Choice of Law Rules

How is the law applicable to the substance of a dispute determind?

The Indonesian Arbitration Law concerns questions of procedural Law and not substantive Law. The Law applicable to the substance of a dispute is determined under rules governing the choice of Law, which are not clear.

If the parties to an agreement have elected a choice of Law, then that choice of Law will generally be honoured by the Indonesian court under the participle of freedom of contract, embodies in Article 1338 of the Indonesian Civil Code. The choice of Law may be challanged if it is in  violation of statute or contrary to good morals or public order, as per Article 1337 of the Indonesian Civil Code. The choice of Law applies only to matters of contact (i.e., matters governed by Book III of the Indonesian Civil Code) and not to matters of person (Book I of the Indonesian Civil Code), property (Book II of the Indonesian Civil Code) or statutory Law.

If a contract does not stipulate a choice of Law, then Indonesian choices of Law rules apply. Indonesian Law does not specifically prescribe a rule for determining the governing law of contract. A court  will be likely to apply the rule applicable  to legal acts generally, namely that the Law governing a legal act is Law of the jurisdiction in which the act accurs.