Enforcing foreign arbitral awards in Indonesia: Overcoming disharmony between international and domestic laws
Date of Award
Doctor of Philosophy
School of Law and Justice
Faculty of Business and Law
Dr Ann-Claire Larsen
As a developing country with a vast population and an abundance of natural resources, Indonesia is keen to foster international business connections and foreign investment in the country. One approach to improving Indonesia’s economy is to nurture its arbitration system, because arbitration is the preferred method by which international business people settle disputes arising out of cross-border transactions.
Having ratified relevant United Nations (UN) conventions as a dualist country, Indonesia has transformed various provisions into its domestic law. However, there is a gap between Indonesia’s international obligations and its domestic legal enforcement whereby the Indonesian judiciary does not operate harmoniously with both Indonesian arbitration law and the international conventions to promote enforcement of foreign arbitral awards (FAAs); in other words, the Indonesian judiciary has insufficient discretion in deciding FAA cases. The practice of Indonesia’s arbitration shows that the country has been struggling to enforce FAAs. In the 12 years prior to February 2012, only 41 FAAs were registered in Indonesia, and the number of successful FAAs has been small.
This thesis explores the practice of arbitration and the enforcement of FAAs using Indonesia as a case study. Ten court decisions focusing on FAAs are analysed using the case study analysis approach to consider how decisions are made. In five of these cases, FAAs were unsuccessful, whereas five FAAs were successful—findings that confirm the hypothesis that Indonesia’s arbitration system has been hampered by obstacles that prevent FAAs being enforced in the country. FAAs in England and Australia provide comparisons to explore whether these countries suffer similar problems to Indonesia.
Various obstacles were identified, including (a) the inconsistency of the Indonesian judiciary in making decisions regarding FAAs; (b) domestic law (i.e. Act No. 30/1999 regarding Arbitration and Alternative Dispute Resolution) that operates unharmoniously with international law (i.e. arbitration laws and conventions); (c) misunderstandings by the Indonesian judiciary in interpreting issues of absolute competence (i.e. jurisdictional issues), the separability doctrine and public policy issues used as grounds to set aside FAAs in arbitration cases; and (d) the dualism adopted in the system in Indonesia may not be the best to promote the growth of international arbitration in Indonesia.
The measures needed to improve Indonesia’s arbitration system include:
(a) Short-term goals: providing up-to-date and further education and professional training for Indonesian judges in international law and international arbitration as well as stronger enforcement of Indonesia’s international obligations; ensuring frequent interactions between domestic judges, lawyers, international jurists and international organisations; and ensuring the quality of the judicial interpretation of law (i.e. discretion of judges).
(b) Long-term goals: a monist system for Indonesia may place the country in a better position than does the current dualist system, and support the development of the country’s arbitration system.
The findings in this thesis confirm that despite ongoing problems, Indonesia is moving towards fulfilling its international obligations, guarding its sovereignty and maintaining impartiality in its judicial decision making. The improvements will create an improved arbitration climate for international investment in Indonesia to bring more justice for arbitral parties should any disputes arise, and to overcome disharmony between international and domestic laws.
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Yustisia, B. D. (2015). Enforcing foreign arbitral awards in Indonesia: Overcoming disharmony between international and domestic laws. Retrieved from https://ro.ecu.edu.au/theses/1667