Common sense a must in Paiton row

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.