Interpretation of Phrase ?Public Order? Through Indonesian Arbitration Law under Review

Indonesian Version

 
Ricky Pratomo, Ali Salmande
 

 

Last Tuesday, the Indonesian Bar Association (PERADI) held an International Seminar on International Arbitration at Menara Slipi in Jakarta. Out of the many topics which were addressed during the seminar, a discussion on the interpretation of the phrase “public order”, as defined under Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (known as Indonesian Arbitration Law), was held.
 
According to Article 66, Part (c) of the Indonesian Arbitration Law, an international arbitral award may only be executed in Indonesia provided that such an award does not disrupt public order within the country. In this context, it is vital that a definition of Indonesian public order be fully understood.
 
However, the Arbitration Law does not specifically address the meaning of the phrase “public order” in any further detail. As a result of this lack of clarity, many lawyers have argued that the notion of public order in Indonesia is being interpreted too broadly. Supporting this view, John K. Arthur, an Australian lawyer, claimed during the seminar that Indonesian courts can easily interfere with any international arbitral awards by invoking notions of public order.
 
“Unfortunately, the interpretation of the phrase ‘public order’ is very broad in Indonesia, in contrast with other countries, which offer more precise interpretations [of this phrase],” Mr. Arthur stated.  
 
In support of his argument, Mr. Arthur explained that Supreme Court Regulation No. 1 of 1990 on Execution Procedures for International Arbitral Awards confirmed the broader interpretation of notions of public order, as they apply to the arbitration law. Specifically, Mr. Arthur referred to Article 4 (2) of this regulation, which states that the, “Exequatur will not be issued if the international arbitration award is manifestly incompatible with fundamental Indonesian legal principles and public order.”
 
Mr. Arthur went on to argue that the common notion of “public order”, as defined under Indonesian law, was broader than its definition by other countries which have adopted the United Nations Commission on International Trade Law Model and the Law on International Commercial Arbitration (UNCITRAL Law Model). According to Mr. Arthur, other countries which have adopted the UNCITRAL Law Model, such as Malaysia, Singapore and Australia, offer precise interpretations of “public order”. In Malaysia, for example, the phrase “violating public order” is interpreted as meaning anything which “offends fundamental notions of morality and justice or anything which definitively violates public order”.
 
“Malaysian courts interpret this in a precise manner by using an approach which is similar to that of other countries which have also adopted the UNCITRAL Law Model,” the Australian lawyer asserted.
 
Mr. Arthur went on to explain that in Singapore, the phrase “public order” is interpreted to mean matters which offend public conceptions of conscience and morality. As a result of this widely held definition, Singaporean judges also interpret this phrase in a precise manner.
 
“Singaporean courts will usually underlay [any decisions which relate to notions of] public order with international precedents which have applied the UNCITRAL Law Model,” Mr. Arthur claimed.
 
However, Mr. Arthur conceded that Indonesia, with its large and highly diverse population, was somewhat different from countries such as Australia or Malaysia, as the populations of these countries were much lower. As a result of this, the governments of these nations can more easily harmonize their national laws with international laws.
 
“However, with a population of 250 million people? Well this process will not be so easy,” Mr. Arthur added.
 
Mr. Arthur then affirmed that he therefore understood why the phrase “public order” was currently interpreted in a broad way by Indonesian judges. Nevertheless, Mr. Arthur expressed his hope that no interpretation would be too broad, as this would allow courts to easily interfere with international arbitral awards.
 
In support of Mr. Athur’s opinion, Ricardo Simanjuntak, Vice Chair of National Board of PERADI, expressed his agreement that the current interpretation of public order, as it applies to the Arbitration Law, was indeed too broad.
 
“There is as yet no single standard definition of public order here, although anything that violates Indonesian regulations is a commonly used yardstick. In general, however, these two words remain ambiguous,” Mr. Simanjuntak explained.
 
In conclusion, Mr. Simanjuntak suggested that Indonesia should study best international practices in regard to this matter.
 
(cd/sp)