Pertamina vs Karaha Bodas - Tudung Mulya Lubis

Almost all international business contracts have clauses on arbitration. Through including these, any commercial dispute that arises in the course of executing that contract can then be resolved through international or national arbitration. While many choices are available for the latter, the option generally chosen is arbitration by the International Chamber of Commerce (ICC) and the United Nations Commission on International Trade Law (Uncitral) at the international level, the Indonesian National Arbitration Body (BANI) in Indonesia, or the Singapore International Arbitration Center (SIAC) in Singapore. There too are many other choices as almost every country in the world has its own arbitration body with approximately the same regulations.

Generally, the primary reason for going to arbitration is that it is relatively speedier and cheaper, in contrast to the lengthy, convoluted and clearly more expensive process of going through the judicial system. Under BANI's regulations, for instance, a dispute must be resolved within six months, although this can be extended if the examination of the matter at hand is incomplete. However, the extension usually proves to be shorter than the time it would take in court. Furthermore, the outcome of the arbitration is final and binding. The outcome of arbitration, therefore, is a first and final decision that binds the parties and is not subject to legal appeal. Hence, the result is immediately executable.

The arbitration decision may be arrived at based on strict law, or through considerations of ex aquo et bono, following the applicable norms of business. All this depends on the arbitration clauses stipulated in the particular international business contract. So, room is provided for arbitrators to refer to current business practices when arriving at their decision.

What is interesting about all this is that not all arbitrators are law experts. Generally, in any register of arbitrators, many experts in other...