Arbitration urged for compensation dispute<\/p>\n
JAKARTA (JP): A legal expert called on the government
\nyesterday to seek international arbitration if foreign investors
\nsought compensation for projects canceled due to the economic
\ncrisis.<\/p>\n
Erman Rajagukguk, a lecturer at the University of Indonesia,
\nsaid he was optimistic an international arbitration agency would
\nrule in favor of Indonesia's decision to cancel certain projects
\nin view of its economic difficulties.<\/p>\n
\"If the arbitration is fair enough, I am very sure we would
\nwin such a case,\" Erman told The Jakarta Post.<\/p>\n
Erman, who has a doctoral degree on economic law from the
\nUniversity of Washington, said there were several international
\narbitration agencies, including the Washington-based
\nInternational Center for Settlement of Investment Disputes, which
\nhandle disputes involving governments and foreign investors.<\/p>\n
Erman made the remarks following a report that the U.S.
\ngovernment's private-sector financing and investment arm, the
\nOverseas Private Investment Corp. (OPIC), had warned the
\nIndonesian government that it may seek to recover US$100 million
\nin lost investments if Indonesia sticks to its decision to cancel
\na power project involving U.S. firm CalEnergy.<\/p>\n
On Jan. 10, President Soeharto canceled and put under review
\n12 infrastructure projects as part of austerity measures to cope
\nwith the economic crisis.<\/p>\n
The 12 projects include the 240-megawatt Patuha power plant in
\nWest Java, in which CalEnergy has a majority share.<\/p>\n
Another U.S. company, Unocal Corp., had its geothermal project
\nin Sarulla, North Sumatra, canceled. The company has not
\nprotested the decision as it is aware that pressure from the
\nInternational Monetary Fund (IMF) was a major factor in the
\ngovernment move.<\/p>\n
Dow Jones reported that OPIC has sent a letter to the
\nIndonesian government saying it had insured the Patuha project
\nagainst political risks and that it would seek to recover
\ninvestment funds from Indonesia if the project was canceled and a
\nclaim was filed.<\/p>\n
OPIC said that under a 1967 mutual investment treaty, the
\nIndonesian government was committed to recognize any payments
\nmade by the U.S. government to American companies holding U.S.-
\ngovernment issued insurance.<\/p>\n
If Indonesia does not compensate the U.S. for the payment, the
\nU.S. could seek to recover the money by going through binding
\narbitration.<\/p>\n
Erman said the current economic crisis has put Indonesia into
\na position which entitles it to cancel the projects under a force
\nmajeure clause.<\/p>\n
Traditional interpretations of a force majeure situation
\ninclude, but are not limited to, problems caused by natural
\ndisasters, riots, war, blockage or labor strife, he said.<\/p>\n
He said a modern interpretation of force majeure could include
\nIndonesia's currency crisis.<\/p>\n
Force majeure is defined as: \"An occurrence beyond the control
\nof the party affected, provided that such party could not
\nreasonably have foreseen such an occurrence at the time of
\nentering into contract or could not reasonably have avoided or
\novercome its consequences\".<\/p>\n
\"Furthermore, investors should realize the government canceled
\nthe projects at the request of the IMF. The IMF has even ordered
\nIndonesia to (assume) zero economic growth, (which means) no
\nadditional power supply would be needed until the crisis is
\nover,\" Erman said.<\/p>\n
He was referring to point No. 13 of the letter of intent
\nsigned by Soeharto and IMF chairman Michel Camdessus on Jan. 15,
\nwhich states: \"In recognition of the serious financial crisis
\nfacing Indonesia, the government has canceled 12 major
\ninfrastructure projects.\" (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/arbitration-urged-for-compensation-dispute-1447893297",
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"sponsor": "Okusi Associates",
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