The dispute resolution Review

Fifth Edition Editor

Richard clark

Law Business Research

The Dispute Resolution Review

Reproduced with permission from Law Business Research Ltd. This article was first published in The Dispute Resolution Review, 5th edition (published in February 2013 editor Richard Clark). For further information please email Adam.Sargent@lbresearch.com

The Dispute Resolution Review

Fifth Edition Editor

Richard Clark

Law Business Research Ltd

THe LAW ReVIeWS

THe MerGers aNd AcQUIsItIONs ReVIeW THe RestrUctUrING ReVIeW THe PrIVate COmpetItION ENfOrcemeNt ReVIeW THe DIspUte ResOlUtION ReVIeW THe EmplOYmeNt LaW ReVIeW THe PUblIc COmpetItION ENfOrcemeNt ReVIeW THe BaNKING ReGUlatION ReVIeW THe INterNatIONal ArbItratION ReVIeW THe MerGer CONtrOl ReVIeW THe TecHNOlOGY, MedIa aNd TelecOmmUNIcatIONs ReVIeW THe INWard INVestmeNt aNd INterNatIONal TaXatION ReVIeW THe COrpOrate GOVerNaNce ReVIeW THe COrpOrate ImmIGratION ReVIeW THe INterNatIONal INVestIGatIONs ReVIeW THe PrOJects aNd CONstrUctION ReVIeW THe INterNatIONal CapItal MarKets ReVIeW THe Real Estate LaW ReVIeW THe PrIVate EQUItY ReVIeW THe ENerGY ReGUlatION aNd MarKets ReVIeW THe INtellectUal prOpertY ReVIeW THe asset maNaGemeNt reVIeW THE PRIVATE WEALTH AND PRIVATE CLIENT REVIEW THe mINING laW reVIeW tHe eXecUtIVe remUNeratION reVIeW THe aNtI-brIberY aNd aNtI-cOrrUptION reVIeW THe Cartels aNd leNIeNcY reVIeW

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PUBLISHER Gideon Roberton BUSINESS DEVELOpMENT MANAgERS Adam Sargent, Nick Barette MARKETINg MANAgERS Katherine Jablonowska, Thomas Lee, James Spearing pUBLISHINg ASSISTANT Lucy Brewer pRODUCTION COORDINATOR Lydia Gerges HEAD OF EDITORIAL pRODUCTION Adam Myers CHIEF SUBEDITOR Jonathan Allen SUBEDITORS Anna Andreoli, Charlotte Stretch EDITOR-IN-CHIEF Callum Campbell MANAgINg DIRECTOR Richard Davey Published in the United Kingdom by Law Business Research Ltd, London 87 Lancaster Road, London, W11 1QQ, UK 2013 Law Business Research Ltd www.TheLawReviews.co.uk No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. The publishers and the editor accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of February 2013, be advised that this is a developing area. Enquiries concerning reproduction should be sent to Law Business Research, at the address above. Enquiries concerning editorial content should be directed to the Publisher gideon.roberton@lbresearch.com ISBN 978-1-907606-56-4 Printed in Great Britain by Encompass Print Solutions, Derbyshire Tel: +44 870 897 3239

ACKNOWledGeMeNtS

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
AdVOKatfIrmaet BA-HR DA (BA-HR) ArtHUr COX ASHTAR ALI & CO, ADVOCATES AND CORPORATE CONSULTANTS AttIas & LeVY ArZINGer AZB & PartNers BAKER & MCKENZIE SOUTH AFRICA BarUN LaW Bedell CrIstIN BIZLINK LaWYers & CONsUltaNts BONellI Erede PappalardO StUdIO LeGale BredIN Prat BUfete HerNNdeZ ROmO CAMILLERI PREZIOSI CraVatH, SWaINe aNd MOOre LLP CrOcI, SIlVa Y CaJINa AbOGadOs De BraUW BlacKstONe WestbrOeK

Acknowledgements

DIttmar & INdreNIUs FONtes TarsO RIbeIrO AdVOGadOs FULBRIGHT & JAWORSKI LLP IN ASSOCIATION WITH MOHAMMED AL-GHAMDI LAW FIRM GatmaYtaN Yap PatacsIl GUtIerreZ & PrOtacIO HeNGeler MUeller HerGNer BIlGeN ZeKe AttOrNeY PartNersHIp HOmbUrGer HUtabarat HalIm & ReKaN JUN HE LAW OFFICES KBH KaaNUUN LaNsKY, GaNZGer & PartNer (LGP) ASZCZUK & PARTNERS LlOreda CamacHO & CO LOYeNs & LOeff Maples aNd Calder MaNNHeImer SWartlING MIYaKe & YamaZaKI MOLITOR aVOcats la cOUr MOtIeKa & AUdZeVIIUs Osler, HOsKIN & HarcOUrt LLP OXfOrd & BeaUmONt SOlIcItOrs

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Acknowledgments

PELLEGRINI & URRuTIA PINSENT MASONS LLP PIpER ALDERmAN PLESNER LAW FIRm POTAMITISVEKRIS SCHRECk LAW OFFICES SLAuGHTER AND MAY SOFuNDE, OSAkWE, OGuNDIpE & BELGORE SZECSkAY ATTORNEYS AT LAW TOMAIER LEGAL ADVOKTN KANCEL S.R.O. TSMP LAW CORpORATION uCA ZbRCEA & ASOCIAII URIA MENENDEZ URA MENNDEZ PROENA DE CARvALHO UTEEm CHAmbERS YOuNG CONAWAY STARGATT & TAYLOR LLP

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CONteNtS
Editors Preface Chapter 1 Chapter 2 Chapter 3 Chapter 4 xi Richard Clark AUSTRALIA 1 Malcolm Quirey and Gordon Grieve AUSTRIA 32 Helena Marko and Anna Zeitlinger BAHRAIN 47 Haifa Khunji, Kaashif Basit and Jessica Lang Roth BELGIUM 59 Geert Bogaert, Etienne Kairis, Aude Mahy and Stphanie De Smedt BRAZIL 80 Marcus Fontes, Max Fontes and Juliana Huang BRITISH VIRGIN ISLANDS 99 Arabella di Iorio and Victoria Lord CANADA 113 David Morritt and Eric Morgan CAYMAN ISLANDS 128 Aristos Galatopoulos and Caroline Moran CHILE 141 Enrique Urrutia and Jos Manuel Bustamante CHINA 152 Xiao Wei, Zou Weining and Stanley Xing Wan COLOMBIA 162 Bernardo Salazar and Natalia Caroprese

Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11

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Contents

Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Chapter 17 Chapter 18 Chapter 19 Chapter 20 Chapter 21 Chapter 22 Chapter 23 Chapter 24 Chapter 25

CZECH REPUBLIC 174 Jan Tomaier and Mat Hanuliak DELAWARE 190 Elena C Norman and Lakshmi A Muthu DENMARK 202 Peter Schradieck and Peter Fogh ENGLAND & WALES 214 Richard Clark and Damian Taylor FINLAND 234 Jussi Lehtinen and Heidi Yildiz FRANCE 246 Tim Portwood GERMANY 261 Henning Blz and Carsten van de Sande GHANA 279 David A Asiedu and Joseph K Konadu GIBRALTAR 292 Stephen V Catania GREECE 301 Konstantinos P Papadiamantis GUERNSEY 312 Alasdair Davidson and Jon Barclay HONG KONG 323 Mark Hughes HUNGARY 345 Zoltn Balzs Kovcs and Dvid Kerpel INDIA 360 Zia Mody and Shreyas Jayasimha

Contents

Chapter 26 Chapter 27

INDONESIA 371 Pheo M Hutabarat IRELAND 392 Andy Lenny, Claire McGrade, Gareth Murphy and Sara Carpendale ISRAEL 406 Shraga Schreck and Daniella Schoenker-Schreck ITALY 432 Monica Iacoviello, Vittorio Allavena and Paolo Di Giovanni JAPAN 455 Tatsuki Nakayama JERSEY 469 David Cadin and Dina El-Gazzar KOREA 481 Tae Yong Ahn, Nathan D McMurray and Rieu Kim KUWAIT 492 Kaashif Basit and Basem Al-Muthafer LITHUANIA 504 Ramnas Audzeviius and Mantas Juozaitis LUXEMBOURG 518 Michel Molitor and Paulo Lopes Da Silva MALTA 527 Marisa Azzopardi and Kristina Rapa Manch MAURITIUS 540 Muhammad R C Uteem MEXICO 553 Miguel Angel Hernndez-Romo Valencia NETHERLANDS 567 Ruud Hermans and Margriet de Boer

Chapter 28 Chapter 29 Chapter 30 Chapter 31 Chapter 32 Chapter 33 Chapter 34 Chapter 35 Chapter 36 Chapter 37 Chapter 38 Chapter 39

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Contents

Chapter 40 Chapter 41 Chapter 42 Chapter 43 Chapter 44

NIGERIA 586 Babajide Ogundipe and Lateef Omoyemi Akangbe NORWAY 601 Jan B Jansen and Sam E Harris PAKISTAN 615 Ashtar Ausaf Ali, Zoya Chaudary and Nida Aftab PERU 632 Claudio C Cajina and Marcello Croci G PHILIPPINES 643 Ben Dominic R Yap, Jesus Paolo U Protacio, Erdelyne C Go and Jess Raymund M Lopez POLAND 657 Justyna Szpara and Agnieszka Kocon PORTUGAL 672 Francisco Proena De Carvalho ROMANIA 683 Levana Zigmund SAUDI ARABIA 697 Mohammed Al-Ghamdi, John Lonsberg, Jonathan Sutcliffe and Sam Eversman SCOTLAND 717 Jim Cormack and David Eynon SINGAPORE 732 Thio Shen Yi, Karen Teo, Peter John Ladd and Adeline Chung SOUTH AFRICA 745 Gerhard Rudolph and Nikita Young SPAIN 766 Esteban Astarloa and Patricia Leandro Vieira da Costa

Chapter 45 Chapter 46 Chapter 47 Chapter 48

Chapter 49 Chapter 50 Chapter 51 Chapter 52

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Contents

Chapter 53 Chapter 54 Chapter 55 Chapter 56 Chapter 57 Chapter 58 Appendix 1 Appendix 2

SWEDEN 789 Jakob Ragnwaldh and Niklas stenius SWITZERLAND 800 Balz Gross, Claudio Bazzani and Julian Schwaller TURKEY 818 Noyan Gksu UKRAINE 840 Sergiy Shklyar and Markian Malskyy UNITED STATES 851 Nina M Dillon and Timothy G Cameron VIETNAM 869 Do Trong Hai abOUt tHe aUtHOrs 885 CONtrIbUtING LaW FIrms cONtact detaIls 925

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EDITORS PREFACE
Richard Clark

Following the success of the first four editions of this work, the fifth edition now extends to some 58 jurisdictions and we are fortunate, once again, to have the benefit of incisive views and commentary from a distinguished legal practitioner in each jurisdiction. Each chapter has been extensively updated to reflect recent events and provide a snapshot of key developments expected in 2013. As foreshadowed in the preface to the previous editions, the fallout from the credit crunch and the ensuing new world economic order has accelerated the political will for greater international consistency, accountability and solidarity between states. Governments increasing emphasis on national and cross-border regulation particularly in the financial sector has contributed to the proliferation of legislation and, while some regulators have gained more freedom through extra powers and duties, others have disappeared or had their powers limited. This in turn has sparked growth in the number of disputes as regulators and the regulated take their first steps in the new environment in which they find themselves. As is often the case, the challenge facing the practitioner is to keep abreast of the rapidly evolving legal landscape and fashion his or her practice to the needs of his or her client to ensure that he or she remains effective, competitive and highly responsive to client objectives while maintaining quality. The challenging economic climate of the last few years has also led clients to look increasingly outside the traditional methods of settling disputes and consider more carefully whether the alternative methods outlined in each chapter in this book may offer a more economical solution. This trend is, in part, responsible for the decisions by some governments and non-governmental bodies to invest in new centres for alternative dispute resolution, particularly in emerging markets across Eastern Europe and in the Middle East and Asia. The past year has once again seen a steady stream of work in the areas of insurance, tax, pensions and regulatory disputes. 2012 saw regulators flex their muscles when they handed out massive fines to a number of global banks in relation to alleged breaches of UN sanctions, manipulation of the LIBOR and EURIBOR rates and money-laundering

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Editors Preface offences. The dark clouds hanging over the EU at the time of the last edition have lifted to some degree after the international efforts in 2012 saved the euro from immediate and catastrophic collapse, although the region continues to prepare for a period of uncertainty and challenging circumstances. It is too early to tell what, if any, fundamental changes will occur in the region or to the single currency, but it is clear that the current climate has the potential to change the political and legal landscape across the EU for the foreseeable future and that businesses will be more reliant on their legal advisers than ever before to provide timely, effective and high-quality legal advice to help steer them through the uncertain times ahead. Richard Clark Slaughter and May London February 2013

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Chapter 26

INDONESIA
Pheo M Hutabarat1

INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK

Indonesia is a unitary state that consists of 33 provinces as autonomous regions, with a uniform system of laws and regulations. The Supreme Court is vested with the power to govern the judicial system and the same procedures for dispute resolution are applicable throughout the country. In Indonesia, disputes may be adjudicated through a litigation process in front of the relevant courts or through private alternative dispute resolution, such as arbitration proceedings. Section VII infra further discusses the private forms of dispute resolution in Indonesia. Although the use of private dispute resolution mechanisms is increasing rapidly in Indonesia, litigation still resolves the vast majority of disputes in Indonesia. If the relevant parties have not agreed to use private dispute resolution as the proper means of reaching an agreement, the court remains the only forum that can be used to adjudicate the dispute. The following is a brief explanation of the structure of the courts in Indonesia. The litigation process in Indonesia can be brought before: the general civil and criminal court; through other special courts, such as the Administrative Court, Labour Court or Commercial Court (the Special Courts); and other quasi-judicial powers, such as the antitrust commission, the consumer commission, etc. The Administrative Court is authorised to adjudicate and to make decisions on cases related to state administrative law. In such forum, a private person (including a company) that has suffered losses caused by an administrative decision can make a claim against the relevant government bodies before this Administrative Court to annul the said administrative decision. The Commercial Court is part of the civil courts and is the

Pheo M Hutabarat is the founder and managing partner at Hutabarat Halim & Rekan.

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Indonesia appropriate forum for hearing bankruptcy and intellectual property rights cases, and the Labour Court specifically deals with labour disputes. The litigation process in both the general civil court and the Special Courts involves examination and decisions at the following levels of the court system. i Courts of rst instance

All civil cases will be brought at the first instance before the District Court. Administrative cases must be brought before the First Level of the Administrative Court, bankruptcy and intellectual property cases must be brought before the Commercial Court and labour cases will be submitted to the Labour Court. These courts are of a first instance to adjudicate and decide the relevant cases. In the Commercial Court and Labour Court, any party appealing against a decision at this first instance can only submit its final appeal to the Supreme Court, as is further explained in (iii), infra. ii Second instance

The High Courts form the courts of second instance at the provincial level, both for civil and administrative cases. However, the High Court for civil cases is a separate institution from the High Court for administrative cases. Both the High Court for civil cases and the Administrative Court give judgments on appeal from the judgments of the lower courts. As the appellate court, both High Courts generally do not examine the facts and evidence submitted by the disputed parties, since these matters should have been examined and verified by the first level of the courts. In practice, if the facts and the evidence have been taken into consideration at the first instance, the presiding judges of the High Courts will mostly focus their review on the legal interpretation, legal reasoning and legal basis of the decision made by the first level of the courts. Generally, there will be no public hearing requirements to be conducted by the presiding judges of the High Court in making a decision on cases at this appeal stage. iii The Supreme Court

Once the decision of the High Court (both for civil and administrative cases) has been decided, either party may also request a second appeal of the decision to the Supreme Court, as the last level of the court, in order to make a final and binding decision over the civil case and the administrative case. The presiding judges at the Supreme Court level make decisions in a closed hearing to decide the relevant case. As explained supra, the Supreme Court is the last appeal instance for bankruptcy, intellectual property rights and labour cases decided by the Commercial Court or the Labour Court (in their capacity as first instance courts). iv Judicial review

Under certain limited conditions, following the final and binding decision of the Supreme Court, the losing party may use an extraordinary means to request a judicial review in order to nullify the final and binding court judgments that have been made by the Supreme Court over civil, administrative, bankruptcy, intellectual property rights and labour cases. The decision to be granted at the judicial review stage will be decided by other members of the panel of presiding judges of the Supreme Court. If the Supreme

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Indonesia Court is of the opinion that the application for judicial review could be accepted for re-examination, the presiding judges at the judicial review stage will decide either of the following: a to reject the application for the judicial review by declaring that the final and binding judgment made by the Supreme Court for which re-examination is requested shall remain in force, by giving the legal basis for its considerations; or b to annul the final and binding judgment of the Supreme Court for which reexamination is requested, and render a new judgment over the case. For as long as the final and binding judgment has not been turned down or annulled by the judicial review process, the said final and binding court judgment made by the Supreme Court can be executed and enforced by the winning party. II i THE YEAR IN REVIEW Lippo Group v. Astro Group

This case relates to a refusal by the Indonesian court to accept the anti-suit jurisdiction of an arbitration award decided by the Singapore International Arbitration Centre (SIAC). The dispute is between Lippo Group, an Indonesian group of conglomerate companies, and Astro Group, a Malaysian-based group of conglomerate companies. The case is related to a joint venture arrangement between them in an Indonesian pay-TV company known as PT Direct Vision (Kabel Vision). Lippo Group, through its subsidiary company (PT Ayunda Prima Mitra), as a plaintiff, lodged a civil case (tort) against several subsidiary companies of Astro Group and its related parties before the District Court of South Jakarta (the Tort case) on 2 September 2008, by claiming US$2,024,846,199 in material and immaterial damages against Astro Group. On 6 October 2008, one week after the registration of the Tort case, eight subsidiary companies of Astro Group initiated a counter action by submitting an arbitration case in front of SIAC, against three subsidiary companies of Lippo Group. In the arbitration process, the SIAC tribunal issued an award on the preliminary issues, dated 7 May 2009, which relates to an anti-suit jurisdiction arbitration award. Inter alia, this award ordered Lippo Group to discontinue the Indonesian legal proceedings in the Tort case and prohibited Lippo Group from bringing any further proceeding in Indonesia against Astro Group and its related parties. However, on 28 October 2009 the chairman of the District Court of Central Jakarta issued a decision to set aside the award on the preliminary issues and declare that the anti-suit jurisdiction award is nonenforceable (non-exequatur) in Indonesia, and therefore this award can not be enforced in the territory of Indonesia. An appeal has been submitted by Astro Group against this decision to refuse the enforcement of the anti-suit jurisdiction award. The Indonesian Supreme Court, as the final court able to adjudicate and finally decide this matter, has reconfirmed that the decision made by the District Court of Central Jakarta is in line with the Arbitration Law 30/1999. It considered that the purpose of the anti-suit jurisdiction award issued by SIAC was merely to discontinue the trial process in Indonesia, and therefore this arbitration award violates the principle of the sovereignty of the Republic of Indonesia

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Indonesia and public policy in Indonesia, and there is no foreign power that can interfere with any existing legal process in Indonesia. This refusal of the international arbitration award on an anti-suit jurisdiction creates a new precedent in Indonesian legal practice. Furthermore, in relation to the enforcement of the final award of the same arbitration case, on 11 September 2012, the chairman of the District Court of Central Jakarta issued a decision to set aside all final awards issued by the SIAC tribunal for the reason that the final awards are an inseparable and integral part of the award on the preliminary issues, and since the final awards contained an anti-suit jurisdiction these arbitration awards violate the principle of the sovereignty of the Republic of Indonesia and public policy in Indonesia, and therefore these final awards of the SIAC tribunal are non-enforceable in Indonesia. An appeal has been submitted by Astro Group against this decision and to date this matter is still being processed. iii i COURT PROCEDURE Overview of court procedure

There are no uniform rules of civil procedure applicable in Indonesian courts. The Emergency Law No. 1 of 19512 was intended to establish a single unified court system. Prior to this Law (during the colonial period) the Dutch established a plural court system. At the time Emergency Law No. 1 was enacted, it was anticipated that a new Civil Procedure Law would soon be adopted. To date, no such code has been enacted and the provisions of Emergency Law No. 1 continue to be in force in practice. Emergency Law No. 1 provides for the applicability of two Dutch colonial laws relating to the civil procedure in the courts in Indonesia. In the courts of Java and the Madura islands, the Herziene Indonesisch Reglement of 1847 (the Revised Indonesian Regulation or the HIR) is applied, and in the other islands in Indonesia outside Java and Madura, the Rechstreglement Buitengewesten (the RBg) is applied. The RBg essentially follows the HIR but provides for longer terms of notice, service and limitation periods. When the HIR or RBg is silent on a particular matter, the courts turn to the Reglement of de Burgelijke Rechtsvordering voor de Rad van Justitie op Java en het Hoogerechtshof van Nederlandsh Indie, also known as the Reglement op de Rechvordering (the RV).3 The following are brief highlights of certain important and relevant rules governing litigation in Indonesia. Civil law system and no stare decisis Indonesias legal system follows the tradition of the civil law system and does acknowledge the principle of jurisprudence (stare decisis principle). Under Indonesian civil procedural laws, the judges are not bound by prior decisions of the High Court or the Supreme Court. Nevertheless, they are known to apply such decisions, whether by way of consensus among the judges or because of the persuasive weight of such decisions. This, again, inevitably leads to some element of uncertainty for any litigation process in Indonesia,

2 3

State Gazette 1951 No. 9. Staatsblad 1847 No. 52 as amended.

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Indonesia since there are no official rules to govern the use of prior jurisprudence. This is mostly because the persuasive value of any one particular case to the panel of judges cannot be known with any particular certainty. Burden of proof In the general civil proceedings, namely, in breaches of contract actions, tort actions and class actions, the pleading must be proved by the plaintiff or claimant. This principle, in which the party who asserts any claim to the court has the burden of proving its existence (onus of proof or burden of proof principle), is stipulated in Indonesian civil procedural laws.4 There are no clear standards that determine when the burden has been satisfied in a case. However, in practice, the plaintiffs should meet the following three fundamental key tests in asserting their claim in the court: a the course of action of the defendants can be proven by the plaintiffs in court and these actions have breached the relevant contract (in a breach of contract case) or violated the prevailing laws, customary laws or prudential principles or the right of the plaintiffs (in a tort case); b the plaintiffs must be able to prove that as a consequence of these actions conducted directly or indirectly by the defendants, the plaintiffs have suffered damages; and c the causality of points (a) and (b) supra. If the plaintiffs are not able to prove these three fundamental factors in relation to the case, but on the other hand, the defendants are able to prove otherwise, then the defendants might potentially have the chance to set aside the merit of the case. Unlike the plaintiffs position supra, the more the defendants are able to prove their positions contrary to the plaintiffs assertions (which are supported by valid evidence, arguments and a legal basis), the more difficult it is for the presiding judges to justify the plaintiffs claim, and the more chance there is for the defendants to potentially win the case. Based on the general practice of litigation in Indonesia, in representing the defendants position and in implementing the defence strategy, the lawyers must assert and explain the arguments in relation to exceptions, that is, the motion to dismiss the case; and the arguments in relation to the merit of the case, insofar as these assertions and arguments on the exceptions and the merits of the case are clearly and properly justified under the circumstances of the case and the prevailing Indonesian laws. In practice, the following are the general arguments that may be asserted and raised by the defendants as a basis for their request for the motion to dismiss the case: a the relevant court does not have any competence or jurisdiction to decide the matter (absolute exception). If this argument is lodged, the presiding judges

This principle is contained in Article 1865 of the Indonesian Civil Code, Article 163 of the HIR and Article 50 of the RV, which stipulates that the party or plaintiff who asserts any claim has the burden of proving its existence in front of the court.

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Indonesia should first decide this motion before they make a decision in relation to the merit of the case; the claim contains error in persona (the claim is addressed to the wrong party);5 the list of parties to the lawsuit is incomplete (lack of parties plurium litis consortium);6 the lawsuit is obscure (obscuur libel);7 there exists inconsistency between the background (posita) and the petitions requested in the pleading;8 the claim is invalid due to the incorrect construction of the pleading, namely, the breach of contract claim and the tort claim have been combined in one pleading. These two matters should be claimed separately;9 the claim is invalid due to too many claims being combined into a single lawsuit;10 or the lawsuit is premature, due to the reason that the plaintiff has not fulfilled the obligations that are required under the relevant contract or the prevailing laws to be fulfilled before it may submit the claim to the court.11

b c d e f g h

Role of judges The Indonesian general legal system and its court system adopt the continental system, in which the roles of the presiding judges in a trial process are generally passive. This is different from the common law (adversarial) system. The presiding judges have a passive role in the examination of the case in the sense that the scope of the disputed matters to be examined by the presiding judges will principally be determined by the disputed parties and not by the presiding judges. In addition to the above passive role of the judges, the presiding judges who are examining and deciding the case will also be bound to the following general principles in making the decision: a Article 25 Paragraph (1) of Law No. 4 of 2004 regarding the Judiciary (Law No. 4/2004), stipulates the basic requirement as follows: All court decisions, besides

7 8 9 10 11

Vide the Jurisprudence No. 10/G/Pdt/1978, dated 15 January 1979, the Jurisprudence No. 195 K/AG/1994, dated 20 October 1995 and the Jurisprudence No. 205 K/Pdt/2001, dated 31 January 2003. Vide the Jurisprudence No. 437 K/Sip/1973, dated 9 December 1972, the Jurisprudence No. 151 K/Sip/1975, dated 13 June 1975 and the Jurisprudence No. 878 K/Sip/1977, dated 19 June 1977. Vide the Jurisprudence No. 492 K/Sip/1970, dated 16 December 1970. Vide the Jurisprudence No. 67.K/Sip/72, the Jurisprudence No. 565.K/Sip/1973, dated 21 August 1974 and the Jurisprudence No. 28.K/Sip/1973, dated 5 November 1975. Vide the Jurisprudence No. 879.K/Pdt/1999, dated 29 January 2001 and the Jurisprudence No. 879K/Pdt/1997. Vide the Jurisprudence No. 415 K/Sip/1975, dated 20 June 1979 and the Jurisprudence No. 962 K/PDT/95, dated 17 December 1995. Vide the Jurisprudence No. 2743 K/Pdt/1995.

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Indonesia containing reasons and the basis for the decision, must also contain certain articles of the said laws and regulations or unwritten legal sources used as the basis for the judgment. In practice, any decision of the court that is not in accordance with Article 25 Paragraph (1) of Law No. 4 /2004 will be deemed as a court judgment that is not legally motivated, and as a consequence thereof this decision must be overruled and cancelled by the appellate courts.12 A court decision that is based on a consideration that is different or deviates from the basis of the claims stated in the lawsuit must be annulled by the higher court.13 If a lower court has wrongly interpreted the laws, this decision is made not in accordance with fairness and justice.14

c d

Language barrier In formal court proceedings in Indonesia, the foreign party may face a language barrier, where all proceedings before the Indonesian courts must be conducted in Indonesian; all relevant documents in English must be translated into Indonesian by a sworn translator before they can be submitted to court; and all witnesses will be questioned in Indonesian and all answers must be translated into Indonesian before they enter the court records. As a result, there is much room for error or translation problems in preparing and submitting the court documents and understanding the court directions or decisions. ii Procedures and time frames

The court of rst instance (district court) Before the presiding judges commence with the formal court proceedings, based on Supreme Court Regulation No. 2 of 2003 regarding the Mediation Procedures in Court (SCR No. 2/2003) the presiding judges have the mandatory obligation to require the parties to the dispute to implement the court mediation process in an attempt to reach an amicable settlement in the case. In this court mediation process, the presiding judges will appoint a court mediator (which is usually another judge in the same court) and request the disputed parties to appear before this court mediator. The mediation process should be conducted within 22 working days as of the appointment of the court mediator. If the parties fail to reach an amicable settlement, the statement and acknowledgment of each party in the mediation process cannot be used as evidence in the court hearing of the related lawsuit or any other lawsuit, and the court mediator must destroy all documents received during the mediation process. If, during the mediation process, the parties agree with the out-of-court settlement, the court mediator will help the parties to enter into an agreement, which inter alia must contain the agreement to withdraw and settle the case amicably, and this agreement may at a later stage be reinstated by the presiding judges

12 13 14

Vide Indonesian Jurisprudences No.: 443-K/Pdt/1986; No.: 2589.K /Pdt/1988, dated 26 October 1993; and No.: 638/K/Sip/1969, dated 22 July 1970. Vide Indonesian Jurisprudence No.: 372 K/Sip/1970, dated 1 September 1971. Vide Indonesian Jurisprudence No.: 3901 K/Pdt/1985, dated 29 November 1988.

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Indonesia as a formal settlement agreement in the decision relating to this case.15 If the mediation process fails, the court will commence the first hearing of the case with the agenda of submitting the claim from the plaintiffs to the defendants. The legal proceedings in this first instance, especially if the claim is somewhat complicated, will generally consist of several hearings. Each of the above hearings is normally one or two weeks apart. The length of time is solely at the discretion of the court. If the claim is somewhat simple, the parties on the day of the first hearing of the court may immediately bring with them all their means of evidence, written documents, if any, and the witnesses they want to be examined. In more complicated cases, it is common practice that only after the examination of the facts to be proven by each of the parties can the witnesses be brought before the court. Any third party having an interest in the civil proceeding may intervene in the case. On the basis of guidance on the implementation of duties and the administration of courts issued by the Supreme Court, the duration for a lawsuit starting from the registration of the claim until the judge renders his or her decision shall not exceed six months. However, in practice, court proceedings in the district court in a number of cases continue much longer. In some cases, the judgment can take anything from one to two years; this is particularly true if most of the defendants reside outside Indonesia. Pre-judgment attachment and interim court injunction Remedies for plaintiffs can be obtained by court order (in the general civil litigation process) by instituting a claim through a civil lawsuit. In this civil case, any plaintiff who has a claim may request a court attachment (pre-judgment attachment) of the particular related property and an interim court injunction. Both of the legal remedies may only be submitted to the court of first instance and may only be granted by the court after the claim is submitted by the plaintiff. The pre-judgment attachment is only preliminary in nature and gives the claimant security until the enforcement of the claim is realised by the court. It should be noted, however, that civil proceedings to obtain a final, binding and enforceable court judgment in Indonesia is a time-consuming process and may take years to complete, during which the defendants may dispose their assets if the court has not granted a pre-judgment attachment over the defendants assets. This would have the effect that the judgment made in favour of the plaintiff would not be enforced effectively if there was no prior pre-judgment attachment and, at the time of the final judgment, the defendants assets were insufficient to cover the claims submitted by the plaintiff. This motion may be submitted together with the claim or submitted before the judgment made by the court of first instance. Based on Circular Letter of Indonesian Supreme Court No. 5 of 1975, the pre-judgment attachment may only be granted by the court of first instance after the presiding judges have examined all evidence in relation to the case. In practice, this prejudgment attachment may only be granted after the court hearing on the examination of evidence has taken place.

15

In practice, this mandatory court mediation process has not effectively been used by the disputed parties to settle the case out of court.

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Indonesia The plaintiff also may seek an interim court injunction to prevent the defendant from conducting any action that might hamper or jeopardise the interests of the plaintiff in submitting its claim in the court. To enable the interim court injunction to be considered by the presiding judges, there are some requirements to be fulfilled by the plaintiff, which include that the submission of this application must be based on prima facie evidence or written valid evidence to support the necessity of requesting of this motion. In practice, the presiding judges will also reject the motion if the substance of the matter is similar or a duplicate of the claims on the merit of the case submitted by the plaintiff in the lawsuit. If this interim court injunction is granted by the court, this judgment will be treated like a specific relief decision (i.e., a court order to direct or prohibit certain conduct of the defendants or the co-defendants). Based on Circular Letter of the Indonesian Supreme Court No. 3 of 2000, an interim court injunction can only be granted by the court after the presiding judges have examined all evidence in relation to the case. In practice, this injunction may only be granted after the court hearing on the examination of evidence has taken place. The second instance (High Court) Each of the disputed parties is entitled to appeal to the High Court. However, neither party is obliged to file a memorandum of appeal with the High Court. Even if this is done, the High Court may, at its sole discretion, hold a hearing, request the court of first instance to conduct a hearing, decide that no such hearing is required or order that the files and documents of the courts of first instance are sent to the High Court for examination and evaluation. There is no fixed time for the rendering of a judgment by the High Court. Judgment may take between one and three years. The appellant bears the cost of the appeal at the court registrar of the same district court that rendered the decision. The highest court (Supreme Court) Once the decision of the High Court has been rendered, either party may request a second appeal for the decision to be considered by the Supreme Court. Such request must be in the form of a notice of cassation, which must be submitted to the Supreme Court through the district court that rendered the decision within 14 days after the receipt of the High Court decision by the disputed parties. The memorandum of cassation must be filed by the appellants within 14 days after the registration of the notice of cassation. This memorandum of cassation must contain reasons as to why the decision of the High Court is incorrect. After this memorandum of cassation has been received by the nonappellants (appellees), the appellees must submit their contra-memorandum of cassation if they would like to use their right to support the decision that has been made by the High Court on the case. The Supreme Court, based on the court documents (including the decisions made by the first level of the court and the High Court, the memorandum of cassation and the contra-memorandum of cassation), will then decide whether or not to consider the appeal. The presiding judges in the Supreme Courts level will make their decision by having a closed hearing among them in deciding the case, and there is no public hearing to be made by the presiding judges in this Supreme Courts level. Each member judge in the panel will have an authorisation to review and gives his or her opinion on

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Indonesia all court documents and evidences that have been submitted by the disputed party for this examination in this cassation stage, and there is no statutory limitation of time for the panel of the presiding judges to make a decision on this cassation stage. The legal process in this second appeal in the Supreme Court can generally take anything from two to five years. The peninjauan kembali Under certain limited conditions, following the binding decision of the Supreme Court being given, the losing party may request a peninjauan kembali (similar to a judicial review) in order to nullify the final and binding court decisions that have been made in the case. One of the popular legal bases for a party to make a peninjauan kembali is the condition that a new fact has been found after the court decisions have been made, which is important and may affect to the case. Such peninjauan kembali must be submitted to the court of first instance that first decided the case. As in the second appeal process, the presiding judges at this peninjauan kembali level will make a decision by having a closed hearing among them in deciding the case, and there is no public hearing to be made by the presiding judges at this level. The legal process of the peninjauan kembali can generally take anything from two to five years. Execution of a judgment In order that a final and binding court judgment may be executed, the party in whose favour judgment is given must apply to the Chairman of the court of first instance for execution of such judgment. The district court upon receipt of the execution order will, within a period of time, which is entirely within the discretion of the court, call the party against whom judgment is given to fulfil the obligations in the judgment, at the latest within eight days thereof. If that party still fails to comply, the Chairman of the court may issue a written order to attach (secure) the property of that party (moveables as well as immoveables), the value of which, according to his or her evaluation, will be adequate to fulfil the judgment debt and the execution fee. The sale of property must be carried out by the State Auction Office. The above process may take up to one year to complete. Problems may arise if there are third-party claimants to such property who wish to contest the execution. Although such objections to executing do not in law postpone the execution, in practice the execution will inevitably be delayed. iii Class actions

Class action cases are common in Indonesia. Several laws in Indonesia have also specifically endorsed the possibility of submitting class action petitions to the general civil court of the first instance.16 The basic requirements and general procedures for submitting class action petitions are regulated in Indonesian Supreme Court Regulation No. 1 of 2002, dated 26 April 2002 regarding the Procedures for Class Action (SC Regulation No. 1/2002).

16

These stipulations, among others, are clearly set forth in the law of consumer protection, environmental law, telecommunication law and water law, etc.

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Indonesia The following are some important general requirements and procedures in submitting the class action petition in Indonesia: a Any class action petition may be filed if: the number of class members is so large that it is ineffective and inefficient to make an individual claim; there are common questions of fact or situation and common questions of law that are substantial, and there are same claims among class representatives and their class members; and a class representative must fairly and seriously protect the interests of the represented members (adequacy of representation). b In a preliminary hearing, a judge must hear and consider whether the above criteria of the class action petition have been fulfilled or not. If the petition has complied with the above criteria, through a court order the judge will certify the validity of the class action and order the plaintiff to submit a draft of the proposed model of a notice for the judges approval. If the judges determine that the petition is not valid or has not complied with the above criteria, the judges will discontinue the proceedings by issuing a court judgment. c To represent the legal interests of class members, class representatives shall not be required to have a special power of attorney from the class members. d The general civil procedural laws will generally be applicable in class action court proceedings, while some lex specialis or specific requirements need to be observed, as set forth in SC Regulation No. 1/2002. e The presiding judges may recommend a class representative to replace a lawyer if the lawyer has performed acts against an obligation to defend and protect the interests of the class members. f The procedures for serving notice to class members may be made through media, government officers or directly served to the class members, and this notice must be served promptly after the judges have declared that the class action petition is valid, and at the stage of the settlement and distribution of damages when the claim is granted by the court. g The notice must also provide the mechanism of opt-outs (i.e., the right of a class member within a period of time to have the chance to opt out from the class membership by submitting a specific form as provided in the attachment of SC Regulation No. 1/2002). A class member who has stated to opt out shall not be legally bound by any judgment of the class action case concerned. h If there exist overlapping class action cases on a similar matter, pursuant to which the same class action petitions have been lodged in several district courts by the different plaintiffs, but representing the same class members, the Indonesian Supreme Court as the highest court in Indonesia must make a judgment to merge these several class actions and to determine which plaintiffs have the quality, capability and credibility to continue in representing the class members in this class action case. iv Representation in proceedings

Parties to a dispute may directly appear in the court or be represented by their licensed lawyers (licensed advocates). The Indonesian civil procedural laws do not oblige the parties to appoint lawyers in representing their interest in the legal proceedings. The

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Indonesia disputed parties may appoint a law firm that in the relevant case can be represented by one or more lawyers or appoint an individual licensed lawyer (advocate). All lawyers representing the disputed parties must obtain a licence from the relevant bar association before they are allowed to appear before the courts. It is a common practice that at the first hearing, the presiding judges will examine the licence of the lawyers appointed in the relevant case. v Service out of the jurisdiction

If one of the defendants is a non-Indonesian national (i.e., either a non-Indonesian natural person or legal entity) and such party resides outwith the Indonesian jurisdiction, the Indonesian court will effectuate the service of notice to such non-Indonesian nationals by requesting the assistance of the Ministry of Foreign Affairs to effectuate the service of notice. Upon receipt of this request, the Ministry of Foreign Affairs will delegate this matter and request the nearest Indonesian embassy where the non-Indonesian national is resided to effectuate the service of notice. On the other hand, if any foreign court document needs to be served to Indonesian nationals who are residing in the territory of Indonesia, based on the Indonesian civil procedural laws, the service of such foreign court document must be made by the court bailiffs or messengers appointed by the relevant court in whose jurisdiction the document is served. This mode of service applies to both local and foreign court documents to be effectuated to Indonesian nationals resident in Indonesia. In relation to this service of notice, please note that Indonesia is not a party to the Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters 1969, or any other convention relating to the service of foreign process, other than a bilateral agreement with Thailand.17 Therefore, if the notice of the foreign court document will be served in Indonesia by way of regular communication without complying with the above requirement under the Indonesian civil procedural laws, any such purported service shall not be valid and not in accordance with Indonesian law. vi Enforcement of foreign judgments

In choosing the foreign court as the forum for settling commercial disputes in Indonesia, please note that Indonesia is not a party to any multilateral or bilateral treaty with other countries for the reciprocal enforcement of judgments. In the absence of an applicable bilateral or multilateral treaty, a judgment rendered by a foreign court shall not be enforced in Indonesia. In addition to the above, the Indonesian civil procedural laws, especially Article 436 of the Regulation on Civil Procedures (RV), stipulates that a foreign judgment cannot be executed in the territory of Indonesia. Therefore, as a general rule, foreign

17

The Convention 1969 applies in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad, and it is stipulated that each contracting state shall be free to effect service of judicial documents upon persons abroad, without application of any compulsion, directly through its diplomatic or consular agents.

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Indonesia judgments are not enforceable in Indonesia. The only single exception to this general rule will be further discussed below. Article 436 of the Regulation on Civil Procedures stipulates as follows:
Apart from the events mentioned in article 724 of the Commercial Code and in other legal stipulations, no sentences that have been passed by foreign judges or courts may be executed within Indonesia. (AB.34; ISR.159; K.568J, 658, 711, 724; Rv.440; F.2-6; IR. 224; RBg.258; Cons.7; Pr.546.). The lawsuits may be handled and settled anew by the judge in Indonesia.

Article 724 of the Indonesian Commercial Code as referred to in the above article relates to the calculation of damages arising from carriage of goods by sea.18 It is therefore clear based on the above that, other than the foreign judgment in relation to the calculation and division of general damages in relation to carriage of goods by sea, as a single exception, other foreign judgments cannot be enforced in Indonesia. A party who has obtained a favourable foreign judgment is still required to file suit (re-litigate) against its Indonesian counterpart before an Indonesian court. The Indonesian courts are not bound by the judgments rendered by foreign courts. Nevertheless, in practice and under certain circumstances, the judgment of a foreign court can be used in Indonesia court as a supplementary documentation only (nonconclusive evidence) on the matter that has been decided by the foreign court. In the recent case of JP Morgan v. PT Kalbe Farma,19 which was registered in the District Court of Central Jakarta (DCCJ), the presiding judges of the DCCJ rejected the submission of a decision of an English court to be enforced in Indonesia. This decision followed the previous jurisprudence as set forth in Supreme Court Decision No. 2944K/Pdt/1983, dated 29 November 1984. Notwithstanding the above, in practice, the choosing of the foreign court is only recommended if secured assets (including cash deposits) belonging to the Indonesian counterparts are located or placed in the foreign country, or there exists a bona fide guarantor (corporate or individual), such as foreign nationals who reside outside of the Indonesian jurisdiction. If there exists no arbitration clause and the assets to be recovered are located in Indonesia or the relevant defendant is an Indonesian national, the plaintiff should consider the use of the Indonesian courts to pursue the matters.

18

Article 724 of the Indonesian Commercial Code stipulates as follows: Calculation and division of general damages is based upon a request by the shipmaster and experts. The experts are appointed by parties or by a judge within its legal territory upon which such calculation and division must be drawn up. The experts must be sworn-in prior to the execution of their duties. The division must be legalised by a judge within its jurisdiction. Outside the territory of Indonesia, the general damages are drawn up by the relevant competent foreign authority. 19 89/PDT/G/2009/PN.JKT.PST.

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Indonesia vii Assistance to foreign courts

To the best of our knowledge, Indonesia has only entered into a bilateral agreement with Thailand on judicial cooperation (the Bilateral Judicial Cooperation Agreement).20 The Bilateral Judicial Cooperation Agreement basically stipulates judicial cooperation and the procedures for submitting court documents and obtaining documents from the relevant authorities of each country. However, it clearly stipulates that the implementation of judicial cooperation between the two countries under this bilateral treaty will be subject to and must honour the national laws of each country. Other than the Bilateral Judicial Cooperation Agreement, the Indonesian courts may give no general assistance to foreign courts. viii Access to court les

Since the independence of Indonesia to date, there has been no comprehensive and systematic reporting of lower court decisions and binding court judgments in Indonesia. This is primarily due to the restrictive access in the past to the court files. The result of all this is that the court decisions have not been interpreted in a detailed fashion so as to allow a thorough examination of the merits of any one individual case. This situation might change in the future, since in 2007 the Indonesian Supreme Court issued Decision No. 144/KMA/SK/VIII/2007, dated 28 August 2007, on the Disclosure of Information in Court (Decision No. 144/2007). Based on this, any party other than the disputed parties may request any information or a copy of court documents to the Supreme Court, particularly in relation to the final and binding court judgment, information on the stage of the case and data statistics of the cases. ix Litigation funding

No specific stipulation under the laws of Indonesia exists on this particular matter. Based on Advocate Law No. 18 of 2003 and the Indonesian Lawyers Code of Ethics 2002, the parties are free to agree on the legal fee to be paid by the client to its lawyers (freedom of contract). This agreement for the provision of the legal fees can be made either verbally or in writing. It is not uncommon in practice that the litigation funding be facilitated by a disinterested third party. However, there are no specific circumstances or prohibitions on concluding funding for litigation cases. The Advocate Law of 2003 only requires that the amount of the legal fee must be agreed based on the fairness principle, which means that the determination of the legal fees should consider the risk, time, capability and interest of the client. Article 4 of the Indonesian Lawyers Code of Ethics 2002 only stipulates that in determining the legal fee, lawyers must consider the clients ability to pay, and lawyers cannot impose unnecessary expenses on their clients.

20

An Agreement on Judicial Co-operation between the Republic of Indonesia and the Kingdom of Thailand, dated 8 March 1978, which has been ratified by the Indonesian government based on Presidential Decree No. 6 of 1978.

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Indonesia Iv i LEGAL PRACTICE Conicts of interest and Chinese walls

The Indonesian Lawyers Code of Ethics 2002, particularly in Article 4, contains the general provisions on conflicts of interest. Generally, lawyers may not represent the interest of more than one party if such interests are in conflict or if there is real chance of such conflict. However, this rule does not prevent lawyers from acting for two or more clients if the clients share a common or similar interest. A lawyer who represents the interests of more than one party with conflicts of interest must withdraw from the relevant case. As a general rule, a lawyer is prohibited to act against a former or existing client of his or her own or of a colleague within the same firm. In practice, conflicts of interest cannot be merely avoided by creating an artificial administrative separation of representation of interests and the relevant files or Chinese walls. An exception to this rule applies if the new client, and the former or existing client, both have given prior written consent to the said lawyer to represent both parties in this conflicting matter, on the basis of proper information being supplied to them. This mostly applies in relation to commercial transactions rather than in litigation cases. The conflict of interest case has been tested in Indonesian legal practice. One famous conflict of interest case relates to Todung Mulya Lubis, an Indonesian lawyer (TML). He had been reported to the Indonesian Advocates Association (Peradi) and as a result, Peradi issued its final decision to revoke permanently his practising or advocate licence due to his serious violation of the Indonesian Advocate Code of Ethics relating to matters of conflicts of interest.21 After TMLs practising licence was permanently revoked by Peradi, he was then involved in the establishment of a new Indonesian bar association, namely the Congress of Indonesian Advocates (KAI), and was appointed as the vice president of KAI. TMLs conflict of interest case was re-examined by KAI, and this new bar association imposed a sanction to suspend his advocate licence for one month and 15 days only.22 Recently, the Supreme Court has issued its ruling that the Supreme Court does not acknowledge the existence of KAI, and therefore only advocates registered with Peradi are valid advocates in Indonesia. ii Money laundering, proceeds of crime and funds related to terrorism

Any money laundering and other related activities (including protection against dealing in the proceeds of crime or funds related to terrorism) are strictly prohibited under the Money Laundering Act of 2002, as amended. Any person who violates the Money Laundering Act of 2002, including lawyers in their capacity as the attorney dealing

21

22

A decision of Peradi No. 036/Peradi/DKD/DKI-Jakarta/Putusan/V/08, dated 16 May 2008. This matter was also widely published in the Indonesian newspapers. Peradi was initially formed as a single Indonesian bar association and the sole self-regulatory body governing all advocates in Indonesia under the Indonesian Advocate Act of 2003. A decision of KAI No. 01/MK-DK KAI/XII/2008, dated 3 December 2008.

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Indonesia with these criminal transactions, may be subject to a general criminal sanction of imprisonment for a minimum of five years and a maximum of 15 years, and a fine of at least 100 million rupiahs and at most 15 million rupiahs. However, no specific provision or decree in the prevailing laws in Indonesia specifically regulates the responsibility of lawyers to eradicate these criminal activities. The growth in money laundering activities and terrorism financing using financial institutions requires concrete action to eradicate these criminal activities. The diversity of products, activities and information technology available in the commercial sector has resulted in an increase in the use of commercial banks, financial service providers, money changer and money transfer companies for such activities. In an attempt to prevent such activities, the prevailing Indonesian laws stipulate specific responsibilities for commercial banks, financial service providers and money changer and money transfer companies to eradicate money laundering criminal activities or to protect against dealing in the proceeds of crime or funds related to terrorism. V DOCUMENTS AND THE PROTECTION OF PRIVILEGE

i Privilege Based on the applicable laws in Indonesia, the relationship between the client and its advocate is subject to and specifically protected by Law No. 18 Year 2003 regarding Advocates (the Indonesian Advocate Act). As to the files and documents, and particularly documents and files submitted by the advocate (lawyer) in the legal proceedings, the Indonesian Advocate Act has guaranteed the strict confidentiality over the files and documents related to a case that is being handled by the advocate for the interest of the client (attorney-privileged documents). This matter inter alia is stipulated in Article 19 (2) of the Indonesian Advocate Act, which states as follows: An advocate is entitled to confidentiality over his/her relationship with his/her client, including protection on the files and documents against seizure or investigation; and protection against any acts of taping on any electronic communication made by the advocate. It is clear that the Indonesian Advocate Act itself guarantees that the attorneyprivileged documents shall be excluded from any disclosure in any legal proceedings. The Indonesian Advocate Act has also guaranteed that the attorney-privileged documents must be free from any attempt to seize, examine, investigate or tape them in whatsoever manner. No provision under Indonesias laws that gives privilege applies to in-house lawyers documents. However, if the in-house lawyer has a licence to practice as an advocate in Indonesia, the said in-house lawyer advocate can have privilege and protection under the Indonesian Advocate Act on his or her documents by mentioning that, as the in-house lawyer, he or she is acting as the Indonesian advocate. ii Production of documents

Indonesian procedural law follows the tradition of a civil law system, and it does not commonly acknowledge the disclosure of documents and other disclosure or discovery. There is no mechanism to enforce any order relating to disclosure or discovery in the

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Indonesia Indonesian courts. As a matter of practice, if a party requests the disclosure of documents by the other party, and the other party refuses to disclose such documents, the presiding judges may draw whatever inference they deem appropriate from such non-disclosure. The general rules on evidence of civil procedure could be found in the Indonesian Civil Procedure Law and Article 1866 up to and including Article 1993 of the Civil Code. Indonesian courts hold a strong preference for original evidence and documentation, but authenticated duplicates are acceptable. Article 1866 of the Civil Code and Article 164 of the HIR define that evidence consists of written evidence (including electronic information or document based on Law No. 11 of 2008 regarding Information and Electronic Transaction), testimony of witnesses, inference, acknowledgements and oath. Indonesian law distinguishes between authentic written evidence and privately made written documents. Authentic written evidence in the form as prescribed by the laws and made before the government official is considered as the strongest evidence (prima facie evidence). Affidavits sworn outside Indonesia must be notarised and legalised by the appropriate embassy or consulate for the documents to be recognised in the Indonesian courts. Indonesian judges play an active role in relation to the examination of evidence and have the discretion to call for or reject direct or expert testimony. Their wide discretionary powers also provide for refusal of evidence as they see appropriate and individual interpretation of evidence and arguments presented. Therefore, the ability to require testimony and the production of documents and to examine the witnesses is entirely within the courts discretion. There is no procedure for compelling the opposite side to present facts or documents reflecting examination outside the court hearings. As explained earlier, the court retains no verbatim transcript. The clerk takes notes of the testimony and of any cross-examination that takes place. Frequently, these notes are incomplete and inaccurate, particularly if the subject matter is technical and new to the appointed clerk. This record forms the basis of the courts decision on factual matters. Copies are not made available to counsel either during the trial or at the appellate stage. Although counsel may review and has access to such records at the clerks office, neither counsel nor the party to the action may officially take copies. New evidence may be presented on appeal to a High Court; however, this practice is not generally permitted in the Supreme Court, although the Court has the discretion to admit new evidence in the interests of justice. Vi i ALTERNATIVES TO LITIGATION Overview of alternatives to litigation

Since litigation in Indonesia is mostly still a time-consuming exercise, and there is relatively little certainty as to the likely outcome of the case, arbitration as one of the alternatives to litigation is currently in the process of becoming the preferred method for settling commercial disputes in Indonesia. This is also driven by the enactment of Law No. 30 Year 1999 on Arbitration and Alternative Dispute Resolution (Indonesian Arbitration Law of 1999). Mostly in all complex and cross-border types of the transaction

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Indonesia documents, it is common that the parties will stipulate the arbitration clause as the proper forum to settle any possible future dispute arising out of such agreements. The following advantages may be the reasons why many business people tend to choose arbitration proceedings rather than a formal court proceeding in Indonesia: a since the arbitrator will mostly be an expert in the area and familiar with the issue in dispute, the parties may have more confidence as to the likely outcome of the case; b privacy is also one of the important factors in the arbitration proceedings, since the proceeding is closed to the public, and the award is presented only to the limited parties; c in arbitration proceedings, the parties can choose the English language as a governing language for the whole process of the proceedings; d appeal or judicial review of an arbitration award is limited and therefore there may be assurance of certainty and finality; and e the choice of arbitration enables the parties to give predictability and certainty as to the dispute settlement process and the parties can choose that the award will be based on the principle of equity (ex aequo et bono), although in some instances this creates inconsistency in deciding the same case. ii Arbitration The basic provisions relating to the arbitration in Indonesia are set out in Law No. 30 of 1999 dated 12 August 1999 (the Indonesian Arbitration Law), and the law stipulates that an agreement to arbitrate must be made in writing either before or after the dispute arises. The parties to the contracts are free to determine the applicable procedural rules in a written arbitration clause before the dispute arises; or a separate arbitration agreement after the dispute has arisen. Not only an individual person but also a government body or a state-owned company in Indonesia could be a party to the arbitration agreement. Through the Presidential Decree No. 34 of 1981, dated 5 August 1981, Indonesia ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.23 In addition to the above, Indonesia also signed and ratified (as the 27th Member State) the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (1965) (the ICSID Convention).24 In the bilateral sphere, Indonesia until 2005 had entered into 24 bilateral investment treaties (BITs) with several countries. The arbitration mechanism under the ICSID Convention has

23

24

Following this ratification and before the enactment of the Indonesian Arbitration Law, the Supreme Court issued Regulation No. 1 of 1990 regarding the Procedures for the Enforcement of Foreign Arbitral Awards. The ICSID Convention was signed on 16 February 1968, ratified on 28 September 1968 and entered into force in Indonesia on 28 October 1968. One of the landmark cases involving Indonesia through the ICSID arbitration tribunal was AMCO ASIA Corp, PAN American Development Ltd, and PT. AMCO Indonesia v. the Republic of Indonesia. The case took almost 12 years: it was registered on 21 February 1981 and resolved on 17 December 1992.

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Indonesia mostly been stipulated in these BITs. No standard terms or model languages have been adopted in the BITs to which Indonesian is a party. However, the BITs mostly contain similar provisions in promoting and protecting investment bilaterally. The Indonesian Arbitration Law stipulates that only disputes that are commercial in nature or those concerning rights that, according to the laws and regulations, are fully under the control of the parties in dispute may be settled through arbitration. In addition, disputes that, according to Indonesian laws, cannot be settled amicably, cannot be submitted to arbitration. In practice, disputes that cannot be submitted to arbitration are, among others: criminal cases; industrial relationship cases; administrative cases; bankruptcy cases; and other related family matters (divorce and adoption). In general, litigation in Indonesia is mostly still an expensive and very timeconsuming exercise, and there is relatively little certainty as to the likely outcome of the case in the litigation process. Arbitration as an alternative to litigation is becoming the preferred method for settling commercial disputes. Many contracts between Indonesian nationals have used the local arbitration institution, Badan Arbitrase Nasional Indonesia (BANI) as the proper forum to settle their disputes. In cross-border contracts, it is not uncommon that the parties (including Indonesian nationals as a party to the contract) will choose the Singapore International Arbitration Centre (SIAC), ICC or UNCITRAL as the arbitration institution to settle their disputes. Under Indonesian law, international arbitral awards will only be recognised and may only be enforced within the jurisdiction of Indonesia if they fulfil the following requirements: a the foreign arbitral award is rendered by an arbitration body or an individual arbitrator in a country that is bilaterally bound to Indonesia or jointly with Indonesia to an international convention regarding the recognition and enforcement of foreign arbitration awards. The enforcement thereof is based on the principle of reciprocity; b the foreign arbitral awards are only limited to awards that, according to Indonesian law, fall within the definition of commercial law; c the foreign arbitral awards are not in contravention of public order under Indonesian law; d the foreign arbitral awards may be enforced in Indonesia only after the Central Jakarta District Court has issued an order of execution (exequatur); e if the Republic of Indonesia is a party to the foreign arbitration award, this award may be enforced in Indonesia only after the Supreme Court of the Republic of Indonesia has issued an exequatur; and f the application for the enforcement of the foreign arbitral awards must be accompanied by: the original or duplicate of the foreign arbitration award, authenticated pursuant to the provisions regarding authentication of foreign documents, and an official translation thereof, pursuant to the legal provisions in force in Indonesia; the original or duplicate of the agreement, as the basis for the foreign arbitration award, authenticated in accordance with the provisions regarding authentication of foreign documents, and the official translation thereof, pursuant to legal provisions in force in Indonesia; and

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Indonesia a statement from the Indonesian diplomatic representative in the country where the foreign arbitration award was rendered, stating that such country is bilaterally bound to Indonesia or jointly bound with Indonesia in an international convention regarding the recognition and enforcement of a foreign arbitration award. The Indonesian Arbitration Law clearly stipulates that arbitral awards shall be a final, binding and enforceable decision against the parties, therefore there is no possibility to appeal an arbitration award. If one of the parties refuses to enforce the domestic arbitral award, the enforcement would be implemented based on the order of the Chairman of the district court based on the request of one of the disputed parties. The decision of the Chairman to reject or accept the application for the execution of the arbitral award cannot be appealed. The enforcement of a foreign (international) arbitral award relating to legal persons in Indonesia (other than the government of Indonesia) can only be implemented after having obtained an exequatur issued by the Central District Court of Jakarta. The granting of the exequatur by the Central District Court of Jakarta is not subject to an appeal. However, if the Central District Court of Jakarta refuses to issue the exequatur, this rejection is subject to an appeal to the Supreme Court. The enforcement of a foreign arbitral award in which the Republic of Indonesia is a party can only be implemented in Indonesia after having an exequatur from the Supreme Court of the Republic of Indonesia, and this is not subject to an appeal. The Indonesian Arbitration Law stipulates that, in the event that the parties have agreed that disputes between them will be settled through arbitration and the parties have given the authorisation, the arbitrator is competent to rule on his or her own jurisdiction, and the Indonesian courts do not have the jurisdiction to adjudicate a dispute where the parties to the contract are bound to an arbitration agreement, since any arbitration agreement concluded in writing by the parties will preclude any right of the parties in the future to submit the dispute to the district court. Therefore, the Indonesian courts must reject, and should not be involved in, any dispute agreed to be under the arbitration proceedings. Although the above non-involvement of the Indonesian courts in arbitration matters is clearly stipulated in the Indonesian Arbitration Law, legal practice in Indonesia shows that some jurisprudence decided by the Supreme Court has justified the nonapplicability of the arbitration awards. This is particularly so if the cases are not related to the breach of contract of agreements per se, but relating to tort or illegal actions. In these cases, the plaintiffs have proved that the cases are relating to the tort claim, which are outside the applicability of the arbitration agreements agreed by the parties. The plaintiffs have argued that arbitration agreements only cover any disputes arising out of the implementation or breach of contract of the agreements between the parties. One recent case in this matter related to Lippo Group v. Astro Group, as explained supra in Section II. Since the enforcement of the international arbitration awards in Indonesia will require an exequatur from the Chairman of the DCCJ, in practice, this has created much room for the disputed party to avoid the enforcement of the arbitration awards by requesting an annulment or refusal of the awards through the Chairman of the DCCJ.

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Indonesia A lot of cases have shown that the Chairman of the DCCJ has refused and annulled the international arbitration awards. iii Mediation and other forms of alternative dispute resolution

The Indonesian Arbitration Law of 1999 acknowledges mediation, conciliation and expert determination as other alternative dispute resolution forms for litigation. However, this Law focused its stipulations on the arbitration issue in great detail; only one article stipulates mediation and expert determination issues. Other than the court mediation as discussed previously, a private mediation is currently being introduced in Indonesian legal practice. However, a private mediation will only be relevant and applicable to solve any dispute in relation to family law matters (particularly in divorce cases). Under the Indonesian Arbitration Law of 1999, both disputed parties can make a written agreement to appoint an expert or mediator to solve their dispute. The mediation process must be solved within 30 days in the form of a written agreement that is a final and binding agreement on the parties and must be registered in the relevant district court no later than 30 days after the signing of such agreement. If no agreement results from this mediation process, both parties can agree to settle the dispute through an arbitration proceeding, or either party may pursue the litigation process against another party. Expert determination is still not generally used in practice. This alternative dispute mechanism will only be relevant and used in practice if the transaction at hand is in relation to a specific, technical and complex transaction that needs an expert determination to decide any possible dispute arising out of this specific transaction. ViI OUTLOOK AND CONCLUSIONS

The rule of law and the reliability of the judicial system, including the Indonesian court system, are still developing and are far from a clear system. When contemplating legal proceedings in Indonesia, the following factors should be taken into account: a execution of any judgment in Indonesia is often cumbersome and problematic. The old Dutch civil procedural rules and regulations, despite their obsolescence, still apply in practice; b there are many factors that may inevitably lead to some element of uncertainty for any litigation process and there is relatively little certainty as to the likely outcome of a case; and c litigation in Indonesia is a relatively expensive and time-consuming process, and much of the cost that the disputing party will incur may not be automatically recoverable from the other party.

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Appendix 1

ABOUT THE AUTHORS

PHEO M HUTaBaRaT Hutabarat Halim & Rekan Mr Hutabarat is the founder and managing partner of Hutabarat Halim & Rekan, and he is the chairman of the commercial dispute resolution practice group within the firm. He has, over the years, represented various domestic and international clients in complex commercial litigation and arbitration proceedings. Mr Hutabarat has been acknowledged in the area of practice of commercial dispute resolution by the Asia Pacific Legal 500 for three consecutive years since 2006 and is regarded as one of the leading individuals in Indonesia in dispute resolution. Mr Hutabarat is a member of: the Association of Indonesian Advocates (Peradi) and has a licence to practice as an advocate in Indonesia; the Indonesian Association of Capital Market Legal Consultants and has a licence as a capital market legal consultant; the INSOL International; the International Bar Association; and the Inter-Pacific Bar Association. He has also been a guest speaker at various seminars and conferences in both domestic and international forums. HUTaBaRaT HaLIm & REKaN Wisma 46 Kota BNI, 34th Floor Jl. Jend. Sudirman Kav. 1 Jakarta 10220 Indonesia Tel: +62 21 574 9820 Fax: +62 21 574 9821 pheo.hutabarat@hnrlawyers.com hnr.jkt@hnrlawyers.com www.hnrlawyers.com

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