Navigating Cross-Border Disputes: The Modern Practice of Transnational Litigation
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Overview
The rapid growth of global trade and cross-border transactions has led to a rising number of disputes that extend beyond a single jurisdiction. These disputes frequently give rise to complex litigation involving multiple jurisdictions, diverse legal systems, or even conflicts of laws. Over the years, scholars and practitioners have used various terms to describe this landscape, but contemporary practice generally converges on the term “Transnational Litigation”.
Court, practitioners and jurisprudence have, over time, revisited and redefined numerous principles in the adjudication of cross-border disputes. Yet one fundamental lesson consistently emerges in the minds of disputing parties: that cross-border transactions and their supplementary legal documentation must be drafted with the utmost care, precision, and foresight.
In this publication, ARMA Law will provide a comprehensive overview of Transnational Litigation and the jurisprudence that has shaped its development across different jurisdictions. Alongside this doctrinal analysis, the series will also offer strategic insights into the practical challenges associated with drafting cross-border contracts, highlighting the critical importance of carefully considering provisions on governing law, jurisdiction and dispute resolution mechanisms.
Brief History
Transnational litigation covers a broad spectrum of cross-border legal issues. One early Indonesian example is the 1959 Bremen Tobacco case.. Following Indonesia’s independence, the government nationalized numerous Dutch-owned enterprises, including NV Verëenigde Deli Maatschappijen and NV Senembah Maatschappijen, both operating tobacco plantations. The former Dutch owners subsequently asserted ownership over the harvested tobacco and initiated proceedings in Bremen, Germany (then a major hub for international tobacco trade) to detain the shipment, giving rise to one of the earliest post-independence instances of cross-border commercial litigation involving Indonesia.
The German courts ultimately held that Indonesia’s Nationalization did not contravene German public order (ordre public), affirming that the expropriation was legally valid and could be recognized under German law, even though full compensation had not yet been paid to the Dutch companies. This landmark decision significantly influenced the development of private international law and is widely regarded as having a substantial impact on the establishment of the International Centre for Settlement of Investment Disputes (ICSID). ICSID later codified a clearer standard of expropriation, whereby it must be conducted for a public purpose, non-discriminatory and accompanied by prompt adequate and effective compensation.1
Cross-border disputes also frequently center on the choice of law and forum for resolving conflicts arising from international contracts. One prominent example is The Bremen v. Zapata Off-Shore Co. (U.S. Supreme Court, 1972) where the towing contract between the parties contained a forum-selection clause, stipulating that any dispute arising from the agreement would be resolved before the High Court of Justice in London, England.
In this case, Zapata Off-Shore Co., a U.S. corporation, entered a contract with Unterweser Reederei GmbH (a German company, also known as The Bremen) to tow Zapata’s drilling rig from Louisiana to a site in the Adriatic Sea. During the voyage, the rig sustained damage in a storm in the Gulf of Mexico. Seeking compensation, Zapata filed a suit in admiralty before U.S. courts. The Bremen moved to dismiss the case, arguing that the contractual clause required the dispute to be brought before the English courts.
The U.S. Supreme Court ultimately upheld the clause, holding that forum-selection provisions in international commercial contracts are presumptively valid unless enforcement would be unreasonable, unjust, or procured through fraud, coercion, or overreaching.
Keys Features and Legal Doctrines
Courts Power and State Immunity
State immunity is a legal doctrine that protects a sovereign state from being sued in the courts of another country without its consent.2 Its purpose is to respect state sovereignty and ensure that foreign courts do not interfere with internal state affairs. Under the widely adopted restrictive theory, states may be sued for commercial or private acts (jure gestionis) but remain immune for sovereign acts (jure imperii).3
Court power refers to a national court’s authority to hear and decide cases, including its jurisdiction over the subject matter and the parties involved. Courts also have discretionary powers, such as issuing interim orders, injunctions, or anti-suit injunctions to prevent parallel foreign proceedings from interfering with justice.4 Courts may use this discretion to dismiss cases on forum non-convenience grounds or transfer cases to a more appropriate forum.
When a private entity enters a commercial contract with a State-Owned Enterprise (SOE), it may provide a plaintiff with the opportunity to bring claims before foreign courts. However, sovereign or governmental acts remain protected under the doctrine of state immunity, limiting the ability to bring claims in certain jurisdictions.5
The doctrine of state immunity varies among jurisdictions. France and Germany, for instance, apply restrictive immunity, balancing state sovereignty with accountability in commercial matters. China has recently followed suit through its Foreign State Immunity Law (FSIL), effective January 1, 2024, marking a shift from absolute to restrictive immunity. While foreign states remain immune for sovereign acts, the FSIL introduces exceptions for commercial transactions, labour disputes, torts and certain arbitration cases, thereby expanding access to justice for foreign plaintiffs in China.
Indonesia, however, lacks a State Immunity Act, resulting in legal uncertainty. This was evident in Navayo International AG & MEHIB v. Ministry of Defense of Indonesia. In this case, Navayo and MEHIB obtained a USD 16 million ICC arbitral award against the Indonesian Ministry of Defense for unpaid contractual obligations under a government satellite program. While the award was successfully enforced in Singapore, it remains unenforceable in Indonesia due to the absence of statutory provisions governing state immunity and its waiver.
The Government of Indonesia argued that the contracts were invalid due to irregularities and lack of authority, and that it enjoyed immunity from enforcement. These defenses highlight a fundamental problem: Indonesia lacks clear rules distinguishing commercial acts (jure gestionis) from sovereign acts (jure imperii), a distinction necessary under international law to determine immunity.
Without a State Immunity, foreign parties face serious barriers to enforcing arbitral awards or court judgments against Indonesian state bodies or SOEs. This undermines Indonesia’s credibility as a party to international arbitration and creates significant enforcement risk for foreign investors. A State Immunity Act would clarify when and how state entities can be subject to legal proceedings and enforcement, align Indonesia with international practice, and reduce the risk of enforcement deadlock in future cases.
Forum non-Conveniens
Forum non convenience is a common law doctrine allowing a court to dismiss a case, although personal jurisdiction and venue are proper, when such a dismissal would serve the convenience of the parties and the ends of justice.6 However, only defendants may invoke the doctrine of forum non convenience or, in some instances, by the court on its own initiative (sua sponte), because plaintiffs have the original choice of forum. This decision is not a bar to res judicata, meaning the plaintiff can re-file the case in the more suitable forum.
To determine whether to grant a forum non convenience dismissal, courts generally apply a two-part test, a balancing of private and public factors, followed by an inquiry into the adequacy of the alternative forum. Private factors include access to evidence, availability of witnesses, and the burdens on the defendant, while public factors consider the complexity of laws involved, local interest and whether the alternative forum judicial system is adequate. A court will typically dismiss a case on forum non convenience grounds only when there is an adequate alternative forum that can provide a remedy for the plaintiff . For instance, a court will not grant a dismissal if the alternative forum has an inadequate judicial system, such as a country with no functioning courts.7
The principles underlying forum non convenience have been affirmed in key U.S. Supreme Court decisions. In Piper Aircraft Co. v. Reyno, 454 U.S. 235, Court held that dismissal is appropriate if there exists an adequate alternative forum, even if the remedy in that forum may be less favorable. Similarly, in Sinochem International Co. Ltd. v. Malaysia International Shipping Corp., 549 U.S. 422, the Court clarified that a district court may dismiss a case on forum non convenience grounds sua sponte, even before determining its own jurisdiction, provided that another forum is substantially more appropriate. These cases emphasize that courts must weigh the convenience of litigating in the proposed forum and the adequacy of the alternative forum to ensure that justice is served efficiently and fairly.
Practical Considerations
Given the complex interplay between Forum Non-Convenience, State Immunity and Court Powers in Transnational Litigation, parties must look beyond a purely legal analysis to adopt practical and strategic measures. While the law provides the framework for determining the appropriate forum, assessing sovereign protections, and exercising judicial authority, effective outcomes depend on proactive planning, risk mitigation, and procedural foresight.
The rule of law plays a crucial role in building businesses and investors’ confidence around the world. Investors feel more secure when they clearly understand their investments, know the regulatory environment and can expect stability. A clear legal framework allows them to assess whether a host country can protect their capital, projects and other interests. In practice, a country’s credibility with foreign investors often depends on how closely its legal system aligns with international standards, particularly those of the investors’ home countries.
Additionally, the degree of uniformity in how domestic laws incorporate international norms and practices becomes a critical factor. Differences or inconsistencies in the standards of the rule of law across jurisdictions may affect a country’s overall appeal and competitiveness as an investment destination.
The interaction between Forum Non-Convenience, State Immunity and judicial authority has a direct impact on foreign investment, as it influences investors’ perception of a jurisdiction’s reliability and fairness. Inconsistent or unpredictable application of these doctrines creates uncertainty regarding dispute resolution and enforcement, discouraging investors from committing capital to jurisdictions perceived as legally unstable. Such uncertainty raises the cost of doing business, increases reliance on arbitration, and weakens confidence in domestic courts as neutral forums. Conversely, a coherent and transparent application of these doctrines enhances investor confidence by ensuring predictability, reducing legal risk and signalling a commitment to the rule of law. In this sense, strengthening the consistency of judicial practice is not merely a procedural improvement but a key factor in maintaining a stable and attractive investment environment.
The following strategic actions outline a key considerations to help parties navigate cross-border litigation efficiently, safeguarding enforceability and minimizing both jurisdictional and procedural risks:
Contractual Structuring
Parties should include exclusive forum selection clauses, Clear contractual language reduces the risk of inconvenient forums, conflicting proceedings and uncertainty in enforcement.
Managing State Immunity
In disputes involving sovereign states or SOE, parties should ensure explicit waivers of immunity for both jurisdiction and enforcement and clearly identify commercial assets that may be subject to recovery. It is essential to distinguish between commercial acts (jure gestionis) and sovereign acts (<i.jure imperii) to confirm that legal action is permissible.
Evidence and Witness Planning
Parties should ensure that critical evidence and witnesses are accessible within the chosen forum. In cross-border cases, this may involve coordinating letters of rogatory, discovery requests and compliance with data protection laws in multiple jurisdictions.
Mitigation of Parallel Proceedings
Anti-suit injunctions or coordinated litigation strategies help prevent contradictory judgments across jurisdictions, protecting procedural efficiency and certainty. Anti-suit injunctions, orders restraining parties from pursuing proceedings in other jurisdictions, are recognized in common law systems such as the UK, Singapore and Hong Kong to prevent duplicative litigation and uphold agreed forums. However, Indonesian law does not expressly recognize or regulate such injunctions. The procedural codes (HIR and RBg) limit judicial authority to Indonesia’s territorial jurisdiction, precluding courts from restraining foreign proceedings.
Nonetheless, similar effects can be achieved contractually. Indonesian courts generally uphold exclusive jurisdiction or arbitration clauses under Article 1338 of the Civil Code and Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Indonesian Arbitration Law). If a party violates such clauses, the opposing party may file a jurisdictional objection (eksepsi kompetensi) under Article 134 HIR, seeking dismissal for lack of jurisdiction. While Indonesia lacks a formal anti-suit mechanism, its courts indirectly maintain procedural efficiency and certainty by respecting agreed dispute-resolution forums, reflecting a pragmatic adaptation within the limits of national procedural law.
Consider Arbitration
Arbitration remains one of the most effective mechanisms for mitigating conflicts of laws and jurisdictional challenges in international disputes. This effectiveness is largely attributed to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC), which obliges its member states to recognize and enforce arbitral awards rendered in other contracting states. Indonesia acceded to the Convention through Presidential Decree No. 34 of 1981, thereby incorporating its principles into domestic law. The Convention’s implementation is further governed by Indonesian Arbitration Law, particularly Articles 65–69, which regulate the recognition and enforcement of foreign arbitral awards by Indonesian courts.
While challenges in arbitration exist, such as public order exceptions and difficulties with enforcement, it offers a more efficient alternative to traditional litigation. By incorporating an arbitration clause into agreements, parties can preemptively resolve jurisdictional conflicts and ensure that disputes are adjudicated in a neutral, predetermined forum.
- The principles later adopted by ICSID reflect a similar approach to the 1959 Bremen Tobacco Case, which upheld a state’s right to nationalize its assets, provided that such action was not conducted in a “barbaric” manner. ↩
- Article 10 & 11 of the United Nations Convention on Jurisdictional Immunities of States and Their Property, 2004. ↩
- Saudi Arabia v. Nelson, 507 U.S. 349 (1993), pp. 357–360. ↩
- Atlantic Marine Construction Co. v. U.S. District Court for the Western District of Texas, 571 U.S. 49, pp. 55–57. ↩
- Germany v. Italy, ICJ 2012, paras. 58–61. ↩
- Paxton Blair, “The Doctrine of Forum Non-Convenience in Anglo-American Law,” 29 COLUM. L. REV. 1 (1929); Edward L. Barrett Jr., “The Doctrine of Forum non-convenience,” 35 CAL. L. REV. 380 (1947); Alexander M. Bickel, “The Doctrine of Forum Non-Convenience as Applied in the Federal Courts in Matters of Admiralty,” 35 CORNELL L.Q. 12 (1949). ↩
- Abdullahi v. Pfizer, Inc., 542 U.S. 692 (2004), paras. 16–17. ↩
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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