Indonesian Merger Control

The term Merger Control can be described as an exercise of oversight/control over merger, acquisition, and consolidation transactions (Business Combinations) of whether such transaction violates the juridical antimonopoly thresholds laid down in the law. The regime of merger control in each jurisdiction may be regulated in different manners, in 1999 Indonesia chooses to promulgate its own Antimonopoly Law contained in Law Numbr 5 year 1999 concerning the Prohibition of Monopolistic and Unfair Business Practices (Antimonopoly Law). In Indonesia the term merger control can be best described by the examination against business combinations which are suspected or considered to have the result (if finalized) of a monopolistic nature. Indonesian merger control is defined in Section 4 Article 28-29 of the Antimonopoly Law, In which KPPU –the Indonesian antitrust watchdog- an abbreviation for Komisi Pengawas Persaingan Usaha (Business Competition Supervisory Comission) under The Antimonopoly regulation has been mandated to exercise authority concerning merger controls.

In reality Merger Control has not been exercised in Indonesia, due to the inavailability of the implementing regulation needed. Under the antimonopoly law a business actor (may be a legal entity or a natural person) has an obligation to report to the authorities inside the period of 30 days after the date of the finalization of the business combinations, which means any merger control examinations are to be conducted ex-post (i.e subsequent to the finalization of a transaction).

Subject to Article 29 of the Antimonopoly Law only business combination transactions which satisfies a certain juridical threshold laid down by Antimonopoly Law are to be reported to the KPPU. For the purpose of setting the benchmark for the antimonopoly law compliance, drafters of the Antimonopoly Law has provided two juridical threshold which are to be considered whether a business combination are to be reported or not, such juridical threshold includes Asset Value and/or Sales Value of the company, however the procedure and mechanism of the test is not yet defined, also due to the inavailability of an implementing regulation needed by the Antimonopoly law.

There is no provision up until this day which gives KPPU the authority to oversee business combinations ex ante. In Indonesia’s case it should be pointed out that it is exceptionally important to introduce this control concept. Due to the inavailability of an ex ante method of control, all business transactions done in the course of completing a merger, consolidation, and acquisition can only be examined by the KPPU only after such transaction has been completed and has the potential to cause unfair business practices. On that basis of that we can immediately consider of two impacts, which are:

1. That conducting examinations regarding an executed and finalized transaction will finally cause the parties to such transaction to suffer considerable loss due to the examination which can include both monetary and time..
2. That such ex post examination method will result in further proceedings, which might reach significant complexity than the examination itself.

Consequently an ex ante examination or a pre merger control of a transaction will help ultimately to reduce these after effects of an ex post method of merger control. Appropriately an ex ante examination should be done by submitting a proposal of any kind of transaction having possibilities of anti trust law or antimonopoly law violation to the KPPU, supposedly this proposal can take the form of submissions containing descriptions of the transactions to be conducted.

Despite the importance of the concept of Merger Control in relation to Monopoly practices, it seemed that so far regulators has been slow in promulgating a regulation which will serve as a guide in the implementation of merger control in Indonesia. Rumor has been spreading that the government is currently discussing and will shortly promulgate two separate regulations implementing the New Company Law and the Antimonopoly Regulation, while KPPU is planning to release a business combination pre-notification regulation however the release date of such regulation is still unclear.

Shares and Transferability under The New Company Law

A. Introduction

One of the more important concepts ever invented in corporate law is the share, how the corporation through ages of development has been going through constant development, how corporations nowadays has not only been seen as an organization of people/entities having the same goal to achieve profit, but also as an entity whose organization and operation has surpassed the limitation of national borders, has become bigger in size and power also due to the development of the concept of the investing in all kinds of form. In this light shares has contributed to the rise to power of corporations as a big organization of capital, spreading its hands and wings globally through production and consumption.

As one out of other important concepts which laid the basis of modern corporate law, the notion of shares, transferability, the rights and obligation attaching to it has been heavily regulated in many if not all countries in the world. This article will discuss mainly the importance of complying with those regulations particularly in the Jurisdiction of The Republic of Indonesia with her prevailing Company Law No. 40 year 2007 (hereinafter will be “The Company Law”) regulating the transferability of shares in company (in this article the discussion will only be done in the context of the private company as opposed to the public company), what is the mechanism regulated by the Company Law and/or other regulations of the Republic of Indonesia governing the transferability of shares.

Therefore to obtain a better understanding of the provisions regulating the transferability of the shares of the company one must first delve into the provisions of The New Company Law, in which it is to be bourne in mind that one of its main concepts is the protection of shareholders particularly the protection of minority shareholders.

B. Transfer of Shares under the Civil Law

First of all shares are something which we can describe as a movable good according to Article 511 (4) of the Burgerlijk Wetboek voor Indonesië (Kitab Undang-undang Hukum Perdata) or the Indonesian Civil Code (hereinafter will be “BW”), however with some limitations in which that the shares will be considered to be movable goods as long as the company still exist, thus this implies whenever the company has been declared bankrupt and/or the process of liquidation has been completed on that date, the title of shares as a movable good and the property rights attaching to it will cease to exist accordingly as well as the ‘erga omnes’ principle of property rights. The description of shares as movable goods can also be found in Article 60 of the New Company Law.

Furthermore as a requirement for the transfer of the shares to be valid, it must comply with the provisions of Article 613 BW in which every abstract goods (in this case included is the share) has to be executed by making an authentic or an unauthentic deed, stating the transfer of rights from the owner to the buyer of the goods. In this case it is clear that a Share Purchase Agreement itself does not accommodate the transfer of rights to the buyer of a share unless a deed of transfer of rights has been executed, therefore the choice is either the inclusion of a provision giving effect to the Transfer of Rights of the shares included in the Share Purchase Agreement bearing the wording that the right of the shares were transferred to the buyer "in feitelijke toestand" or the deed of transfer is to be signed in a separate agreement with the Share Purchase Agreement to transfer the rights of the goods (we recognize this deed under Indonesian Law as an Acte van Transfer).

B. Transfer of Shares under The Company Law

As what has been mentioned before the provision of shares as a movable good is also regulated inside The Company Law. And subsequently as a Lex Specialis to the BW regulating Indonesian Companies, The New Company Law also requires the execution of a deed of transfer of rights of the shares in order for a transfer of shares to be valid (Article 56 of The Company Law), this is as what has been discussed in part A above to be differentiated from the concept of the Share Purchase Agreement (hereinafter will be “SPA”) itself, and therefore the signing of an SPA without an inclusion of a transfer of the rights of the shares to the buyer or an execution of a separate transfer of rights deed will not cause the rights and ownership to be transferred to the buyer. We can in this light therefore for the practical solution of the share purchase include together both the Obligatoire Overeenkomst (the agreement binding both parties only to the extent that both parties are obliged to satisfy each of their obligation and receives their rights towards the other) and the Zakelijke Overeenkomst (the actual agreement concluding an actual transfer of the rights to the good/object of the agreement) into one agreement. The importance of this matter is to be taken into account to avoid any invalidation of the transfer of the shares.

As soon as the deed of the transfer of rights has been concluded, the director of the company will take notes of such transfer of ownership of shares and enter the new shareholders name in the list of shareholders and/or in the special list (the list maintained by the company containing the list of share ownership by the Directors or Commissioners of the Company). Accordingly the Director is obliged to submit the alteration of the list of shareholders and/or the special list to the Minister of Law and Human Rights inside the time frame required by law.

C. The Provision of the Transfer of Shares in the Article of Association

The Company Law gave the choice to drafters/shareholders/founders of the company’s Article of Association (hereinafter will be “AOA”) to have more freedom in drawing up the rules of play for the company i.e the company’s Article of Association, including concerning the provision of the transferability of the shares.

The Company Law gave options to drafters of the company’s Article of Association to choose between three provisions to be included inside the Article of Association governing the transferability of the company’s shares as the following:

1. the requirement to offer the shares to the current shareholders of the company with certain classification or other shareholders of the company;
2. the requirement to obtain approval of the transfer of the shares from Organs of the Company (included inside is the General Meeting of Shareholders, Commissioners, and Directors of the Company);
3. the requirement to obtain previous approval from the relevant authorities according to the relevant prevailing regulations.

Due to the practical and useful character of the transfer provisions regulated in The Company Law we can find these Articles regulating the transfer of shares inside most company’s Articles of Association, nonetheless it is usually varied from one Article of Association of a company to another, nonetheless with the inclusion of the wording "can be regulated" in Article 57 of The New Company Law shows possibilities of the non regulation of the transfer of shares inside the Article of Association.

Other matters to be given attention and to be checked by the buyer regarding the transfer of shares:

1. whether existed a shareholder agreement between the shareholders of the company which limits the transferability of the shares.

2. that if the transfer of the rights of the shares are as a result of a transfer of rights by law ( inheritance, mergers, acquisition and consolidation), then those provision regulated under article 57 of The New Company Law although regulated inside the company’s Articles of Association will have no effect and therefore need not to be satisfied.

To be noted that an act to satisfy the pre-emptive rights regulated in the AOA is only to be done once, and once it is completed and no shareholder reacted to such offer the target shares can be transferred to another party..

D. Transfer of Shares and Approval of the Organs of Company

Transfer of shares can be done to third party by a shareholder, as soon as the following requirements has been satisfied:

1. In the case that a provision of pre-emptive rights has been included in the AOA, a time frame of 30 days has passed without a single shareholder reacting to such offer and/or accepts the offer to buy the shares.

2. In the case that that a provision regulation the requirement to obtain an approval of the company’s organs has been included in the AOA, then after the passing of a 90 days time frame given by law for the Organs of the Company to approve the transaction.

E. Conclusion

Considering the importance of these provision and articles, a buyer of a share of a company must always, check any and every company documents, minutes of meeting, AOA and its alteration, shareholder agreements (if any), in order to be aware whether there is limitations to be satisfied before concluding a transfer of shares to avoid the invalidation of the transaction between the buyer and the seller of a company’s shares.

The possibility of the nonexistence of transfer limitations of shares provisions regulated in the AOA is not many, commonly nowadays the AOA's of Indonesian companies include one or more of these limitations. Therefore ensure and in order to avoid negative impacts diligent research has to be done, and at the least obtaining an approval of the General Meeting of Shareholders of the Company.

Corporate Shareholder Litigation in Indonesian Company Law

I. Corporate Litigation in Indonesian Law

It is acknowledged that in Indonesian Company Law, also taking into account its rather new corporate statute which is the Regulation No. 40 Year 2007 as a sucessor of the old company law provisions stipulated in the KUHD, corporate litigation as a method of stengthening the shareholders position and to correct wrongdoing also vindicating liability of the company directors and the company itself are rarely used.

But in regard of the important use and pragmatic solution provided by the derivative action as one of the important method of corporate governance, Indonesian legislators has also inserted provisions regulating the institution of the derivative action. While this being of corporate litigation have been given life through the New Company Law provisions, other methods such we will find in the american system namely through class action and direct action, is still not clearly regulated in Indonesian Law, in other words there is no prohibition of pursuing director or company liability through class action and direct actions existed in Indonesian legislation nor there is an explicit provision regulating in detail the litigation method. Hereafter in a paragraph excerpted from a book by Munir Fuady, in which he expresses his concerns regarding the need for a stronger basis for other corporate litigation proceedings outside of the derivative action method:

In a company, the derivative action model should have the same (legal) standing with other company litigation methods, such as the shareholders direct suit or the class action suit which is also instituted by the shareholders. Only that, in Indonesian Company Law led by Regulation No, 1 Year 1995, those corporate litigation method have not yet been fully accomodated.[1]

This by no means have rejected the concept of class action and direct action in Indonesian company law based litigation, but merely stating that its application is still rare and therefore in need of a stronger legal basis for vindication of director and commisioners liability.

II. The Derivative Action as an Ex-Post Strategy for Minority Shareholders

The New Company Law as also it predecessor Regulation No.1 year 1995 contained provisions regulating the institution of derivative actions against director(s) and commisioners or the supervising board of the company.

While it has not been regulated exhaustively as with the procedural and substantive law of corporate litigation as in the United States, nonetheless the provisions stipulated in the new company law is sufficiently regarded to be a strong basis in pursuing liability through derivative litigation.

Preceeding regimes of Regulation No.1 Year 1995 and The New Company Law such as the KUHD basically does not acknowledge the principles of minority shareholder protection against wrongdoing by company organs through litigation as have been provided by the former. This condition is in line with the principles of the Persona Standi in Judicio of the old company law (and also in the New Company Law), that the rights to act as representative of the company, can only be done through the company’s organs. The minority shareholders is not allowed to pursue a derivative action[2]. The legal standing or Persona Standi in Judicio of directors to act as representative of the company is stipulated in article 98 of the New Company Law where it is stated that Director(s) represent the Company either inside or outside of court[3], but the number of directors authorized to represent the company somehow vary from company to company on the basis of each specific company bylaws.

In light of these condition and circumstances of barriers to representation of the company by minority shareholders, legislators has created a concept of what is known as a derivative right formed in article 97 (6) and 115 (6) in the New Company Law which is according to Chatamarrasjid Ais in his book, a derivative right according to Indonesian law is a right given or owned by minority shareholders so that he can take specific actions in safeguarding or to represent the company against actions taken by other organs of the company if the company incurs damages.”[4]

So by now we have come to the conclusion that through corporate litigation particularly derivative action, Indonesian company law gives minority shareholders a vehicle to act as representative of the company which can be viewed as an abnormality, where this duty or obligation is normally to be bore by the company’s director by virtue of article 98 of the New Company Law and subject to the articles of incorporation also bylaws of the company. “Why is this derivative action more characteristic to minority shareholders and not majority shareholders?” one might ask, because as for the the majority shareholders their representation on the company’s board and by virtue of their majority ownership of company shares will eventually lead to a dominaton of the general meeting of shareholders, it is viewed that their (majority shareholder) protection has been sufficiently given, while this is not the case with minority shareholders, where often they (minority shareholders) do not have much say in the general meeting shareholders which can lead to abuse of their rights.

But usage of this method is not without boundaries. Inline with the principle of the proper plaintiff, as also can be found in other countries regulating derivative litigations, instituting a derivative action under the New Company Law does also require a shareholder plaintiff to cross a certain threshold, by which a minority shareholder after the fulfillment of the requirement can be regarded as a proper plaintiff thus authorized to also continue pursuing the derivative action against the company directors or a member of the board of commisioner liable for wrongdoing. The article containing provisions as the basis for minority shareholder to institute a derivative action is as the following:

(6) Acting on behalf of the of the company, a shareholder representing at least 1/10 (one tenth) of the whole amount of shares with voting rights can submit to sue through the district court against the company director in which because wrongdoing or negligence incurred damages to the company.[5]

But this derivative vehicle threshold does also pose a problem, that is in this provision the wording refers to a single substantial substantial shareholder who is able to exercise at least 10% of the issued shares with valid voting rights[6]. Thus a pooling of shareholder stakes to reach the 1/10 ownership threshold is not an available choice, this will especially cause barriers for the minority shareholders in a public company eager to use the derivative vehicle, where a dispersion of share ownership is so apparent that it is impossible for a minority to sue by the fact that the minority shareholder is not legible to sue using the derivatie vehicle because his ownership does not cross the 1/10 threshold.

Further, similar comparable wording in other articles were brought in comparison for the purpose of analyzing the relevancy of the argument that it is not possible to aggregate votes from more than one shareholder in order to reach the 1/10 threshold. Benny S. Tabalujan compares this article concerning derivative litigation with two provisions of Regulation No.1 year 1995 which is Article 66 (2) (now article 79 (2) (a) in the New Company Law) and article 117 (1) (b) (this article or a similar provision is now non existent in the New Company Law, where Regulation No.1 year 1995 stipulated that a shareholder could and should submit a request to the district court for the dissolving of a company, where in the New Company Law this request for dissolvance of the company can be made through the general meeting of shareholders.) hereunder is his statement:

(if it is intended that this right be extended to one or more shareholders who, together in aggregate, exercise at least 10% of the issued shares with valid voting rights, then a different wording – similar to that used in Arts 66 (2) or 117 (1)(b) UUPT – would have been used instead.)[7]

To clarify the statement above, the articles mentioned (art 79 (2) (a)) used as a comparison to the derivative action provision uses the wording “1 (one) or more shareholder which together represent 1/10 (one tenth) or more than the whole amount of shares with voting rights[8]”, so this means that the legislator of the New Company Law as also in Regulatin No.1 year 1995 clearly intended that pooling of shareholders to reach the threshold is not possible, thus using class action in combination with derivative litigation according to the New Company Law is not applicable.

Similar provision regarding derivative litigation which applies mutatis mutandis with the provision in article 97 (6) of the New Company Law can also be enforced against individual members of the board of commisioners liable for wrongdoing or negligence causing damages to the company. This in its substance is contradictive with the provisions stipulated in article 108 (3) regulating the actions taken by the Board of Commisioner, there it is specified that the Board of Commisioner which consisted of more than 1 (one) one more member is a council and a single member of the Board of Commisioner can not act on its own, whereas it has to act based on the decision of the Board of Commisioner as a whole.[9] Thereby in this sense it is more appropriate that the derivative claims under article 97 (6) of the New Company Law were to be enforced against the board of commisioners as a whole not against individual member of the board, because by virtue of article 108 (3) it implies that each member of the board is jointly and severally liable for the the wrongdoing and negligence done by each of its member as it is obligated to always act as a whole board and not as individual commisioners.

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[1] Munir Fuady, SH, LL.M, Doktrin-Doktrin Modern Dalam Corporate Law & Eksistensinya Dalam Hukum Indonesia, (Bandung: PT. Citra Aditya Bakti, 2002), P. 73.

[2] Felix O. Soebagjo. 1995. “Merjer, Akuisisi dan Konsolidasi Ditinjau Dari Sudut Undang-undang Nomor 1 tahun 1995 dan Peraturan Perundang-undangan di Bidang Pasar Modal”. This paper is presented on the Menyongsong Berlakunya Undang-Undang Nomor 1 Tahun 1995 Tentang Perseroan Terbatas Dan Implikasinya Terhadap Perkembangan Dunia Usaha Di Indonesia Seminar. Yogyakarta: Universitas Gadjah Mada.

[3] Regulation No. 40 Year 2007 concerning Limited Liability Company, article 98 (1)

[4] Prof. Dr. Chatamarrasjid Ais, S.H., M.H., Penerobosan Cadar Perseroan dan Soal-Soal Aktual Hukum Perusahaan,(Bandung: PT. Citra Aditya Bakti, 2004), P. 31

[5] Regulation No. 40 Year 2007 concerning Limited Liability Company, article 97 (6)

[6] Benny S. Tabalujan, Indonesian Company Law A Translation and Commentary, (Singapore: Sweet & Maxwell Asia, 1997), P. 193

[7] Id, at P. 193

[8] Regulation No. 40 Year 2007 concerning Limited Liability Company, article 79 (2) a

[9] Regulation No. 40 Year 2007 concerning Limited Liability Company, article 108 (4)

Provisional and Protective Measures in Arbitration Proceedings

I. Introduction

Globalization has led to an increase in trade between legal and natural persons. And as soon as this rise in trading between international natural and/or legal persons rise in number, also will the number of disputes arising as a product of bad business between parties which were involved in the agreement. Nowadays, litigating through court are not anymore the first choice in settling disputes between parties in relation to contractual or legal relationships, to a greater extent more people are now turning into International Arbitration such as the ICC as the alternative method to adjudicate their legal disputes. These organizations are regarded to be more reliable and will provide the parties with more neutral and fair judgments compared to choosing either party nationals conventional court litigation.

During the arbitration proceedings, situations of the dispute object might change, the dispute object may disappear, such case might happen when the respondent has foreseen or predicted that the arbitral award might be given in favour of the claimant, thus the respondent will take actions to withdraw all the money in the respondent's bank account in order to avoid seizure or freezing orders by the arbitral tribunal as a consequence of the arbitral award imposed upon the respondent, or find ways to transfer the company's assets to third parties before being seized or freezed as a result of an arbitration award.

In this case provisional and protective measure comes in and plays an important part, since it will secure the assets in dispute, and in the end of the arbitration process the winner of the arbitration proceeding can collect from the losing party's bank account or asset which is rightfully his on the basis of the arbitral award. The relevant question to this matter is whether an arbitration committee has the authority to award a provisional and protective measure to an asset as a provisional measure in order to safeguard the assets of the dispute as is usually given by judges in conventional court litigation?

This article will deal with the availability of a provisional and protective measure in international commercial arbitration proceedings and whether this provisional and protective measure awarded by the arbitration tribunal can be enforced against parties to the arbitration proceedings on the basis of the UNCITRAL Model Law on International Commercial Arbitration, although it only serves as a model law, nonetheless it can still be regarded to be the blueprint for national arbitration laws of nations.

II. Provisional and Protective Measures: The Terminology

First we look to the term provisional and protective measures, what does it really mean? What is the important use of these measures in private international law and in the course of arbitration?

We can explain provisional remedies in court litigation as a generic term for any temporary order of a court to protect a party from irreparable damage while a lawsuit or petition is pending, While the latter term, protective, can be described almost in the same way as provisional measures, which is an order given by the court which were given in order to protect the disputed assets.

So we can derive that provisional and protective measures are means to secure or maintain the current condition of the debtor's assets and to prevent the transfer of those assets to third parties in the time of the conduct of the proceedings. Feeder in his paper, published in the United Nations Publication stressed the importance of provisional and protective measures in arbitration in which 'an enforceable interim measure can maintain the status quo until the award is made and it can also secure assets out of which an award may be satisfied where a recalcitrant debtor is deliberately dissipating assets to render itself judgment proof'.

With its nature as a secondary decision to the final outcome or judgment of a case, then the period of this provisional and protective measure are also limited, in other words it is given on a temporary basis, that as soon as the final judgment on the merits of the case is decided, then it will cease to have validity, and the assets will either transfer or maintained by one of the party to the dispute.

III. The Existence of Provisional and Protective Measures in Arbitral Proceedings

An important question is whether provisional and protective measures exist in the course of an arbitral proceeding considering its vital role in securing or can we say maintaining the status quo of the disputed assets. The answer is not certain, while if we look closely at the main convention commonly used for regulating international arbitration proceedings which is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (hereinafter will be "New York Convention 1958") it neither provides provisions in requesting from and to give provisional and protective measures in arbitration proceedings by arbitral tribunals.

The problem lies in the power and authority of the arbitrators, in this case in giving orders of provisional and protective or interim measures. We can infer that the arbitrators do not actually have the "authority" to enforce an award upon parties to arbitration although an award given by an arbitral tribunal is final and binding against the parties. By observing the arbitration practice based in the award given by an arbitrator, it is regulated that to enforce an award against the losing party the winning party must complete another set of procedures which is a procedure of obtaining an exequatur from the court of the country in which the winning party seeks enforcement. This means that if the award were not to be obeyed voluntarily by the losing party then the arbitrator cannot do anything without the help of formal judicial authority such as the Court, the same goes with provisional and protective measures.

So as it may be, the provisional and protective measures or interim orders given by an arbitral tribunal can be accepted only as a recommendation to the parties. Thus what can be expected from a recommendation by the arbitral tribunal? There is a possibility that the party subject to obey the provisional and protective measures given by the court may not voluntarily submit. A sanction given by the end of the arbitration process by the arbitral tribunal might eliminate this difficulty, as H. Van Houte have proposed this solution 'indeed, in their final decision arbitrators can always impose sanctions on the party which did not comply with the provisional measures ordered, even if they were actually only recommendations'. But this is not always the case, it can possibly happen that although sanctions can be imposed upon the party defying the provisional and protective orders have already transferred the disputed object to third party, and so become that there is nothing can be done to reverse what has already happened.

The UNCITRAL Model Law on International Commercial Arbitration have also tried to tackle this problem by providing a model that is supposed to be used as a reference for the national arbitration rules of a country. Nonetheless this model law still serves only as model law, and therefore cannot be treated as a regulation to be enforced against the parties. Thus article 17 paragraph (1) contained suggestions on a model for regulation clauses regarding provisional and protective measures in arbitration which stated the following 'Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.', we can interpret from this model clause that an arbitral tribunal, as the adjudicator of the arbitration proceedings, may give provisional and protective measures, only as far as both of the parties does not provide to set aside this in their arbitration agreement.

If integrated and applied correctly in international arbitration rules, then this article 17 paragraph (1) of the UNCITRAL model will provide the parties with the basis for requesting a provisional and protective measure in arbitration, provided that they have not set aside the possibility of applying a provisional and protective measures in front of an arbitral tribunal in their arbitration agreement.

However article 17 A (1) and (2) of The UNCITRAL Model law also provided some restrictions, measures to be considered by the arbitral tribunal in order to order a provisional and protective measure to a party in an arbitral proceedings, namely, first that the party requesting provisional and protective measures have to prove that the provisional measures requested are vital, that is if the order to temporarily seize the disputed assets are not taken it will cause irreparable damage to the party requesting provisional and protective measures, also by giving such order of measures it will not give the party subject to obey the provisional and protective measure given would not incur more damages than if those orders are not given by the arbitral tribunal. Second is that the arbitral must consider the likely chance of the requesting party will succeed in the outcome of proceedings.

On the contrary under article 17 G of The UNCITRAL Model Law the party requesting an interim measure can be held liable, therefore pay for damages caused to the other party in the proceeding if in the proceedings the arbitral tribunal found that the provisional and protective measures should have not been taken, that the interim measure have incurred damages unnecessary to the party subject to the provisional or interim measures.

IV. Conclusion

On the basis of the UNCITRAL Model Law on International Commercial Arbitration, provisional and protective measure do exist in arbitral proceedings, on the condition that the parties have not previously agrees to restrict this provisional and protective measure in their arbitration agreement. Thus contracts and/or arbitration agreements are one of the utmost important aspect to build a foundation of a provisional and protective measure given by an arbitral tribunal.

Although the arbitral tribunal does not have the authority to enforce these provisional and protective measures, the enforcement function of provisional and protective measures can be delegated to the national court to decide according to the lex loci arbitri, as also the same case with enforcement of final arbitral awards or decisions of the arbitral tribunal under the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.