Arbitration is a method of dispute resolution outside the court system, conducted by parties who have bound themselves in an arbitration agreement, whereby they agree to appoint an arbitrator or arbitral tribunal to examine and resolve the disputes between them by issuing a final and binding decision[1]. In opting for arbitration, parties may choose either domestic or international arbitration.[2]

Indonesia's economy has grown rapidly despite a slowdown in the global economy. In the fourth quarter of 2023, Indonesia recorded annual economic growth of 5.04%, surpassing the government’s previous projection of 5%. This growth was driven by increased household consumption and investment. Factors contributing to the growth include rising minimum wages and government social assistance programs, which have strengthened Indonesians’ purchasing power.[3]

Specifically, investment growth in Indonesia increased by 4.40%, largely due to infrastructure development. Although the growth slowed, it reflects investor confidence in the Indonesian economy, supported by political, economic, and market stability.[4]

As the economy grows, commercial activities in Indonesia also expand, including partnerships between foreign and local businesses in international trade. In business cooperation, it is not uncommon for parties to fail in fulfilling their respective rights and obligations, leading to disputes.

Arbitration is a preferred dispute resolution method among business actors due to its speed, flexibility, confidentiality, and the final and binding nature of the award.[5] This differs from the lengthy and public process in national courts (conventional litigation) in each country[6]. Due to these characteristics, arbitration is highly favored by business actors from various countries around the world. Consequently, both local and foreign parties often choose arbitration seated in and governed by the law (lex arbitri) of a third country to ensure neutrality in the adjudication of disputes.

Indonesia ratified the 1958 New York Convention (“Convention”) on 7 October 1981[7] through Presidential Decree No. 34 of 1981[8]. Consequently, Indonesia is bound to implement the Convention's provisions, including the enforcement of international arbitral awards. Under the Convention, international arbitral awards can be recognized and enforced in contracting states[9], which must incorporate the necessary provisions into their national laws.

In Indonesia, the recognition and enforcement of international arbitral awards are governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Law 30/1999”), particularly Articles 65 to 69. However, in practice, enforcing international arbitral awards is not as straightforward as stipulated in Law 30/1999.

This is evident in Supreme Court Decision No. 169 K/Pdt.Sus-Arbt/2017, which established a legal principle regarding the enforcement and annulment of international arbitral awards. In that case, the Supreme Court held that the Central Jakarta District Court does not have jurisdiction to annul an international arbitral award.

Accordingly, this paper aims to examine the legal procedures for enforcing international arbitral awards in Indonesia and to explore why district courts are not authorized to annul such awards.

Based on the background above, the research questions to be examined and analyzed by the author are as follows: (1) What is the legal procedure for the enforcement of international arbitral awards? (2) Why is the district court not authorized to annul international arbitral awards

1. Legal Analysis

1. Legal Procedure for the Enforcement of International Arbitral Awards.

An international arbitral award is defined in Article I(1) of the Convention as an arbitral decision made in the territory of a state other than the state where the recognition and enforcement of the award is sought, and which arises from a dispute between parties, whether individuals or legal entities.

Accordingly, the primary requirement for an arbitral award to be considered “international” is that it must be rendered outside the territory of the country where recognition and enforcement are being sought. In addition to this primary criterion, another essential requirement is that the award must pertain to a dispute arising between individuals or legal entities.[10]

In principle, recognition and enforcement of arbitral awards with other countries are based on the principle of reciprocity. This means that the recognition and enforcement of arbitral awards must be grounded in bilateral or multilateral agreements between the relevant states.[11]

In this context, the enforcement of international arbitral awards in Indonesia is governed by Law 30/1999 and the Supreme Court Regulation No. 3 of 2023 on the Procedures for Appointment of Arbitrators by the Court, Right of Refusal, and Examination of Requests for the Enforcement and Annulment of Arbitral Awards (“Supreme Court Reg. 3/2023”).

While enforcement of arbitral awards is, in principle, carried out voluntarily by the parties (self-executing), in practice, challenges and resistance are often encountered, especially from the losing party (or the party ordered to pay damages). Thus, state authority is needed to compel enforcement of the award.

For international arbitral awards, either party may apply for enforcement through the following procedure:[12]
 

1. Register the international arbitral award with the Registrar of the Jakarta Pusat District Court;
2. Submit the following documents:

1. The original or authentic copy of the international arbitral award, along with an official translation;
2. The original or authentic copy of the agreement underlying the issuance of the arbitral award, along with an official translation; and
3. A statement from the diplomatic representative of the Republic of Indonesia confirming the existence of a bilateral or multilateral agreement with the country where the award was issued.

1. Obtain a writ of execution (exequatur) from the Central Jakarta District Court.[13]

However, in order to obtain an exequatur from the Jakarta Pusat District Court, the international arbitral award must meet the following requirements:[14]
 

1. The country where the arbitral award was issued must have a bilateral or multilateral relationship with the Republic of Indonesia;
2. The arbitral award must fall within the scope of a commercial dispute; and
3. The arbitral award must not be contrary to public policy.

Thus, as long as the international arbitral award complies with and fulfills the substantive and procedural requirements above, its recognition and enforcement may be carried out in the territory of the Republic of Indonesia.

2. Grounds for Annulment of International Arbitral Awards.

An arbitral award may be annulled by a district court through the submission of an annulment application to the civil registry office.[15]

The grounds for seeking annulment of an arbitral award are as follows:[16]

1. A document or evidence submitted during the arbitral proceedings is declared to be forged or falsified;
2. A decisive document that was concealed by the opposing party after the award was issued is discovered; or
3. The award was rendered based on fraud committed by one of the disputing parties.

However, these grounds for annulment apply only to domestic arbitral awards, as affirmed by the Supreme Court in decision No. 169 K/Pdt.Sus-Arbt/2017. In its legal considerations, the Supreme Court held that under Article V(1)(e) of the Convention, the court with jurisdiction to annul (set aside) an international arbitral award is the court in the country where the award was rendered or under the law of which the award was made. Therefore, the Jakarta Pusat District Court does not have the authority to annul an international arbitral award issued by the Singapore International Arbitration Centre (SIAC).

Furthermore, the panel held that the authority of the Central Pusat District Court under Article 68 of Law 30/1999 only extends to granting or denying an exequatur for an international arbitral award. Thus, in the author’s view, the proper legal basis for annulling an international arbitral award is to challenge it before the competent court in the country where the award was rendered, in accordance with Article V(1)(e) of the Convention.