“While arbitration clause is included within a written agreement between the parties, an arbitration agreement is an agreement made after a dispute has arisen between the parties. Without any arbitration clause or arbitration agreement, the dispute shall be settled by the district court by default.”
Arbitration is a way of settling a civil dispute outside the general court based on an arbitration agreement or arbitration clause made in writing by the parties to the dispute. Arbitration is explained in Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolution. As mentioned in Article 5 of the Arbitration Law, disputes that can be resolved through arbitration are only disputes in the trade sector and regarding rights which, according to laws and regulations, are fully controlled by the disputing parties.
In accordance with Article 1 paragraph (3) Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolution, an arbitration clause is contained in a written agreement made by the parties before a dispute arises. The arbitration clause is usually listed and forms part of the agreement or commercial contract made by the parties. This commercial agreement or contract can be in the form of a sale and purchase agreement, lease, joint venture agreement or other agreement as long as it falls within the scope of civil law in the trade sector.
Meanwhile, an arbitration agreement is a separate agreement made by the parties after a dispute arises. This type of agreement by several Indonesian writers is often referred to as a compromise deed, which is a special agreement made after a dispute has occurred to regulate how to submit a dispute that has occurred to be settled by the forum of arbitration.
Unlike the arbitration clause requires it to be made in writing and signed by the parties, an arbitration agreement (compromise deed) must be made in compliance with the provisions of Article 9 in Law No. 30 of 1999 which states that:
1) In the event that the parties choose dispute resolution through arbitration after the dispute has occurred, agreement regarding this matter must be made in a written agreement signed by the parties.
2) In the event that the parties cannot sign the written agreement referred to in paragraph (1), the written agreement must be made in the form of a notarial deed.
3) The written agreement as referred to in paragraph (1) must contain:
a. disputed issues;
b. full name and residence of the parties;
c. full name and residence of the arbitrator or arbitral tribunal;
d. the place where the arbitrator or arbitral tribunal will make a decision;
e. full name of the secretary;
f. dispute resolution period;
g. a statement of willingness from the arbitrator; and
h. a statement of the willingness of the disputing parties to bear all costs necessary for the settlement of the dispute through arbitration.
4) A written agreement that does not contain the things referred to in paragraph (3) is null and void by law.
On another note, arbitration clause is not mandatory, and it can be made and integrated into the main agreement signed or it can also be agreed later after the main agreement has been agreed upon. However, even if the main agreement ends, the arbitration clause on the main agreement does not necessarily end. This is what is known as a separability or severability principle.
Furthermore, an arbitration clause is necessary to state clearly in the agreement, among other things, the arbitration institution, the law that they used, and an appointment of an arbitrator(s) that are agreed by both parties in the agreement. This is mentioned in Article 4 in the Law No.30/1999.
Dispute resolution through arbitration can be carried out if there has been an agreement in the form of an arbitration clause contained in a written agreement made by the parties before the dispute arises, or a separate arbitration agreement made by the parties after the dispute arises. This means that as long as there is an agreement for arbitration, disputes can be resolved through the forum of arbitration.
Alternatively, if there is no arbitration agreement or arbitration clause, dispute resolution can be carried out through litigation process, namely through the district court. This is because under the Indonesian law, the default dispute settlement for any dispute is through the district court. Furthermore, for disputes which are not included in the types of disputes which can be resolved through arbitration, such disputes must be resolved by litigation through the district court as well.
Author: Atsyilla Salsabilla
Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. Commercial Dispute.
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