Arbitration is a consensual, private process in which parties agree to refer a dispute to one or more impartial arbitrators, rather than to the courts, and to accept the arbitrators' decision (the award) as final and binding.
The Arbitration Agreement
Arbitration rests on agreement. Parties may include an arbitration clause in their contract before any dispute arises, or conclude a submission agreement after a dispute has arisen. A valid arbitration agreement generally excludes the jurisdiction of the national courts over the merits of the dispute.
Advantages
Parties choose arbitration for its neutrality in cross-border disputes, the ability to appoint arbitrators with specialist expertise, confidentiality, procedural flexibility and, above all, the ease of enforcing awards internationally under the New York Convention of 1958, to which more than 170 states are party.
In Indonesia
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution governs arbitration in Indonesia. It applies to commercial disputes concerning rights that the parties may freely dispose of. Domestic awards must be registered with the District Court, and international awards are enforced through the Central Jakarta District Court after obtaining an exequatur. Indonesia ratified the New York Convention by Presidential Decree No. 34 of 1981. The Indonesian National Board of Arbitration (BANI) is the leading domestic institution.
Challenging an Award
Awards cannot be appealed on their merits. Under Article 70 of the Arbitration Law, a domestic award may be annulled only on limited grounds, such as forged documents, concealed decisive documents or fraud by a party in the conduct of the dispute.