BANI Arbitration in the construction and infrastructure sectors in Indonesia – some key features and lessons learnt

The Badan Arbitrase Nasional Indonesia (BANI), established in 1977, is one of Indonesia’s leading arbitral institutions. While the Indonesian Courts remain the preferred forum for dispute resolution in Indonesia in many contexts, arbitration under the BANI Rules and administered by BANI is the preferred option for some Indonesian parties, including certain state-owned companies, and particularly in the construction, infrastructure, technology and communications, mining and natural resources sectors. As such, international parties doing business in Indonesia and their legal advisors are also increasingly interested in BANI arbitration. While BANI arbitration is very broadly in line with international norms and other leading institutions’ rules, parties and their advisors who are considering agreeing to BANI arbitration should be aware of the following features.

Timelines

The standard, default timeline for a BANI arbitration is 180 days from the Tribunal’s constitution to the close of proceedings. This is shorter than is typical under many leading institutions’ rules although similar to the ‘expedited procedure’ under the SIAC Rules (which can apply where the total amount in dispute does not exceed S$6 million, in cases of exceptional urgency or if the parties agree) and to the ICC’s default timeline of rendering the final award within 6 months from signing the terms of reference. 

However, extensions to this timeline in BANI arbitrations are not uncommon in Clyde & Co’s experience, although very much depend on the particular tribunal’s approach of course, and parties should plan and prepare on the basis that the default timeline may be kept to.

Qualifying Arbitrators

The BANI Rules provide that save for “special situations”, parties may only select arbitrators from BANI’s panel (Article 10(1) 2022 BANI Rules), which differs from the more flexible approach in the SIAC and ICC rules for example. Such “special situations” arise only where the nature of the dispute requires an arbitrator with expertise which no other arbitrator on BANI’s panel possesses (Article 10(2)(a) 2022 BANI Rules).

However, international parties are likely to be comforted by the fact that BANI’s panel includes a number of prominent and very well-regarded international arbitrators.

Article 11(2) of the 2022 BANI Rules provides that where the Tribunal is to comprise of 3 arbitrators, the BANI Chairman will appoint the presiding arbitrator. This is of course typical, and the same approach is adopted in the ICC and SIAC rules for example. However, in Clyde & Co’s experience BANI may prefer to appoint Indonesian presiding arbitrators, even where one party is the locally incorporated entity of a foreign company.

Language

The default language under the BANI rules is Bahasa Indonesia (which is consistent with Article 28 of Indonesia’s Arbitration Law (Law 30 of 1999)).

While the parties are technically free to agree on the use of another language (Article 15(1) 2022 BANI Rules and Article 28 Arbitration Law) this is subject to the consent of the tribunal. In practice and given that the BANI panel is dominated by Indonesian arbitrators, proceedings are typically in dual language – i.e. Bahasa Indonesia and English – where one of the parties and / or tribunal members are not Bahasa Indonesia speakers.

It should also be noted that a BANI tribunal is entitled to request that documents be submitted in Bahasa Indonesia even if the parties have agreed that another language is to be used for the proceedings (Article 15(2) 2022 BANI Rules).

Foreign Counsel Representation

Unlike other arbitral institutions such as the SIAC and ICC, BANI requires foreign lawyers to be ‘accompanied by’ an Indonesian legal advisor if the dispute is ‘subject to Indonesian law’ (Article 5(2) 2022 BANI Rules).

Approach to Procedure

Indonesian tribunal members and counsel in BANI arbitrations, as well as BANI itself, may be inclined to apply practices consistent with the Indonesian civil procedure rules and court practices, notwithstanding that with a few exceptions, these do not apply strictly to arbitration.

The requirement for a legal representative always to have a power of attorney, for example, is in line with the civil procedure rules and is expressly included in the BANI Rules (Article 5(1)).

However, other requirements in line with the civil procedure rules and court practices do not appear in the BANI Rules or Indonesia’s Arbitration Law but may still be required in practice. This includes, for example, requirements to submit all documents in hardcopy, for written witness statements to be read out in full at evidentiary hearings, for hearings to be split into multiple tranches addressing different matters on different non-consecutive dates, and for all documentary evidence to be ‘legalised’.  

BANI Administration and Fee Scale

Parties to a BANI arbitration may in practice be expected to communicate directly with the BANI Secretariat regarding all matters, and not with the tribunal directly. While not a significant issue, this could in some instances result in delay or miscommunication. 

Similar to the ICC Rules, for example, the arbitration fees payable by the parties under the BANI Rules are based on a percentage of the ‘quantum of the claim’ (ranging from 0.6 to 10%). Unlike the ICC Rules, however, BANI’s fee scale includes both the tribunal’s fees and BANI’s administration fees (in proportions which are not specifically set in the rules).

In practice, BANI appears to determine what fees should be payable within this range. The proportion of fees which are then actually paid to the arbitrators, as opposed to BANI, may also be an issue. According to the IBA Arbitration Committee’s Arbitration Guide in 2018, less than half of the amount is actually paid to the arbitrators based on BANI’s policy at that time. https://www.ibanet.org/MediaHandler?id=06406456-22F4-4035-BF04-75B85A5E903F

Issues regarding ‘Two BANIs’ and BANI’s Powers are now resolved

A new institution, confusingly named BANI Pembaharuan (“BANI-P”), was established in September 2016 to handle domestic and international arbitrations. BANI did not recognise BANI-P and there was some uncertainty as to which institution is entitled to administer arbitrations where the parties had selected arbitration under the ‘BANI’ rules. This was resolved by the Indonesian Supreme Court in 2019 which (a) affirmed the decision of the lower courts to nullify the constitution and registration of BANI-P; and (b) upheld BANI’s right to use the “BANI” trademark.

Article 14(1) of the previous version of the BANI Rules 2018 provided that “the Arbitration Tribunal shall examine and rule on the dispute between the parties on behalf of BANI and therefore may exercise all of the authority possessed by BANI in connection with the examination and passing of resolutions on the dispute in question”. This contradicts international arbitration practice whereby the tribunal is distinct from the arbitral institution and decides on its own authority. This was rectified in the 2022 BANI Rules which now provides that “the Arbitration Tribunal shall examine and rule on the dispute between the parties” (Article 14(1) 2022 BANI Rules).