WHY DID CONSTITUTIONAL COURT SET ASIDE ELUCIDATION OF ARTICLE 70 OF INDONESIAN ARBITRATION LAW?

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WHY DID CONSTITUTIONAL COURT SET ASIDE ELUCIDATION OF ARTICLE 70 OF INDONESIAN ARBITRATION LAW

Indonesian Arbitration Law

Indonesian Arbitration Law

INDONESIAN ARBITRATION LAW

The Constitutional Court assessed that the Elucidation of Article 70 of Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolutions (Arbitration Law) against the 1945 Constitution of the Republic of Indonesia and it is not legally binding.

Applying for an annulment of an arbitration award now appears to be a common step taken by an unsatisfied party of the decision made by the Indonesian National Arbitration Board (BANI). But this annulment can only be done in a limited manner on the basis of Article 70 of the Arbitration Act.

However, referring to Article 60 of the Arbitration Act, an arbitration award is final, has permanent legal force and binding on the parties. In the elucidation of Article 60 of the Arbitration Act reaffirmed that an arbitration award cannot be appealed, applied for cassation or reconsideration.

Article 70 of the Indonesian Arbitration Law

Indonesian Arbitration Law

Indonesian Arbitration Law

In Article 70 of the Indonesian Arbitration Law, an application for annulment may be filed if the award is contained the following elements:

  1. Letters or documents submitted in the hearings which are acknowledged to be a forgery or are declared to be forgeries after the award has been issued;
  2. Documents are found after the award has been issued which are decisive in nature and were deliberately concealed by the opposing party; or
  3. An award is made based on fraud committed by one of the parties to the dispute.

Therefore, if one of the parties believes an arbitration has at least one of the elements specified in Article 70 of Arbitration Law, an annulment application may be filed before the district court. Request cancellation of the arbitral award must be submitted in writing no later than 30 (thirty) days from the day of delivery and registration of the arbitration decision to the clerk of the local district court.

An application for annulment of an arbitration award must be submitted in writing within no more than thirty (30) days from the date such arbitration award was submitted for registration to the Registrar of District Court.

However, the application for annulment of the arbitration award is sometimes hampered by the provision in elucidation of Article 70 of Arbitration Act:

An application for annulment can only be filed against the arbitration award, which was registered in the Court. The reasons for the annulment request referred to in this article must be proven by a court decision. If the court declares that these reasons are proved or disproved, then it can be used as a basis for consideration to grant or refuse the request.

According to Article 176 of Law Number 12 of 2011 regarding the Establishment of Legislation Regulation, an elucidation as a means to clarify the norm in the articles and it should not result in a lack of clarity of the norm in question. Moreover, if it becomes a new norm.

The contradiction in elucidation of Article 70

Clearly, the elucidation of Article 70 of the Arbitration Act is considered in contradiction to the intention contained in the article itself. Given the effect of raise a new norm, instead of explaining the Article 70 of the Arbitration law. On the other side the government argued that the elucidation is executorial of the phrase “alleged” in the Article which must be proven by a judicial decision, in order to provide legal certainty.

The phrase “alleged” above refers to a presumption that the arbitration award was based on limitative elements mention in Article 70 of The Arbitration Law. These allegations will then be proven during the court hearing of annulment of the arbitration award.

In the elucidation of Article 70 Arbitration Act it specified that the reasons which form the basis of a request for annulment of the arbitration award must be proven by a court decision. Therefore the limitative elements defined in Article 70 of the Arbitration Law as the basis for annulment request of an arbitration award must be proven by a court decision. The court decision can be interpreted as a court decision which have permanent legal force, valid and binding to the parties.

The requirement mentioned in elucidation of Article 70 of the Arbitration Law gives some troubles to the aggrieved applicant, as the time limit of 30 days which stipulated in Article 71 of the Arbitration Law clearly will be exceeded. Further, it is not possible a lawsuit can be examined and decided upon within 30 days. This is considered not to provide legal certainty as it raises a new legal rules which is conflict with the provisions contained in Article 70 of the Arbitration Law itself.

As the deadline specified in Article 71 cannot be met, then application for annulment of the arbitration award obviously cannot be submitted and if it still going to be submitted, it most likely will be rejected by the Panel of Judges.

Various cases of annulment of arbitration award have been proposed. And many have rejected through due to the presence of elucidation of Article 70 of the Arbitration Act. Accordingly, this become the basis of a request for judicial review towards Elucidation Article 70 of the Arbitration law before the Constitutional Court (MK) by Ir. Darma Amblar, M.M. Minerina as Director of PT. Cipta Guna and Drs. Sujana Suleiman as President Director of PT. Bangun Bumi Bersatu.

In the application for judicial review, the Court agreed with the applicant and declared Elucidation of Article 70 of the Arbitration Law is Contrary to the 1945 Constitution of the Republic of Indonesia and does not have a binding legal effect (Constitution Court decision No. 15 / PUU / XII / 2014).

To discuss further on the above issue, you can contact us now at: ask@bplawyers.co.id and call to +62821 1000 4741.

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