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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 arbitral award to the Central Jakarta District Court compared to the domestic arbitral award that I have mentioned previously. 

Joyce: My takeaway from what you've just said, Afriyan, is that domestic awards, in other words, awards which are issued in Indonesia-centered arbitrations, lead to quicker and fast reinforcement in Indonesia. What are some possible hurdles to registering a domestic award in the local district court? 

Afriyan: So previously is about time when they doing examination of the request of this enforcement of arbitral award. Before 2023, there is unclear regulation for the district court to examine of this enforcement. But Supreme Court has issued a regulation in 2023 to give guidelines for the judges at the district court who handle enforcement of the domestic arbitral award and also for foreign arbitral award. And now we need to see how the district court shall accommodate this issue of time. 

Joyce: So just to be clear, Afriyan, following the regulation in 2023, how long will it take for domestic awards to be enforced in the local district courts, at least in theory? 

Afriyan: In theory there is no time so that's why in practice it can take weeks, months, sometimes. But from the Supreme Court regulation in 2023, it gives guideline for the judges to examine the request for enforcement of arbitral award which within 14 calendar days. So they will need to issue whether they can accept for the enforcement, whether they approve the enforcement, or they reject this request for enforcement of arbitral award. 

Joyce: I see. Let's now turn to foreign awards. You mentioned earlier that a party must bring the foreign award to the Central Jakarta District Court so that the award can be enforced. Can the decision of the Central Jakarta District Court be appealed? 

Afriyan: Yes, a party can appeal if the Central Jakarta District Court has denied enforcement of the foreign award, in which the appeal shall need to be filed to Supreme Court as the highest judicial institution in Indonesia. If the Central Jakarta District Court has granted enforcement, no further legal remedies could be taken based on the arbitration law. Apart from the above, parties can file annulment over the arbitral award, either foreign or domestic, at the Central Jakarta District Court or to the local district court in the case of domestic arbitral award. With recent, among others, letters of documents submitted in the hearing, which are admitted to be forged or are declared to be forgeries after the award has been rendered. B. Documents are found after the award has been rendered which are decisive in nature and were deliberately concealed by the opposing party. Or at last, an award is made based on fraud committed by one of the parties to the dispute. This is according to Article 70 of the arbitration law. 

Joyce: That's really helpful to know, Afriyan. Another factor which determines a seat's attractiveness is the local court's willingness to uphold and support the arbitration process. Would you describe the Indonesian courts as being generally pro-arbitration? 

Afriyan: Yes, provided the contract is not against public policy and complies with Indonesian law. I have three examples. Firstly, gambling contracts are illegal in Indonesia. An award enforcing a gambling contract will not be enforced in Indonesia. Other example that a contract, despite their governing laws, which has Indonesian party who entered to the contract, shall need to make Bahasa Indonesia available. This requirement is regulated under law number 24 of 2009. Finally, disputes arising from joint venture agreements may face enforcement obstacles, particularly if the merits of the case involves foreign ownership structures that are inconsistent, with the Indonesian foreign investment regulation. If the contract is compliant, the courts do not tend to treat domestic and foreign awards differently. 

Joyce: That's interesting to hear. For me, this really emphasizes the importance of doing proper due diligence before entering into the contract to avoid problems down the line. How about orders in support of arbitration, such as injunctions or asset preservation orders? Can the Indonesian courts issue such orders? 

Afriyan: Yes, it is straightforward to enforce domestic interim orders issued by the tribunal in support of arbitration, such as confiscation orders. However, foreign orders can be difficult to de-register since the Supreme Court regulation only address enforcement of asset preservation order or security attachment as ordered by arbitral tribunals in Indonesia. It is more difficult to obtain interim orders from the court as the order needs to be attached to a main case. In principle, Indonesian civil procedure does not allow for stand-alone interim relief. Such injunction or asset preservation orders, unless there is an ongoing main case before the court. 

Joyce: That's interesting to know. Now, turning back to enforcement, and we touched on this briefly earlier, what grounds do parties tend to use to challenge recognition and enforcement of awards in Indonesia? 

Afriyan: As I explained earlier, no need to recognize and enforce domestic awards. They can be enforced directly at the local district court. Only foreign awards need to be recognized and enforced. Common arguments raised are the awards against Indonesian laws and regulations, public policy, and annulment reason as regulated under Article 70 of the arbitration law. Like I mentioned previously, like fake documents, forgery kind of thing. 

Joyce: I see. So bearing in mind what you've just said during this podcast session, what should parties and tribunals do to maximize their chances of a successful enforcement in Indonesia? 

Afriyan: I think we need to see from the contracting states or from the early states to ensure that the contract complies with Indonesian law. This is where local council advice is helpful, even if the governing law is not Indonesian law. Under the Indonesian Civil Code, there are four important elements for a contract to be valid. First, there must be a consent of the parties who are bound thereby. Second there must be capacity to enter into an obligation third there must be a specific subject matter and last there must be a permitted cause or in accordance with the Indonesian laws and regulation example of point this is that the node in particular the requirement for availability of Indonesian language under law number 24 of 2009 for contract the SSH and Indonesian party In practice, the contract will be made in bilingual language and the parties may choose English as the governing language. After the award is issued, ensure that all the relevant formalities and documents are comply with for enforcement. For example, the court requires the original wedding awards, which can be tight timing for domestic awards which have to be enforced within 30 days. Also, if the word is not in Bahasa, a sworn translation must be prepared. 

Joyce: It's all very helpful tips. Thank you. One final question as we wrap up. Have you observed any trends in Indonesia-related arbitrations which our listeners should be aware of? 

Afriyan: Well, since COVID-19 in 2020, virtual hearings have been on the rise. While convenient, these raise all sorts of issues. For example, confidentiality issues. Unlike in-person hearings, parties need to be mindful of their surroundings and the impact on confidentiality of the arbitration process. BANI also issued a new rules in 2025 that comprise among others the availability of emergency arbitration for case handled by them with arbitration fee of 200 million rupiah, and is a fixed fee and shorter period of arbitration proceeding. But interesting to see how this develops and how the enforcement of emergency arbitration when it is requested to the court. Indeed, I look forward to hearing more about how this develops. 

Joyce: Afriyan, thank you so much for your time today. This has been really insightful and I've learned so much. 

Afriyan: Thank you, Joyce. Thank you again for inviting me to this podcast. 

Joyce: My pleasure. Take care. 

Outro: Arbitral Insights is a Reed Smith production. Our producers are Ali McCardell and Shannon Ryan. For more information about Reed Smith's Global international arbitration practice, email arbitralinsights@reedsmith.com. To learn about the Reed Smith Arbitration Pricing Calculator, a first-of-its-kind mobile app that forecasts the cost of arbitration around the world, search Arbitration Pricing Calculator on reedsmith.com or download for free through the Apple and Google Play app stores. You can find our podcast on podcast streaming platforms, reedsmith.com and our social media accounts at Reed Smith LLP. 

Disclaimer: This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship, nor is it intended to suggest or establish standards of care applicable to particular lawyers in any given situation. Prior results do not guarantee a similar outcome. Any views, opinions, or comments made by any external guest speaker are not to be attributed to Reed Smith LLP or its individual lawyers. 

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