The Shanghai Maritime Court issued a pivotal ruling affirming the validity of an ad hoc arbitration clause, the first decision of its kind following the implementation of the Regulations on Promoting the Establishment of an International Commercial Arbitration Center in Shanghai (“Arbitration Regulations”). The decision represents a judicial milestone that strengthens confidence in party autonomy and supports broader regional ambitions for arbitration reform.

The dispute involved two companies registered in the China (Shanghai) Pilot Free Trade Zone and the Lingang New Area concerning costs incurred during goods importation. The parties had entered into an ad hoc arbitration agreement under the Shanghai Arbitration Association Ad Hoc Arbitration Rules. The respondent sought to invalidate the clause, citing the absence of specifically named arbitrators. However, the court upheld the agreement, reasoning that the arbitration mechanism was sufficiently detailed and the parties’ intent to arbitrate was unequivocal.

This ruling is significant as it signals the Chinese judiciary’s growing acceptance and institutional support for ad hoc arbitration. By recognizing party autonomy and validating a flexible dispute resolution process, the Shanghai court aligns domestic practice more closely with global arbitration standards. Furthermore, this case would create a ripple effect for regional dispute resolution, particularly for cross-border transactions involving Chinese investors.

The Shanghai Maritime Court’s ruling is more than a domestic development, it marks China’s strategic push to position Shanghai as a regional arbitration hub. Chinese-funded companies operating or investing in jurisdictions like Indonesia (especially in capital-intensive sectors such as energy, infrastructure, and natural resources) must aware that the Shanghai decision encourages the structuring of ad hoc arbitration clauses into commercial contracts. Such clauses can offer neutrality, cost efficiency, and flexibility, which are highly attractive to investors in complex multi-jurisdictional projects.

For Indonesian legal practitioners and clients, this is a development that warrants close attention. The ruling has the potential to shape the arbitration landscape for future China–Indonesia commercial disputes, encourage the adoption of hybrid arbitration models, and influence the way foreign-related contracts are drafted and enforced.

By comparison, under Indonesian law, ad hoc arbitration is legally permitted but remains infrequently used. The legal framework for arbitration in Indonesia primarily governed by Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution does not prohibit ad hoc arbitration. In fact, the law affords parties the autonomy to determine their own procedural rules, provided that the arbitration agreement is made in writing and fulfills the elements of legal certainty and enforceability.

In contrast to the progressive approach taken by the Shanghai Maritime Court, to date we have not found any Indonesian court decision that explicitly recognizes the validity of ad hoc arbitration agreements with full procedural autonomy, such as those governed by the UNCITRAL Arbitration Rules or other non-institutional frameworks.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of the leading corporate law firms in Indonesia, with extensive experience handling similar matters. Our team of professional corporate and civil lawyers makes us one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author:
Budhi Satya Makmur