Common sense a must in Paiton row<\/p>\n
By Stefanus Haryanto<\/p>\n
BATAM, Riau (JP): The resignation of Adhi Satriya and Hardiv
\nSitumeang as the president director and director of planning of
\nstate electricity company PLN has whipped up nationalistic
\nfeelings among Indonesians.<\/p>\n
Many have voiced their concern about \"pressure\" from the
\nUnited States on our sovereign country, demanding that President
\nAbdurrahman Wahid be firm in handling the case and not succumb to
\nforeign intervention.<\/p>\n
Public opinion seems to be on Adhi Satriya's side, arguing
\nthat the Paiton dispute be settled through the Indonesian court
\nsystem, notwithstanding the fact that the power purchase
\nagreement (PPA) between PLN and Paiton Energy contained an
\narbitration clause. Coordinating Minister for the Economy,
\nFinance and Industry Kwik Kian Gie has been widely criticized and
\naccused of losing his nationalism merely for agreeing with
\nPresident Abdurrahman Wahid's conviction that cases related to
\nindependent power producers (IPPs) should be settled amicably.<\/p>\n
Speaker of the People's Consultative Assembly Amien Rais even
\nstated that \"we don't want any Indonesian to serve foreigners at
\nthe expense of national interests\" (The Jakarta Post, Dec. 22).
\nSince things have developed out of proportion in the Paiton case,
\nit is necessary that we use our common sense and consider the
\nlong-term implications of taking arbitrary measures against
\nPaiton and the other IPPs.<\/p>\n
All Indonesians will surely agree that Indonesia's interest as
\na sovereign country may not be compromised in settling the Paiton
\ncase. However, it must be noted that Indonesia is a member of the
\ninternational community and is in dire need of foreign investment
\nto revive its economy. Taking arbitrary action against foreign
\ninvestors, although conducted \"legally\" through Indonesian
\ncourts, will send a clear message to investors that Indonesia
\nwill use its governmental instrumentalities, including the court
\nsystem, to expropriate their investments without providing fair,
\nprompt and adequate compensation as stipulated by international
\nlaw.<\/p>\n
In its editorial on Dec. 22, the Post aptly stated that the
\nconfrontational stance taken by PLN and tacitly endorsed by then
\npresident B.J. Habibie horrified foreign investors, bankers and
\ngovernments. Prominent banks and insurance companies from five
\nmajor countries jointly warned Indonesia in July that a failure
\nto honor its power contracts would have disastrous implications
\nfor its economy, indicating it could lead to a halt of
\ngovernment-to-government loans.<\/p>\n
It appears that the IPPs or other foreign investors would not
\nbe afraid to go through a legal process to settle their disputes
\nwith PLN or the Indonesian government as long as there is
\nassurances they would receive fair and objective judgment
\naccording to the principle of due process of law.<\/p>\n
In the Paiton case, it was clear that PLN was not willing to
\nhave the dispute heard by an international arbitration tribunal
\nas stipulated in the PPA. There was no apparent reason for PLN's
\nstance to not honor the arbitration clause, whereas an
\ninternational arbitration tribunal is the most fair and objective
\nforum to settle an international commercial dispute.<\/p>\n
If PLN really believes that the PPA is void ab initio (null
\nand void), and its lawyers are able to present convincing
\nevidence before the arbitration tribunal, there would be no
\nreason for avoiding a legal battle in an international
\narbitration forum. If the international arbitration tribunal
\nfinds in favor of PLN and declares that Paiton's contract is null
\nand void, there will be no reason for foreign investors or
\nlenders to be concerned with the case since it was heard by a
\nfair and objective international forum.<\/p>\n
However, in the Paiton case, it is quite clear PLN had no
\nconfidence that it would be able to present convincing legal
\narguments before an international arbitrary tribunal. Therefore,
\nPLN filed a lawsuit in the Central Jakarta District Court,
\nseeking an injunction to prohibit Paiton from proceeding with its
\nintention to initiate the international arbitration process as
\nstipulated in the PPA.<\/p>\n
Unfortunately, the court seemed \"too responsive\"' to PLN's
\nrequest and granted an injunction even before it considered the
\nargument from Paiton's attorney on jurisdictional issues. If the
\ncourt was patient enough to wait until it had rendered its
\ndecision on jurisdictional issues before it rendered the
\ninjunction to prohibit the arbitration from proceeding, the
\ninternational community would probably still believe that there
\nwas a due process of law in the case.<\/p>\n
As an Indonesian, this writer shares the opinion that we
\ncannot compromise our national sovereignty, and would strongly
\nobject to any foreign powers dictating Indonesia's economic,
\nsocial and political policies, as indicated by Amien Rais.<\/p>\n
However, common sense indicates that if we still want to play
\nan active role in the global economy, we have to prove to the
\nworld that we will honor the sanctity of contracts. It means that
\nif disputes arise in the implementation of the contracts,
\nIndonesia will give assurances that foreign investors will be
\ntreated fairly according to the principle of due process of law.
\nIn the Paiton case, there would be no problem to settle the case
\nlegally, as long as the principle of due process of law is upheld
\nconsistently. If PLN is represented by reputable international
\nlawyers, PLN would surely be able to win the case in an
\ninternational arbitration forum.<\/p>\n
However, if PLN cannot afford to engage reputable
\ninternational lawyers nor is unwilling to take the chance of
\ngoing thorough an international arbitration process, there would
\nbe no choice but to negotiate and come to an amicable, out-of-
\ncourt settlement. By doing this, the international community
\nwould understand that Indonesia is willing to honor the sanctity
\nof a commercial contract and therefore the country would still be
\nconsidered safe for foreign investments. In this regard, people
\nwith good common sense would agree with President Abdurrahman
\nWahid that an out-of-court settlement would be the only way to
\nprotect Indonesian dignity as one of the world's \"civilized
\nnations\".<\/p>\n
The writer is a senior lawyer at the law firm of Hanafiah
\nPonggawa Adnan Bangun Kelana.<\/p>",
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