judicial review of an arbitration award is limited and therefore theremay be assurance of certainty and finality; and

e the choice of arbitration enables the parties to give predictability and certainty asto the dispute settlement process and the parties can choose that the award willbe based on the principle of equity (ex aequo et bono), although in some instancesthis creates inconsistency in deciding the same case.

ii Arbitration

Te basic provisions relating to the arbitration in Indonesia are set out in Law No. 30 of

1999 dated 12 August 1999 (the Indonesian Arbitration Law), and the law stipulatesthat an agreement to arbitrate must be made in writing either before or after the disputearises. Te parties to the contracts are free to determine the applicable procedural rules ina written arbitration clause before the dispute arises; or a separate arbitration agreementafter the dispute has arisen. Not only an individual person but also a government bodyor a state-owned company in Indonesia could be a party to the arbitration agreement.Trough the Presidential Decree No. 34 of 1981, dated 5 August 1981, Indonesia ratifiedthe New York Convention on the Recognition and Enforcement of Foreign Arbitral

Awards 1958.23

In addition to the above, Indonesia also signed and ratified (as the 27th MemberState) the Washington Convention on the Settlement of Investment Disputes BetweenStates and Nationals of Other States (1965) (the ICSID Convention).24In the bilateralsphere, Indonesia until 2005 had entered into 24 bilateral investment treaties (BIs)

with several countries. Te arbitration mechanism under the ICSID Convention has

23 Following this ratification and before the enactment of the Indonesian Arbitration Law, theSupreme Court issued Regulation No. 1 of 1990 regarding the Procedures for the Enforcement

of Foreign Arbitral Awards.

24 Te ICSID Convention was signed on 16 February 1968, ratified on 28 September 1968 and

entered into force in Indonesia on 28 October 1968. One of the landmark cases involving

Indonesia through the ICSID arbitration tribunal was AMCO ASIA Corp, PAN American

Development Ltd, and P. AMCO Indonesia v. the Republic of Indonesia. Te case took almost

12 years: it was registered on 21 February 1981 and resolved on 17 December 1992.


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mostly been stipulated in these BIs. No standard terms or model languages have beenadopted in the BIs to which Indonesian is a party. However, the BIs mostly containsimilar provisions in promoting and protecting investment bilaterally.

Te Indonesian Arbitration Law stipulates that only disputes that are commercial

in nature or those concerning rights that, according to the laws and regulations, arefully under the control of the parties in dispute may be settled through arbitration. Inaddition, disputes that, according to Indonesian laws, cannot be settled amicably, cannotbe submitted to arbitration. In practice, disputes that cannot be submitted to arbitrationare, among others: criminal cases; industrial relationship cases; administrative cases;bankruptcy cases; and other related family matters (divorce and adoption).

In general, litigation in Indonesia is mostly still an expensive and very time-consuming exercise, and there is relatively little certainty as to the likely outcome of thecase in the litigation process. Arbitration as an alternative to litigation is becoming thepreferred method for settling commercial disputes. Many contracts between Indonesiannationals have used the local arbitration institution, Badan Arbitrase Nasional Indonesia(BANI) as the proper forum to settle their disputes. In cross-border contracts, itis not uncommon that the parties (including Indonesian nationals as a party to thecontract) will choose the Singapore International Arbitration Centre (SIAC), ICC orUNCIRAL as the arbitration institution to settle their disputes.

Under Indonesian law, international arbitral awards will only be recognised andmay only be enforced within the jurisdiction of Indonesia if they fulfil the following

requirements:a the foreign arbitral award is rendered by an arbitration body or an individual

arbitrator in a country that is bilaterally bound to Indonesia or jointly withIndonesia to an international convention regarding the recognition andenforcement of foreign arbitration awards. Te enforcement thereof is based onthe principle of reciprocity;

b the foreign arbitral awards are only limited to awards that, according to Indonesianlaw, fall within the definition of commercial law;

c the foreign arbitral awards are not in contravention of public order under

Indonesian law;d the foreign arbitral awards may be enforced in Indonesia only after the Central

Jakarta District Court has issued an order of execution (exequatur);e if the Republic of Indonesia is a party to the foreign arbitration award, this award

may be enforced in Indonesia only after the Supreme Court of the Republic ofIndonesia has issued an exequatur; and

f the application for the enforcement of the foreign arbitral awards must beaccompanied by:

the original or duplicate of the foreign arbitration award, authenticatedpursuant to the provisions regarding authentication of foreign documents,and an official translation thereof, pursuant to the legal provisions in force inIndonesia;

the original or duplicate of the agreement, as the basis for the foreignarbitration award, authenticated in accordance with the provisions regardingauthentication of foreign documents, and the official translation thereof,pursuant to legal provisions in force in Indonesia; and


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a statement from the Indonesian diplomatic representative in the countrywhere the foreign arbitration award was rendered, stating that such countryis bilaterally bound to Indonesia or jointly bound with Indonesia in aninternational convention regarding the recognition and enforcement of a

foreign arbitration award.

Te Indonesian Arbitration Law clearly stipulates that arbitral awards shall be a final,binding and enforceable decision against the parties, therefore there is no possibility toappeal an arbitration award. If one of the parties refuses to enforce the domestic arbitralaward, the enforcement would be implemented based on the order of the Chairman ofthe district court based on the request of one of the disputed parties. Te decision ofthe Chairman to reject or accept the application for the execution of the arbitral awardcannot be appealed. Te enforcement of a foreign (international) arbitral award relatingto legal persons in Indonesia (other than the government of Indonesia) can only beimplemented after having obtained an exequaturissued by the Central District Courtof Jakarta. Te granting of the exequaturby the Central District Court of Jakarta is notsubject to an appeal. However, if the Central District Court of Jakarta refuses to issue theexequatur, this rejection is subject to an appeal to the Supreme Court. Te enforcementof a foreign arbitral award in which the Republic of Indonesia is a party can only beimplemented in Indonesia after having an exequatur from the Supreme Court of theRepublic of Indonesia, and this is not subject to an appeal.

Te Indonesian Arbitration Law stipulates that, in the event that the partieshave agreed that disputes between them will be settled through arbitration and theparties have given the authorisation, the arbitrator is competent to rule on his or herown jurisdiction, and the Indonesian courts do not have the jurisdiction to adjudicatea dispute where the parties to the contract are bound to an arbitration agreement, sinceany arbitration agreement concluded in writing by the parties will preclude any rightof the parties in the future to submit the dispute to the district court. Terefore, theIndonesian courts must reject, and should not be involved in, any dispute agreed to beunder the arbitration proceedings.

Although the above non-involvement of the Indonesian courts in arbitrationmatters is clearly stipulated in the Indonesian Arbitration Law, legal practice in Indonesiashows that some jurisprudence decided by the Supreme Court has justified the non-applicability of the arbitration awards. Tis is particularly so if the cases are not relatedto the breach of contract of agreements per se, but relating to tort or illegal actions. Inthese cases, the plaintiffs have proved that the cases are relating to the tort claim, whichare outside the applicability of the arbitration agreements agreed by the parties. Teplaintiffs have argued that arbitration agreements only cover any disputes arising out of

the implementation or breach of contract of the agreements between the parties. Onerecent case in this matter related to Lippo Group v. Astro Group, as explained supra inSection II.

Since the enforcement of the international arbitration awards in Indonesia willrequire an exequaturfrom the Chairman of the DCCJ, in practice, this has created muchroom for the disputed party to avoid the enforcement of the arbitration awards byrequesting an annulment or refusal of the awards through the Chairman of the DCCJ.


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A lot of cases have shown that the Chairman of the DCCJ has refused and annulled theinternational arbitration awards.

iii Mediation and other forms of alternative dispute resolution

Te Indonesian Arbitration Law of 1999 acknowledges mediation, conciliation andexpert determination as other alternative dispute resolution forms for litigation. However,this Law focused its stipulations on the arbitration issue in great detail; only one articlestipulates mediation and expert determination issues.

Other than the court mediation as discussed previously, a private mediation iscurrently being introduced in Indonesian legal practice. However, a private mediation

will only be relevant and applicable to solve any dispute in relation to family law matters(particularly in divorce cases). Under the Indonesian Arbitration Law of 1999, both

disputed parties can make a written agreement to appoint an expert or mediator tosolve their dispute. Te mediation process must be solved within 30 days in the formof a written agreement that is a final and binding agreement on the parties and must beregistered in the relevant district court no later than 30 days after the signing of suchagreement. If no agreement results from this mediation process, both parties can agreeto settle the dispute through an arbitration proceeding, or either party may pursue thelitigation process against another party.

Expert determination is still not generally used in practice. Tis alternativedispute mechanism will only be relevant and used in practice if the transaction at

hand is in relation to a specific, technical and complex transaction that needs an expertdetermination to decide any possible dispute arising out of this specific transaction.

VII OUTLOOK AND CONCLUSIONS

Te rule of law and the reliability of the judicial system, including the Indonesian courtsystem, are still developing and are far from a clear system. When contemplating legalproceedings in Indonesia, the following factors should be taken into account:

a execution of any judgment in Indonesia is often cumbersome and problematic.Te old Dutch civil procedural rules and regulations, despite their obsolescence,still apply in practice;

b there are many factors that may inevitably lead to some element of uncertainty forany litigation process and there is relatively little certainty as to the likely outcomeof a case; and

c litigation in Indonesia is a relatively expensive and time-consuming process, andmuch of the cost that the disputing party will incur may not be automaticallyrecoverable from the other party.


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Appendix 1

ABOUT THE AUTHORS

PHEO M HUTABARAT

Hutabarat Halim & Rekan

Mr Hutabarat is the founder and managing partner of Hutabarat Halim & Rekan, andhe is the chairman of the commercial dispute resolution practice group within the firm.He has, over the years, represented various domestic and international clients in complexcommercial litigation and arbitration proceedings.

Mr Hutabarat has been acknowledged in the area of practice of commercialdispute resolution by the Asia Pacific Legal 500 for three consecutive years since 2006and is regarded as one of the leading individuals in Indonesia in dispute resolution.

Mr Hutabarat is a member of: the Association of Indonesian Advocates (Peradi)and has a licence to practice as an advocate in Indonesia; the Indonesian Association ofCapital Market Legal Consultants and has a licence as a capital market legal consultant;

the INSOL International; the International Bar Association; and the Inter-Pacific BarAssociation. He has also been a guest speaker at various seminars and conferences in bothdomestic and international forums.

HUTABARAT HALIM & REKAN

Wisma 46 Kota BNI, 34th FloorJl. Jend. Sudirman Kav. 1Jakarta 10220

IndonesiaTel: +62 21 574 9820Fax: +62 21 574 [email protected]@hnrlawyers.com

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