THE AUTHOR:
Eddy Marek Leks, Partner of Leks&Co and Arbitrator at BANI Arbitration Center
The jurisdiction of the tribunal stems from the existence of an arbitration agreement. Indonesia Arbitration Law of 1999 does not specifically regulate the tribunal’s jurisdiction and whether the tribunal can determine its jurisdiction on its own, i.e., kompetenz-kompetenz doctrine. But there is a provision that is close to it, namely, Article 4 para 1, which essentially stipulates that when the parties have agreed to settle the dispute through an arbitration, an arbitrator is authorized to decide on the rights and obligations of the parties. Despite the lack of clarity regarding this provision on the power to determine his own jurisdiction, the institutional rules will normally have it. For example, under Article 17 para 1 of BANI Rules 2025, the tribunal is authorized to determine challenges on its authority, including the validity of the arbitration agreement. The question will then arise, when there is a partial challenge(s) on jurisdiction in relation to the arbitrability of a claim, would the tribunal declare that it is not authorized to wholly hear the dispute (under the Indonesian court style) or partially admit it.
This article will discuss the partial jurisdictional challenge based on a hypothetical case between one claimant and one respondent. The claimant claims breach of contract under the arbitration agreement referring to the institutional arbitration. The claimant claims two broad categories. First is on the violation of laws and legal principles, e.g., violation of the Anti-Monopoly Law, the Consumer Protection Law, etc. The second is the breach of contract by the respondent. The reliefs for the first category are to obtain some provisions in the agreement considered nonbinding, as they violate laws and legal principles. And for the second category, to get compensation. The respondent challenges jurisdiction based on the first category of relief sought, that some provisions of the agreement violate the Anti-Monopoly Law. The tribunal declares that it is not authorized to totally hear the case on the grounds of first category relief, namely, violation of the Anti-Monopoly Law. This article will discuss whether that tribunal’s approach is legitimate.
The issue in the case would broadly consist of arbitrability and its extent in relation to the jurisdiction of the tribunal. The arbitrability of an arbitration case is regulated under Article 5 of the Indonesian Arbitration Law. It essentially provides that all disputes in the field of commerce, and those fully controlled by the disputing parties, can be resolved through arbitration. It goes further by stipulating that a dispute that cannot be settled is not arbitrable. On another provision, elucidation of Article 65, ‘commerce’ includes, among others, trade, banking, finance, investment, industry, and intellectual property rights. The word ‘among others’ entails that they are just examples, and the law does not want to restrain the extent of ‘commerce.’
The primary issue in the first category of the case is a violation of several provisions of the agreement related to the Anti-Monopoly Law. In this matter, the arbitration agreement itself is not disputed. The parties are aware of this, and the respondent did not raise any objections or challenges. But since there are two broad categories of relief sought, the respondent then partially challenges the jurisdiction of the tribunal due to the inclusion of the Anti-Monopoly Law, claiming that the Business Competition Supervisory Committee (KPPU) has the authority to examine this issue. The claimant argues that the relief sought is based on certain provision under Indonesian Civil Code which allows the tribunal to assess whether an agreement’s cause is violating the law (Article 1320 point (4)), namely the Anti-Monopoly Law, and the claimant does not request the tribunal to act as if it is a KPPU. As the case goes to the end of the proceedings, the tribunal then declares that it is not authorized to totally hear the dispute based on the Anti-Monopoly Law.
Reading Article 5 of the Arbitration Law, an ‘anti-trust’ or ‘Anti-Monopoly’ is not included as a ‘commerce’ example. However, as they are merely examples, it does not necessarily imply that any lack of inclusion results in non-arbitrability. The basis of the claim is Article 1320 of the Indonesian Civil Code (“ICC”) on the validity of an agreement, which is the legitimate authority of the tribunal to assess. Nevertheless, the ‘law’ to be analyzed is the Anti-Monopoly Law, which established the KPPU as the official authority to assess and penalize all violations of the Anti-Monopoly Law.
Since there is no clarity under the Arbitration Law, one should consult the jurisprudence on similar cases. The following are several jurisprudences like the case analysis, in which the judges consider the Anti-Monopoly Law or, in general, the prohibition of monopolies.
- Decision No. 294/Pdt.G/2013/PN.Jkt.Sel, Judex Facti argues, “based on the evidence … connected with the testimonies by witnesses … the Defendants in doing its business in Indonesia have implemented monopoly practice and unfair trade [emphasis] as well as undue influence over its circumstance and/or position …”
- Decision No. 3440 K/Pdt/2015, Judex Juris argues, “since it is proven that the Claimant in executing an agreement is in good faith, by putting in place clauses of Deed of Agreement Number 35 dated 30 April 2010, which its contents contain and or violate with the Law Number 5 of 1999 on Monopoly Practice and Unfair Competition [emphasis].”;
- Decision No. 664 K/Pdt.Sus-KIP/2019, Judex Juris argues in relation to the decision by the Central Information Commission, “that in the public consequence test it was put forth a test on the existence of unfair competition in accordance with Law Number 5 of 1999 on Monopoly Practice and Unfair Competition [emphasis]…”
- Decision No. 95/PDT/2021/PT MND that is upheld by the Supreme Court under its Decision No. 4427 K/PDT/2022 argues, “considering, that the Letter Agreement Division of Territory … it is proven violating the prevailing laws and regulations particularly Article 9 of Law Number 5 of 1999 on Monopoly Practice and Unfair Competition, therefore violating the objective principle of an agreement [emphasis] causing the Letter Agreement Division of Territory dated 2 April 2020 as null and void …”
The above legal rules and considerations clearly demonstrate that judges in public courts refer to the Anti-Monopoly Law without undermining the authority of the KPPU. The courts’ jurisprudence surely does not bind the tribunal, but it provides important references for the tribunal in its award. Gunawan Widjaja, in his book titled Arbitrase vs. Pengadilan (Arbitration versus Court), published by Kencana in 2008, explained in the context of jurisdictional challenge, that for a business competition issue dispute, the authorized party is KPPU. This is mostly accurate since the Anti-Monopoly Law falls under the KPPU’s authority. However, this opinion is broad and might vary depending on the specifics of a case as per the case analysis. Therefore, even though the arbitrability issue is not straightforward, the jurisprudence shows that the tribunal should have admitted the case as part of its jurisdiction.
We come to the second issue, regarding the extent of arbitrability in relation to the tribunal’s jurisdiction, as the tribunal declares that it lacks the authority to fully adjudicate the dispute. In other words, would it be justifiable to terminate the proceeding due to jurisdiction based on one inclusion of the Anti-Monopoly Law, given the existence of a second category of relief?
As outlined before, the second category of relief does not discuss the Anti-Monopoly Law at all. It just focuses on the breach of several provisions under an underlying agreement between the disputing parties. In the second category, there have been no jurisdictional issues. Nonetheless, the tribunal concludes that it completely lacks jurisdiction.
Let’s consider the various legal bases. Reglement op de Rechtswordering (“Rv”) is the old law on arbitration that was replaced by the Arbitration Law of 1999. Article 643 of the Rv stipulates that the annulment of an award can be lodged when the tribunal is negligent in awarding one or more things to be decided as per the arbitration agreement. Article 54 of the Arbitration Law stipulates that an arbitration award must include “g. consideration and conclusion by arbitrator or panel of arbitrators on all disputes [emphasis];” Further, like Article 643 of the Rv, Article 58 of the Arbitration Law on the administrative correction stipulates that a correction can be made on the addition or deduction of relief in the award. Its elucidation explains that any party may object when the award, among others, “b. does not include one or more reliefs sought to be decided;” Subsequently, on public court, Article 178 para (1) of Indonesia Civil Procedural Law (“ICPL”) essentially stipulates that the judge must examine every part of the relief sought. It is compulsory in nature. In international context, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) of 1958, which Indonesia is bound to, in Article V para (1) (c) provides that the recognition and enforcement of the award may be refused when “the award deals with a difference … not falling within the terms of the submission to arbitration …” Further, under the UNCITRAL (United Nations Commission On International Trade Law) Model Law on International Commercial Arbitration (2006), Article 33 para (3) provides the disputing party to request the tribunal “to make an additional award as to claims presented in the arbitral proceedings but omitted from the award.”
The various explanations provided suggest that the tribunal should hear the second category of relief and issue an award in response to the relief sought. Rejecting all claims solely based on a partial jurisdictional challenge, thereby dismissing other reliefs, is incorrect. Even public court do not operate this way. The disputing parties expect the arbitration proceeding to be more lenient than court proceedings. Therefore, the tribunal’s understanding of the arbitration law and its principles is essential to ensure the continued trust by the disputing parties to settle their disputes through arbitration.
ABOUT THE AUTHOR
Dr Eddy Marek Leks, FCIArb, is the founder and managing partner of Leks&Co. He has obtained his doctorate degree in philosophy (Jurisprudence) and has been practising law for more than 15 years and is a registered arbitrator of BANI Arbitration Centre. Aside to his practice, the author and editor of several legal books. He led the contribution on the ICLG Construction and Engineering Law 2023 and ICLG International Arbitration 2024 as well as Construction Arbitration by Global Arbitration Review. He was requested as a legal expert on contract/commercial law and real estate law before the court.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
