Court annuls arbitration ruling against PLN
Court annuls arbitration ruling against PLN
JAKARTA (JP): The Central Jakarta District Court annulled on Thursday an arbitration ruling that ordered state-owned electricity company PT Perusahaan Listrik Negara (PLN) to pay US$572.3 million in damages for breach of contracts to two units of American energy company MidAmerican Energy Holdings Co.
The panel of judges said the ruling made by the United Nations-supervised arbitration panel last May was "legally defect". They said MidAmerican's units -- Himpurna California Energy Ltd. and Patuha Power Ltd. -- had not consulted with state oil and gas company Pertamina on the arbitration lawsuit filed by both companies against PLN and the Indonesian government.
The judges said under the joint operation contract (JOC) signed by Pertamina and Himpurna and Patuha, the state company held the title to geothermal exploration and production facilities used by both companies.
"The defendants (Himpurna and Patuha) are only contractors of Pertamina. They only have utilization rights over the facilities," senior judge Endang Sumarsih said.
"However, the arbitration panel stated in its ruling that the facilities are owned by Himpurna and Patuha, which is in conflict with Pertamina's contracts with both companies," she said in the provisional ruling on the lawsuit filed by Pertamina against both companies.
Himpurna and Patuha have developed geothermal power plants in respectively the Dieng area in Central Java and in the Patuha area in West Java.
The companies signed the JOC with Pertamina to allow them to develop geothermal resources in both areas.
With Pertamina, both companies later signed an energy sales contract with PLN, under which PLN would buy power from both companies through Pertamina.
However, due to financial difficulties, PLN refused to pay Himpurna for its power supplies, despite a take-or-pay clause.
The government put Patuha's power project on hold last year amid the economic crisis.
PLN, which recorded Rp 9 trillion in losses last year, is experiencing financial difficulties following the sharp depreciation of the rupiah against the dollar in mid-1997. The company sells power in rupiah but buys power from independent power producers (IPP), including Himpurna and Patuha, in U.S. dollars.
Himpurna and Patuha won arbitration lawsuits against PLN and the government.
The arbitration panel ordered PLN to pay both companies to pay $572.3 million in damages.
PLN filed a lawsuit at the Central Jakarta District Court to annul the arbitration ruling.
In a move of apparent support for PLN, Pertamina also sued Himpurna and Patuha at the court for breach of contracts.
Sources said MidAmerican was set to file another arbitration suit to force the Ministry of Finance to cover damages payable by PLN.
However, the panel of judges ordered Himpurna and Patuha to postpone their intention "to execute the arbitration's decision on the damages and file further arbitration litigation", until the court made a definitive ruling on the case.
"The defendants are liable to pay the plaintiff (Pertamina) $1 million per day in penalties if they act against these rulings," Endang said.
MidAmerican's team of lawyers from the Hanafiah and Ponggawa law firm filed an appeal against the panel's ruling.
One of MidAmerican's lawyers, Joni Aries Bangun, voiced concerns over what he said was "an indication that the judges were not objective in examining the case".
Endang said the trial would resume next Thursday to provide opportunities for MidAmerican's lawyers to counter the court's temporary decision. During the trial, the lawyers are expected to deliver arguments stating the court has no right to examine the case.
"If the panel of judges accept their arguments, the trial of the case will continue at the Jakarta High Court.
"If the panel of judges dismiss their arguments, the Central Jakarta Court will continue examining the case," Endang said. (jsk)