An update on procedure for appointment of arbitrators by Indonesian Supreme Court 

An update on arbitration process: Procedure for appointment of arbitrators by the Court and right of refusal, annulment of arbitral awards and enforcement of interlocutory decision

What you need to know

• The Supreme Court recently issued Supreme Court Regulation No. 3 of 2023 concerning Procedure for Appointment of Arbitrators by The Court, Right of Refusal, Examination of Petitions for Enforcement and Annulment of Arbitral Awards ("SCR 3/2023").
• SCR 3/2023 contains further implementation of Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution ("Arbitration Law"), specifically on the time limitation on submission and issuance of decision on the appointment of arbitrator by the district court and the right of refusal by the parties, examination of petitions for enforcements of international arbitral awards, annulment of arbitral awards and enforcement of security attachment request.

Appointment of arbitrator by the Court

SCR 3/2023 provides more clarity on the appointment of arbitrator process by the court if the disputing parties fail to reach an agreement on such appointment, including the relevant time limitation. In this regard, the district court must appoint arbitrator within 14 calendar days after receiving the request from either party.

Rights of refusal

We note that in the chapter explaining appointment of the arbitrator by the court and the rights of refusal, SCR 3/2023 does not clearly differentiate rights of refusal related to appointment of arbitrator by the court or by the parties. Having said that, reading SCR 3/2023 together with Article 23 – 25 of the Arbitration Law on rights of refusal for appointment by the parties, we analyse that Article 4 and Article 5 of SCR 3/2023 regulates each types of refusal.

Article 4 of SCR 3/2023 regulates the challenge of the appointment of arbitrator by the court, which has not been regulated by the Arbitration Law. For this challenge, the refusing party must file a refusal petition before the Chairman of the district court within 14 calendar days after the appointment by providing admissible reasons and sufficient evidence demonstrating that the arbitrator is not independence and impartial (i.e., the arbitrator has family, financial or work relations with one of the parties or their attorney). Lastly, within 14 calendar days dated from the submission of the petition, the Chairman should set out their verdict on the refusal petition.

Article 5 of SCR 3/2023 regulates further the challenge process on the appointment of arbitrator by the parties (out-of-court appointment) which was already governed by the Arbitration Law. In this regard, the refusing party must file a refusal petition to the opposing party and relevant arbitrator. However, if the opposing party disagrees with the petition and the relevant arbitrator is not willing to resign from his/her position, the refusing party may file a petition to the Chairman of the district court and a decision on such petition shall be rendered within 14 (fourteen) calendar days after the receipt of such petition. A clear timeline on this process would solve previous practical problem where a petition to challenge appointment of arbitrator processed as a typical civil claim which can last up to 6 months until a decision is issued by the district court.

Enforcement of international arbitration awards

Under the Arbitration Law, it is regulated that the international arbitral award can be enforced in Indonesia after acquiring the writ of execution (exequatur) from the Chairman of the Central Jakarta District Court. In practice, there is no particular timeline on this process. The SCR 3/2023 provides that the Chairman of the Central Jakarta District Court to issue their decision within 14 calendar days after the application for the writ of execution was received.

Public order

The Arbitration Law provides that one of the requirements of arbitral award enforcement in Indonesia is it shall not contradict with the public order. In light of this, SCR 3/2023 also provides a clearer definition on the "public order" which was not defined clearly on the Arbitration Law and other regulations. SCR 3/2023 defines public order as everything that constitutes the fundamental elements necessary for the operation of the legal, economic, and socio-cultural systems of the society and nation of Indonesia. This may provide clarity on the parameter of the "public order" even if we shall also observe on how Indonesian judges implement such provision in the future.

Annulment of arbitration awards

Upon the arbitral award, Arbitration Law regulates that the parties can submit an annulment petition if the arbitral award is alleged to contain certain elements, i.e.: a) letter or document which was submitted in the proceeding, after the award has been rendered, is admitted to be false or declared as false; b) after the award has been rendered, it is found that there is a decisive document which was hidden by the opposing party; or c) the award is rendered based on fraud which was done with one of the parties who is related with the proceeding.

SCR 3/2023 provide detailed technical guideline for the petition for the annulment of arbitral award, as follow:

The district court’s judgment can be challenged to the Supreme Court. SCR 3/2023 regulates that the petition to the Supreme Court must be decided by the Supreme Court within 30 (thirty) days after the petition is registered in the Supreme Court.

Enforcement of a security attachment from arbitration process

Arbitration law enables the arbitrator or arbitral tribunal to establish security attachment upon petition from one of the parties to be decided prior to the final award. SCR 3/2023 now further regulates on the enforcement of such petition and stipulates that the arbitrator or its proxy can register the interlocutory decision on security attachment to the district court. The applicant then can file the petition to enforce the interlocutory decision to the relevant district court in accordance with the applicable civil procedural law.

At the latest 2 (two) days after the enforcement of the security attachment, the relevant district court must send the minutes of enforcement to the arbitrator/arbitration institution.

Conclusion

The presence of SCR 3/2023 aims to fill the gap on the provisions under Arbitration Law. In particular, SCR 3/2023 provides the detailed timeline for the refusal petition of the appointment of arbitrators and the petition for the annulment of arbitral award. SCR 3/2023 also supplement the provision that has not been regulated by Arbitration Law, i.e., the process for annulment of arbitration award and the enforcement of interlocutory decision on security attachment.

Authors: Hillman Sembiring, Partner; Rizki (Imral) Rakhim, Senior Associate; I Ketut DP Yoga, Associate; and Joyce Silitonga, Trainee Associate.