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As
a member of the World Trade Organization (WTO), Indonesia is obliged to
comply with globalization and free trade — with key measures including
opening vast opportunities and ensuring legal certainty for business
players.
The level of trust in business dispute resolution through court hearings
is very low, apparently due to rampant judicial corruption, with frequent
cases of pre-arranged verdicts and no guarantee of honest, competent,
independent or impartial judgments.
Thus, there must be a settlement mechanism that is brief, economic,
quick, concise, confidential, closed and fair for both parties to a
dispute.
In practice, particularly in industrial countries, business actors often
opt to resolve their disputes through mediation and/or commercial
arbitration, where the rulings are final and binding, confidential
(proceedings take place in closed sessions with no press coverage) and
offer a win-win solution to the disputing parties.
Cases in commercial arbitration are decided by arbitrators who are
experts in the fields of business and trade. In addition, there are also
arbitrators with backgrounds in engineering, economy, banking, finance,
manpower, intellectual property and so forth. Arbitrators are usually
elected from among professionals who must have at least 15 years of
experience in their respective fields of expertise.
Apart from possessing expertise, honesty, integrity, ethics, fairness,
independence and impartiality, arbitrators are also expected to show
wisdom in rendering awards. Usually, arbitrators are over 50 years of age
and successful in their fields.
In order to guarantee their independence and impartiality, arbitrators
are prohibited from meeting with one of the disputing parties without the
presence of the other during the examination of the arbitration case
through until the award is rendered.
Up to the present time, Indonesia is considered a country unfriendly
toward commercial arbitration proceedings and awards, after many foreign
and local arbitration awards have not been enforced — for various
reasons. Court verdicts in the past, especially before the 1999
Arbitration Law was enacted, were ambiguous.
Parties in business agreements have agreed to adopt commercial arbitration
as a dispute settlement mechanism, but there are still court verdicts
that declare that they have jurisdiction to hear such cases, arguing that
if a lawsuit concerns a breach of contract, the court has jurisdiction to
hear and issue a verdict on the case.
However, if the lawsuit is about an unlawful act that is not part of the
agreement, the court declares it has no jurisdiction to hear and issue
the verdict on the case.
In several cases, jurisdiction cited for institutional arbitration or ad
hoc arbitration often faces a jurisdictional challenge from one of the
parties or their legal counsel (advocates). This jurisdictional challenge
is taken because of the lack of understanding on the essence of the
clause on the arbitration agreement. Rejection of jurisdiction of
institutional arbitration or ad hoc arbitration should not have occurred
after the Arbitration Law was enacted.
This is confirmed in articles 3, 10 (h) and 11 of the law, and is
also stipulated in Article 23 paragraph (1) of the United Nations
Commission on International Trade Law (UNCITRAL) Arbitration Rules (as
revised in 2010).
These provisions provide the principles that can reject a jurisdictional
challenge.
First is the principle of competence, which basically states that
arbitration has the authority to decide its own jurisdiction.
Second is the principle of separability which states that an arbitration
agreement is an agreement that is independent and not binding toward the
principal agreement.
As an example, if the principal agreement made by the parties is void for
some reason, the arbitration agreement is not automatically void in the
same way as the principal agreement because the arbitration agreement is
independent. Mauro Rubino states in his book International Arbitration:
Law and Practice, Second Edition (2001): “An arbitration clause has its own life and, therefore, must not
automatically be affected by the possible nullity of the contract to
which it belongs.”
Thus, based on the two principles above, as long as the parties have
agreed and bound themselves to an agreement that the mode of dispute
settlement the parties will choose if a dispute occurs is the arbitration
mechanism, the jurisdictional challenge submitted by either of the
parties becomes groundless.
In this era of globalization, a meeting and interaction of various legal
systems is inevitable. Every international business and trade agreement
includes the choice of law for an agreement and the choice of forum.
Business actors as the parties in a dispute are free to determine the
choice of law and the seat of arbitration according to the written
agreement of the parties.
For example, for an arbitration through the Singapore International
Arbitration Center (SIAC), the International Chamber of Commerce (ICC) or
UNCITRAL, the seat of arbitration is left to the parties, where the
parties can choose any place or country considered the most appropriate
or easy to reach.
In the future, there may be a time when a court will no longer be the
principal choice, when commercial arbitration has become the principal
facility to resolve business and trade disputes for the reasons that have
been explained above. ●
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