Joyce Fong welcomes Afriyan Rachmad (Partner, Nusantara DFDL Partnership) to discuss Indonesia’s dispute resolution landscape. They cover interim court measures, enforcement timelines and procedures, seat selection strategy and practical tips for recognizing foreign awards. The episode also touches on the broader legal environment and recent trends shaping Indonesia-related arbitrations.

----more----

Transcript:

Intro: Welcome to Arbitral Insights, a podcast series brought to you by our international arbitration practice lawyers here at Reed Smith. I'm Peter Rosher, Global Head of Reed Smith's International Arbitration Practice. I hope you enjoy the industry commentary, insights and anecdotes we share with you in the course of this series, wherever in the world you are. If you have any questions about any of the topics discussed, please do contact our speakers. And with that, let's get started. 

Joyce: Welcome to the latest episode of our Arbitral Insights podcast series. This is the third in a series of podcasts which I'm doing with DFDL, exploring arbitration across various jurisdictions in South and Southeast Asia. For this episode, I'm delighted to host Afriyan Rachmad, who will share insights from Indonesia. Afriyan is a partner at Nusantara DFDL partnership, an Indonesian law firm, and a DFDL collaborating firm. He is a projects and infrastructure specialist with particular expertise in natural resources and infrastructure projects. Afriyan’s dispute resolution practice includes litigation and arbitration. Selamat siang, Afriyan. Thank you for joining me today on this podcast. 

Afriyan: Hi Joyce, thank you for inviting me to this podcast. 

Joyce: To kick us off, perhaps you could give us an overview of the dispute resolution landscape in Indonesia. Tell us about the laws which form the legal framework for arbitration in Indonesia. Are they based on the UNCITRAL model law? And does the same law apply to both domestic and foreign arbitration? 

Afriyan: Okay, the legal framework for arbitration in Indonesia is under law No. 30 of 1999 concerning arbitration and alternative dispute resolution. While they are not based on the UNCITRAL Model Law, although some provisions are adopting it. Yes, the arbitration law applies for domestic and foreign arbitration, although there are different sections for domestic and foreign arbitration. 

Joyce: With these laws in place, would you say that arbitration is commonly used to resolve disputes in Indonesia? 

Afriyan: In Indonesia, arbitration is more towards the complex disputes due to the high arbitration fee involved for conducting arbitration proceedings. The arbitration fee is based on percentage of claim value filed by the claimant. From a range of zero point six percent for claim above two trillion rupiah, approximately USD hundred twenty five million, to ten percent for claim less than one billion rupiah approximately USD 62,500. This is according to the BANI Domestic Arbitration Forum. On the other hand, court fees are in the range of USD 100 to 300 depending on the number of parties. Court litigation is however slower as it could take around three years to obtain a final and binding decision from district court to supreme court compared to arbitral award that could be rendered in approximately six months. 

Joyce: So from what you've just said, Afriyan, arbitration appears to be faster but more expensive than court litigation. This is not at all surprising and is consistent with global trends. Given the significant cost difference, when do parties tend to choose to arbitrate their disputes? 

Afriyan: Generally speaking, parties arbitrate more complicated disputes. For example, in construction disputes where they prefer an arbitrator who has expertise in the subject matter. Court judges just tend to have legal rather than technical knowledge. Parties also tend to choose arbitration where the dispute is between a foreign party and a local party or local company. I've seen in the past that parties tend to select the dispute resolution mechanism which is best suited for their dispute. regardless of the dispute resolution clause in their contract. I have seen cases where parties agree to arbitrate the dispute only after the dispute arises. I have also seen cases where parties agree to court litigation even though the contract has an arbitration clause. This tends to be accommodate parties' circumstances. For example, if one party causes an arbitration fee, Although the arbitration fee will be borne equally by both claimant and defendant, however, in practice, the claimant shall pay full in advance before the arbitration proceeding could be started. This is particularly for cases handled by BANI. 

Joyce: So picking up on a point which you've just raised, Afryan, foreign parties often prefer arbitration of a litigation when contracting with a local party. There tends to be concerns with litigating on the local party's home turf, where the foreign party may be unfamiliar with the local court procedure and may also perceive the local party to have an upper hand. I think this is especially the case if the local party is well connected or linked to the government. Based on your experience, when parties agree to arbitrate, do parties tend to choose Indonesian or foreign arbitral seats? 

Afriyan: Well, this perception I think can be used by parties. But if the balance of power is equal during the contract negotiation, parties tend to choose international arbitration. for example, seated in Singapore or Paris with SIAC or ICC administrating. The main reason probably international arbitration proceeding is more comfortable for foreign parties compared to domestic arbitration institution. If the local Indonesian party is likely to be the defaulting party under the contract, an Indonesian seat with BANI administrating is popular. Jakarta is often selected as the seat, unless there is another seat which has closer connection to the dispute. For example, the parties may choose Bali or Kalimantan as a seat where the dispute relates to a construction project there. There is a famous case between PT Pertamina and PT Lirik Petroleum, in which the case was handled by BANI. This case was brought appealed to Supreme Court when was requested for enforcement. And Supreme Court at that time made consideration that the case is deemed as foreign arbitral award due to the race element of foreign in the contract, although the parties are Indonesian and it was handled by BANI, particularly BANI Mampang. In end of 2024, a lecturer filed a case to concessional court to review definition of foreign arbitral award under the arbitration law and constitutional court give a decision that a case considered as foreign arbitration proceeding or domestic arbitration proceeding based on territorial principle in which if the case was handled by foreign arbitration institution and seated not within the Indonesian territory then it will be considered as foreign arbitration proceeding. I will also add that there are two different institutions called BANI in Indonesia. It was started in 2016 and for around six years there are duality in BANI, which is BANI Mampang and BANI Sovereign. Both parties were arguing in civil court, state administrative court, and commercial court for trademark violation. In the recent years, BANI Mampang tends to be more popular than the BANI Sovereign, since currently we cannot find BANI Sovereign website or legal domicile address of this BANI Sovereign. Due to this invariability and taking consideration of the amount of the case that is being handled, we will suggest for any dispute that would like to choose local arbitration or domestic arbitration institution to choose BANI Mampang. 

Joyce: Thank you for the helpful insight on the two BANIs. It's certainly important to nominate the right BANI if parties intend to select BANIs as an arbitral institution. Otherwise, there is being satellite litigation over which BANI was the parties intended. I also find it quite interesting what you said about all arbitrations in Indonesia being deemed to be domestic, regardless of whether there's a foreign element and which institution administers the arbitration. On that note, is ad hoc arbitration common in Indonesia? 

Afriyan: Although ad hoc arbitration is permitted in Indonesia, but it is not common to the best of my experience, Joyce. 

Joyce: Okay, okay. Just going back then to the choice of Indonesia as a seat, what are the advantages to parties for seating and arbitration in Indonesia? 

Afriyan: According to the arbitration law, it is easier to enforce a domestic award in Indonesia due to the arbitral award in Bahasa Indonesia. The arbitral award can go directly to the local district court to register the award for enforcement. Note that this must be done within 30 days from the date of the award. If it is missed, then the domestic arbitral award could not be requested for enforcement to the district court. The winning party could wait until the counterparty voluntarily do the domestic arbitral award or to file a new case at the district court and the domestic arbitral award will be the primary evidence. For foreign awards, the arbitral award must first go to the Central Jakarta District Court to request for the issuance of execution of the award. Before bringing that word to the local district court who has jurisdiction to conduct execution over the losing party. Note that arbitration law requires few documents to be filed together with the original arbitral award issued by the foreign arbitration institution. There is, however, no time limit for filing this enforcement of foreign a