Enforcement of Foreign Judgements and Arbitration Awards in Indonesia

This memorandum will explain the enforcement of foreign judgements and arbitration awards in the Republic of Indonesia. As a preliminary matter, it must be noted that the United States and Indonesia are not mutual parties to any bilateral or multilateral treaty for the enforcement of judgements. Both countries are, however, contracting parties to the U.N. Convention on the Recognition and Enforcement of Foreign Arbitration Awards of 1958 (the "New York Convention"). Therefore the issues of enforcement of judgements and enforcement of arbitration awards must receive separate treatment.

Since foreign judgements are not enforceable between Indonesia and the United States, a contractual dispute reduced to a judgement in a foreign jurisdiction will be retried on the merits in Indonesia. The prior foreign judgement will be admissible as evidence only during the subsequent enforcement proceedings in Indonesia.

Although Indonesia has been a party to the New York Convention since 1981, foreign arbitration awards were not regarded as enforceable in Indonesia until 1990, when the Supreme Court issued its Regulation No. 1 setting forth the applicable implementing regulations (the "Regulation"). The Regulation defines a foreign arbitral award as an award either made by an arbitration tribunal outside Indonesia or otherwise deemed to be foreign under the laws of Indonesia. By the terms of the Regulation, a foreign arbitral award may be recognized and enforced when (i) it is rendered by a tribunal in a country which is a party to a bilateral or multilateral convention with Indonesia concerning recognition and enforcement of foreign arbitral awards; (ii) it relates to the field of commercial law as that term is defined under Indonesian law; and (iii) the arbitral award does not "manifestly" contravene "public order". These conditions in the Regulation are consistent with the New York Convention. The scope of the "public order exception" under Indonesian law remains unclear because there is no Indonesian case law providing criteria on determinations of international public policy. Article 4(2) of the Regulation defines public order as "the basic principles of the entire legal system and society in Indonesia". Most contracting parties to the New York Convention, where the objective is to facilitate international trade, apply the public order exception more sparingly in an international context than in a purely domestic context.

To enforce a foreign arbitration award, the applicant must obtain a writ of execution (exequatur) from the Supreme Court. To apply for a writ, an application must be registered with the clerk of the Central Jakarta District Court accompanied by (i) an original or authenticated copy of the award with an official translation; (ii) an original or authenticated copy of the underlying contract on which the award is based with an official translation, and (iii) a declaration by Indonesia's diplomatic representative in the country where the award is made that the "applicant's country" is bound by a bilateral or multilateral treaty with Indonesia concerning recognition and enforcement of foreign awards. The application is supposed to be forwarded by the Central Jakarta District Court to the Supreme Court within 14 days of receipt. The Supreme Court will review the award to ensure that there has been no violation of public policy. After the writ of execution has been issued by the Supreme Court, it is delivered to the Central Jakarta District Court, and is then either enforced by such court or transferred to the appropriate district court having jurisdiction at the place of enforcement. A registration fee of Rp. 250,000 is payable at the time of filing the application, and the expenses of enforcement will also be assessed.

Appeal of the arbitral award to the Supreme Court is possible only if the Parties have not waived their right of appeal in the arbitration agreement (i.e. Section 631 of the Reglement op de Rechtsvordering ("R.V.") under Indonesian law). There remains, however, the possibility of a action for setting aside the arbitral award (Sections 643-646 of the R.V.), generally on one of the following grounds (i) the arbitrators exceeded the scope of the submission (ii) the arbitrators decided issues not submitted for consideration or awarded more than was claimed; or (iii) the arbitrators failed to decide on an issue submitted for consideration.

Finally, there are some practical considerations in the drafting and enforcement of an arbitration clause with an international contract involving an Indonesian party:

1. Arbitration in Singapore is frequently accepted by contracting parties in Indonesia because of the reputation of Singapore for impartiality and legal excellence, as well as its close proximity to Indonesia.

2. The general practice in drafting the contract is to provide for application of the procedural rules of either an international arbitration convention (i.e. ICC, UNCITRAL) or the procedural rules of the arbitration jurisdiction (i.e. American Arbitration Association, Singapore Center for International Arbitration).

3. The choice of governing law (i.e. New York, Singapore, Indonesia) is for the parties. To maintain cost effectiveness, most parties generally seek to institute a governing law that will be familiar to the arbitrator(s).

4. It is not necessary to reduce an arbitration award to final judgement in the US courts because the arbitration award, not the judgement, will be enforceable in Indonesia. The arbitration clause should provide that the award is final and binding, with reference to relevant sections of the governing law of the contract providing for final arbitration.

We have attached a copy of a form of arbitration clause used for contracts governed by Indonesian law, providing for arbitration at the International Arbitration Center in Singapore.

Article

1 Any dispute among the Parties or any of them relating to this Agreement, upon written notification of the complaintant(s), shall be settled by arbitration in accordance with this Article 14 and, to the extent not inconsistent herewith, the Arbitration Rules of the International Arbitration Board of Singapore ("IABS") existing on the date hereof. The arbitration shall be conducted by a single arbitrator chosen by agreement in writing of the complainant(s) and the respondent(s), provided that if the complainant(s) and respondent(s) cannot select an arbitrator by mutual agreement within thirty (30) days following the complainant's written notice, then either Party may request the IABS to appoint the arbitrator.

2 The Parties expressly agree that

3 The Parties expressly agree to waive Section 641 of the R.V., Articles 15 and 108 of Law No. 1 Year 1950, and any other applicable laws permitting appeal to courts of law or any other body so that accordingly there shall be no appeal to any court or other body from the decision (or any interim decision) of the arbitrators and neither Party shall dispute nor question such decision before any judicial authority in the Republic of Indonesia or elsewhere.

4 Pending the submission to arbitration and thereafter until the arbitration tribunal issues its decision, each Party shall, except in the event of expiration, termination or failure by any of the other Parties to obey or comply with a specific order or decision of the arbitration tribunal, continue to perform all of its obligations under this Agreement without prejudice to a final adjustment in accordance with the said award.