Arbitration law in Indonesia

Any dispute arising between foreign investors and the government can be settled through international arbitration as agreed by both parties. Indonesia’s Investment Law, implemented in 2007, established the principle of equal treatment for foreign and domestic investors. The principle source of the law of arbitration in Indonesia is Law No. 30/1999 concerning Arbitration and Alternative Dispute Resolution (the Indonesian Arbitration Law). In case of a dispute related to industrial labour, the first step in dispute resolution is a bipartite negotiation between a company and a labour union (Law 2/2004). Indonesia has bilateral investment treaties (BIT) with around 60 countries. The agreements commit the signatories to give equal treatment to each other’s foreign direct investment (FDI) and protection of FDI from nationalisation. These treaties also cover arbitration in case of disputes between the Indonesian state and foreign investors, supported by the World Bank International Centre for the Settlement of Investment Disputes (ICSID). Indonesian officials regard the ICSID framework as disadvantageous to the country. Hence changes in this field are expected, as Indonesia wants to revise the investment agreements. The key arbitral institutions in Indonesia are the Indonesian National Board of Arbitration (BANI), the Indonesian Capital Market Arbitration Board (BAPMI) and the Shariah National Arbitration Body (BASYARNAS). BANI handles arbitrations in sectors including corporations, insurance, financial institutions, manufacturing, intellectual property rights, construction, maritime and environment. BAPMI handles disputes relating to the capital market sector. The main objective of establishing BAPMI was to provide an alternative dispute resolution forum from the courts for all capital market players in Indonesia. With regard to the protection of intellectual property rights, Indonesia has made progress in improving its legal framework during the last years. In 2012 Indonesia’s Supreme Court issued Regulation 5/2012 and Regulation 4/2012 outlining the procedures for obtaining temporary injunctions against infringement.

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