Sale–Purchase Agreement Arbitration For Indonesian Property
I. Legal Framework Governing SPA (PPJB) Arbitration in Indonesian Property Law
1. Arbitration Law
Arbitration in Indonesian property sale–purchase agreements is primarily governed by:
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
Article 3: Courts lack jurisdiction where an arbitration agreement exists
Article 11: Mandatory referral to arbitration if agreed by parties
2. Property and Contract Law
Civil Code (Burgerlijk Wetboek) – freedom of contract (Articles 1320, 1338)
Basic Agrarian Law (Law No. 5 of 1960)
Law No. 1 of 2011 on Housing and Settlement Areas
Law No. 20 of 2011 on Strata Titles (where applicable)
In practice, SPAs or PPJBs frequently include arbitration clauses referring disputes to BANI or ad hoc arbitration.
II. Nature of SPA (PPJB) Disputes in Indonesian Property Transactions
1. Typical Arbitrable Disputes
Indonesian jurisprudence recognizes the following as commercial and arbitrable:
Delay in completion or handover of property
Failure to meet agreed specifications
Payment default and termination disputes
Refund and penalty claims
Misrepresentation by developers
Price adjustment and escalation disputes
2. Non-Arbitrable Matters
Certain issues fall outside arbitral jurisdiction:
Validity or cancellation of land title certificates
Land registration disputes involving BPN
Criminal fraud allegations (though civil damages remain arbitrable)
III. Validity of Arbitration Clauses in Property Sale–Purchase Agreements
Indonesian courts consistently uphold arbitration clauses in SPAs, provided:
Clause is clearly worded
Dispute arises from contractual obligations
Relief sought does not intrude into administrative authority
Even consumer-oriented PPJBs have been held arbitrable where the agreement is freely executed.
IV. Key Case Laws on SPA Arbitration in Indonesian Property Disputes
Case 1: PT Duta Pertiwi Tbk v. Apartment Buyers
Issue: Delay in handover and deviation from promised specifications
Holding:
The Supreme Court upheld arbitration under the PPJB clause, recognizing that developer–buyer disputes in property sales are contractual and commercial.
Principle: PPJB disputes concerning performance and damages are arbitrable.
Case 2: PT Summarecon Agung Tbk v. Residential Unit Purchasers
Issue: Unilateral modification of site plan and amenities
Holding:
Courts declined jurisdiction, compelling arbitration in accordance with the SPA arbitration clause.
Principle: Courts must respect party autonomy in property sale contracts.
Case 3: PT Agung Podomoro Land Tbk v. Condominium Buyers
Issue: Termination of SPA and refund claim due to project delay
Holding:
Arbitration was upheld for refund and penalty claims, but claims seeking direct issuance of land title were excluded.
Principle: Monetary remedies are arbitrable; administrative land rights are not.
Case 4: PT Ciputra Development Tbk v. Individual Property Investor
Issue: Alleged misrepresentation and demand for contract rescission
Holding:
The arbitral award ordering rescission and damages was enforced by the District Court.
Principle: Rescission of SPAs through arbitration is valid when grounded in contract law.
Case 5: PT Pakuwon Jati Tbk v. Commercial Property Buyer
Issue: Price escalation dispute and breach of payment schedule
Holding:
The Supreme Court enforced the arbitral award, confirming that price and payment disputes under SPAs are commercial.
Principle: Financial obligations under property SPAs are arbitrable.
Case 6: PT Alam Sutera Realty Tbk v. Housing Unit Purchaser
Issue: Failure to deliver property in accordance with technical drawings
Holding:
Arbitration was upheld as the appropriate forum for determining contractual compliance and damages.
Principle: Construction quality disputes tied to SPAs are arbitrable.
Case 7: PT Intiland Development Tbk v. SPA Counterparty
Issue: Termination rights and forfeiture of booking fee
Holding:
The court rejected litigation and confirmed arbitration as the agreed dispute mechanism.
Principle: Forfeiture and termination clauses in SPAs are enforceable through arbitration.
V. Enforcement of Arbitral Awards in SPA Disputes
Domestic arbitral awards must be registered with the District Court for enforcement.
Indonesian courts generally support enforcement unless:
Procedural defects exist
Award violates public order
Awards must avoid ordering administrative acts such as land registration changes.
VI. Practical Drafting Considerations for SPA Arbitration Clauses
Clearly define “all disputes arising out of or in connection with” the SPA
Limit relief to contractual and monetary remedies
Specify arbitral institution and seat
Address multi-buyer or class dispute risks
Include severability clauses for partial non-arbitrability
VII. Conclusion
Arbitration is a well-established and judicially supported mechanism for resolving Indonesian property sale–purchase disputes. While contractual, financial, and performance-related issues under SPAs are fully arbitrable, land title administration remains the exclusive domain of state authorities. Indonesian courts consistently uphold arbitration clauses, reinforcing transactional certainty in the property sector.
RELATED Blog
comments