Interpretation and Application of the New York Convention in Indonesia

Soemartono, Gatot

doi:10.1007/978-3-319-50915-0_18

Gatot Soemartono⁴

Part of the book series: Ius Comparatum - Global Studies in Comparative Law ((GSCL,volume 23))

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Abstract

The interpretation and application of the New York Convention in Indonesia has been marked by certain peculiarities. These peculiarities stem from both case law and statute. This report provides a succinct analysis of the state of the New York Convention in Indonesia. More importantly, it delineates those areas where the courts in Indonesia have deviated significantly from accepted international standards or domestic statutory standards.

Gatot Soemartono holds a senior lectureship in law at the Law Faculty of Tarumanagara University, Jakarta. He obtained a BSc in Economics from Diponegoro University, an LL.B. and an MSc in Management from Gadjah Mada University, an LL.M. from Harvard Law School, and a Ph.D. in Law from the National University of Singapore.

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Notes

1.
Undang-Undang Nomor 30 Tahun 1999 tentang Arbitrase dan Alternatif Penyelesaian Sengketa, published in the State Gazette of the Republic of Indonesia No. 138 of 1999 with its Elucidation published in the Supplement to the State Gazette of the Republic of Indonesia No. 3872 of 1999.
2.
“Status – Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)” www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html. Indonesia acceded to the Convention on 7 October 1981 and the Convention came into force in Indonesia on 5 January 1982.
3.
Decision of the Supreme Court No. 2944/K/Pdt/1983 issued on 20 August 1984.
4.
N Rubins, “The Enforcement and Annulment of International Arbitration Awards in Indonesia” (2005) 20 American University International Law Review 359, 368, stating that “[a]rbitration scholars around the world denounced the ruling…”
5.
Yahya Harahap, Arbitrase (Jakarta, Sinar Grafika, 2004) 32 [translated by author].
6.
The Supreme Court Regulation No. 1 of 1990 concerning the Procedure of the Enforcement of Foreign Arbitral Award, issued on 1 March 1990.
7.
Article 3 of the Regulation.
8.
Article 5 of the Regulation.
9.
Decision of the Supreme Court No. 904 K/Pdt.Sus/2009, 9 June 2010. See also decision of the Central Jakarta District Court No. 01/Pembatalan Arbitrase/2009/PN.Jkt.Pst., 3 September 2009.
10.
Art 32(1) of the New Arbitration Law.
11.
Art 1320 of the Civil Code.
12.
It should be noted that this provision stands annulled by the Supreme Court through its Circular Letter of 5 September 1963 (Surat Edaran Mahkamah Agung Nomor 3 Tahun 1963), which declared that Art 108 of the Civil Code was no longer valid.
13.
Arts 1332-1334 of the Civil Code.
14.
Gambling is punishable under Undang-Undang Nomor 7 Tahun 1974 tentang Penertiban Perjudian, published in the State Gazette of the Republic of Indonesia No. 54 of 1974 with its Elucidation published in the Supplement to the State Gazette of the Republic of Indonesia No. 3040 of 1974.
15.
Art 15(4)(5) of the New Arbitration Law.
16.
Interlocutory Decision of the Central Jakarta District Court No. 517/Pdt.G/1999/PN.JKT.PST issued on 13 December 1999.
17.
See Art 4 of the New Arbitration Law.
18.
Interlocutory Decision of the South Jakarta District Court No. 454/Pdt.G/1999/PN.Jak.Sel. issued on 25 January 2000.
19.
Art 19.2 of the Distribution Agreement between the parties stated that “[i]n the event of any dispute arising among the parties in relation to, or in connection with this Agreement or a breach hereof which cannot be settled amicably shall be finally settled by arbitration … under the Rules of the Indonesian National Board of Arbitration …”
20.
See Art 56 of the New Arbitration Law.
21.
Decision of the Central Jakarta District Court No. 86/PDT.G/2002/PN.JKT.PST issued on 19 August 2002.
22.
Decision of the Central Jakarta District Court No. 499/Pdt/G/1988/PN.JKT.PST issued on 29 June 1989.
23.
Decree of the Chairman of the Central Jakarta District Court DAFT. NO: 070/2011 Eks Jo. SIAC Number 028/2009 (ARB028/09/MM) dated 1 September 2010.
24.
See above n 21..
25.
See C Harinowo, IMF: Penanganan Krisis dan Indonesia Pasca IMF (Jakarta, Gramedia Pustaka Utama, 2004) 93, stating, “because of the crisis, Indonesia relied on IMF to restructure its economy. As a result, Indonesia had to comply with all the conditions imposed by the IMF.” [translated by author]
26.
Under Art 13.2(a) of the Joint Operation Contract, in respect of the appointment of arbitrators, it was clearly stated that “[e]ach Party [KBC and Pertamina] will appoint an arbitrator within thirty (30) days after the date of a request to initiate arbitration… Arbitrators not appointed within the time limits set forth in the preceding sentence shall be appointed by the Secretary General of the International Center for Settlement of Investment Disputes.”
27.
Art 4 of the UNCITRAL Rules states: “Within 30 days of the receipt of the notice of arbitration, the respondent shall communicate to the claimant a response to the notice of arbitration.” An interview with Mr. Simson Panjaitan, one of Pertamina’s lawyers, revealed what led to Pertamina not responding to KBC’s notice of arbitration. Apparently, Pertamina was busy consolidating and restructuring the organization as a result of the prevailing economic crisis, and so, there was no solid coordination between Pertamina and the Government of Indonesia in respect of the handling of the case, including in particular, the appointment of Pertamina’s arbitrator.” (An e-mail dated 4 October 2011 from Mr. Simson Panjaitan is on file with the author.)
28.
See above n 4.
29.
Himpurna Cal. Energy Ltd. (Bermuda) v PT. (Persero) Perusahaan Listruik Negara (Indonesia) 14 Mealey’s Int’l Arb. Rep. A-1, A-51 (Dec. 1999) (Himpurna-PLN Final Award); Patuha Power Ltd. (Bermuda) v PT. (Persero) Perusahaan Listruik Negara (Indonesia) 14 Mealey’s Int’l Arb. Rep. B-1, B-44 (Dec. 1999) (Patuha-PLN Final Award).
30.
Patuha-PLN Final Award at B-2.
31.
ibid.
32.
See Patuha-PLN Final Award at B-2, B-19-21, under the “general framework for private power projects” the government was no longer allowed to use the word “guaranteed” for its signature on project documents in relation to geothermal projects but it could use the word “approved.” As such, the Government of Indonesia did not guarantee the obligations of PLN under power purchase agreement.
33.
Patuha-PLN Final Award at B-7, the MoF Letter stated that “[a]s long as the [project company’s] material obligations which are due under the ESC and JOC have been fulfilled, the Government of the Republic Indonesia will cause [both] Pertamina and PLN, their successors and assigns, to honor and perform their obligations as due in the above-mentioned contracts.”
34.
See above n 25.
35.
See 14 Mealey’s Int’l Arb. Rep. 3 (Dec 1999), stating that Indonesia’s currency lost about 80 per cent of its value against the US dollar, resulting in serious problems for PLN as it had to sell electricity on domestic market in Indonesian rupiah.
36.
ibid at B-5. PLN and the Government of Indonesia rejected the option to have a single consolidated arbitration. Thus, the parties agreed to go through four separate arbitration proceedings with the first two proceedings against PLN and the other two proceedings against the Government of Indonesia. The rationale behind this choice was that the Government’s liability would in turn be based on PLN’s liability under the ESCs.
37.
See above n 35 at B-14.
38.
Karen Mills has acted as lead counsel for the Government of Indonesia and leading state-owned companies in a number of investor-state arbitrations. An e-mail from Karen Mills dated 13 October 2011 is on file with the author.
39.
M Kantor, “International Project Finance and Arbitration with Public Sector Entities: When is Arbitrability A Fiction?” (2001) 24 Fordham International Law Journal 112; see also K Mills, “Recent Developments in Arbitration and ADR – Indonesia” (2003) 6 International Arbitration Law Review 192, noting: .”..the plethora of press reports prepared and widely disseminated by the claimants in the original arbitral references (first defendants in these court applications) and by their various counsel and expert witnesses, with no counterbalancing coverage emanating from the other parties nor from independent scholars.”
40.
Interview with Prof Priyatna held on 29 November 2010 at Tarumanagara University, Jakarta.
41.
See Patuha-PLN Final Award at B-11 referring to s8.3 of ESC. However, Himpurna, Patuha and PLN had “agreed that the Arbitral Tribunal should not be bound by rules of law insofar as their application would contradict the terms of the contract.”
42.
Art 44(1) of the New Arbitration Law reads: “[i]f on the day determined, pursuant to Article 40 paragraph (2), the respondent without a valid reason fails to appear, while the respondent has been duly summoned, the arbitrator or arbitral tribunal shall immediately summon the respondent once again.”
43.
See K Mills above n 39, stating, “they [the Claimants] collected their insurance with OPIC and then used diplomatic pressure to collect again from the Government through the Paris club.”
44.
See K Mills above n 39.
45.
See above n 18.
46.
See above n 21.
47.
See Decision of the Central Jakarta District Court No. 86/PDT.G/2002/PN.JKT.PST issued on 19 August 2002 in G Soemartono, Analisis Yuridis Keefektifan Penggunaan Arbitrase International bagi Penyelesaian Sengketa Karaha Bodas Company melawan Pertamina (“Juridical Analysis of the Effectiveness of International Arbitration Use for Dispute Settlement in Karaha Bodas Company versus Pertamina” [translated by author]) (Jakarta, Tarumanagara Research Centre, 2005).
48.
See above n 21 at 109-110.
49.
Astro Nusantara International BV and others v PT Ayunda Prima Mitra and others [2012] SGHC 212.
50.
SIAC Registered Award Nos. 06 of 10 February 2010, 07 of 18 February 2010 and 14 of 12 April 2010 registered at CJDC No. 03/PDT/ARB-INT/2010/PN.JKT.PST and No 05/PDT/ARB-INT/2010/PN.JKT.PST on 27 May 2010.
51.
Decision of the Supreme Court No. 808/K/Pdt.Sus/2011 issued on 28 June 2012.
52.
See above n 21.
53.
See Karaha Bodas Company L.L.C. v Perusahaan Pertambangan Minyak dan Gas Bumi Negara [2003] 335 F.3d 357 at para 5.
54.
ibid at para 6.
55.
Decision of the Supreme Court No. 01/Banding/Wasit-Int/2002 issued on 8 March 2004.
56.
Pertamina quoted Judge Schwebel (expert witness) who had stated that “[t]he conduct of KBC not only misled counsel for Pertamina, who knew and affirmed to the Tribunal that there was no OPIC insurance but could not know there was other political risk insurance…” In fact, KBC had made an insurance arrangement with Berry Palmer and Lyle (Lloyd’s Brokers).
57.
Decision of the Supreme Court No. 444/PK/Pdt/2007 issued on 9 September 2008.
58.
Art 5(1) of the New Arbitration Law.
59.
Art 5(2) of the New Arbitration Law.
60.
See above n 6.
61.
Art 3(3) of the Regulation.
62.
Art 4(2) of the Regulation states: “An exequatur shall not be granted if the foreign arbitral award manifestly violates the fundamental principles of the entire legal system and society in Indonesia (public policy).”
63.
ibid.
64.
Writ of Execution (Supreme Court) No. 1 Pen.Ex’r/Arb.Int/Pdt/1991 issued on 1 March 1991.
65.
See above n 22.
66.
Decision of the Jakarta Appellate Court No. 486/Pdt/1989/PT.DKI issued on 14 October 1989.
67.
Decision of the Supreme Court No. 1205 K/Pdt/1990 issued on 4 December 1991.
68.
ibid.
69.
G Soemartono, Arbitrase dan Mediasi di Indonesia (Jakarta, PT Gramedia Pustaka Utama, 2006) 40-41.
70.
See above n 21.
71.
See above n 47.
72.
Art 70 of the New Arbitration Law. The grounds stipulated in Art 70 of the New Arbitration Law seem to have restricted a court’s authority to set aside a foreign arbitral award for reasons such as the arbitral award having violated Indonesian public policy or the arbitral tribunal having exceeded its powers.
73.
Decision of the Central Jakarta District Court No. 86/PDT.G/2002/PN.JKT.PST issued on 27 August 2002.
74.
See above n 49.
75.
Art 17.4 of the SSA reads: “If the Parties in dispute are unable to resolve the subject matter of dispute amicably within thirty (30) days, then any Party in dispute may commence binding arbitration through the Singapore International Arbitration Centre (SIAC) and in accordance except herein stated, with all the rules of SIAC. The Arbitration shall take place at the Singapore International Arbitration Centre and the award of the arbitrators shall be final and binding upon the Parties.”
76.
South Jakarta District Court Case No. 1100/Pdt.G/2008/PN.JKT.Sel. filed on 3 September 2008.
77.
The anti-suit injunction required the following: (i) forthwith discontinue the Indonesian Proceedings (Case No. 1100/Pdt.G/2008/PN.Jkt.Slt.) in so far as they concern Astro All Asia Networks et al; (ii) take no further steps in the Indonesian Proceedings; and (iii) be prohibited from further proceedings against Astro All Asia Networks et al.
78.
Decision of the Supreme Court No. 1/K/Pdt.Sus/2010 issued on 24 February 2010.
79.
See Art 11(1) of the New Arbitration Law.
80.
Decisions of the Central Jakarta District Court No. 001/Pdt/Arb.Int/1999/PN.JKT.PST, No. 002/Pdt/Arb.Int/1999/PN.JKT.PST, and No. 002/Pdt.P/2000/PN.JKT.PST issued on 3 February 2000. These decisions involved two cases that were virtually identical – Bankers Trust Company & Bankers Trust International v PT. Jakarta International Hotels and Development, Tbk and Bankers Trust Company & Bankers Trust International v PT. Mayora Indah.
81.
Decision of the South Jakarta District Court No. 46/Pdt.G/1999/PN.Jkt.Slt. issued on 9 December 1999.
82.
See above n 14.
83.
See T Budidjaja, “Public Policy as Grounds for Refusal of Recognition and Enforcement of Foreign Arbitral Awards in Indonesia” (2001) 23 IPBA Journal 23, 37- 41. Mr. Budidjaja’s firm represented BT in this case.
84.
Decision of the Supreme Court No. 02K/Ex’r/Arb.Int/Pdt/2000 issued on 5 September 2000.
85.
See Mulyana and JK Schaefer, “Indonesia’s New Framework for International Arbitration: A Critical Assessment of the Law and Its Application by the Courts” (2002) 17 International Arbitration Report 1, suggesting “[t]he commencement of a lawsuit before Indonesian courts to nullify a contract in which there is an arbitration clause has often been used as a tactic to avoid the arbitration proceedings, and avoid paying damages or compensation.”
86.
Art 66(c) of the New Arbitration Law.
87.
See Arts 65-69 of the New Arbitration Law.
88.
See Art 66 of the New Arbitration Law.
89.
Art 65 of the New Arbitration Law states: “The Central Jakarta District Court shall be the court that has the authority to handle matters of the recognition and enforcement of International Arbitral Awards.”
90.
Art 67(2)(c) of the New Arbitration Law.
91.
Decision of the Supreme Court No. 4231 K/Pdt/1986 issued on 4 May 1988. See also Decision of the South Jakarta District Court No. 22/48/JS/1983 on 13 February 1984; Decision of the Jakarta Appellate Court No. 512/PDT/1985/PT DKI on 23 December 1985.
92.
See Art 59(4) of the New Arbitration Law.
93.
Art 5(2) of the New Arbitration Law.
94.
Art 5(1) of the New Arbitration Law.
95.
Art 61 of the New Arbitration Law.
96.
Art 62(2) of the New Arbitration Law.
97.
Art 62(3) of the New Arbitration Law.
98.
Art 68(2) of the New Arbitration Law.
99.
See Art 68(1) of the New Arbitration Law, which stipulates: “No appeal or cassation may be filed against a decision of the Chairman of the Central Jakarta District Court, recognizing and enforcing an International Arbitration Award.”
100.
See above n 4 at 398.

References

G Soemartono, “Pelaksanaan Putusan Arbitrase Asing di Indonesia serta Implikasinya” (“The Implementation of Foreign Arbitral Awards in Indonesia and Its Implications”) (1995) Tahun IX/Nomor 33 Buletin Ilmiah Universitas Tarumanagara.
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K Mills, “Arbitration and the Indonesian Judiciary – Enforcement and Other Issues” (2002) 5 International Arbitration Law Review 150.
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G Soemartono, Arbitrase dan Mediasi di Indonesia (Arbitration and Mediation in Indonesia) (Jakarta, Gramedia Pustaka Utama, 2006).
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Faculty of Law, Tarumanagara University, Jl. Letjen S. Parman No. 1, Jakarta, 11440, Indonesia
Gatot Soemartono

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Columbia Law School, New York, New York, USA
George A. Bermann

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Soemartono, G. (2017). Interpretation and Application of the New York Convention in Indonesia. In: Bermann, G. (eds) Recognition and Enforcement of Foreign Arbitral Awards. Ius Comparatum - Global Studies in Comparative Law, vol 23. Springer, Cham. https://doi.org/10.1007/978-3-319-50915-0_18

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DOI: https://doi.org/10.1007/978-3-319-50915-0_18
Published: 18 July 2017
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