INDONESIA Law and Practice Contributed by: Stephen Igor Warokka and Mutiara Kasih Ramadhani, SSEK Law Firm
only take place upon the resolution of the claim or through the revocation of the arrest via a court order. The use of a club’s letter of indemnity or a foreign bank’s guarantee may therefore not be accepted by the court. 5.10 Procedure for the Judicial Sale of Arrested Ships As discussed in 5.5 Arresting a Vessel and 5.9 Releasing an Arrested Vessel , there is an absence of regulations on the procedure for the arrest of ships. If the ship has previously been arrested and subjected to a collateral seizure (ie, a seizure order issued to ensure that the assets remain accessible and are not transferred or removed for enforcement purposes) pri - or to the issuance of a final and binding decision, sub - ject to procedures relevant to the applicable laws, the execution of these assets may be carried out through a private sale agreed between the parties. This pro - cess allows the judgment debtor (the losing party) to fulfil its obligations to the judgment creditor (the win - ning party) in line with the relevant court decision. However, if there is no previous collateral seizure imposed prior to the decision, and it is the intention of the judgment creditor to arrest the ship owned by the judgment debtor for the purpose of enforcing the decision, then the judgment creditor may file a petition with the courts to execute the decision. As a result of this petition, the State Auction Office will carry out a judicial sale in the form of an auction. The costs for such auction may vary depending on the district court. In addition, there are no detailed regulations or guidelines regarding the maintenance of assets during the period of arrest. However, the arrest of the vessel itself will be carried out by the relevant port authority. Under Article 316 of the ICC, the following claims are seen to have priority rights for the proceeds of auc - tion sales: • costs for execution – ie, confiscation/seizure for judicial sale ( biaya sita-lelang ); • claims for the captain and crew of ships arising from labour agreements; • fees for assistance, sea guides and signage, ports and other shipping costs; and
• collision claims. Article 316a of the ICC provides that claims or receiva - bles with priority rights as described above will take precedence over mortgages. 5.11 Insolvency Laws Applied by Maritime Courts Law No 37 of 2004 regarding Bankruptcy and Post - ponement of Debt Settlement Obligation (the “Indo - nesian Bankruptcy Law”), as last partially revoked by Law No 4 of 2023 regarding the Development and Strengthening of the Financial Sector, is analogous to Chapter 11 of the United States Bankruptcy Code. The Indonesian Bankruptcy Law regulates the reorganisa - tion of a company to allow it to continue business while simultaneously paying its debts to its creditors. As discussed in 1.1 Domestic Laws Establishing the Authorities of the Maritime and Shipping Courts , the authority of Indonesia’s maritime court is limited to the inspection of ship accidents and the enforcement of ethical codes for captains and officers. Therefore, under Article 222 of the Shipping Law, the arrest of a vessel will be ordered by the district court ( pen- gadilan negeri ), whereas the competent bankruptcy court in Indonesia is the commercial court ( pengadilan niaga ). However, Articles 242 and 245 of the Indone - sian Bankruptcy Law prohibit the arrest of the vessel and judicial sales by the owners during “Chapter 11” proceedings before the Indonesian Commercial Court. 5.12 Damages in the Event of Wrongful Arrest of a Vessel Indonesia is a party to the International Convention on Arrest of Ships, 1999 but has not yet ratified it into law. As discussed in 5.5 Arresting a Vessel and 5.9 Releasing an Arrested Vessel , the lack of regulations concerning the procedure for vessel arrest results in uncertainty in the event of a wrongful arrest. If a party intends to get indemnified or obtain damages due to wrongful arrest, it will have to file a claim or law - suit with the district court. The judges at the district court will determine whether to order payments for the wrongful arrest, using their discretionary authority. It is important to note that Article 223 of the Shipping Law does elaborate on the circumstances that con -
265 CHAMBERS.COM
Powered by FlippingBook