Enforcing International Arbitration Agreements in Indonesia: Its Possible Impact on Multinational Companies and Investments

Abstract

This paper examines Indonesia’s approach to arbitration in cross-border commercial disputes by evaluating its domestic legal framework under Indonesian Arbitration Law and comparing it with international best practices reflected in the UNCITRAL Model Law, the New York Convention, and the ICC and the LCIA Arbitration Rules. The analysis focuses on several key aspects of arbitration practice, including the formation of valid arbitration agreements, joinder of third parties, challenges to arbitral awards, recognition and enforcement of arbitral awards, and the role of public order in enforcement proceedings. This paper argues that, although Indonesia’s arbitration framework recognises core principles such as party autonomy, separability, finality of awards, and limited court intervention, practical uncertainties remain in its implementation. These uncertainties arise particularly from formalistic requirements, restrictive procedural mechanisms, and potential judicial inconsistency in enforcement-related matters. The paper further assesses how these issues may affect multinational companies operating in Indonesia, including through increased transaction costs, contractual uncertainty, and operational disruption. Finally, this paper highlights recent developments, including the Indonesian Supreme Court Regulation No. 3 of 2023, the Indonesian Constitutional Court Decision No. 100/PUU-XXII/2024, and the 2025 BANI Arbitration Rules, and offers recommendations for reform to better align Indonesia’s arbitration regime with international best practices.