Similar to most jurisdictions, Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (“Indonesian Arbitration Law“) recognises at least two types of decision that can be rendered by a tribunal. The first is a decision solely based on the four corners of contracts and the law (including the parties’ contract), while the second is a decision based on the principles of equity and fairness, also known as ex aequo et bono.
The Indonesian Arbitration Law allows a tribunal to render a decision based on the ex aequo et bono principle, but only if the parties have agreed that the tribunal can do so. However, there has been a recent and worrying trend where arbitral tribunals have applied this principle without the parties’ agreement.
In this article, we look into the statutory framework for the application of the ex aequo et bono principle, and how it has been applied in recent arbitrations.
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