Despite efforts to improve legal certainty under President Susilo Bambang Yudhoyono's administration, investor trust in the Indonesian legal system remains low.
Asrul Sani of the Indonesian Corporate Counsel Association (ICCA) said that given the lack of trust in the local courts and arbitration bodies, many domestic companies preferred to choose international arbitration bodies to resolve their commercial disputes.
Among the world's international arbitration bodies, the Singapore International Arbitration Center (SIAC) has long been considered as the ideal alternative for dispute resolution among Indonesian companies.
"There is a lack of trust among foreign investors and foreign business partners in the Indonesian judicial system, which, in turn, leaves them reluctant to use the services of the Indonesian National Arbitration Board (BANI)," he explained.
In many cases, Asrul said, Indonesian companies were also often "forced" to accept overseas arbitration because their foreign partners preferred long established international arbitration services, such as International Chamber of Commerce arbitration in Paris, or the services provided by other trusted bodies, such as those located in London and New York.
He said that this often disadvantaged Indonesian companies, not only because of the higher legal costs they had to bear, but also due to the fact that many international arbitration bodies were not familiar with Indonesian corporate law.
SIAC administration fees ranged from S$2,750 (about US$1,775), for a claim and counterclaim valued below $250,000, and about S$25,000 for claims above S$10 million, while BANI charges were as low as Rp 1.5 million (around US$164).
SIAC arbitrators charged between S$300 and S$900 per hour, depending on seniority and the complexity of the case, whereas BANI arbitrators charged lump-sum fees.
"Singapore has a very good arbitration body. Good in the sense that it doesn't cost as much as those in London or Paris. Plus, they have arbitrators who are familiar with Indonesia. That is why many companies see SIAC as a good alternative," he said.
SIAC counsel & senior assistant registrar Sabiha Shiraz told The Jakarta Post that Singapore benefited from having good arbitration infrastructure and from progressive laws that were very pro-arbitration.
"The courts are very supportive of arbitration. They don't interfere with the arbitration processes. We offer neutrality and transparency in everything we do," she said.
"Currently, we have around 150 ongoing cases, and an average of 80 new cases per year, most of which involve Indonesian companies," Shiraz said.
Another important thing that SIAC offered, Shiraz said, was more than 200 qualified arbitrators with expertise in a wide variety of fields, including Indonesia law.
"We have four arbitrators from Indonesia and we have other members of our panel who are experts on Indonesia. Plus, we can always appoint an expert to advise a tribunal on Indonesian law," she said.
Aware of Indonesian business concerns about costs, Shiraz said that SIAC would introduce new arrangements next year that would determine arbitrators' fees based on the value of the dispute, hence ensuring certainty for all sides.
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