The Advantages and Disadvantages of Indonesian Arbitration

A number of commercial disputes in Indonesia from contraction disputes to disputes in regard to terminating the lease are in fact, settled by the arbitration. The approach referring to Law no.30 of 1999 on Indonesian Arbitration and Alternative Dispute Resolution or Arbitration Law possesses operating efficiencies.

The steps taken, be it an appointment for party’s arbitrator or arbitral hearings, seem to go in a good manner. It is utterly true that most out of companies (both local and foreign) are content with the upshot. However, this method also comes with a handful of flaws indivertible to the concerned parties.

Here are the advantages and disadvantages of arbitration under the Indonesian scope you need to heed:


  • An arbitrator is the key person in resolving the disputes. Unlike the settlement process in the general court causing some disparities, the arbitration always ends up with the agreement of both sides according to the final decision of an arbitrator.
  • The disputing parties are free to appoint the judges or arbitrators. The arbitrators offer an in-depth analysis so that the case handled is more specialized. On the contrary, the judges at the court do not have this feature.
  • In comparison to the court judgment, the proceedings in arbitration take a short time. The dispute cases are normally ended immediately once the hearings take place. The examination from the Arbitration Law is only within 180 days.
  • Not only is arbitration effective but also worth the money. Why a couple of companies coming with disputes prefer arbitration to litigation is due to the cheap settlement process. Hiring an arbitrator is much more reasonable than paying the witnesses for trial and testifying. The same is true with preparing the arbitration.
  • The arbitration proceedings are more confidential than the trial. The hearings and dispute settlement in arbitration are through a private procedure, enabling the whole process to remain secret (not open to the public).


  • The issue of arbitration award might be the main disadvantage while using the arbitration. Be it international or local, arbitrations awards are required to be listed in the Indonesian courts. Executing the awards can be challenging and ineffective.
  • Arbitration has limited discovery. Unlike litigation in the court in which you can provide an abundance of evidence such as documents and particular information, the arbitration is the opposite. The arbitration is hard to achieve until the discovery is fulfilled.
  • There is no need to appeal if the arbitration is binding. To finish the dispute is only based on the final arbitral decision. Regardless of the disagreement of disputing parties, the arbitrator’s judgment is ultimate.
  • In the case of arbitration with a contract, the freedom of parties to pick arbitration is restricted—it must be agreed by both sides. Additionally, the mandatory arbitration even makes the opposing party apply arbitration.
  • There is no precise standard for the arbitrators. Instead of following the common law, some arbitrators tend to use the apparent fairness from the parties’ position—and this matter is fine.

Arbitration, successfully resolving the disputes, doesn’t only give rise to advantages but also the disadvantages. The advantages and disadvantages of arbitration are inseparable.

Source : Corporate Law Firm Indonesia

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