1. Arbitration in Indonesia: A General Overview
Arbitration in Indonesia is governed by Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Law No.30/1999”) , which provides the legal foundation for resolving commercial disputes outside the public court system. Arbitration is gaining popularity as a preferred method due to its unique advantages over court proceedings — particularly for complex, high-value, or cross-border matters.
Importantly, the law does not mandate arbitration through a single institution. While the Indonesian National Arbitration Board (“BANI”) is one of the more established and frequently utilized forums, parties are free to choose other arbitration bodies, including international institutions or ad hoc arrangements, provided that their arbitration clause or agreement complies with legal standards.
Let’s explore why arbitration is increasingly seen as a strategic choice for resolving commercial disputes in Indonesia.
2. Key Advantages of Arbitration Over Litigation in Indonesian Courts
Arbitration offers numerous benefits compared to litigation in Indonesian civil courts. Below is a detailed comparison to illustrate these differences:
Comparison Table: Arbitration vs. Court Litigation in Indonesia
| Aspect | Arbitration | Court Litigation |
| Confidentiality | Proceedings are private and confidential. | Proceedings and decisions are generally public through court websites or Indonesia’s Supreme Court directory |
| Time Efficiency | Must conclude within 180 days (per Law No. 30/1999), extensions are limited. | Cases often take several years due to backlog and procedural delays. |
| Finality of Decision | Awards are final and binding; no appeal process. | Court decisions can be appealed through multiple layers up to the Supreme Court. |
| Enforceability | Awards can be enforced internationally under the 1958 New York Convention. | Domestic enforcement only; international recognition is limited. |
| Selection of Decision-Maker | Parties choose arbitrators with subject-matter expertise. | Judges are assigned and may not have industry-specific knowledge. |
| Flexibility of Process | Procedures, rules, venue, and language can be customized by agreement. | Proceedings follow rigid procedural rules set by the judiciary. |
| Costs | Typically higher upfront costs but fewer hidden procedural expenses. | Generally lower official fees but potentially higher long-term costs due to delays. |
| Commercial Sensitivity | Trade secrets and sensitive data are protected from public exposure. | Information disclosed in court. |
3. You might be wondering: how much does this all cost?
One of the primary considerations when opting for arbitration is the cost. According to Article 76 of Law No.30/1999 arbitration fee consist of:
a. Arbitrators’ honorarium;
b. Travel expenses and other expenses which are expended by the arbitrator;
c. fees relating to witness or expert witness which are required in the proceeding;
d. administrative fees.
This regulation does not specify the cost for arbitrations. However, based on our experience in BANI, BANI sets arbitration fees as follows:
1. Registration Fee: BANI sets a fixed registration fee of IDR5,000,000, which is required to initiate proceedings. This fee applies regardless of the dispute’s value.
2. Arbitration Fees: Beyond registration, parties are required to pay for the arbitration fees, which encompass:
a. Administrative costs;
b. Hearing and procedural expenses;
c. Arbitrators’ fees.
These fees are calculated based on the total value of the dispute, following a percentage scale published in BANI’s 2025 Regulations. As a result, the higher the claim, the higher the arbitration fees.
In general, according to Article 77 of Law No. 30/1999, the burden of these costs generally falls on the losing party. However, if a tribunal grants only partial relief (dikabulkan sebagain), the costs may be shared proportionally between the disputing parties.
4. Conclusion: Arbitration Is a Strategic Tool in Commercial Dispute Management
Arbitration in Indonesia offers a sophisticated, efficient, and business-friendly alternative to court proceeding. While not without costs, its advantages—in confidentiality, enforceability, speed, and subject-matter expertise—make it an essential consideration in commercial contracting and dispute resolution strategy.
With Indonesia’s commercial landscape continuing to grow and globalize, understanding arbitration’s role and benefits is increasingly critical for local and foreign businesses alike. Whether through BANI or another institution, arbitration stands as a flexible, enforceable, and internationally recognized tool for resolving disputes—especially in a complex and dynamic business environment.
Disclaimer: This article provides a general overview of arbitration in Indonesia and how it compares to court litigation. While BANI (Badan Arbitrase Nasional Indonesia) is mentioned as an example, arbitration in Indonesia can also be conducted through other institutions or arrangements, both domestic and international. The content is based on Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution and practical experience in commercial disputes.
This article is for informational purposes only and does not constitute legal advice. Readers should not rely solely on this information without consulting a qualified legal professional. Laws and practices may change, and results can vary depending on each case. If you need legal assistance or further clarification, our team is available to help.