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Should BANI Rules Accommodate Aspiration of the Investors?

As a national arbitration center, Badan Arbitrase Nasional Indonesia (BANI) should be the primary arbitration center to resolve any business dispute or discrepancy of opinion involving Indonesian investor. However, many Indonesian investors prefer to settle their dispute through Singapore International Arbitration Center (SIAC). The SIAC Annual Report 2018 reported that as many as 62 Indonesian parties arbitrating at SIAC in 2018. The SIAC Annual Report 2018 also has placed Indonesia at the 5th rank for the states with the highest cases resolved at the SIAC.

The preference of investors both domestic and foreign investors in choosing an arbitration center are determined by various factors, including the ability of the arbitration center to accommodate the aspiration of the disputed investors. Pursuant to the foregoing, BANI and its rules as regulated under Arbitration Rules and Procedures of BANI as per 1st January 2018 (“BANI Rules”), are deemed to have not accommodated aspiration of the investors when it is compared to SIAC under Arbitration Rules of the SIAC as per 1st August 2016 (“SIAC Rules”).

First, Article 11.3 of the BANI rules provide third arbitrator (presiding arbitrator) shall remain be designated by the Chairman of BANI regardless the parties agree otherwise. BANI argues that as the parties have appointed its each arbitrator, then the presiding arbitrator shall be appointed by the Chairman of BANI. This is different to SIAC Rules, the SIAC Rules grant freedom for the parties to appoint the presiding arbitrator. Article 11.3 of SIAC Rules stipulates unless otherwise mutually agreed by the parties on other procedures to appoint the presiding arbitrator, or if the agreed procedures do not result to an appointment within determined time period by the parties or the Registrar, the President of SIAC shall appoint third arbitrator who will serve as the presiding arbitrator.

Second, Article 10.1 of the BANI Rules provides that the parties may only appoint arbitrator listed in BANI list of arbitrators to act as arbitrator in order to resolve the dispute. The appointment of arbitrator who is not listed in the BANI list of arbitrators (external arbitrator) may be conducted by submitting application to the Chairman of BANI provided that such external arbitrator shall possess special expertise. If the Chairman of BANI does not approve the designation of the external arbitrator, the Chairman must recommend, or designate, with his own choice, an alternative arbitrator chosen from the BANI list of arbitrators or an expert meeting the requirements in the required field but is not registered in the BANI list of arbitrators. Otherwise, SIAC Rules grant freedom to the parties to designate the presiding arbitrator, regardless such arbitrator is registered at the SIAC or not.

Third, restriction to designate external arbitrator is not fully supported by the number of arbitrators listed at the BANI. Pursuant to the BANI’s official website, only as many as 149 arbitrators had been registered at BANI in September 2019. Meanwhile, SIAC’s official website recorded as many as 536 arbitrators had been registered at SIAC for the same period.

In the end, It deems necessary for BANI to amend BANI Rules to more accommodate aspiration of the investors, considering that the determination of arbitration forum and applicable rules are solely authority of the parties in accordance with “Party’s Autonomy” principle as implemented in Arbitration Clause. Therefore, to increase the investor’s interest in resolving their cases through BANI, the BANI Rules is advised to grant freedom for the investor to designate the presiding arbitrator, or arbitrators outside the BANI list of arbitrators. In the same time, BANI is encouraged to increase the quantity and quality of its arbitrators to enrich option for the investors. SCN/HES