INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Theodoor Bakker, Ulyarta Naibaho and Adithya Lesmana, ABNR Counsellors at Law
Arbitration Law. Article 3 requires the courts to refer disputes arising out of a contract (that has an arbitra - tion clause) to arbitration instead of assuming juris - diction, and Article 11 states that parties to a written arbitration agreement are no longer entitled to initiate litigation proceedings in court. Several Indonesian arbitration institutions incorporate this principle specifically into their arbitration rules, such as Article 17 of the 2025 BANI Rules. 5.2 Circumstances for Court Intervention The Arbitration Law does not allow the courts to address the issue of the jurisdiction of an arbitral tri - bunal. It does set out the limited involvement of the courts, such as: • the appointment, discharge and recusal of an arbitrator; • the registration and issuance of exequatur for an arbitral award; and • the annulment of an arbitral award. However, as this is limited, the courts tend to be reluc - tant to intervene in questions relating to the jurisdic - tion of arbitral tribunals. There have been cases in which the courts have assumed jurisdiction where the claim was argued to represent a tort rather than a breach of contract subject to an arbitration clause – see 5.5 Breach of Arbitration Agreement . 5.3 Timing of Challenge The Arbitration Law does not provide any mechanism to challenge the jurisdiction of an arbitral tribunal before the courts. Therefore, unless there is ambigu - ity in the arbitration clause that may trigger the courts’ jurisdiction, a challenge to the jurisdiction of an arbi - tral tribunal may only be heard by the arbitral tribunal itself. 5.4 Standard of Judicial Review for Jurisdiction/Admissibility Admissibility and/or jurisdiction issues will first be addressed by the arbitral tribunal at the beginning of the arbitration proceeding, before examination of the substance of the dispute. Such issues may also be
subject to court review during the enforcement stage. In either case, the standard should be de novo: the Indonesian courts would not apply restraint in their review, particularly not where it concerns due process and equality issues such as the right to be heard. However, this view is yet to be confirmed by an Indo - nesian court – see 3.2 Arbitrability . 5.5 Breach of Arbitration Agreement Current trends show a strong tendency of Indonesian courts to reject jurisdiction in breach of an arbitra - tion agreement: where there is a clear and unambigu - ous arbitration clause, and that clause is valid and enforceable and the dispute concerns an alleged breach of contract, the courts must refer the parties to arbitration. In practice, there have been cases where the parties have initiated court litigation based on tort in order to avoid the application of an arbitration clause. The argument typically used was that the arbitration juris - diction was limited to matters involving breach of contract and hence could not extend to a tort-based claim. However, Article 134 of the Revised Civil Pro - cedural Law (HIR) opens up the possibility for par - ties wishing to invoke an arbitration clause to chal - lenge the court if it assumes jurisdiction over a matter covered by an arbitration agreement. Indonesian law requires that the arbitration agreement and the lack of jurisdiction must be raised in the first written pleading. 5.6 Jurisdiction Over Third Parties Third parties that are not a party to the arbitration agreement may join the arbitration proceedings if: • the third party has an interest in joining in the arbi - tration; • the participation is agreed by the disputing parties; and • the arbitral tribunal approves the third party’s join - ing the arbitration. The Arbitration Law does not limit this condition to domestic parties; it should be applicable to both for - eign and domestic third parties. In principle, a third party (ie, any person or entity that has not signed an arbitration agreement) is not bound
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