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Editorial

Guidance on the Enforcement of Foreign Arbitral Awards in the Republic of Indonesia

by Tony Budidjaja, Managing Principal

 

A.       Applicable Laws

 

1.       The Republic of Indonesia ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) pursuant to Presidential Decree No. 34 of 1981, dated 5 August 1981. Under the Convention, Indonesia agreed to recognize and enforce a foreign arbitral award rendered in a country which is a contracting state/party to the Convention.

 

2.       On 12 August 1999, Indonesia enacted Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolution (the “Arbitration Law”). The Arbitration Law provides for the rules of procedure for recognizing and enforcing foreign arbitral awards in the Indonesia,

B.       Procedures

 

1.       As a general rule, the Arbitration Law provides that a foreign arbitral award will be recognized and enforced in Indonesia if it fulfills the following:

 

a.        The award is rendered by an arbitrator or arbitral tribunal in a country which, with Indonesia, is a party to a bilateral or multilateral treaty on the recognition and enforcement of foreign arbitral awards;

 

b.        The award must fall within the scope of commercial law under Indonesian law; and

 

c.        The award does not violate public policy in Indonesia.

 

2.       The process to enforce foreign arbitral awards in Indonesia involves four main steps: (i) registration of the award; (ii)leave for enforcement (exequatur); (iii) court reprimand on the debtor; and (iv) execution of debtor’s assets.

 

3.       Registration of the Award Procedures

 

a.        The Arbitration Law requires an arbitrator or his/her proxy to apply for registration of a foreign arbitral award with the District Court of Central Jakarta. (Such applications may only be filed in the District Court of Jakarta).

 

b.        The Arbitration Law also requires that the following documents accompany any application for registration of a foreign arbitral award:

 

(1)            the original or an authenticated copy of the award;

(2)            an official Indonesian translation of the award;

(3)            the original or an authenticated copy of the underlying agreement which is the basis for the award;

(4)            an official Indonesian translation of the underlying agreement;

(5)            a certification letter from the diplomatic representative of Indonesia in the country in which the award was rendered, stating that the country and Indonesia are mutually bound by a bilateral or multilateral treaty providing for the recognition and enforcement of foreign arbitral awards.

 

c.        For registration of the award, the arbitrator(s) may be represented by a proxy. In this case, a letter of authority or power of attorney from the relevant tribunal to the proxy is required. In practice, a letter of authority or power of attorney which is signed only by the Chairman of a tribunal consisting of more than one person is usually regarded by the court as sufficient[1].

 

d.       Like other legal documents signed overseas, the court requires that the letter of authority or power of attorney be signed in the presence of a local notary public and then legalized by the nearest Indonesian embassy or consulate.

 

e.        Such letter of authority or power of attorney is not necessary if the tribunal explicitly names in its award the proxy/attorney who is authorized to register the award in Indonesia[2].

 

4.       Leave for Enforcement (Exequatur) Process

 

a.        After the award is properly registered, an application for leave for enforcement (exequatur) must be submitted to the Chairman of the District Court of Central Jakarta.

 

b.        The leave for enforcement (exequatur) is usually given in the form of a court decision stating that the foreign arbitral award is in accordance with the requirements of the Arbitration Law, and can therefore be enforced in Indonesia. A foreign arbitral award for which leave for enforcement (exequatur) has been obtained is legally enforceable in Indonesia, and has the same effect as a final and binding judgment issued by Indonesian courts.

 

c.        The leave for enforcement (exequatur) will be issued by the Chairman of the District Court of Central Jakarta. The leave for enforcement (exequatur) will be issued by the Supreme Court if Indonesia is one of the parties named in the award.

 

5.       Court Reprimand on the Debtor (Aanmaning)

 

a.        Pursuant to the Arbitration Law, further process of enforcement of the arbitral awards must be conducted in accordance with the procedures established under Indonesian civil procedural laws.

 

b.        If the debtor fails to comply with the award after leave for enforcement (exequatur) is issued, the party seeking to enforce the award may apply to the Chairman of the District Court of Central Jakarta[3] to order the losing party to appear before him, and be warned to fulfill its obligations within maximum of eight (8) days. Such reprimand may be made in the absence in court of the losing party.

 

c.        Such order and the warning will be recorded in a Minutes of Reprimand (Berita Acara Teguran/Aanmaning).

 

6.       Execution Process

 

a.        Pursuant to Indonesian civil procedural laws, the winning party may apply to the Chairman of a District Court to issue a writ of executorial attachment (penetapan sita eksekusi) if the losing party has not complied with the foreign arbitral award after being reprimanded/warned (aanmaning).

 

b.        It is widely accepted view and practice that the Chairman of the District Court where the losing party’s assets are located is authorized to issue a writ of executorial attachment and carry out attachment and seizure over the assets.

 

c.        When issuing a writ of executorial attachment, the court will typically order a court bailiff to take possession of property owned by the losing party. The property can then be sold by way of auction and the proceeds paid to the winning party in partial or full satisfaction of the award.

 

d.       It is generally considered preferable for the court bailiff, if so requested by the winning party, to take possession of money from the losing party's bank account.

 

e.        If the losing party owns real property, the court bailiff will request the relevant land office to “freeze” the title until the execution is satisfied.

 

C.       Timeframe for Enforcement of Award

 

1.       The Arbitration Law does not provide a timeframe for the enforcement of a foreign arbitral award. Practically, enforcement requires a long process if the losing party refuses to voluntarily comply with it.

 

2.       It usually takes 3 to 6 months after the filing of an application, to complete the process of registration and exequatur of a foreign arbitral award. Meanwhile, the issuance of writ of execution and the process of sale of assets could vary and depends on many factors such as where the losing party is domiciled and its assets.

 

D.       Types of Assets and Forms of Security over Assets

 

1.       Holding security over certain assets could be an important factor when a losing party fails to comply with an arbitral award. The winning party might exercise security rights over secured assets to recover the amount payable under the award. There are forms of security rights under the Indonesian laws which give priority or preferential right to certain creditor(s)vis-a-vis other creditor(s), in cases where secured assets are sold. However, security rights over certain assets in Indonesia do not confer ownership over the assets to the creditor.

 

2.       The most common types of assets and forms of security that could be granted are:

 

a.      Real estate, e.g. land, buildings and fixtures, are commonly secured with Land Security (Hak Tanggungan);

b.      Tangible movable property, e.g. machinery, inventory, raw materials and vehicles, are commonly secured with fiduciary security.

c.      Shares and bank accounts are commonly secured with pledges.

d.     Registered intellectual property is commonly secured with fiduciary security.

 

3.       The holder of security rights over certain assets should serve a demand letter on the losing party if it wants to enforce its security rights. If the losing party fails to comply with the letter, the holder of security should proceed with the sale of assets through public auction or in accordance with the procedure provided for in the statutory regulations. Meanwhile, the party should seek the court’s assistance for the arrest of assets if the losing party refuses to surrender the secured assets which it holds.

 

E.       Asset Investigation in Indonesia

 

In Indonesia, there is no one official government agency which maintains and provides information on all of a company’s/person’s assets. Asset investigation must be carried out independently or through a private investigator or by checking with the various individual government agencies which are required to register ownership over certain types of assets – for example, the agency which registers ownership over land, the agency which registers ownership over shares of a limited liability company, etc.

 

F.       Other Notes - Confidentiality Issues

 

One of the benefits of arbitration is confidentiality. However, if a foreign arbitral award is to be enforced in Indonesia, the parties are deemed to have waived confidentiality. Under the Indonesian law[4], a document issued by a court (such as deed of registration of foreign arbitral award or order of exequatur) is considered to be public information.

 

 


[1] Please see Appendix I as for the suggested format of Letter of Authority.

[2] The following standard wording may be used by the Tribunal in the Award as a reference: “The Tribunal authorizes [name of the Claimant] and its attorney in Indonesia, Budidjaja & Associates Lawyers, to act for and on behalf of the Tribunal to take any and all necessary steps to register and obtain leave for enforcement (exequatur) of this Award with the District Court of Central Jakarta, and to do all things necessary for such process of registration and leave for enforcement (exequatur) (including but not limited to translate the Award).

[3] Or other court (s) having jurisdiction over the domicile of the losing party.

[4]   Law No. 14 of 2008 regarding Public Information Disclosure and Letter of the Chief of the Supreme Court No. 1-144/KMA/SK/I/2011 dated 5 January 2011.

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