Originally from Arbitration Law and Practice in Asia - Second Edition

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I. INTRODUCTION: ARBITRATION IN INDONESIA – HISTORY AND INFRASTRUCTURE

A. History and Current Legislation on Arbitration

1. Historical evolution of law relating to arbitration

After a long colonisation by the Dutch, Indonesia’s legal system is based upon the Dutch civil law, which was adopted by the new Indonesian nation at the time of its independence in 1945. The Indonesian Constitution provided for each existing Dutch law not in conflict with Indonesia’s independent status to continue, at least as guidance, to prevail until and unless a new Indonesian law was to be passed to supersede it.  A number of laws have since been revised, and other new laws are being drafted all the time to fit in with ever-changing global economic trends and needs. Although many of these new laws include principles from common law jurisdictions such as the United States and Australia, the basis of legal practice remains with civil law. However, the basic Dutch Civil, Criminal and Commercial codes remain in force as they have not yet been revised.

Indonesia is not, traditionally, a litigious culture. Her underlying philosophy, Pancasila, calls for deliberation to reach a consensus and discourages contention in all things. In the Javanese culture, the dominant one of approximately 300 ethnical cultures that make up this archipelago,  it is considered shameful to have to resort to litigation, in effect leaving it to someone else to resolve one’s problems.  Accordingly, commercial litigation is not as common as it is in such jurisdictions as India, Singapore and the United States, for example. But aside from the cultural rationale, there are more practical reasons for hesitancy to litigate, which are based generally upon the uncertainty and unpredictability of court judgments and the inordinate amount of time it can take to reach a final and binding decision through the judicial system.