Mata KuLIah : Law in International Business
Dosen : Dr. Shidarta, S.H., M.Hum
Topik : ARBITRATION: ACCORDING TO UU 30 Tahun 1999 b
What is arbitration? The term of arbitration itself was actually derived from the word “arbitrare" (Latin), "arbitrage" (Dutch / French), "arbitration" (English) and "shiedspruch" (Germany), which means the power to get things done according to the wisdom or peace through the arbitrator or umpire.
Arbitration is a type of alternative dispute resolution where the parties submit to the authority of a neutral party, the arbitrator, to give the verdict, without the court. The arbitrator is a neutral individual who is appointed to make a decision over the dispute of the parties.
According to the Black Law Dictionary :
“Arbitration is the reference of a dispute to an impartial (third) person chosen by the parties to the dispute who agree in advance to abide by arbitrator’s award issue after hearing at which both parties have an opportunity to be head. An arrangement for taking and abiding by the judgment of selected persons in some dispute matter, instead of carrying it to establish tribunal of justice, and is intended to avoid the formalities, the delay, the expense and taxation of ordinary litigation.”
According to Prof. Subekti, SH :
“Arbitration is completion or termination of the dispute by the judge based on the agreement that the parties would agree or abide to the decision given by the judge who was selected or appointed by those parties. “
Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, where the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is similar to mediation in that a decision can not be imposed on the parties.
In Indonesia, there are some legal basis for the arbitration :
- UU No. 30 Tahun 1999 about arbitration and dispute resolution
- UU No. 5 Tahun 1968 about the agreement of Convention on the Settlement of Disputes between States and Nationals and Citizens Regarding Investment.
- Keputusan Presiden No. 34 Tahun 1981 about the ratification of New York Convention 1958.
- Peraturan Mahkamah Agung No. 1 Tahun 1990 about extra regulation in Recognition and Enforcement of Foreign Arbitral Awards.
According to the UU No. 30 Tahun 1999 :
- Arbitration is a way of resolving civil disputes outside the public court based on the arbitration agreement is made in writing by the parties to the dispute.
- Arbitration agreement is an agreement in a written agreement made by the parties before the dispute arises, or a separate arbitratis agreement by the parties after the dispute arises.
- Thus, the dispute arbitration can only be done if there is a prior written agreement and without it, then there is no dispute to arbitration
What is the object of the arbitration? It include :
- All civil disputes (not criminal) in the field of trade and labor / employment provided that the disputes concerning personal rights can be fully controlled by the parties
- ·Personal rights, but do not include rights that do not involve public order or public interest, for example: divorce, status of children, recognition of children, guardianship and others.
- Article 66 of Law no. 30 of 1999, which are included in activities such as field of Commerce, Banking Finance, and Investment.
As for the arbitration process, in Indonesia there is a national arbitration institution, BANI (Badan Arbitrase Nasional), an organization based on the UU No. 30 Tahun 1999. But, of course we can use another international arbitration organization
Within the time given or decided by the arbitrator or the arbitral tribunal, the applicant must submit a letter of demand and contain:
a. Full name and place of residence
b. Brief description of the dispute, with the attachment of evidence
c. Clear demands
The simple of arbritation process is like this :
- File a
A claimant initiates an arbitration by filing a statement of claim that specifies the relevant facts and remedies requested.
- Answer a
A respondent responds to an arbitration claim by filing an answer that specifies the relevant facts and available defenses to the statement of claim.
Arbitrator selection is the process in which the parties receive lists of potential arbitrators and select the panel to hear their case.
Prior to the hearing, the arbitrators and parties meet telephonically to schedule hearing dates and resolve preliminary issues.
Discovery is the exchange of documents and information in preparation for the hearing.
The parties and arbitrators meet in person to conduct the hearing in which the parties present arguments and evidence in support of their respective cases.
After the conclusion of the hearing, the arbitrators deliberate the facts of the case and render a written decision called an award
However, in Indonesia, the process is a little bit different especially if we choose BANI as the arbitrator.
1. There has been a consensus among the parties that the settlement of disputes will be resolved by BANI and according to the procedures of the arbitration.
2. Petitioners filed a petition with the BANI arbitration to pay the registration fee and the administrative costs and the trial. Under the terms of Article 77 paragraph (1) of Law no. 1999 30 administrative fees and the trial is the responsibility of the losing party.
3. Application will be rejected later than 30 days if the settlement is not in the authority of BANI
4. Chairman of BANI submits a copy of a written request to the defendant.
5. Respondent must file a written response no later than 30 days since receivinga copy of the petition request.
6. Chairman of BANI send the requested reply to the applicant
7. Both parties note to immediately facing trial period of 14 days since the order was issued.
8. If the applicant is not present at the hearing, then the request of the arbitration will be aborted.
9. If the defendant is not present, and did not present after properly called a second time, the panel will decide disputes in verstek (verdict without the defendant's presence)
According to Article 59 UU No. 30 Tahun 1999, the decision of the arbitration must be done :
1. Within a period of 30 (thirty) days from the date of the decision, an authentic copy of the original sheet or arbitral award delivered and registered by the Registrar of arbitrators or attorney to the District Court.
2. Submission and registration referred to in paragraph (1), carried out by recording and signing at the end or at the edge of the verdict by the Clerk of the District Court and the arbitrator or submit proxies, and the record is a certificate of registration.
3. Arbitrator or attorney must submit the original verdict sheet and the appointment as arbitrator or authentic copies to the Clerk of the District Court.
4. Non-compliance of the provisions referred to in paragraph (1), resulting arbitration award unenforceable.
5. All costs associated with the manufacture of the registration certificate charged to the parties in the arbitration process.
There are some advantage of using arbitration instead of the Court :
- Arbitration is often faster than litigation in court
- Arbitration can be cheaper and more flexible for businesses
- Arbitral proceedings and an arbitral award are generally non-public, and can be made confidential or secret
- In arbitral proceedings the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied
- Because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments
- In most legal systems there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability
However, there are also some of the disadvantages, such as :
- Arbitration may be subject to pressures from powerful law firms representing the stronger and wealthier party
- If the arbitration is mandatory and binding, the parties waive their rights to access the courts and to have a judge or jury decide the case
- In some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes
- Although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays
As a reference, we can see an explanation of arbitration and the process in the USA, given by the U.S. Securities and Exhcange Comission
Here is a link to a video about arbitration.
Nicholas Connon, of the Law Firm Connon Wood Scheidemantle LLP explains how arbitration can help in the case that the opposing party is a powerful multi-national or has far more resources available to spend on the case
From this session, students can learn more about what arbitration is and the process. Now students know that there are some type of arbitration (such as binding, non-binding, voluntary, etc) and how the arbitration in Indonesia happen based on the UU 30 tahun 1999
• Gatot Soemartono, 2006, Arbitrase dan Mediasi di Indonesia, PT. Gramedia Pustaka Utama, Jakarta, ISBN : 979-22-111-5.
• H. Sudiarto dan Zaeni Asyhadie, 2004, Mengenal Arbitrase : Salah Satu Alternatif Penyelesaian Sengketa Bisnis, Jakarta, ISBN : 979-365-31-7.