Friday, January 14, 2011

Research Proposal on Arbitration

Research Proposal on Arbitration

Recently, arbitration is one of the alternative settlement of disputes that has been used by many people especially businessman, because they prefer arbitration better than court. Furthermore, the Government of Indonesia has promulgated Law No. 30 of 1999 Concerning Arbitration and General Alternative Settlement of Dispute. The new law, which concerns both arbitration and alternative dispute resolution, went into effect immediately upon its promulgation on 12 August 1999.

Arbitration is a private form of adjudication that uses one or several arbitrators to resolve the dispute. Based on the Black’s Law Dictionary, arbitration is a process of dispute resolution in which a neutral third party (arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard.


There are several reasons why most people prefer arbitration better than court. First of all, the arbitrator is definitely an expert of a case, because the parties themselves that will choose the arbitrator. Usually, an arbitration institution will provide a list of experts that can be appointed as an arbitrator. The list consists of several experts in various fields of study.

Second, the process of arbitration is confidential. The confidentiality of the arbitration process is very useful to protect the parties, because it will be a disadvantage for a company if people know that it has been involved in a dispute.

Next, the arbitration procedure is very fast and the arbitration cost is not as expensive as court, because the parties do not have to go through difficult procedures. Unlike in court that allows the parties to go through some stages if they were not satisfied with the judge decision; arbitration does not have many stages. Therefore, the arbitration cost is a lot cheaper than the court cost.

Also, an arbitral award is final, binding, and can be easily enforced. The most popular and important convention concerning the enforcement of a foreign arbitral award is the 1958 United Nations Conventions on the Recognition and Enforcement of Foreign Arbitral Awards that is known as the New York Convention.

Indonesia ratified the New York Convention by a Presidential Decree No. 34 of 1981 Concerning the Promulgation of Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Pursuant to the Presidential Decree, the Supreme Court has also promulgated Regulation No.1 of 1990 Concerning the Procedure for Enforcement of Foreign Arbitral Awards.

Since the use of arbitration as a method of resolving disputes has grown with the growth of International Trade, several international institution has been established. For example, United Nations Commission on International Trade Law (UNCITRAL), International Chamber of Commerce (ICC), and International Center for the Settlement of Investment Disputes (ICSID) are the international institutions of arbitration that can be used. On the other hand, there is also a national institution of arbitration that has been established by the Government of Indonesia. For instance, in 1977 the Government of Indonesia has established the National Arbitration Body of Indonesia.

In addition, the above institutional bodies have established some arbitration conventions, such as, UNCITRAL Arbitration Rules, UNCITRAL Model Law, ICC Rules of Arbitration and ICSID Convention. Indonesia signed the ICSID Convention on 16 February 1968 Concerning the Ratification of Convention on the Settlement of Investment Disputes between States and Nationals of Other States. However, the Indonesian Arbitration Law did not take the UNCITRAL Model Law into account, therefore Indonesia can not be qualified as a Model Law Country.

In summary, arbitration is a dispute resolution method that is better than the court. People should put arbitration clause in their agreement or contract as a way to settle a dispute. However, states should also support their citizen in using the arbitration as an alternative dispute resolution by ratifying international conventions.

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