Tactics to delay settlement of dispute will eventually backfire<\/p>\n
Todung Mulya Lubis, Jakarta<\/p>\n
When Susilo Bambang Yudhoyono's administration took over the
\ngovernment, one of the items in its first-100-day agenda, as put
\nforward by Coordinating Minister for the Economy Aburizal Bakri,
\nwas to settle the Karaha Bodas and Cemex cases. One of the
\nCabinet members told me privately that aside from these two
\ncases, the Newmont case was also included in this first-100-day
\nworking agenda of the United Indonesia Cabinet. The first 100
\ndays have long passed, but none of these cases have been settled.
\nWhat is really going on here?<\/p>\n
I'm afraid there is something wrong in the way the government
\nviews the cases involving Karaha Bodas, Cemex and Newmont. The
\ngovernment has shown no sense of urgency and, unfortunately, this
\nabsence of a sense of urgency is also found in our judicial and
\nsemi-judicial institutions.<\/p>\n
Just take a look at what has happened to the case involving
\nthe sale of two Pertamina's supertankers, which the Business
\nCompetition Supervisory Commission (KPPU) has found to be in
\nviolation of Law No. 5\/1999 on the ban on practices of monopoly
\nand unhealthy business competition. In this context, we fail to
\nsee the KPPU realize that there was really an urgent need to sell
\nthe two supertankers because if Pertamina had been a little late
\nin selling these supertankers, Karaha Bodas would have seized
\nthem.<\/p>\n
Indeed, the supremacy of the law must be enforced. However, in
\nbusiness cases, a good understanding of business realities is a
\nnecessity as this will make the law actual and relevant. If you
\napproach business cases only in the spirit of the law, you are
\nbound to be misled because this will only complicate the
\nsettlement of these cases.<\/p>\n
Ideally, we all should have an economic legal paradigm that
\nis responsive not only to the supremacy of the law but also to
\neconomic realities. It is in this context that I have repeatedly
\ncalled for the government to seek a win-win settlement. I'm
\nconvinced that all businessmen who are in pursuit of business
\nopportunities will keep their doors wide open for a win-win
\nbusiness settlement.<\/p>\n
The only thing that matters here is that time is very
\nimportant. People always say that \"time is of the essence\", which
\nimplies that once we are too late, it is highly likely that a
\nwin-win settlement will be out of reach. I'm afraid the
\ngovernment has begun to lose this time.<\/p>\n
Pertamina's defeat is also the government's. The world knows
\nthat Pertamina has always been a government-owned enterprise.
\nTherefore, the government is indeed required to take swift action
\nto settle this case. The arbitration ruling that decided that
\nKaraha Bodas won the case is final and binding. No legal attempt
\ncan revoke this ruling even if Law No. 30\/1999 on arbitration
\ngives room for this.<\/p>\n
In the context of international arbitration, it is very
\ndifficult for a state that loses a case to suddenly revoke the
\narbitration ruling even if this is done through a court of law.
\nThe only way to contest it is to fight in the arbitration
\nproceedings, something that Pertamina, alas, failed to do. My
\nconclusion is that Pertamina's defeat was not attributable to the
\ncompany's weak legal position but, rather, because Pertamina had
\nnot gone out of its way to fight.<\/p>\n
It was strange, indeed. Pertamina should have made the
\ncancellation of a geothermal power plant caused by the regional
\neconomic crisis a justification that would strengthen its legal
\nposition. In addition, alleged practices of corruption, collusion
\nand nepotism in this project should have been exposed as a very
\neffective means of defense.<\/p>\n
The negligence during this arbitration had to be paid for
\ndearly with a defeat with a very devastating implication,
\nparticularly because Pertamina, as a result, cannot freely do
\nbusiness overseas. The fact that several of Pertamina's accounts
\nin overseas banks have been blocked shows huge losses and these
\nlosses will be bigger taking into account the legal fees for the
\nforeign attorneys hired by Pertamina. That is why there is no
\nother option but to thoroughly settle this Karaha Bodas case.
\nUnfortunately, even today this case is still not settled.<\/p>\n
It is very difficult to understand the policy of the
\ngovernment, which, reportedly, will probe into the graft and tax
\nmanipulation in Karaha Bodas. I am not saying that Karaha Bodas
\nis corruption free and does not have any tax arrears. All this
\nmay be correct. The question is why didn't this probe start much
\nearlier? If the probe into the graft and tax manipulation had
\nbeen conducted prior to or during the arbitration process, the
\nfinding could have been used to show to the arbitration court
\nthat Karaha Bodas was indeed a problem-embroiled company. Karaha
\nBodas could also have been held responsible for violating the
\nForeign Corrupt Practices Act.<\/p>\n
Reportedly, Karaha Bodas has manipulated its taxes in huge
\namounts and if this amount is compared with the damages that
\nPertamina has to pay, the government's financial burden can
\nsurely be significantly alleviated. Here the government wishes to
\nresort to a set-off.<\/p>\n
I cannot imagine where this shallow idea has come from. Does
\nthe government not realize that Karaha Bodas and the arbitrators
\nwill see all this as something \"post factum\" in nature and very
\nlikely to be caused by Pertamina's defeat in the arbitration
\ncourt?<\/p>\n
With all due respect for the efforts that government has made,
\nI must state again that the government will again fail in its
\nattempt to bring Karaha Bodas to any settlement if the
\nperspective of the settlement remains what we witness now. It is
\nalmost certain that Karaha Bodas will never respond to the
\ngovernment's attempt. I'm afraid that all the government's
\nefforts now will be pointless.<\/p>\n
I have said earlier that time is of the essence. It is now
\ntime for the government to think in terms of practical business
\nsolutions. Rather than having to sustain bigger losses, the
\ngovernment has to resort to the only business solution left, one
\nthat gives compensation to Karaha Bodas to enter this country and
\nget a bite of the business project cake here.<\/p>\n
The government's liabilities to Karaha Bodas can be reduced
\nonly by allowing a little concession to Karaha Bodas. The other
\nfact is that the Karaha Bodas case is a very dear lesson for
\nanybody wishing to face an arbitration process either at home or
\nabroad.<\/p>\n
The writer is an international business legal consultant.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/tactics-to-delay-settlement-of-dispute-will-eventually-backfire-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }