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ARE TORT CASES ABLE TO BE SOLVED THROUGH ARBITRATION ?

Basically, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration Law”) does not provide the limitation of the only tort cases that can be resolved through arbitration. So, in the event of a tort committed by one of the parties which were bound by a treaty binding, the dispute can certainly be resolved through arbitration.

It is stipulated in Article 2 of  Arbitration Law, that is:
“These laws regulate the settlement of disputes or differences of opinion between the parties to a particular legal relationship that has entered into an arbitration agreementwhich expressly states that all disputes or differences of opinion arising or which may arise from the legal relationship will be settled by way of arbitration or through alternative dispute resolution. “

The existence of the phrase: ‘that may arise from the legal relationship’ in Article 2 of the Arbitration Law is the basis for those who feel aggrieved over a tort in order to solve existing dispute through arbitration. So, any dispute categorized as a tort (Article 1365 of Civil Code) between parties bound by an agreement containing the arbitration clause, is also under the authority of arbitration to resolve. It shows that a settlement through arbitration does not only resolve the dispute in the basis of breach of contract  only.
The examples of other forms of torts that may arise from an agreement between the parties are:

  1. Related to essential things or foundation of a new treaty discovered after the agreement is signed. For example, issues concerning  the object of the agreement. If it is known that one of the parties pledge an object that does not belong to her or contrary to the existing legislation , the other party may apply for an annulment of the agreement. The basis used is the tort committed by one of the parties during the process of agreement drafting;
  2. Actions conducted by one of the parties which cause damage to another party directly or indirectly related to the existing agreement.
  3. In some instances of the existing precedents, a tort lawsuit which is intrinsically related to a contract containing an arbitration clause is filed in district court.  As a result, the lawsuit is rejected by the judge on the grounds of absolute competence.

The judges in their consideration state that district court is not authorized to investigate the case because in the agreement containing an arbitration clause. As defined in Article 3 of Arbitration Law, the arbitration clause in an agreement automatically disregards the authority of the district court to investigate a dispute related to the agreement.
One of the reasons generally used by the party who files the lawsuit of tort to district court and not to arbitration is due to their relationship with the third party related to the existing problems. However, Article 30 of the Arbitration Law has accommodated the possibility of checking process in an arbitration involving third parties outside the agreement, that is:

“The third party outside the arbitration agreement can participate and join in the process of settling disputes through arbitration, if there are elements related to interests and participation, it  was agreed upon by the parties to the dispute and approved by the arbitrator or panel of arbitrators who investigate the related dispute.”

Arbitration Law itself did not provide further details on the participation of third parties in the settlement process in the arbitration. However, if it only refers to the provisions of Article 30 of  Arbitration Law, the inclusion of third parties is possible in a process of arbitration investigation. A condition should be fulfilled; the inclusion of the third party should be approved by both the arbitrator or panel of arbitrators and the parties (Applicant and the Respondent).
By claiming the third party as one of the parties, that third party has an equal footing with the Petitioner and the Respondent to express and defend their interests. Based on the rules of arbitration procedures of Indonesian National Arbitration Board (BANI), the third party also has an obligation to pay the administrative costs and other fees, related to their participation.

Therefore, is it possible for a third party to get involved because it is invited by one of the litigants? In our opinion, it is possible, as long as it is approved by the parties involved in the arbitration process namely, the arbitrators, the opposing party and the third party concerned. As the essence of settlement by arbitration itself is based on the existence of an agreement among the parties concerned.

BP Lawyers can help you
We can assist you in providing the best solution to the problems or disputes related to contracts, settlement through the arbitration process and the general judiciary. You can contact us at:

Email: bpl@smartlegal.id
Phone: +62821-1234-1235

Author :

Bimo Prasetio, S.H. dan Fairus Harris, S.H., M.Kn.

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