Enforcement of foreign arbitral awards in Indonesia: the role of public policy exception

The public policy exception under Article V (2) (b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (NYC) is the most controversial ground for challenging enforcement of foreign arbitral awards. The great uncertainty as to the ambit of the public policy exception has led to inconsistent approach adopted by the courts which created problems for parties wishing to enforce foreign arbitration awards. -- This thesis explores the complexity and inconsistent application of the public policy exception in Indonesia. It critically analyses the tendency of the Indonesian judiciary system towards the judicial application of public policy in determining the enforceability of foreign arbitral awards after the ratification of the NYC, considering the distinctive feature of the Indonesian legal system and approaches that have been taken by the courts of other countries. Occasionally, reference is also made to statutory provisions in arbitration from other countries to indicate approaches that have been taken elsewhere in regard to the public policy exception. This thesis examines whether current decisions of the Indonesian Supreme Court and the District Courts are in compliance with the pro-enforcement policy of the NYC, which demands a narrow approach to the public policy exception. It also examines the extent of judicial review of foreign arbitral awards by the Indonesian courts, particularly concerning the standards for applying judicial discretion to refuse or allow enforcement under the public policy exception. -- A proposition presented in this thesis is that the concept of public policy in Indonesia lacks a strong international character and, for this reason, it has a tendency to be interpreted in domestic terms instead of international public policy under the NYC. Another central proposition is that domestic concept of public policy in the Indonesian arbitration law is influenced by Indonesian pluralistic legal traditions and cultures. Therefore, a harmonisation of the concept of public policy in Indonesia with the concept of public policy under the NYC and the Model Law needs to be addressed. -- Despite the changes brought by new Indonesian arbitration law reform, the central position of the narrow approach to the public policy exception has yet to achieve full recognition. If this situation is related to the enforcement of foreign arbitral awards in Indonesia, it can be seen that the finality and enforceability of the awards will hardly be achieved until the underlying issue concerning a restrictive concept of public policy is addressed. It is argued that a failure to adopt a narrow approach to the public policy exception can be related to the enforceability of foreign arbitral awards in Indonesia. -- The recommendations throughout this thesis promote the Indonesian judiciary system to shift away from a 'domestic' concept of public policy. They encourage the Indonesian judiciary and Arbitration legal framework to strongly adopt the concept of internationalism in establishing the judicial approach to public policy exception. In doing so, this thesis also contributes to harmonizing the judicial application of public policy through establishing the concept of 'international' public policy that is based on the narrow approach to the public policy exception and the presumption of favouring enforcement of international arbitral awards.