Benefits of arbitration are not widely known

By Prapti Widinugraheni

JAKARTA (JP): Many Indonesian firms fail to use arbitration as a means to settle their business disputes, assuming that the system is expensive and time consuming, an executive of the Indonesian National Board of Arbitration says.

Board chairman Priyatna Abdurrasyid said that the assumption is incorrect and caused by a lack of information about and unfamiliarity with the arbitration system.

In the end, many Indonesian businesses take their disputes to court, which -- in Indonesia -- is known to be rife with long, complicated procedures and often unfair practices.

Arbitration is just the opposite.

"As an alternative dispute resolution system, arbitration is cheap, time-saving and amicable," he told The Jakarta Post.

The Indonesian National Board of Arbitration, known by its local acronym BANI, charges a registration fee of Rp 250,000 (US$106.60) and administration fees that vary between Rp 150,000 and Rp 1.25 million, depending on the amount of the claim.

Arbitration fees, paid to selected arbitrators, are between 10 percent and 0.5 percent of the claim.

"These fees are equally shared by the disputing parties. I can assure you there are no additional fees apart from these," Priyatna said.

He said a dispute can be solved within three to six months after it is filed with BANI.

Unlike court trials -- which involve lawyers, prosecutors, judges and may be attended by the public and even the press -- arbitration sessions are confidential.

They involve only the parties in dispute, their lawyers and one to three arbitrators who have been selected by and agreed upon by the disputing parties. This helps to avoid unwanted publicity which may ruin the reputation of either of the parties.

He pointed out that even though the arbitrators are chosen by the parties in dispute, they may not take sides.

"They are arbitrators who are chosen for their integrity, honesty and professionalism and for their technical expertise in examining and solving disputes," Priyatna said.

Furthermore, unlike ordinary litigation, the award reached through arbitration is final and binding, with the same legality as that of a district court, but with no chance for appeal.

Arbitration also gives the opportunity to reach an amicable solution where both parties stand to gain a reasonable benefit.

"A win-win solution like this allows business between the two partners to continue smoothly after the dispute is settled," Priyatna said.

"Arbitration is a system which applies only to bonafide, professional businesses that can't afford to waste time, business partners and a public image. It is not for companies that intentionally bring their case to court knowing they will win under Indonesia's current system," he added.

BANI

Thus it remains to be asked why Indonesian companies are reluctant to resolve their disputes through BANI?

"We have never commercialized BANI," Priyatna answered.

This is justified by the six to eight cases that the board has been handling each year since its establishment in 1977 by Priyatna and his colleagues, Subekti, Harjono Tjitrosoebono and J.R. Abubakar.

The board's advisors include former minister of foreign affairs Mochtar Kusuma-atmadja and former chief justice Purwoto Gandasubrata, while its 22 non-permanent members, who act as arbitrators, consist of lawyers, engineers and experts of various disciplines.

The disputes handled by BANI involve the construction of buildings, factories, oil refineries, ships, insurance claims and telecommunications.

But lack of publicity is not the only reason why businesses don't bring their disputes to BANI.

"Going through arbitration requires the consent of all the parties in dispute, and this is not always easy," Priyatna said.

There is also the problem of different legal systems applied in different countries, which often results in awards that fail to satisfy the interests of the parties in dispute.

In spite of the board not having gained much popularity among Indonesian businesses, it has a significant role at the international level.

"Members of BANI are often asked by the (Paris-based) International Chamber of Commerce (ICC) to handle disputes in Jakarta, or they are invited to arbitrate cases in Paris," Priyatna said.

BANI has also established joint arbitrations with a number of countries, including the Netherlands, South Korea, Japan and Australia, which allow the disputing parties in those countries and the party's counterpart in Indonesia to carry out arbitrations without going through the 1958 New York Convention.

Under the convention, Indonesia agreed that an award reached through arbitration conducted outside the country can be executed in Indonesia. However, under Indonesian law, the award may be annulled if it is not approved by the Supreme Court.

"Through BANI's cooperation with the arbitration boards of several countries, international arbitrations can now be conducted in Indonesia and the award can be directly executed as if it were a local arbitration," Priyatna said.

But still, all of this does not mean BANI will change its style.

"The board's integrity and independency is what we stand for. All board-members work on a voluntary basis, so commercializing it would ruin our image," Priyatna said.

He pointed out that arbitration fees in European countries, for example, are far higher than those imposed by BANI.

In Paris, registration fees may reach $6,000, administration fees between $10,000 and $50,000 and arbitrators may charge $30,000 to $40,000 per person, he said.