Three-star Kartika Plaza hotel showcases arbitration process<\/p>\n
JAKARTA (JP): The three-star Kartika Plaza hotel on Jl.
\nThamrin, in the heart of Jakarta, has been a superb case study
\nover the last decade for law students interested in international
\narbitration.<\/p>\n
The case is even more interesting because the Indonesian
\ngovernment is a party in the dispute.<\/p>\n
The dispute started in 1981 when the National Investment
\nCoordinating Board (BKPM) canceled the business license of PT
\nAmco Indonesia, an American joint venture company, because the
\nU.S. partner violated the terms of Indonesian foreign investment
\nlaw.<\/p>\n
According to Prof. Sudargo Gautama in Perkembangan Arbitrase
\nDagang International Indonesia (the Development of International
\nCommercial Arbitration in Indonesian), PT Amco Indonesia agreed
\nto build Kartika Plaza Hotel in 1968 and to operate it for 30
\nyears.<\/p>\n
The company however reneged on its obligation to invest US$3
\nmillion and only put in $983,000.<\/p>\n
BKPM then decided to take over the company's assets by force,
\nassisted by the military, in 1980 and canceled the company's
\nbusiness license the following year.<\/p>\n
Since Indonesia had ratified the convention of the
\nInternational Center for the Settlement of Investment Disputes
\n(ICSID), PT Amco had the right to bring the government of
\nIndonesia to the arbitration forum to settle the dispute.<\/p>\n
It did this in 1981.<\/p>\n
PT Amco appointed Canadian lawyer Edward Rubin to represent it
\nat ICSID. Indonesia chose Prof. Isi Foighel, a noted Danish law
\nscholar who is also Denmark's finance minister. Noted French law
\nexpert Prof. Berthold Goldman was named head arbitrator.<\/p>\n
After a long and expensive process, Goldman, Rubin and Foighel
\ndecided to make an award of merits on Nov. 20, 1984. The ruling
\nsaid that BKPM's 1980 action was wrong and awarded $4.2 million
\nin damages to PT Amco.<\/p>\n
Indonesia then asked ICSID to review its decision saying that
\nthe arbitrators ignored articles in the convention which ruled
\nthat local law must be at the basis of their examination.<\/p>\n
ICSID then appointed an ad hoc committee, chaired by Prof.
\nIgnaz Seidl Hohenveldern of Austria, to study the possibility of
\nchanging the ruling.<\/p>\n
In May 1986, the committee concluded that the earlier
\narbitration team had exceeded its powers and annulled part of the
\naward and determined that the Indonesian government's decision to
\ncancel PT Amco's business license in 1980 was lawful.<\/p>\n
The committee ruled, however, that the Indonesian government
\nmust pay damages to PT Amco for forcibly taking over the hotel in
\n1980. (mas)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/three-star-kartika-plaza-hotel-showcases-arbitration-process-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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