It is known that the principle of freedom of contract (pacta sunt servada) in an agreement is stated in Article 1338 Book of Indonesian Civil Code. So, the parties that have agreed upon an agreement  are free to decide matters related to the deal, as long as  they are not contrary to law, norms that areprevalent  in society such as decency and public order. One of those matters is the freedom to determine the choice of dispute resolution forum in the Agreement.

 If an Agreement has determined Singapore International Arbitration Centre (“SIAC“)as the chosen resolution forum, when a dispute arises , then, the parties are bound by their provisions. The parties concernedcan not request arbitration to any other arbitration institution or ad hoc, because it will be rejected , due to the absolute competence.

At the beginning process of applying for arbitration, for example via the Indonesian National Board of Arbitration (“BANI”), a preliminary investigation will be carried out in advance by BANI concerning its competence in examining the application. The Preliminary investigation is conducted by investigating the dispute resolution clause in the agreement, which become the basis for the legal relations of the litigants.

However, the parties can still cease with the investigation in BANI if they agree to change the forum of dispute resolution clause in principal agreement, by creating an addendum to the existing agreement. Even if the parties have not initially determined the dispute resolution mechanism, it can be accommodated by making Acta Van Compromis. The parties may then agree on the election dispute resolution forum, after the agreement is made and the disputes arise between them.

To determine the selected resolution forum in an agreement is generally influenced by the interests of the parties involved in the agreement. If one party is a foreigner , the person is usually more neutral and more credible, and will select Singapore arbitration forum, that is SIAC. But it does not apply for all cases. In some cases, foreign businessmen prefer BANI forum,considering that the implementation of these contracts will be conducted in Indonesia. Furthermore, the assets of the counterpart also exist in Indonesia. And, there are several other considerations concerning this matter.

However, if the parties involved are Indonesian citizens it will be more beneficial to use arbitration forum in Indonesia through BANI since the execution process will be easier. Using the Singapore arbitration as stated in law Number. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration Law“), will be treated as an international arbitration award, although the parties are Indonesian citizens.

If an international arbitration award is about to be executed in Indonesia, the arbitration award must first obtain the Exequatur (command execution) from the Chairman of the Central Jakarta District Court. The process of execution of international arbitration award takes longer process and is time consuming than the national arbitration award.

One thing that must be taken into consideration is the cost that will be incurred in the process of resolving the dispute. Concerning the cost, it is not only related to the arbitration process, but also the execution of the implementation of the arbitral award. In the end, the execution of the arbitral award is filed in the country where the assets of the counterparty are located. Throughout the country where the assets are located, have ratified the New York Convention in 1958, the principle of reciprocity is applied. Based on this principle, a foreign arbitration award can be executed in countries that have ratified the New York Convention in 1958.

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 by:

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

Author :

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