Indonesia in for messy Cemex litigation<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The Indonesian government is in for a messy, multimillion
\ndollar litigation after the Washington-based International Center
\nfor Settlement of Investment Disputes (ICSID) has registered a
\nrequest for arbitration submitted by Cemex regarding a dispute
\ninvolving the Mexican company and its late-1998 acquisition of
\n25.50 percent of state-controlled PT Semen Gresik (SG).<\/p>\n
Cemex's representative office here confirmed on Thursday the
\ndecision by the ICSID, an affiliate of the World Bank, but
\ndeclined to provide further information.<\/p>\n
ICSID regulations and rules stipulate that an official
\nregistration means that the arbitration body has accepted the
\nrequest -- filed by Cemex in mid-December -- as a case that
\nmerits a hearing and is entirely within its jurisdiction.<\/p>\n
Cemex, the world's third largest cement company, said in mid-
\nDecember that it had been compelled to file a request for
\narbitration with the ICSID after several attempts it made failed
\nto reach a negotiated or mediated solution in the dispute over
\nits investment in Indonesia's largest cement group.<\/p>\n
The ICSID was set up in 1966 under the United Nations
\nConvention on the Settlement of Investment Disputes between
\nStates and Nationals of Other States, to which Indonesia is a
\nsignatory.<\/p>\n
A lawyer familiar with the ICSID's arbitration proceedings
\nsaid on Thursday that the process could take between one to three
\nyears, but once the arbitration body reached a decision, the
\nverdict was final and neither party could make an appeal.<\/p>\n
"The ICSID's registration of the Cemex request shows that the
\nMexican company has a very strong case against Indonesia, because
\nthe arbitration body is very selective regarding those cases it
\nis willing to hear," added the lawyer, who requested anonymity.<\/p>\n
Both parties -- the government and Cemex -- are required to
\npropose their respective arbitrators within the next 30 days, and
\nthe ICSID will appoint an independent arbitrator to form a three-
\nmember tribunal.<\/p>\n
According to ICSID rules, the losing party, besides having to
\npay an award to the winner as decided by the tribunal, is
\nrequired to reimburse all costs for the arbitration proceedings
\nborne by the winning party.<\/p>\n
The lawyer estimated that the costs of the proceedings --
\nincluding the fees of arbitrators and lawyers and their out-of-
\npocket expenses -- could reach more than US$50 million.<\/p>\n
The government has often acknowledged its failure to fulfill
\nseveral provisions of the agreement it concluded with Cemex in
\nSeptember 1998. State Minister of State Enterprises Laksamana
\nSukardi has also been quoted by reporters as conceding that
\nIndonesia would possibly lose if Cemex brought its grievances to
\nan international arbitration court.<\/p>\n
The SG issue arose almost four years ago after its
\nsubsidiaries -- PT Semen Padang in West Sumatra and PT Semen
\nTonasa in South Sulawesi -- with the full support of vested
\ninterest local groups, demanded complete independence from SG.<\/p>\n
Semen Padang was especially aggressive in its fight for a
\ntotal split from SG, even embroiling the holding company in a
\nseries of lawsuits. SG has also been in trouble with the Jakarta
\nstock market watchdog for failing to publish an audited
\nconsolidated balance sheet for 2002, because the old Semen Padang
\nmanagement refused to have its books independently audited.<\/p>\n
Most analysts have criticized the government, which owns 51
\npercent of SG, for its unwillingness to resolve the dispute.
\nWhile the government did attempt negotiations with Cemex, the
\noptions it offered were so economically and politically
\nunfeasible that the effort was seen by Cemex more as a stall for
\ntime.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesia-in-for-messy-cemex-litigation-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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