In recent years, the Indonesian judiciary has made great strides in turning Indonesia into a more supportive jurisdiction for arbitration, especially with regards to enforcement of arbitral awards and setting aside of domestic arbitral awards.
First, the Supreme Court issued Regulation No. 3 of 2023 on the Procedure for the Appointment of Arbitrators by the Court, Challenge of Arbitrators, and Examination on Application for Enforcement and Annulment of Arbitral Awards ("Supreme Court Regulation No. 3/2023"). Second, on 3 January 2025 the Constitutional Court rendered its judgments on two judicial review applications which concern the provisions of Law No. 30 of 1999 on Arbitration and Alternative Dispute Settlement ("1999 Arbitration Law") that relates to the issue of enforcement of foreign arbitral awards.
In a nutshell, the two developments above make the procedure for the issuance of a decree of enforcement (exequatur) for foreign arbitral awards in Indonesia much more certain and predictable, as well as make it much more difficult to set aside a domestic arbitral award in Indonesia.
Further elaborations are as follows:
Supreme Court Regulation No. 3/2023
With respect to foreign arbitral awards, Supreme Court Regulation No. 3/2023 in particular set a very clear and specific timeline for the issuance of a decree of enforcement for foreign arbitral awards by the Central Jakarta District Court, namely within 14 days since the application for enforcement is filed. This was a very welcomed regulatory enhancement on the process because the 1999 Arbitration Law itself did not provide any timeline, leading to much uncertainty for the award creditor – it had been common for the decree of enforcement to be issued by the court after months or even a year.
So far, there is no official data or information on the actual implementation of the timeline under Supreme Court Regulation No. 3/2023 (i.e. whether the 14-day timeline is strictly adhered to by the court). Nevertheless the regulation provides a much firmer basis for the award creditor to push the court for a timely issuance of the decree of enforcement.
Furthermore, in the last two years there has been no record of any cassation proceeding in the Supreme Court against the district court's refusal to enforce a foreign arbitral award. In other words, it can be inferred that all applications for enforcement of a foreign arbitral award are likely granted by the Central Jakarta District Court.
With respect to setting aside or annulment of domestic arbitral awards, Supreme Court Regulation No. 3/2023 appears to reaffirm the notion that Indonesian law only recognises 3 restrictive grounds for setting aside an arbitral award, as provided under Article 70 of the 1999 Arbitration Law: (i) there is a document or evidence found to be fraudulent after the award is rendered, (ii) there is a decisive document not previously disclosed by the relevant party during the arbitral proceedings, and (iii) the award is rendered based on fraud by one of the parties during the arbitral proceedings.
Previously, Indonesian court decisions have been split on whether the court may set aside a domestic arbitral award based on other grounds (e.g. by borrowing from the grounds to refuse award enforcement under Article V of the 1958 New York Convention). Nevertheless, Indonesian court decisions since the issuance of Supreme Court Regulation No. 3/2023 have consistently upheld the restrictive nature of the grounds to set aside under Article 70 above. This has made it far more difficult to set aside a domestic arbitral award in Indonesia.
Constitutional Court Judgments in Early 2025
Two recent Constitutional Court proceedings in relations to the judicial review of the 1999 Arbitration Law have been concluded, with Judgment No. 100/PUU-XXII/2024 ("Judgment No. 100/2024") and Judgment No. 131/PUU-XXII/2024 ("Judgment No. 131/2024"). Previously, we had reviewed both judicial review petitions in a separate article.
First, Judgment No. 100/2024 reaffirms that only an arbitral award rendered outside the territory of Indonesia should be considered as an 'international arbitral award' (i.e. foreign arbitral award) under the 1999 Arbitration Law. While not expressly stated, the judgment impliedly rebuked the 2009 judgment of the Supreme Court in Pertamina v. Lirik, whereby an award in an ICC arbitration seated in Jakarta was considered to be an 'international' (i.e. foreign) arbitral award. In this regard, the Constitutional Court's judgment gives more certainty as to the status of arbitrations seated in Indonesia conducted under a foreign institutional rules (e.g. ICC).
Second, the Constitutional Court in Judgment No. 131/2024 rejected the petition to require court proceedings for enforcement of foreign arbitral awards be conducted in a contentious manner as opposed to the current court practice of treating it ex parte. Hence, the Constitutional Court in effect reaffirms that the Central Jakarta District Court is not required to serve notice of any application to enforce a foreign arbitral award to the award debtor and can proceed to issue a decree of enforcement (exequatur) on an ex parte basis. Furthermore, the Constitutional Court also rejected the petition to allow a cassation to the Supreme Court by the award debtor against a decree of enforcement which has been issued by the district court. Hence, the judgment reaffirmed the final and binding nature of a decree of enforcement for foreign arbitral awards.
Key Insights and What These Developments Mean
In particular, Judgment No. 131/2024 represents a missed opportunity to improve the enforcement process of foreign arbitral awards in Indonesia. Without a formal opportunity for the award debtor to raise any objection against the application to enforce the foreign arbitral award, the court practically does not have any proper or sufficient way to assess whether there is actually any reason where the foreign arbitral award should be refused enforcement either under the 1999 Arbitration Law or the 1958 New York Convention.
This means that any award debtor facing a prospect of enforcement of a foreign arbitral award against that party is well advised to closely and actively monitor with the Central Jakarta District Court for any enforcement application by the award creditor. That way, the award debtor can be in a position to raise an objection against the enforcement application once the application reaches the court – something which in any case may worth attempting regardless of any specific procedure for doing so.
On the other hand, generally the above developments underscore the growing pro-arbitration and pro-enforcement stance of the Indonesian courts. In particular, the highlights are: (i) a very clear and specific timeline for the issuance of a decree of enforcement for foreign arbitral awards by the Central Jakarta District Court (i.e. within 14 days since the application for enforcement), (ii) the ex parte procedure for enforcement, and (iii) the very restrictive basis upon which a domestic arbitral award can be set aside.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
