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The State Administrative Court In the First Instance Nullifies the Decree on Establishment of New BANI

July 28, 2017

After there had been a dualism in the arbitration process in Indonesia with the existence of two national arbitration bodies, the State Administrative Court granted the request of the Old (initial) BANI and nullified the Decree on the Establishment of the New BANI. Although it is not a final and binding decision yet, it raises the question of how can there be two national arbitration bodies appear in Indonesia?

BANI Mampang (Old/Initial BANI)

The Indonesian National Board of Arbitration (Badan Arbitrase Nasional Indonesia BANI”) was established in 1977. Its name was registered as a trademark at the Directorate General of Intellectual Property in 2002. Domiciled at Mampang (“BANI Mampang”), BANI is an arbitral institution, providing a range of services in relation to arbitration, mediation, binding opinions and other forms of dispute resolution. In Indonesia, the interest in settling disputes through arbitration began to grow upon the promulgation of Law number 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Arbitration Law”). The growing interest is consistent with globalization in which out of court settlements have become the choice of forum for business entities in resolving their disputes. Besides being speedy, efficient and final, arbitration uses the principle of win-win solutions and is direct as there are no appeals and cassation.

Renewed BANI (New BANI)

In 8 June 2016, several arbitrators of BANI Mampang who wanted BANI to be a legal entity in its own right founded a new BANI called the Renewed/Sovereign BANI (BANI Pembaharuan) with the legal form of an Association (Perkumpulan) under Deed No. 23 dated 14 June 2016 concerning the establishment of the Legal Entity of the Indonesian National Arbitration Board Association domiciled in Sovereign Plaza that was approved by the Minister of Law and Human Rights in his Decree No. AHU-00064837.AH.01.07.Year 2016 on 20 June 2016 (“MOLHR Decree”) (“New BANI”).

The Lawsuit and The State Administrative Court Decision

BANI Mampang objected to the establishment of the New BANI, and filed a lawsuit against the Minister of Law and Human Rights (as the Defendant) with his Decree No. AHU-00064837.AH.01.07.Year 2016 concerning the establishment of the Legal Entity of the Indonesian National Arbitration Board Association in the State Administrative Court and against New BANI (as Defendant II Intervention). The State Administrative Court, on 6 July 2017, issued Decision No. 290/G/2016/PTUN-JKT (“PTUN Decision”) which essentially granted the claim, and declared that the MOLHR Decree was null and void and so ordered the defendant to revoke the MOLHR Decree. Please note that pursuant to Article 67 Paragraph (1) Law No. 51 of 2009 regarding the Second Amendment to Law No. 5 of 1986 concerning State Administration (“State Administration Law”), the MOLHR Decree remains valid until there is a final and binding court decision which states otherwise.

The State Administration Law states that if a party is not satisfied with the PTUN Decision it may file an appeal with the Administrative High Court and file a cassation and Judicial Review with the Supreme Court of the Republic of Indonesia. If no appeal is filed within 14 days from the issuance of a PTUN Decision, it will become final and binding, thus making the MOLHR Decree null and void.

However, if New BANI files an appeal then, taking into account Article 67 Paragraph (1) of the State Administration Law, the dualism of BANI will still exist. It is safe to argue that such a dualism will affect the legal certainty of parties who enter into a business transaction agreement that has an arbitration clause which has BANI as the dispute settlement body. Let’s wait and see.

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The article was prepared by Aditya Indrajati (Associate) and edited by Linna Simamora (Partner).

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