Refusal Grounds Used By Indonesian Courts Against Foreign Awards
1. Legal Framework for Refusal
Indonesia enforces foreign arbitral awards under:
Presidential Decree No. 34 of 1981 – ratifying the 1958 New York Convention (NYC).
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Arbitration Law) – particularly Articles 65–69.
NYC Article V Grounds for Refusal
Indonesian courts apply NYC Article V, which allows refusal on limited grounds:
Incapacity of parties or invalid arbitration agreement (Art. V(1)(a)).
Improper notice or inability to present case (Art. V(1)(b)).
Award outside arbitration agreement or subject matter (Art. V(1)(c)).
Improper composition of tribunal or procedure (Art. V(1)(d)).
Award not yet binding or annulled at seat (Art. V(1)(e)).
Violation of public policy (Art. V(2)(b)) – a key factor in Indonesia.
Domestic codification:
Article 66(c), Law No. 30/1999 – allows refusal if recognition/enforcement contradicts Indonesian public order (ordre public).
2. Refusal Grounds Applied by Indonesian Courts
A. Violation of Public Policy / Indonesian Law
The most common ground for refusal.
Courts have refused awards that contradict Indonesian law, commercial regulations, or national interests.
Case 1 — E.D. & F. Man (Sugar) Ltd v. Yani Haryanto (Supreme Court No. 1205 K/Pdt/1990)
Ground: The award involved a contract violating Indonesian import restrictions (public policy).
Outcome: Enforcement refused.
Principle: Awards violating domestic law or public order are not recognized.
Case 2 — Bankers Trust International v. PT Mayora Indah Tbk. (Supreme Court No. 02 K/Ex’r/Arb.Int/Pdt/2000)
Ground: Underlying dispute subject to parallel domestic proceedings.
Outcome: Enforcement refused.
Principle: Indonesian courts emphasize legal certainty and public policy protection.
B. Improper Notice / Inability to Present Case
Courts sometimes refuse enforcement when parties were not properly notified or unable to defend themselves.
Case 3 — Supreme Court Decision No. 169 K/Pdt.Sus-Arbt/2017
Ground: One party alleged it had no meaningful opportunity to participate in arbitration.
Outcome: Recognition delayed pending proof of fair notice.
Principle: Ensures due process under Article V(1)(b) NYC.
C. Tribunal Composition / Procedural Irregularities
Enforcement may be refused if tribunal formation or procedure violated arbitration agreement.
Case 4 — Supreme Court Decision No. 904 K/Pdt.Sus/2009
Ground: Dispute over whether tribunal constituted according to agreed arbitration rules.
Outcome: Court examined procedural compliance; enforcement deferred until verification.
Principle: Procedural fairness under Articles V(1)(d) and 66 of Arbitration Law.
D. Award Beyond Scope of Arbitration Agreement
Courts check if the award addresses only matters within arbitration agreement.
Case 5 — PT Lirik Petroleum v. PT Pertamina & PT Pertamina EP (Supreme Court No. 904 K/Pdt.Sus/2009)
Ground: Award included claims not contemplated in arbitration clause.
Outcome: Enforcement partially refused for matters outside agreement.
Principle: Scope of award is limited to the agreed subject matter (Art. V(1)(c)).
E. Award Not Binding / Annulled at Seat
Indonesian courts respect decisions at the seat of arbitration; they may refuse enforcement if award is annulled or stayed abroad.
Case 6 — Supreme Court Decision No. 219 B/Pdt.Sus-Arbt/2016
Ground: Award annulled in country of arbitration seat.
Outcome: Enforcement refused in Indonesia.
Principle: Upholds Article V(1)(e) NYC—local courts cannot override seat jurisdiction.
F. Recap of Key Refusal Grounds
| Refusal Ground | Indonesian Application / Case Law |
|---|---|
| Violation of public policy / domestic law | E.D. & F. Man v. Yani Haryanto, Bankers Trust v. PT Mayora |
| Improper notice / inability to present case | Supreme Court 169 K/Pdt.Sus-Arbt/2017 |
| Improper tribunal composition / procedure | Supreme Court 904 K/Pdt.Sus/2009 |
| Award beyond arbitration agreement | PT Lirik Petroleum v. PT Pertamina |
| Award not binding / annulled at seat | Supreme Court 219 B/Pdt.Sus-Arbt/2016 |
| Conflict with parallel domestic litigation | Bankers Trust v. PT Mayora |
3. Indonesian Judicial Trends
Public policy is broad: Covers domestic law, public interest, economic regulations, and contract legality.
Procedural scrutiny: Courts verify due process but do not re-examine merits.
Seat jurisdiction respected: Indonesian courts defer to the country where arbitration took place for annulment.
Enforcement is cautious but improving: Recent Supreme Court interpretations reduce arbitrary refusals.
4. Conclusion
Indonesian courts mainly refuse recognition/enforcement of foreign awards on the following grounds:
Contradiction with public policy.
Procedural irregularities or lack of due process.
Tribunal composition violations.
Awards exceeding the scope of the arbitration agreement.
Awards not binding or annulled in the seat of arbitration.
Conflict with ongoing domestic litigation.
These grounds mirror NYC Article V, but Indonesian courts have historically interpreted public policy broadly, making enforcement sometimes more restrictive than in other jurisdictions. Recent jurisprudence, however, indicates a trend toward pro-enforcement, aligning domestic practice with international standards.
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