Common sense a must in Paiton row

By Stefanus Haryanto

BATAM, Riau (JP): The resignation of Adhi Satriya and Hardiv Situmeang as the president director and director of planning of state electricity company PLN has whipped up nationalistic feelings among Indonesians.

Many have voiced their concern about "pressure" from the United States on our sovereign country, demanding that President Abdurrahman Wahid be firm in handling the case and not succumb to foreign intervention.

Public opinion seems to be on Adhi Satriya's side, arguing that the Paiton dispute be settled through the Indonesian court system, notwithstanding the fact that the power purchase agreement (PPA) between PLN and Paiton Energy contained an arbitration clause. Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie has been widely criticized and accused of losing his nationalism merely for agreeing with President Abdurrahman Wahid's conviction that cases related to independent power producers (IPPs) should be settled amicably.

Speaker of the People's Consultative Assembly Amien Rais even stated that "we don't want any Indonesian to serve foreigners at the expense of national interests" (The Jakarta Post, Dec. 22). Since things have developed out of proportion in the Paiton case, it is necessary that we use our common sense and consider the long-term implications of taking arbitrary measures against Paiton and the other IPPs.

All Indonesians will surely agree that Indonesia's interest as a sovereign country may not be compromised in settling the Paiton case. However, it must be noted that Indonesia is a member of the international community and is in dire need of foreign investment to revive its economy. Taking arbitrary action against foreign investors, although conducted "legally" through Indonesian courts, will send a clear message to investors that Indonesia will use its governmental instrumentalities, including the court system, to expropriate their investments without providing fair, prompt and adequate compensation as stipulated by international law.

In its editorial on Dec. 22, the Post aptly stated that the confrontational stance taken by PLN and tacitly endorsed by then president B.J. Habibie horrified foreign investors, bankers and governments. Prominent banks and insurance companies from five major countries jointly warned Indonesia in July that a failure to honor its power contracts would have disastrous implications for its economy, indicating it could lead to a halt of government-to-government loans.

It appears that the IPPs or other foreign investors would not be afraid to go through a legal process to settle their disputes with PLN or the Indonesian government as long as there is assurances they would receive fair and objective judgment according to the principle of due process of law.

In the Paiton case, it was clear that PLN was not willing to have the dispute heard by an international arbitration tribunal as stipulated in the PPA. There was no apparent reason for PLN's stance to not honor the arbitration clause, whereas an international arbitration tribunal is the most fair and objective forum to settle an international commercial dispute.

If PLN really believes that the PPA is void ab initio (null and void), and its lawyers are able to present convincing evidence before the arbitration tribunal, there would be no reason for avoiding a legal battle in an international arbitration forum. If the international arbitration tribunal finds in favor of PLN and declares that Paiton's contract is null and void, there will be no reason for foreign investors or lenders to be concerned with the case since it was heard by a fair and objective international forum.

However, in the Paiton case, it is quite clear PLN had no confidence that it would be able to present convincing legal arguments before an international arbitrary tribunal. Therefore, PLN filed a lawsuit in the Central Jakarta District Court, seeking an injunction to prohibit Paiton from proceeding with its intention to initiate the international arbitration process as stipulated in the PPA.

Unfortunately, the court seemed "too responsive"' to PLN's request and granted an injunction even before it considered the argument from Paiton's attorney on jurisdictional issues. If the court was patient enough to wait until it had rendered its decision on jurisdictional issues before it rendered the injunction to prohibit the arbitration from proceeding, the international community would probably still believe that there was a due process of law in the case.

As an Indonesian, this writer shares the opinion that we cannot compromise our national sovereignty, and would strongly object to any foreign powers dictating Indonesia's economic, social and political policies, as indicated by Amien Rais.

However, common sense indicates that if we still want to play an active role in the global economy, we have to prove to the world that we will honor the sanctity of contracts. It means that if disputes arise in the implementation of the contracts, Indonesia will give assurances that foreign investors will be treated fairly according to the principle of due process of law. In the Paiton case, there would be no problem to settle the case legally, as long as the principle of due process of law is upheld consistently. If PLN is represented by reputable international lawyers, PLN would surely be able to win the case in an international arbitration forum.

However, if PLN cannot afford to engage reputable international lawyers nor is unwilling to take the chance of going thorough an international arbitration process, there would be no choice but to negotiate and come to an amicable, out-of- court settlement. By doing this, the international community would understand that Indonesia is willing to honor the sanctity of a commercial contract and therefore the country would still be considered safe for foreign investments. In this regard, people with good common sense would agree with President Abdurrahman Wahid that an out-of-court settlement would be the only way to protect Indonesian dignity as one of the world's "civilized nations".

The writer is a senior lawyer at the law firm of Hanafiah Ponggawa Adnan Bangun Kelana.