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Business actors, both at the national and national levels, are certainly not spared from what is called a dispute. In general, in resolving disputes, business actors who become parties resolve disputes in general courts.

However, the resolution of business disputes in the general court which seems complicated and non-stop makes the parties reluctant to resolve disputes in the general court.

Settlement of business disputes other than in general courts, in essence, can be done through arbitration and alternative dispute resolution.

In this article, we will thoroughly examine commercial arbitration, starting from the definition to the implementation of commercial arbitral awards.

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Get to know Commercial Arbitration

Commercial arbitration is certainly different from other types of arbitration which are non-commercial arbitrations such as labor dispute settlement arbitration, border dispute settlement arbitration and so on.

Commercial arbitration is a settlement of civil disputes outside the general court which is carried out with an arbitration agreement made in writing by the parties to the dispute. This definition is stated in Article 1 point 1 of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution.

Ramlan Ginting added to the definition of commercial arbitration above which states that commercial arbitration is carried out based on the agreement of the parties in a business contract, the implementation of commercial arbitration based on private procedures and arbitration awards that are final and binding.

Commercial Arbitration Agreement and Jurisdiction

Article 1 point 3 jo. Article 9 of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution explains that an arbitration agreement is an agreement in the form of an arbitration clause contained in a business contract made by the parties before a dispute arises. In addition, the arbitration agreement can also be made separately by the parties after a dispute arises. 

The two types of arbitration agreements mentioned above have the same legal force. Both were made in anticipation of disputes that might arise over the implementation of commercial transactions stipulated in business contracts. 

The International Court of Arbitration, the American Arbitration Association, and the London Court of International Arbitration in the Rules of Arbitration explain that arbitration can only be carried out on the basis of an arbitration agreement.

The American Arbitration Association and the London Court of International Arbitration in their Rules of Arbitration also state that an arbitration agreement consists of an arbitration clause and a separate arbitration agreement.

Arbitration jurisdiction itself is essentially equivalent to general court jurisdiction. General courts are prohibited from intervening in the examination of cases conducted through an arbitration mechanism based on an arbitration agreement. 

In addition, the parties to a business contract that has entered into an arbitration agreement will lose their right to submit business disputes that arise to the general court.

The general court is obliged to refuse and will not intervene in a dispute resolution determined through arbitration.

Arbitrators, Examinations, and Commercial Arbitration Awards

In international commercial arbitration, the arbitrator may consist of a single arbitrator or a panel of arbitrators whose number is based on the agreement of the business actors set forth in the arbitration agreement. The appointed arbitrator must be independent and impartial to one of the parties.

Independent means that the opinion of the arbitrator may not be influenced by the opinion of a third party. If it turns out that the principle of independence cannot be implemented by the arbitrator and the arbitrator is proven to be in favor of one of the parties, then the disputing party has the right to request that the arbitrator concerned be dismissed and replaced with a new arbitrator. 

The appointment of the arbitrator mentioned above is carried out immediately after a dispute arises. In this case, the appointed arbitrator must be independent and impartial to any of the parties.

In national commercial arbitration, pursuant to Article 1 point 7 of Law Number 30 of 1999 concerning Arbitration and Alternative Dispute Resolution, it is explained that the arbitrator may consist of a single arbitrator or a panel of arbitrators as well as international commercial arbitration. In this case, the arbitrator is chosen by the parties. 

If the parties fail to choose an arbitrator, the Chairman of the District Court has the authority to appoint an arbitrator. The exercise of the court’s authority here does not mean intervening in the arbitral authority but facilitating the formation of arbitration. 

Examination of disputes in arbitration is carried out behind closed doors and must be carried out in writing, oral examinations can only be carried out if agreed by the parties or if the arbitrator deems necessary.

Examination of disputes through arbitration can use national or international arbitration institutions. Where the time limit for the completion of the dispute examination is a maximum of 180 days since the arbitrator or arbitrator tribunal is formed.

The arbitral award is final and binding . The point is that against the arbitral award there are no other legal remedies. There is no longer an appeal, cassation, or review as is the case in the general justice system. Arbitration decisions are as valid as general court decisions that have permanent legal force.

However, the arbitral award may not conflict with public order in the country where the arbitral award is enforced. If it is contradicted, then the arbitral award cannot be executed. Thus, the implementation of the arbitral award was rejected.