Law Paper
Law Paper
Law Paper
Compiled by:
Naufal Riski - 205210247
FACULTY OF LAW
TARUMANAGARA UNIVERSITY
JAKARTA
2024
THE ROLE OF ARBITRATION IN DISPUTE RESOLUTION
E-COMMERCE ON INTERNATIONAL TRANSACTIONS
ABSTRACT
The development of e-commerce has created new opportunities and challenges in the
world of international business. One of the challenges that arises is the increasing
potential for disputes between business actors and consumers in international
transactions. Dispute resolution in an agreement bond can basically be resolved in various
ways. One way is through the litigation process and settlement by referee court. The
choice of dispute resolution is highly dependent on the willingness of the business
parties, both agreed upon before the implementation of the agreement and the agreement
after the dispute occurs. This journal discusses the role of arbitration in resolving e-
commerce disputes on international transactions. Arbitration is an alternative dispute
resolution outside the court that is based on the agreement of the parties.
ABSTRACT
The development of e-commerce has brought new opportunities and challenges to the
business world. One of the challenges that arises is the increasing potential for disputes
between business actors and consumers in international transactions. Settlement of
disputes that arise in the implementation of an agreement can basically be resolved using
various options. Such as through the lawsuit process in general court and settlement by
referee. This choice really depends on the wishes of the parties, whether agreed before
the implementation of the agreement or agreed upon after a dispute occurs. This journal
discusses the role of arbitration in resolving e-commerce disputes in international
transactions. Arbitration is an alternative dispute resolution outside of court based on
the agreement of the parties.
1
CHAPTER I
BACKGROUND
As at the beginning, the attachment was established on the basis of wanting to find
something mutually beneficial for both parties; this also applies equally in the
steps of efforts to resolve the dispute that occurred. The parties that are established
between each other usually anticipate the worst possibility and prolonged disputes
from the agreements that have been formed. The form of anticipation that has
usually been prepared is, by including a clause in the agreement. Usually the
clause will be written, that if there is a dispute during the agreement or contract,
then the settlement will be carried out by peaceful consensus deliberation efforts
to get a solution in the form of a joint decision. 1 Just as at the beginning the
attachment was established based on wanting to find something mutually
beneficial for both parties, this also applies equally in the steps of efforts to
resolve disputes that occur.2 The parties that are established with each other
usually anticipate the worst possible outcome of the agreement that has been
formed. The form of anticipation is that it has been arranged in advance to know
how to stage and solve problems in the event of a dispute in the business
relationship that will be carried out later. In this modern era, there are already
many ways to resolve a case without going directly to court, one of which is by
using mediation and arbitration channels. The term arbitration itself is an
alternative route that can be carried out both litigated and non-litigation, as a way
of resolving disputes in civil law that is carried out outside the general court based
on the agreement of the two parties in the arbitration agreement made in writing
by both parties to the dispute.3
1
Sarwono Hardjomuljadi, Alternative Construction Dispute Resolution in Indonesia, (Bandung:
Logoz Publishing), p. 7.
2
Grace Henni Tampongangoy, "Arbitration is a Legal Remedy in the Settlement of International
Trade Disputes", Lex et Societatis, Vol. 3 No. 1, Year 2017, p.161.
3
Wahyu Simon Tampubolon., "The Role of an Arbitrator in Dispute Resolution Through
Arbitration", Scientific Journal of Advocacy, Vol. 07 No. 01, Year 2019, p. 21
2
Along with the rapid development of the industrial and technological revolution in
Indonesia, community life is now becoming more practical with the help of
technology in helping to facilitate people's mobility. One of these can also be felt
in the business sector which can be done with electronic-based technology.
Electronic Commerce or commonly abbreviated as e-commerce, is the process of
buying and selling goods or services electronically through the internet. 4 In e-
commerce, business transactions occur online without any direct interaction
between buyers and sellers. The concept of e-commerce has been around since the
early 1970s, but its growth and mass adoption only occurred in the 1990s as the
internet and information technology evolved. Ever since the 1990s e-commerce is
already become one of the most important sectors in the whole wide world
economy and continues to grow rapidly until today. 5 There are several business
models that usually used by e-commerce, here are the following:
3
However, with the various advantages provided by e-commerce, it does not rule
out the possibility of business problems that occur when using it. Legal problems
that generally occur in the use of e-commerce as a business medium include:6
1. Protection of Personal Data
Personal data protection is one of the main issues in e-commerce. Businesses
must comply with data privacy regulations such as GDPR in the European
Union or the Personal Data Protection Law (PDP Law) in Indonesia. They
must ensure that consumers' personal information is stored and processed
securely, as well as obtain appropriate consent before collecting personal
data.
2. Taxes and Regulations on Electronic Commerce
E-commerce taxes can be very complicated since transactions go across
multiple countries' boundaries and authorities. These rules also differ per
nation changing how goods are ordered or delivered from internet based shops.
3. Consumer Protection
When it comes to e-commerce transactions, consumers have rights that have to
be respected. These rights include the right of getting clear information in
relation to products or services, the right for filing complaints as well as
returning items that are not what they wanted and compensation incase of
fraudulent or faulty goods.
4. Abuse of Intellectual Property Rights (IPR)
Pirated or counterfeit products are commonly sold on E-commerce platforms,
thereby infringing on intellectual property rights including trademarks,
copyrights and patents. Businesses must ensure they do not violate others’
intellectual property rights through E-commerce activities.
5. Contract Terms and Online Transaction Law
The seller’s agreement with the consumer must clearly define the terms and
personalized consumer sites must be aligned with the legislation. Thus, it
contains the right and duty of the seller as well as the purchaser. And also how
to return goods and where to address disputes in case they arise.
6. Transaction Security and Online Fraud
Businesses need to take steps to protect online transactions from fraud and
security attacks such as identity theft, phishing, and malware. They must also
ensure that their payment and delivery systems are safe and secure.
7. Data Usage and Analytics
The use of consumer data for analytics and marketing purposes must also
comply with applicable data privacy regulations, and businesses must ensure
that they do not violate consumer privacy in their use of such data.
6
Amran Suadi, Sharia Economic Dispute Resolution: Theory and Practice, (Jakarta: Kencana), p. 7-8.
4
Understanding and complying with applicable legal regulations is important in
running an e-commerce business safely and legally. Therefore, efforts are needed
to resolve effectively and comprehensively in the event of a business dispute,
where this is aimed at not affecting the economic flow of business which is
carried out too late.
In this modern era, dispute resolution efforts are also known as arbitration as an
alternative route that can be carried out both through litigation and non-litigation.
Arbitration itself is a way of resolving disputes in civil law that is carried out
outside the general court based on the agreement of both parties in the arbitration
agreement made in writing by the parties to the dispute. 7 The legal basis
governing dispute resolution by arbitration itself is regulated in Law Number 30
of 1999 concerning Arbitration and Alternative Dispute Resolution. There are
other alternative steps for dispute resolution contained in the article such as
negotiating, conciliation, consultation, providing expert views and opinions, and
resolving by other alternative means that can include as a form of mediation
process.
7
Wahyu Simon Tampubolon., "The Role of an Arbitrator in Dispute Resolution Through
Arbitration", Scientific Journal of Advocacy, Vol. 07 No. 01, Year 2019, p. 21.
8
Candra Irawan, Alternative Law of Dispute Resolution in Indonesia, Revised Edition,
(Bandung: Mandar Maju, 2017), p. 7.
9
Faisal Riza and Rachmad Abduh, "Arbitration Dispute Resolution to Protect Consumers
through the Consumer Dispute Resolution Agency", EduTech Journal, Vol. 4 No. 1, Year 2018, p.
34.
10
Nita Triana, Alternative Dispute Resolution: Alternative Dispute Resolution with
Mediation, Arbitration, Negotiation, and Conciliation Models, (Yogyakarta: Pustaka Ilmu, 2019),
p. 2.
5
Dispute resolution using this arbitration route has actually existed for a long time
in Indonesia, although it has only been crowded in recent years. There are several
regulations that regulate juridically related to arbitration authority, including: 11
1. Article 337 HIR or Article 705 RBG
"If Indonesians or Foreign Orientals want their disputes to be decided by
arbitrators or arbitrators, then they are obliged to comply with the rules of the
courts applicable to Europeans". As explained above, the court regulations
applicable to European Nations referred to in Article 377 of the HIR are all
provisions on Civil Proceedings regulated in the RV.
2. Article 615 – Article 651 RV
The rules regarding arbitration in the RV are set out in Book 3 of the First
Chapter of Articles 615 to 651 of the RV, which include the approval of the
arbitration and the appointment of arbitrators, the pre-examination of the
arbitration, the arbitral award, the efforts to appeal the arbitral award, and the
termination of the arbitral proceedings.
3. Article 3 paragraph (1) of Law Number 14 of 1970 concerning the Principal
Provisions of Judicial Power Settlement of cases outside the court on the
basis of peace or through referees or arbitration is still allowed.
4. Article 80 of Law Number 14 of 1985 concerning the Supreme Court
The only law about the Supreme Court that applies in
Indonesia, namely Law No. 14 of 1985, does not regulate arbitration at all.
The transitional provisions contained in Article 80 of Law No. 14 of 1985,
stipulate that all existing implementing regulations regarding the Supreme
Court are declared to remain valid as long as these regulations do not
contradict this Supreme Court Law. In this case, we need to refer back to Law
No. 1 of 1950 concerning the Composition of Power and the Court Road of
the Supreme Court of Indonesia. Law No. 1 of 1950 appoints the Supreme
Court as the court that decides in the second instance an arbitral award
regarding a dispute involving an amount of money more than Rp. 25,000
(Article 15 Jo. Article 108 of Law No. 1 of 1950).12 reviews
5. Law No. 5 of 1968 concerning the Ratification of the Convention on the
Settlement of Disputes Between States and Foreigners Regarding Investment
or as a form of ratification of the International Convention on the Settlement
of Investment Disputes Between States and Nationals of Other States:
This law states that the government has the authority to give approval for a
dispute regarding 5 foreign investments to be decided by the International
Centre for the Settlement of Investment Disputes (ICSD) in Washington.
11
Didin R Dinovan, "The Authority of the Commercial Court to Adjudicate Bankruptcy Cases
Against the Existence of Arbitration Clauses in Agreed Agreements", Supremacy Jurnal Hukum,
Vol. 1 No. 2, Year 2019, p. 91.
12
Directorate General of the Ministry of Law and Human Rights, "Harmonization of Laws and
Regulations", http://ditjenpp.kemenkumham.go.id/htn-dan-puu/421-harmonisasi-
peraturanperundang-undangan.html, Directorate General of Laws and Regulations, (accessed April
28, 2024).
6
6. Presidential Decree Number 34 of 1981
The Indonesian government has ratified the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards, abbreviated as the New York
Convention (1958), the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, which was held on June 10, 1958 in New York and
initiated by the United Nations.
7. Supreme Court Regulation Number 1 of 1990
Furthermore, with the ratification of the New York Convention with
Presidential Decree No. 34 of 1958, the Supreme Court issued Supreme Court
Regulation (PERMA) No. 1 of 1990 concerning Procedures for the
Implementation of Foreign Arbitral Awards, on March 1, 1990 which took
effect from the date of issuance.
8. Law Number 30 of 1999 concerning Arbitration and Alternative Dispute
Resolution13
As the latest provision regulating arbitration institutions, the government
issued Law No. 30 of 1999 concerning Arbitration and Alternative Dispute
Resolution, on August 12, 1999 which is intended to replace the regulations
on arbitration institutions that are no longer in accordance with the
development of the times and the progress of international trade. Therefore,
the provisions regarding arbitration as referred to in Articles 615 to 651 RV,
Article 377 HIR, and Article 705 RBG, are declared invalid. Thus, the
procedural law provisions of the current arbitration institution have used the
provisions contained in Law No. 30 of 1999.
According to the statement submitted by H.M.M. Purwonosutjipto said that the
use of the term referee in arbitration is interpreted as a form of peace justice,
where the parties will later agree that disputes that occur regarding personal rights
that they cannot fully control will be examined and tried by impartial judges
appointed by the parties themselves and the decision is binding for both parties. 14
In carrying out its duties, there are 2 (two) basic principles of arbitration that must
be upheld and carried out by arbitrators when handling the settlement of disputes,
namely:15
1. Dispute resolution with this arbitration effort must be carried out based on a
fair, fast, and independent settlement in finding solutions to the problems to
be solved;
2. The settlement of cases outside the court on the basis of peace is carried out
by ensuring the confidentiality of disputes, avoiding various forms of delays
caused by procedural and administrative problems, and the settlement must
emphasize solutions using the concept of win-win-solution for both parties to
the case.
13
Indonesia, Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution,
Ps. 4 paragraph (2): "The agreement to resolve disputes through arbitration as referred to in
paragraph (1) is contained in a document signed by the parties."
14
Firda Ainun Fadillah and Saskia Amalia Putri, "Alternative Dispute Resolution and
Arbitration (Literature Review of Ethics), Journal of JIMT: Journal of Applied Management
Sciences, Vol.2 No.6, Year 2021, p.5
15
Sarman Sinaga, Reconstruction of Business Dispute Resolution in Electronic Transactions
(E-Commerce) Based on the Value of Justice, (Doctoral thesis: Sultan Agung Islamic
University, 2019), pp. 25-26.
7
In Article 1 paragraph (1) of Law Number 30 of 199 concerning Arbitration, it is
explained that arbitration is a way of resolving civil disputes outside the court
based on an arbitration agreement that has been written and agreed upon by both
parties. Thus, the arbitration clause itself is a unit of arbitration and cannot be
separated from the existing principal agreement. 16 Therefore, the arbitration
clause in this agreement must be carefully drafted, accurate, and binding.
In their contracts with each other, those who are in dispute when they both trade
online will say they want it resolved out-of-court instead of going to court
[arbitration]. Among others, for these clauses to be comprehensive and concise
one must file certain documents such as what method should be employed during
dispute resolution-arbitration procedures-, what persons should act as arbitrators
(arbitration procedure)-the type of law (governing arbitration). The legal setting
that discusses this in Indonesia includes: Regulation No. 30/1999 on Arbitration
as well as its Supreme Court Directive 4/2016 on Arbitration Guidelines.
Therefore, it is important for the parties involved to understand the arbitration
procedure, select a suitable arbitral institution, and undergo the process in good
faith in order to achieve a fair and satisfactory settlement.
16
Didin R Dinovan, "The Authority of the Commercial Court to Adjudicate Bankruptcy Cases Against the Existence of
Arbitration Clauses in Agreed Agreements", Supremasi Jurnal Hukum, Vol. 1 No. 2, Year 2019, p. 91.
17 Pujiyono, "Absolute Authority of Arbitration Institutions", Journal of Rechts Vinding, Vol. 7 No. 2,
Year 2018, p. 245.
18 Jeffry Latumahina, "The Legal Relationship of the Arbitration Calendar with the Jurisdiction of the
District Court", Ecodemica Journal, Vol. 4 No. 2, Year 2020, p. 291.
8
When looking at business disputes that occur in the international realm, the
parties involved must determine the choice of law that will later be used in
practice. Arbitration agreements usually set out the law that will govern the
dispute. This law can be the national law of one of the parties, international law,
or special law related to the subject matter of the agreement. After the election of
the law is enforced, then the
It will also affect the jurisdiction of the courts in looking at the recognition of the
enforcement of arbitral awards by courts in various jurisdictions. 19 This is based
on the arbitration agreement usually stipulating the scope of the arbitration
authority, i.e. the types of disputes that can be submitted to arbitration. This
arbitration authority shall be consistent with applicable law and other relevant
provisions.20 Therefore, the location where the arbitral proceedings will take
place is also specified in the agreement. These locations are usually chosen based
on considerations of practicality, cost, and other relevant factors.21 reviews
PROBLEM FORMULATION
After explaining the background above, the author compiles 2 (two) problem
formulations that can be further studied for the problem as follows:
19
Ni Nyoman Adi Adisti & Jefry Tarantang, "Business Dispute Resolution Through Arbitration
Institutions", Al-Qardh Journal, Vol. 3 No. 2, Year 2018, p. 115.
20
Cut Memi, International Commercial Arbitration, Application of Clauses in District Court
Decisions, (Jakarta: Sinar Grafika, 2017), p. 51.
21
M. Alvin Syahrin, "Determination of Authoritative Forums and Dispute Resolution Models for
International Business Transactions Using E-Commerce: A Study of Legal Certainty in National
Economic Development", Journal of Rechts Vinding, Vol. 7 No. 2, Year 2018, p. 211.
9
CHAPTER II
ANALYSIS
In today's digital age, living a life full of rapid expansion and improvement, e-
commerce is one of the most active and growing sectors of the industry. This
increase is made possible by the growth in the number of new companies trading
personal goods, and services over the internet. But it also led to an increase in
disputes, which became increasingly complex and represented a new testing
ground for the law. One of the most popular methods and ways of solving them is
arbitrage in e-commerce. This is possible due to several advantages of arbitration
that make it more efficient than trial in court. This article discusses this method,
why it is effective, and what are its benefits and challenges.
1
Dian Rubiana Suherman, ONLINE ARBITRATION IN BUSINESS DISPUTE RESOLUTION AS A
FORM OF CONSUMER RIGHTS PROTECTION
2
Barkatullah, Abdul Halim. "Application of online arbitration in e-commerce transaction dispute
resolution." Ius Quia Iustum Law Journal 17.3 (2010): 363-382.
1
0
Arbitration is often used as a dispute resolution method by international e-
commerce companies for a variety of reasons, making it more attractive than
traditional litigation. The speed of the dispute process is one of the main
advantages of arbitration. In the fast pace of the international eCommerce sector,
time cannot be afforded. Arbitration beats litigation because parties give
arbitrators specific timeframes. This means that time sensitive approach helps to
forestall long term business interruptions through quicker settlement of disputes.
There often remains a significant interference with business practices through old-
style judicial processes mainly because of slowness and bureaucratic red tapes.
Conversely, the effectiveness of arbitration is evidenced by the faster but more
organized settlements which reduce the timing for one to get an award.3
Even though arbitration costs are relatively high, they’re usually more efficient
than lengthy litigation expenses. Costs matters in international e-commerce since
profit margins may be thin. Parties to an arbitration can regulate costs more easily
than parties to litigation because of the possibility to decide how many arbitrators
would sit, at what point the hearing should start or end and how intricate a matter
they want heard.4 Also, the indirect consequences of avoiding long litigations
include disruptions in the reputation of companies and businesses. It can also help
to lower the indirect expenses including lost productivity and disruptions to
normal operations by shortening the disagreement settlement period; it is also
important to note, though, that arbitration cost varies, too. Arbitration experts who
are high rated and skilled can ask for substantial amounts. Nonetheless, these
expenses usually depend on the advantages gotten, saying promptness in settling
disputes and more targeted ones together with useful decisions. Moreover, to
lessen the time when resolving disputes, such a method is also beneficial in that it
in return reduces consequential costs such as lowered work output or harm done
to one’s commercial activities.
Most often than not arbiration dispute resolution is more cost-effective compared
to ordinary litigation. What traditional courts do is to charge the attorney fees,
litigation costs, and many are unpredictable in most circumstances. The cost is
more predictable because arbitration puts more decisionmaking powers into the
hands of the parties – they control arbitrator selection, determination of the
arbitration schedule and venue and can make adjustments to save costs.
3
Salami, Rochani Urip, and Rahadi Wasi Bintoro. "Alternative Dispute Resolution in Electronic
Transaction Disputes (E-Commerce)." Journal of Legal Dynamics 13.1 (2013): 124-135.
4
Barkatullah, Abdul Halim. "Application of online arbitration in e-commerce transaction dispute
resolution." Ius Quia Iustum Law Journal 17.3 (2010): 363-382.
1
1
In international e-commerce disputes often involving sensitive information such
as customer data and trade secrets, the level of confidentiality that arbitration
offers is huge. It cannot be achieved through public litigation. The arbitration
proceedings are closed to the public, and the results are not publicized, thus
protecting the privacy of the parties and safeguarding the company's reputation. It
is essential for the parties to allow for justice and be pleased with the outcome of
the case. This is only possible when both parties can share their evidence and
arguments freely without worrying about their image or place in the market.
Enforcing awards is made easier when disputes are arbitrated internationally. The
New York Convention of 1958 concerning the Recognition and Enforcement of
Foreign Arbitral Awards permits recognition and enforcement of arbitral awards
globally. The principle underlying this is that parties can expect their dispute
resolution or judgments from courts to bear fruit in many nations; something
important when it comes to cross border e-commerce transactions as such actions
may be subject to different legal systems within various regions of the world.. 5
There have been various crucial cases that have taken place highlighting the
utilization of arbitration in e-commerce disputes. Domain name ownership and
use disputes are commonly arbitrated, for instance with UDRP being the most
preferred route to resolve such issues. UDRP requires for three arbitrators to be
involved in order to come up with quick and efficient outcomes on domain name
disputes. Furthermore, arbitration is used for resolving conflicts about copyrights,
patents and trademarks concerning e-commerce. Arbitrators with special expertise
in the field of intellectual property can render precise and in-depth rulings on
technical issues. Contract disputes between e-commerce platforms and sellers or
between sellers and buyers can also be resolved through arbitration, including
disputes regarding breach of contract, product non-conformity, and payment
issues. While resolving disputes using arbitration has many benefits, there are
several challenges that it faces. One of them is because the cost of arbitration can
be very high if the dispute case is handled with a highly skilled arbitrator or the
dispute has many disputes involving many witnesses and technical evidence.
Arbitration hearings are always conducted in closed rooms, in the sense that they
are not open to the public, and decisions pronounced in closed hearings are almost
never made public. Thus, the settlement through arbitration is expected to
maintain the confidentiality of the parties to the dispute.41The principle of
examination conducted behind closed doors at each stage can also be seen in
Article 14 paragraph (5) of the BANI Procedure Regulations which reads: "All
examinations are conducted with closed doors." 42This principle must not be
violated, the consequences can be fatal. As a result, the examination and decision
are null and void so that the dispute must be re-examined with the door closed.
Only such consequences can be overcome by asking for the consent of both
parties.
However, these costs often outweigh the benefits obtained for resolving the
dispute case itself.
5
DEWI, NI WAYAN LISNA, I. GUSTI KETUT ADNYA WIBAWA, and I. WAYAN ANTARA.
"Arrangements for the Recognition and Enforcement of International Arbitral Awards Based on the 1958
New York Convention in Indonesia." Scientific Magazine of the University of Tabanan 18.1 (2021): 121-
127.
1
2
The success or failure of an arbitration proceeding depends largely on whether the
parties agree to participate in the arbitration proceeding. Without this consent, the
arbitration cannot take place. In addition, cultural and legal differences in
international conflicts can pose challenges in understanding and resolving
conflicts. For arbitrators to be able to make a just and equitable award, they
should take cognisance of these degeneracies in dispute resolution. Public
authorities and other regulators play a key role in promoting the utilization of
arbitration within the realm of internet trade disagreements/cases .
Comprehensible legal framework and promotion about trade arbitration would
enhance the trust which firms have towards such arrangements. Some nations
have enacted statutes that promote arbitration and mediation thereby reducing
litigation costs. It is crucial to establish a supportive legal context and to give
certainty and clarity to all parties who resort to arbitration as a means of settling
disputes. 6
6
Fadillah, Firda Ainun, and Saskia Amalia Putri. "Alternative Dispute Resolution and Arbitration
(Literature Review of Ethics)." Journal of Applied Management Science 2.6 (2021): 744-756.
7
Riza, Faisal, and Rachmad Abduh. "Alternative Dispute Resolution by Arbitration through the Utilization
of Information Technology." De Lega Lata: Journal of Legal Sciences 4.1 (2019): 77-86.
8
Matheus, Juan. "E-Arbitration: Digitization of Business Dispute Resolution in the E-Commerce Sector in
Welcoming the Industry 4.0 Era in the Midst of the Covid-19 Pandemic." Lex Renaissance 6.4 (2021): 692-
704.
1
3
Arbitrage has also adapted to technological advancements, which is increasingly
relevant in e-commerce business. Many arbitral institutions now offer online
arbitration, which allows parties to participate in the arbitration proceedings
without having to be physically present. This reduces travel costs and makes it
easier for parties in different geographical locations to resolve their disputes.
Online arbitration uses a secure digital platform to conduct hearings, deliver
documents, and communicate. This technology not only improves the efficiency
of the process but also makes arbitration more accessible to all parties involved.
Flek's understanding of e-commerce-specific technology and terminology ensures
that decisions are made more relevant and on target. This is very important to
ensure justice and satisfaction of the parties to the dispute. Expert arbitrators can
also offer creative and practical solutions that may not be possible through
conventional court proceedings. Confidentiality is one of the main advantages of
arbitration, especially in the context of e-commerce. Business disputes often
involve sensitive information such as customer data, trade secrets, and business
strategies that they do not want to disclose to the public. Open court proceedings
can cause this sensitive information to become public, which can damage a
company's reputation and provide a competitive advantage to competitors.
Arbitration, on the other hand, offers a more closed process, where only the
parties involved and the arbitrator have access to sensitive information. This
confidentiality allows the parties to be more open in providing their evidence and
arguments, without fear of negative impact on their reputation or market position.
Along with the times, e-court was then introduced by the Supreme Court. Now the
administrative arrangements for cases and trials in the court electronically are
regulated separately into Perma 1/2019. Meanwhile, if referring to Article 4
paragraph (3) of Law 30/1999 which states: "In the event that it is agreed that the
settlement of the dispute through arbitration occurs in the form of an exchange of
letters, then the delivery of telephone, telegram, facsimile, e-mail or in the form of
other means of communication, must be accompanied by a record of receipt by
the parties."9 With the above law, now arbitration for international e-commerce
dispute resolution can be carried out more easily with the existence of online
arbitration, online arbitration is the latest innovation that is increasingly popular in
e-commerce dispute resolution. Online arbitration platforms allow parties to file
their cases, submit evidence, and participate in hearings over the internet. This not
only reduces travel costs but also makes the process more accessible for parties
from different geographical locations. The use of technology in arbitration, such
as video conferencing and electronic documents, improves process efficiency and
reduces logistical barriers. This allows disputes to be resolved quicker and less
expensively, and offers more options to geographically and financially restricted
parties.
9
Ningtyas, Gerynica Ayu. Application of Law Number 30 of 1999 concerning Arbitration and Alternative
Dispute Resolution to Online Trade Dispute Resolution (E-commerce) through Online Arbitration. Diss.
Brawijaya University, 2014.
1
4
10
Arbitration is a dispute resolution technique that takes place outside court systems
and has been employed in various sectors for many years. E-commerce disputes
are also resolved through arbitration in today’s rapidly changing digital era. As
one of the most vibrant and rapidly expanding industries, e-commerce often
witnesses different forms of conflicts that necessitate prompt solutions. To
determine how effective arbitration, One of arbitration’s benefits is that when the
arbitrator makes an award it will be considered final and immutable hence parties
are required to accept its ruling, therefore, curtailing the possibility of dragging
cases as it happens with normal courts. As such, when scrutinizing arbitration
procedurally it amounts to scrutinizing several significant aspects namely;
quickness in reaching settlements, the costs involved, arbitrator’s familiarity with
the case at hand, secrecy surrounding a particular case – thereby ensuring minimal
publicity regarding the same – in addition to abidance by the established arbitral
awards. It thereby decreases the probability of long and dragged out legal disputes
that are often typical of traditional litigation. Moreover, arbitral awards are easier
to enforce in external jurisdictions compared to court judgments due to
international conventions such as the New York Convention on the Recognition
and Enforcement of International Arbitral Awards. In the field of e-commerce,
where transactions typically span countries, this renders its execution in various
jurisdictions a huge plus. This ensures that the parties can reach an effective and
efficient settlement, without having to engage in complex and repetitive legal
proceedings in different countries. So, it can be concluded that Law 30/1999
opens up opportunities to use internet instruments. [2] The same thing was also
said by the Deputy Chairman of the Indonesian National Arbitration Board
(BANI), Huala Adolf, explaining that arbitration dispute resolution is allowed
using electronic means, as stipulated in Article 14 paragraph (4) of the BANI
Arbitration Rules and Procedures 2022 also regulates: "... Internal meetings and
hearings of the Arbitral Tribunal may be held at any time and place, including via
the internet, if the Arbitral Tribunal deems it necessary."
Indonesia itself already has a set of rules that support the implementation of
online arbitration as a mechanism for resolving e-commerce disputes, as well as
encouragement from the President through Presidential Instruction Number 74 of
2017 concerning the Roadmap of the Electronic-Based National Trade System
(Road Map E-Commerce) for 2017-2019. In the regulation, there is consumer
protection with the aim of building consumer trust with a comprehensive legal
framework that will accommodate:
1. Classification of e-commerce business actors: divided based on various
factors, including business scale, business model, and role in the e-
commerce ecosystem.
2. Electronic authentication: used to encrypt data transmitted between users
and e-commerce servers.
3. Accreditation process: This accreditation is essential for building
consumer trust, improving a company's reputation, and ensuring that the
business adheres to established quality, safety, and ethical standards.
10
Arum Afriani Dewi. Online Arbitration in the Era of the Industrial Revolution 4.0 and the COVID-19
Pandemic. Journal of Legal Reasoning, Vol. 3, No. 2, 2021;
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4. Payment mechanism policy: payment mechanism policies are essential to
ensure safe, efficient, and convenient transactions for consumers around
the world. This policy involves various aspects, from the choice of
payment methods to transaction security.
5. Consumer and industry player protections specific to electronic-based
commerce (e-commerce) transactions: These protections cover various
aspects of law, regulation, and best practices designed to ensure safe, fair,
and transparent transactions for all parties involved.
6. Online dispute resolution scheme: a dispute resolution process that uses
digital technology to facilitate the resolution of problems between parties
to a conflict. In the context of international e-commerce, ODR is
becoming increasingly important as transactions occur across borders, and
traditional courts are often impractical or effective.
7. Internalization of consumer protection specifically for e-commerce in
national consumer protection strategies: Consumers in e-commerce
transactions often face risks such as fraud, inappropriate goods, data
privacy issues, and lack of transparency. Therefore, the internalization of
consumer protection in national strategies is very important to ensure
consumer trust and convenience in online transactions, especially in the
context of international business.
8. Electronic-based (e-commerce) business actor information application
system: a digital platform designed to facilitate and manage various
aspects of online business transactions between countries. The system
integrates a wide range of functions and services to ensure efficient and
secure operations in international electronic commerce.11
11
Ridayati, Emanuella, et al. "The Imposition of E-Commerce Tax After the Promulgation of Law Number
11 of 2020 concerning Job Creation." Lex Specialis Journal 1.2 (2020).
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The dispute resolution process was submitted to the Singapore International
Arbitration Centre (SIAC) for follow-up, this arbitration panel consisted of 3
people formed to handle this case. The arbitration panel in this case consists of
arbitrators who are experienced in the field of e-commerce and intellectual
property.
This ensures that cases are handled by individuals who have in-depth knowledge of
relevant issues. The parties presented their evidence and arguments before the 3
arbitration panels. The license agreement between Alibaba and Lazada clearly
defines the rights and obligations of each party. This assists the arbitral tribunal in
understanding the nature of the dispute and in reaching an appropriate award.
Alibaba was able to provide strong evidence to support its allegations against
Lazada. This is especially important in arbitration cases, as the arbitral tribunal
does not have the same authority as the court to compel the disclosure of evidence.
In the context of e-commerce, where transactions are often cross-country, the ease
of enforcement of arbitral awards in various jurisdictions is a great advantage. This
ensures that the parties can reach an effective and efficient settlement, without
having to engage in complex and repetitive legal proceedings in different countries.
The arbitral panel issued a ruling in favor of Alibaba in part and ordered Lazada to
pay damages to Alibaba. This case shows that arbitration can be an effective forum
for resolving complex and cross-border e-commerce business disputes. The
arbitration panel has the necessary expertise and experience to understand the
technical issues involved in the case and to reach a fair and equitable solution.
From this case, several important points can be analyzed as follows:
The legal document between Alibaba and Lazada spells out the rights and
responsibilities of each party for a common understanding among
arbitrators so they can come up with appropriate decisions.
Supports its allegations with strong evidence: According to its accusations
of Lazada, Alibaba supports it with such strong evidence that turns out to
be of great importance when it comes to solving e-commerce
disagreements during international transactions where arbitral tribunals are
not endowed with the same powers as state courts in terms of compelling
parties to produce evidence.
Feasibility of arbitration committee: These arbitrators have extensive
knowledge on e-commerce and intellectual property rights; therefore cases
are only tackled by those persons who possess sufficient understanding
about them
The arbitral tribunal's award in this case has significant consequences for
both parties including getting compensated for Lazada's breach of the
license agreement and changing Lazada’s business practices to adhere to
the agreement.
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The limitation of the Alibaba v. Lazada scenario shows that for complicated e-
commerce business disputes involving different nations, arbitration can work
well. Whenever parties make deals across the borders in e-commerce, it is
important for them to take into account arbitration as one of the available ways of
addressing any eventualities that may arise from such transactions. By way of
example, this matter indicates how international arbitration can effectively
facilitate resolution of e-commerce disputes:
Fast and Efficient Resolution: Arbitration proceedings only take about 10
months, compared to court proceedings that can take years. This is
important for e-commerce businesses that need quick legal certainty.
Fair and Reasonable Solution: The arbitral tribunal's award obliges Lazada
to pay damages to Alibaba for Lazada's breach of the license agreement.
This shows that arbitration can result in a fair and reasonable solution for
both parties.
Confidentiality: The arbitration process is confidential, so sensitive
information about both parties' business is not disclosed to the public. This
is important for e-commerce businesses that want to maintain their
reputation.
Enforcement of Strong Awards: Binding arbitral awards are enforceable in
most countries in the world under the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards. This ensures
that the winning party in the arbitration can obtain an effective settlement.
12
Riza, Faisal, and Rachmad Abduh. "Alternative Dispute Resolution by Arbitration through the Utilization
of Information Technology." De Lega Lata: Journal of Legal Sciences 4.1 (2019): 77-86.
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II. WHAT IS THE ARBITRAL AUTHORITY IN HANDLING E-
COMMERCE BUSINESS DISPUTES ON INTERNATIONAL
TRANSACTIONS?
13
Ibid, p.142
14
Article 5 of Law No. 30 of 1999
15
Explanation of Article 66 of Law No.30 of 1999
16
Ibid, p.144.
17
Article 1 of the BANI Arbitration Procedure Rules
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In order for a dispute to be submitted to the Indonesian National Arbitration
Board (BANI) for examination and adjudication, in the agreement made by the
parties there must be an article containing the following arbitration clause: "All
disputes arising from this agreement shall be resolved and decided by the
Indonesian National Arbitration Board (BANI) in accordance with the rules of the
procedure of the Indonesian arbitration. Bani's decision is binding on both parties
to the dispute, as the first and last decision." It is important to note that in the
arbitration clause or arbitration agreement, it is stated that the arbitral/BANI
award is binding on both parties as the first and final award, which cannot be
compared to the Supreme Court. Taking into account the nature of arbitration as a
voluntary or extra-judicial institution, compared to a court which is an official
body with the function and authority to adjudicate cases, can the arbitration clause
agreed upon by the parties get rid of the court's jurisdiction to examine and
adjudicate disputes? For more details, the following will be discussed about the
absolute authority of arbitration and the general principles of arbitration.
If it has been agreed by the parties in the agreement to bring a civil case to
arbitration, then the dispute must be resolved through an arbitration forum, this is
as stipulated in Article 3 of the Arbitration Law which reads: "The District Court
is not authorized to adjudicate disputes between parties who have been bound by
an arbitration agreement."18
18
Article 3 of Law No. 30 of 1999
19
Frans Hendra Winarta, Op.cit, hlm.57.
20
Criminal Code, Permata Press, 2008 p.318
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Since the arbitration clause is an agreement or agreement made by the parties to
the agreement, it applies entirely to the arbitration agreement:21
Arbitration agreement is absolutely binding on the parties
If a dispute arises from what they have agreed on, the authority to
resolve and decide the dispute is "absolutely" the authority of
arbitration.
The court has no authority to examine and adjudicate disputes
absolutely
The lapse of the arbitration clause only occurs if it is expressly
withdrawn upon the agreement of the parties
The law of tacit withdrawal cannot be justified, let alone unilateral
withdrawal.
As stipulated in Article 11 of the Arbitration Law, the State Court is required not
to accept and not participate in cases that have been stated in its agreement that
arbitration is the medium of dispute resolution.
"The existence of a written arbitration agreement negates the right of
the parties to submit the resolution of disputes or differences of opinion
included in the agreement to the District Court."
"The District Court is obliged to refuse and will not intervene in a
dispute settlement that has been determined through arbitration, except
in certain matters stipulated in this law."22
21
Yahya Harhap, O.P. Sit, Halam.88.
22
Article 11 of Law No. 30 of 1999
23
Huala Adolf, Ibid, hlm.26.
24
Ibid, pp.26-27
25
Huala Adolf, Arbitration of ASEAN Countries, Jakarta: National Legal Development Agency, Ministry
of Law and Human Rights of the Republic of Indonesia, 2009, p.51.
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2. GENERAL PRINCIPLES OF DISPUTE RESOLUTION
THROUGH ARBITRATION
26
Huala Adolf, Op.cit, hlm.163.
27
Ibid, p.164
28
Ibid, p.165.
29
Article 18 paragraph (1) of the BANI Procedure Regulations
30
Article 60 of Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution
31
Suleman Batubara and Orinton Purba, Op.cit, pp.88-89.
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c. Principles of Decision-Making Based on Fairness and Propriety
In court institutions, in examining, adjudicating, and giving verdicts, the
approach is more in accordance with the applicable legal provisions. This
means that the decision given is based solely on the application of the law,
which can result in a winning party and a losing party (win-lose). On the
other hand, arbitration-based dispute resolution prioritizes the principles of
fairness and balance, as well as considering the interests of the parties to
the dispute. This approach tends to produce a win-win solution for all
parties involved.32 The principle of decision-making based on propriety
and fairness is emphasized in Article 56 of the Arbitration Law which
reads:
(1) "The arbitrator or arbitral tribunal shall make a decision based on the
provisions of law, or on the basis of fairness and propriety."
(2) "The parties have the right to determine the choice of law that will
apply to the settlement of disputes that may or have arisen between the
parties."33 The litigants (entrepreneurs) usually still want to maintain the
permanence of their business relationship so that a decision that is a win-
win solution is a decision that both parties want.
32
Suleman Batubara and Orinton Purba, Op.cit, p.25.
33
Article 56 of Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution
34
Suleman Batubara and Orinton Purba, Op.cit, p.26.
35
Article 27 of Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution
36
Gatot Soemartono, Arbitration and Mediation in Indonesia, Jakarta: PT Gramedia Pustaka Utama, 2006,
pp.11-12.
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One example of resolving business disputes outside of litigation is the ownership
dispute of PT Cipta Televisi Pendidikan Indonesia (TPI) which has been renamed
MNC TV between Siti Hardiyanti Rukmana (Tutut) and PT Berkah Karya Bersama
(BKB). PT Berkah Karya Bersama (BKB) has filed a legal remedy with the
Indonesian National Arbritase Agency (BANI). Settlement efforts to the Indonesian
National Arbritase Agency (BANI) are in accordance with the investment
agreement made by both parties. The problem arises when one of the litigants is
dissatisfied with the arbitration award, so the dissatisfied party seeks to take
another path, namely through a lawsuit in court with a different object of dispute to
avoid exclusion from the other party.
37
www.Mediaonline.com
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CHAPTER III
CONCLUSION
Arbitration offers several advantages compared to the court route for resolving e-
commerce business disputes, including:
Flexibility and autonomy: Parties to a dispute can determine for themselves the
rules of procedure, arbitrators, and the place of arbitration.
Expertise and specialisation: Arbitrators can be selected based on their expertise
and experience in the field of e-commerce and international transactions.
Confidentiality and privacy: Arbitration proceedings are generally confidential, so
sensitive information about the business and transactions is not disclosed to the
public.
Efficiency and speed: Arbitration proceedings are generally faster and more
efficient than court proceedings.
Enforcement of awards: Binding arbitral awards are enforceable in most countries
of the world.
Case studies show that arbitration can be an effective forum for resolving complex
and cross-border e-commerce business disputes.
Overall, arbitration can be an effective option for resolving e-commerce business
disputes. Parties involved in international e-commerce transactions should consider
arbitration as a viable alternative to resolving disputes that may arise.
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