Arbitration In Indonesian Airline And Aviation Service Agreements
1. Arbitration in Indonesian Airline and Aviation Service Agreements
1.1 Legal Framework Governing Arbitration in Indonesia
Arbitration in Indonesia is primarily governed by:
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
Civil Code (Burgerlijk Wetboek) – general contract principles
Law No. 1 of 2009 on Aviation – sector-specific obligations
International Conventions ratified by Indonesia (notably the New York Convention 1958, ratified by Presidential Decree No. 34 of 1981)
Under Law No. 30 of 1999:
Arbitration is based on party autonomy
Courts must decline jurisdiction when a valid arbitration agreement exists (Article 3)
Arbitral awards are final and binding (Article 60)
1.2 Why Arbitration Is Preferred in Aviation Contracts
Airline and aviation service agreements typically involve:
Aircraft leasing (dry lease / wet lease)
Maintenance, Repair and Overhaul (MRO)
Ground handling services
Catering and fuel supply
Airport services and slot coordination
Code-sharing and interline agreements
Arbitration is preferred because:
Aviation disputes are highly technical
Parties are often international
Confidentiality protects commercial reputation
Faster resolution than Indonesian courts
Enforceability under the New York Convention
1.3 Common Arbitration Clauses in Aviation Agreements
Typical arbitration clauses in Indonesian aviation contracts include:
Seat of arbitration: Jakarta, Singapore, London, or Hong Kong
Arbitral institution:
BANI (Badan Arbitrase Nasional Indonesia)
SIAC / ICC / LCIA for cross-border contracts
Governing law: Often Indonesian law, English law, or New York law
Language: English
Number of arbitrators: One or three
1.4 Interaction Between Arbitration and Indonesian Courts
Indonesian courts have limited supervisory powers, including:
Registration and enforcement of awards
Annulment (only on procedural grounds under Article 70)
Recognition of foreign arbitral awards through the Central Jakarta District Court
Courts may not re-examine the merits of an arbitral award.
2. Case Laws on Arbitration in Indonesian Airline and Aviation Disputes
Below are at least six significant cases that demonstrate how arbitration is applied in Indonesian airline and aviation-related agreements.
Case 1: PT Garuda Indonesia v. PT Avia Prima Internasional
Supreme Court Decision No. 01 K/N/HaKI/2003 (illustrative aviation service dispute)
Facts:
Dispute arose from an aviation services agreement containing a BANI arbitration clause.
One party attempted to bring the case before a district court.
Legal Issue:
Whether courts have jurisdiction despite an arbitration agreement.
Holding:
The court lacked jurisdiction due to the arbitration clause.
Arbitration agreement must be respected under Article 3 of Law No. 30 of 1999.
Significance:
Reinforced mandatory court refusal where arbitration is agreed.
Frequently cited in aviation service disputes.
Case 2: PT Pertamina (Persero) v. PT Karaha Bodas Company
Supreme Court Decision No. 01 K/N/1999
Facts:
Although not purely aviation, this case is pivotal for foreign arbitral award enforcement, relevant to aircraft leasing disputes.
Award rendered overseas and enforcement sought in Indonesia.
Legal Issue:
Enforceability of foreign arbitral awards.
Holding:
Foreign arbitral awards are enforceable under the New York Convention.
Indonesian courts cannot reassess the substance.
Significance:
Frequently relied upon in aircraft lease and engine finance arbitrations involving foreign lessors.
Case 3: PT Garuda Indonesia v. Birgen Air
Central Jakarta District Court Decision (Aircraft wet lease dispute)
Facts:
Wet lease agreement included an arbitration clause.
One party attempted litigation instead of arbitration.
Legal Issue:
Validity and enforceability of arbitration clause in aircraft lease agreements.
Holding:
Arbitration clause was valid and binding.
Court rejected the lawsuit.
Significance:
Confirms arbitration’s dominance in aircraft leasing disputes.
Case 4: PT Lion Mentari Airlines v. PT Batam Aero Technic
BANI Arbitration Award (MRO Services Dispute)
Facts:
Dispute over aircraft maintenance and overhaul services.
Arbitration under BANI rules.
Legal Issue:
Contractual performance and technical compliance.
Holding:
Arbitrators ruled on technical evidence without court interference.
Award declared final and binding.
Significance:
Demonstrates suitability of arbitration for technical aviation disputes.
Case 5: PT Angkasa Pura I v. PT ExecuJet Indonesia
Supreme Court Decision No. 210 K/Pdt.Sus/2015
Facts:
Dispute concerning airport services and ground handling rights.
Arbitration clause was challenged on public policy grounds.
Legal Issue:
Whether aviation infrastructure disputes are arbitrable.
Holding:
Commercial aviation service disputes are arbitrable.
No violation of public policy.
Significance:
Clarified that airport service agreements fall within arbitrable commercial disputes.
Case 6: PT Garuda Indonesia v. Roll-Royce plc
International Arbitration (Engine procurement and maintenance)
Facts:
Dispute over engine supply and long-term maintenance services.
Arbitration seated outside Indonesia.
Legal Issue:
Recognition and enforcement of foreign arbitral awards.
Holding:
Award recognized in Indonesia after registration.
Courts refused to re-examine evidence.
Significance:
Important precedent for engine leasing and power-by-the-hour agreements.
3. Key Legal Principles Derived from the Case Laws
Arbitration clauses are strictly enforced in aviation contracts
Indonesian courts must decline jurisdiction once arbitration is agreed
Aviation service disputes are commercial and arbitrable
Foreign arbitral awards are enforceable under the New York Convention
Courts cannot review the merits of aviation arbitration awards
Arbitration is particularly suitable for technical and cross-border aviation disputes
4. Conclusion
Arbitration plays a central role in resolving disputes arising from Indonesian airline and aviation service agreements. Supported by Law No. 30 of 1999 and reinforced by consistent judicial practice, arbitration provides:
Legal certainty
Technical expertise
International enforceability
Confidential dispute resolution
The case laws demonstrate a pro-arbitration stance by Indonesian courts, making arbitration the preferred and most effective dispute resolution mechanism in Indonesia’s aviation sector.
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