Constitutional Court Decision on the Definition of International Arbitral Award

On December 17, 2024, the Constitutional Court of the Republic of Indonesia (the “Court“) rendered its decision towards Case No. 100/PUU-XXI/2024 (the “Decision“). The case was submitted and examined for the judicial review of Article 1 Point 9 of Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (the “Arbitration Law“).

The petitioners raised the arguments on the applicability of Article 1 Point 9 of the Arbitration Law which was inconsistent with Article 28D Paragraph (1) of the 1945 Constitution of the Republic of Indonesia (the “Constitution“) that guarantees the right to legal certainty. Please see below the disputed article, i.e. Article 1 Point 9 of the Arbitration Law:

“International Arbitration Award refers to an award which is rendered by an arbitral institution or individual arbitrator outside the jurisdiction of the Republic of Indonesia, or an award which is rendered by an arbitral institution or individual arbitrator, of which, according to legal provisions of the Republic of Indonesia, it shall be deemed as an International Arbitration Award.”

Petitioners’ Argument

The petitioners contended that the two phrases within the article create conflicting interpretations. The table below highlights the conflicting interpretations:

This conflict, according to the petitioners, creates ambiguity and the risk for misinterpretation. For example, despite the parties agreeing on the seat of arbitration in their agreement, Indonesian courts could reinterpret the classification of the award based on the provisions of the Arbitration Law.

Court’s Decision

Considering the petitioners’ arguments, the Constitutional Court agrees to remove the phrase “shall be deemed” from Article 1 Point 9 of the Arbitration Law. This amendment aligns the definition of an International Arbitration Award with the territorial principle outlined in the First Phrase.

Therefore, the revised Article 1 Point 9 of Arbitration Law is as follow:

“International Arbitration Award refers to an award rendered by an arbitral institution or individual arbitrator outside the jurisdiction of the Republic of Indonesia, or an award rendered by an arbitral institution or individual arbitrator, which, according to the legal provisions of the Republic of Indonesia, is an International Arbitration Award.”

Impact of the Decision

The Court’s decision establishes legal certainty by eliminating the discretionary phrase that could lead to inconsistent interpretations of International Arbitration Awards. Moving forward, the classification of an international arbitral award in Indonesia will adhere strictly to the territorial principle, providing clearer guidelines for parties involved in arbitration.

AKSET

Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com), Raymont Travis (rtravis@aksetlaw.com), or Arthur Basa Okuli Nainggolan (anainggolan@aksetlaw.com) for further information.

 

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