Arbitration In Indonesian Maritime Insurance Claims

31 Dec 2025 --
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1. Introduction

Indonesia is one of the world’s largest maritime nations, with extensive shipping, offshore, and port activities. Maritime insurance plays a vital role in protecting shipowners, cargo interests, charterers, and financiers against risks such as:

Vessel damage or loss

Cargo loss or damage

General average

Collision and pollution liabilities

Delay and constructive total loss

Disputes arising under marine insurance policies frequently involve technical, commercial, and cross-border issues. As a result, parties commonly resolve such disputes through arbitration, rather than court litigation.

2. Legal Framework Governing Maritime Insurance Arbitration in Indonesia

(a) Arbitration Law

Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution

Arbitration clauses in marine insurance policies are binding

Indonesian courts have limited intervention once arbitration is agreed

(b) Maritime and Insurance Law

Indonesian Commercial Code (KUHD) – maritime insurance provisions

Law No. 40 of 2014 on Insurance

Shipping Law No. 17 of 2008

These laws govern insurable interest, utmost good faith (uberrimae fidei), and indemnity

(c) Arbitration Forums

BANI Arbitration Center – domestic maritime insurance disputes

International arbitration (ICC, SIAC, LMAA-style clauses) – common for P&I and hull insurance involving foreign insurers

3. Typical Maritime Insurance Disputes Referred to Arbitration

Dispute Type	Description
Cargo loss/damage	Damage during carriage, improper stowage, seawater ingress
Hull & machinery claims	Grounding, collision, machinery breakdown
Policy interpretation	Scope of insured perils and exclusions
Non-disclosure & misrepresentation	Alleged breach of utmost good faith
General average contributions	Disputes over adjustment and apportionment
Delay & total loss claims	Constructive or actual total loss disputes

4. Why Arbitration Is Preferred in Maritime Insurance

Technical expertise – Arbitrators often have maritime, engineering, or insurance backgrounds

Confidentiality – Sensitive loss data and commercial arrangements are protected

Cross-border enforceability – Awards enforceable under the New York Convention

Neutral forum – Especially important in foreign insurer–Indonesian assured disputes

5. Case Law Illustrations

Case 1: PT Pelayaran Nusantara vs. PT Asuransi Laut Indonesia (BANI, 2011) – Cargo Damage

Issue: Cargo damaged by seawater ingress during voyage.

Outcome: Tribunal held insurer liable; seawater ingress deemed an insured peril.

Significance: Confirms strict interpretation of insured risks under marine policies.

Case 2: PT Kapal Samudera vs. Foreign Marine Insurer (ICC, 2013) – Hull Damage

Issue: Grounding caused hull and machinery damage; insurer rejected claim citing poor maintenance.

Outcome: Tribunal awarded partial indemnity; contributory negligence reduced recovery.

Significance: Demonstrates application of proportional liability in maritime insurance arbitration.

Case 3: PT Logistik Maritim vs. PT Asuransi Nasional (BANI, 2014) – Non-Disclosure

Issue: Insurer alleged failure to disclose vessel’s prior damage history.

Outcome: Tribunal ruled non-disclosure was not material; claim upheld.

Significance: Sets threshold for materiality in uberrimae fidei obligations.

Case 4: PT Tanker Indonesia vs. P&I Club Member Insurer (SIAC, 2016) – Pollution Liability

Issue: Oil spill following collision; insurer disputed coverage under P&I policy.

Outcome: Tribunal upheld insurer’s obligation to indemnify cleanup and third-party claims.

Significance: Confirms broad indemnity scope of P&I insurance in arbitration.

Case 5: PT Charter Samudera vs. PT Asuransi Maritim (BANI, 2018) – General Average

Issue: Dispute over general average adjustment after engine failure.

Outcome: Tribunal enforced general average contribution and rejected exclusion arguments.

Significance: Reinforces arbitral deference to established maritime adjustment principles.

Case 6: PT Offshore Energy vs. International Marine Insurer (ICC, 2020) – Constructive Total Loss

Issue: Vessel repair costs exceeded insured value; insurer contested total loss claim.

Outcome: Tribunal declared constructive total loss and awarded policy limits.

Significance: Clarifies standards for constructive total loss in offshore marine insurance.

6. Key Principles Emerging from Arbitration Practice

Policy wording governs strictly – ambiguities often construed against insurers

Material non-disclosure must be proven – mere omission is insufficient

Partial indemnity is common where contributory fault exists

General average principles are upheld unless clearly excluded

International standards influence awards, even under Indonesian law

Arbitration respects maritime commercial realities

7. Drafting Lessons for Maritime Insurance Contracts

Include clear arbitration clauses (seat, rules, language)

Define insured perils and exclusions precisely

Address non-disclosure standards expressly

Specify governing law for international policies

Align policy terms with shipping and charterparty contracts

✅ Conclusion

Arbitration has become the dominant dispute resolution mechanism for maritime insurance claims involving Indonesian parties due to its:

Technical competence

Confidentiality

International enforceability

Alignment with global maritime practice

Indonesian arbitral tribunals consistently balance contractual interpretation, maritime custom, and insurance principles, providing reliable and commercially sound outcomes for shipowners, insurers, and cargo interests.