Permanent Arbitration Institution May Waive Arbitration Law

 
Robert Sidauruk, Hasyry Agustin
 
Rather than protracted and complicated court proceedings, arbitration has long been considered as one of the most effective ways to settle disputes, especially in the business world. Arbitration’s greater flexibility can have downsides, however, and it is not always one-hundred percent perfect, with differences in opinion at times on the interpretation of procedural and substantive issues. One such contentious issue is the right of refusal (hak ingkar) and general arbitration procedures.
 
This was evident in expert testimony during recent proceedings at the South Jakarta District Court. Hikmahanto Juwana, law professor from Universitas Indonesia, explained that the “right of refusal” is right possessed by disputing parties to refuse the appointment of an arbiter. The basis for this right is possible injustices arising if an arbiter continues to hear a dispute.
 
This right, however, only applies to proceedings at the arbitration center the disputing parties have agreed upon, and does not apply to court proceedings.
 
“If the parties decided the arbitration center that would hear the dispute, then the procedures of such arbitration center prevails, including the procedure to submit a right of refusal petition,” explained Professor Juwana on Wednesday.
 
For instance, when disputing parties use the Indonesian National Board of Arbitration (Badan Arbitrase Nasional Indonesia – “BANI”), then BANI will apply its own procedural rules, instead of the procedures set out under Law No. 30 of 1999on Arbitration and Alternative Dispute Resolution (Arbitration Law).
 
According to Professor Juwana, BANI, as a permanent arbitration center, is not bound to comply with the Arbitration Law, as the later only applies to ad hoc arbitration institution sthat do not have their own procedural rules.
 
Moreover, Professor Juwana also said that the arbitration procedures under Chapter IV of the Arbitration Law do not apply if the disputing parties have appointed BANI as their arbitration center.
 
“This is a common practice at the international level. BANI may create provisions that deviate from the Arbitration Law,” added Professor Juwana.
 
Gunawan Wijaya, law lecturer at Universitas Pelita Harapan, however, takes a different view on this issue. At the same proceedings, Mr. Wijaya said that the Arbitration Law is a lex arbitri or t law that applies to all arbitration centers in Indonesia. Therefore, internal procedural rules established by any arbitration center in Indonesia should not conflict with the Arbitration Law.
 
Based on this rationale, Mr. Wijaya further concluded that a petition to exercise a right of refusal against an arbiter appointed by BANI can be filed with the district court. The main aim of the right of refusal is to ensure the independency of the arbiter. If an arbiter refuses to step down despite a request by the disputing parties, a right of refusal petition may be filled with the district court.
 
“Although the arbitration center has their own internal procedures for processing applications to exercise a right of refusal, an independent institution may be also be called to hear the matter, which is the district court. Therefore, the Arbitration Law applies to both permanent and ad-hoc arbitration centers”, argued Mr. Wijaya.
 
The debate on arbitration procedures and the right of refusal between both experts is the result of a dispute between PT Berkah Karya Bersama against PT Citra Televisi Pendidikan Indonesia (CPTI) over the ownership of PT Cipta Televisi Indonesia.
 
After lengthy litigation, last month on the 29 October the Supreme Court handed down its decision dismissing the case review petition filled by PT Berkah Karya Bersama and declared the cassation decision delivered on 2^nd of October 2013 by the Supreme Court in favour of PT CPTI as the final and binding decision.
 
Despite the Supreme Court decision, the losing party initiated arbitration proceedings at the Indonesian National Board of Arbitration (BANI), which was later approved by BANI which is now putting together an arbitration tribunal to hear the dispute.
 
In response, Mohammad Jaman, Director of PT CPTI filed a right of refusal petition against BANI and PT Berkah Karya Bersama at the South Jakarta District Court, claiming that the Supreme Court has decided the case and questioning the independency of the arbiter appointed by BANI.
 
(Professor Hikmahanto Juwana has sent his objection regarding the Indonesian version of this news, as provided here)

(hot/kc)