Enforcement of Foreign Arbitral Awards in Indonesia

IIndonesia ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 by Presidential Decree No. 34 of August 5, 1981. Furthermore, Indonesia became the 27th State to ratify the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (ICSID Convention) in 1968.

Indonesian courts are not bound by judgments handed down by foreign courts. However, in practice, under certain circumstances, foreign court judgments can only be used in Indonesian courts as supporting material (non-conclusive evidence) on matters decided by foreign courts. A party who has obtained a favorable foreign judgment must sue (relitigate) the Indonesian counterpart in an Indonesian court in order to enforce the foreign judgment in Indonesian jurisdiction. Therefore, when a dispute involves an Indonesian party or the subject matter is within Indonesian jurisdiction, the best option to resolve the dispute is through Indonesian domestic courts. This is the main difference with arbitration; foreign arbitral awards can be recognized and enforced in Indonesian jurisdiction.

Indonesia’s arbitration framework began with the enactment of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) dated August 12, 1999. This law provided a structured framework for dispute resolution through arbitration and marked an important milestone in Indonesia’s legal system. With the enactment of this law, Indonesia demonstrated its commitment to fostering a conducive environment for investment and business activities.

but, Following calls for amendments to the Arbitration Law, the Supreme Court of the Republic of Indonesia enacted Supreme Court Regulation No. 3 of 2023 on the Procedures for the Appointment of Arbitrators by the Court, Challenges to the Appointment of Arbitrators, and Review of Requests for Enforcement and Annulment of Arbitral Awards (Supreme Court Regulation No. 3/2023) on 17 October 2023, bringing Indonesia closer to becoming an arbitration-friendly jurisdiction. With particular attention to the procedural guidelines and timeframes for the recognition and enforcement of foreign arbitral awards in Indonesia, the key points outlined in Supreme Court Regulation No. 3/2023 are set out below:

Registration

According to the Arbitration Law, enforcement of a foreign arbitral award may be effected by the Jakarta Central District Court (“Canada“). However, the Arbitration Law does not set a deadline for the CDCJ to complete the procedures, resulting in a long time for the registration and recognition of foreign arbitral awards. According to the latest provisions of SC Regulation No. 3/2023, foreign arbitral awards must be submitted to the Court Clerk of the CDCJ by the arbitrator or his/her representative for registration, which must be done by the Court Clerk within 14 days after the submission of complete registration documents. This registration can be done electronically via the Court’s Electronic Information System (SIP).

Equateur

If either party does not comply with a foreign arbitral award, either party may request a letter of authorization from the Chairman of the CDCJ, which may be submitted electronically through SIP. CDCJ must issue or refuse to issue a license letter within 14 days of the submission of the license letter request.

If the request for grant of enforcement is granted, the Chair of the CDCJ shall inscribe the enforcement title on the original and the certified copy of the foreign arbitral award. In addition, if the Chair of the CDCJ considers that the award is outside the scope of commercial transactions or contrary to public order and morals (Keterchiban Umm), the Chair of the CDCJ may deny the request through a court ruling, which is subject to appeal to the Supreme Court (Kasashi).

Recognition and Enforcement

The deadline for the CDCJ to issue a ruling on the recognition and enforcement of the foreign arbitral award is then 30 days after the filing of the request.

The request may also be submitted electronically through SIP. SC Regulation No. 3/2023 emphasizes that if the CDCJ recognises and enforces a foreign arbitral award, this decision is final and binding and no legal remedies are available. However, if the CDCJ refuses to recognise and enforce a foreign arbitral award, this refusal may be subject to appeal to the Supreme Court (Kasasi).

public Policy definition

In practice, the CDCJ, as a court with jurisdiction to grant warrants for foreign arbitral awards, does not always or automatically grant decisions on warrants.

CDCJ reviews license applications on a case-by-case basis, and there have been cases where CDCJ has refused to grant licenses on the grounds that they violate public policy.

Furthermore, SC Regulation No. 3/2023 provides an even clearer definition of public policy. Keterchiban Umm The Arbitration Law provides that a court must take into account possible violations of public policy when deciding whether to accept and enforce a foreign arbitral award.

What is noteworthy about Supreme Court Regulation No. 3/2023 is that it introduces a broader definition of public policy to include “those that constitute the essential foundations for the operation of the legal, economic and socio-cultural systems of the Indonesian community and state.”

of Keterchiban Umm The definition previously provided in Supreme Court Regulation No. 1 of 1990 on the Enforcement Procedures for Foreign Arbitral Awards was only defined as “a fundamental principle of the Indonesian legal system and society as a whole.” Supreme Court Regulation No. 3/2023 therefore provides a more comprehensive perspective on Indonesia’s position on public policy.

Conclusion

The enactment of SC Regulation No. 3/2023 marks Indonesia’sArbitration FriendlyCountry. Previously, the procedure for registration of foreign arbitral awards took a significant amount of time. The Supreme Court, by SC Regulation No. 3/2023, has streamlined electronic filing via SIP for the registration of foreign arbitral awards, reducing the duration of the following procedures:

1. Registration. The CDCJ Clerk of Court must register a foreign arbitral award within 14 days after filing all registration documents.
2. LAW. The CDCJ must issue a LAW or DISCLAIMER for the foreign arbitral award within 14 days after the filing of a LAW request.
3. Enforcement. The CDCJ must recognize and enforce or set aside a foreign arbitral award within 30 days after the filing of a request for enforcement.

SC Regulation No. 3/2023 then provided clarity and a broader definition of public policy, or Keterchiban UmmAs a ground for refusing to enforce a foreign arbitral award.

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