Indonesia – Jakarta State Administrative High Court Backs New Arbitral Centre Over Original BANI.

30 January, 2018

 

In August last year, a new Indonesian arbitral institution had been established in mid-2016 under the name of Renewed BANI or BANI Pembaharuan (“BANI-P”), notwithstanding the continued existence of the separate institution already known as BANI. We reported that the two institutions were in dispute as to which of them could legitimately claim the right to refer to itself as BANI, and we explained that although this might at first appear to be of purely local interest, the confusion has real and serious implications for contracts that provide for arbitration under BANI rules (as many now do).

 

BANI-P brought the matter to the South Jakarta District Court. In August 2017 BANI-P prevailed in obtaining an order declaring it to be the rightful institution to be referred to as BANI. Meanwhile, however, the original BANI had succeeded in separate proceedings in the Jakarta State Administrative Court, obtaining a ruling nullifying the decision of the Ministry of Law and Human Rights to acknowledge and register BANI-P as an arbitral institution. BANI had also obtained a ruling from the Commercial Court confirming it as the rightful owner of the trademark name “BANI”.

 

Both BANI-P and BANI appealed against the decisions of the South Jakarta District Court and the Jakarta State Administrative Court. However, BANI-P has apparently elected not to appeal against the decision of the Commercial Court.

 

Recently, the State Administrative High Court issued a decision in favour of BANI-P and reversed the decision of the lower Administrative Court. However, the Administrative High Court made this ruling on a technical ground: it found that the administrative courts do not have jurisdiction on the matter which is effectively a civil dispute. The Administrative High Court observed that its conclusion is strengthened by the fact that there are already ongoing proceedings in the South Jakarta District Court and the Commercial Court dealing with the issue of which entity has the right to use the name of, and be recognised as, BANI.

 

This decision is a blow to BANI as it is now faced with two decisions that are not in its favour.

 

The following table summarises the current state of proceedings involving BANI and BANI-P.

 

Based on our enquiries, it is understood that BANI has filed a cassation (Supreme Court appeal) against the decision of the State Administrative High Court a few weeks ago.

 

What next? 

 

Given the likely long-term uncertainty of this dispute, for users of arbitration in Indonesia, our outlook and recommendations as set out in our initial report and in our Keris Book (Guide to Dispute Resolution and Governing Law Clauses in Indonesia Related Contracts) remain unchanged. In summary, a cautious approach should be adopted and: 

 

• for arbitration agreements concluded before the establishment of BANI-P, it is prudent for the time being, to construe this as reference to the original BANI. 
• for arbitration agreements concluded after the establishment of BANI-P, consider the parties’ knowledge and intentions at the time the contract was executed. Additional wording may need to be agreed before commencing arbitration with either institution in order to insulate any award issued from potential enforcement challenges premised on the dispute between the two institutions. 
• for new arbitration agreements, consider – where possible – the use of alternative rules and institutions so as to avoid the uncertainties. Where parties are contemplating the use of domestic industry-specific institutions, specialist legal advice should be sought. 

 

 

 

For further information, please contact:

 

Alastair Henderson, Partner, Herbert Smith Freehills

alastair.henderson@hsf.com