Annulment of Arbitration Awards Due to Fraud Elements in Construction Cases

Abstract

This study explores a construction dispute between PT MDP and PT PLN (Persero) Southern Sumatra Power Plant, which was resolved through the Indonesian National Arbitration Board (BANI). The dispute arose due to a contract termination by PLN that was deemed unilateral by MDP. The arbitration resulted in a ruling in favor of MDP, but PLN filed for annulment of the arbitration award at the Central Jakarta District Court. The main focus of this research is to analyze the application of Article 70 and its explanation in the Arbitration Law as the basis for filing an annulment of an arbitration award concerning construction issues, to examine the Supreme Court's considerations in upholding the annulment of the arbitration award in Supreme Court Decision No. 441B/Pdt.Sus-Arbt/2018, and to analyze the legal consequences following the issuance of a ruling that upholds the annulment of the arbitration award due to fraudulent conduct in the arbitration forum. This research employs a normative descriptive analysis method. The findings indicate that, based on Article 70 of the Arbitration Law, the annulment of an arbitration award by BANI must meet one of the elements in that article. The construction case demonstrates that an arbitration award containing elements of fraud, such as the misuse of the selection of an Arbitration Panel with financial interests, can be declared legally flawed. The panel of judges at the Palembang District Court granted the annulment request because fraud was proven. The Supreme Court upheld this decision but rejected the directive to resolve the dispute through BADAPSKI as it was not previously agreed upon. The annulment of the arbitration award renders all rights arising from the BANI decision regarding compensation null and void, causing losses to both parties as they must undergo the dispute resolution process from the beginning again.