Court annuls int'l ruling on Kahara project
Court annuls int'l ruling on Kahara project
Much N. Kurniawan, The Jakarta Post, Jakarta
State oil and gas company Pertamina said on Wednesday it had
won its battle against independent power producer Karaha Bodas
Co. LLC at a local court over a dispute concerning a suspended
power project.
Pertamina president Baihaki Hakim said that Central Jakarta
District Court had annulled an international arbitration ruling
requiring the company to pay US$261 million in compensation to
Karaha.
"The (Jakarta) court has issued a ruling in favor of us," he
told reporters.
He said that, based on the court's ruling, issued on April 1,
Pertamina had the legal grounds to refuse to pay compensation.
Karaha is controlled by American firms Florida Power and
Caithness.
The power company signed a contract in 1994 with the state
electricity company PLN and Pertamina to develop a 400 Megawatt
geothermal power project in West Java.
But the government suspended the project, along with several
other power projects, in 1998 after the country was hit by the
regional financial crisis. The government ordered PLN to
renegotiate the contract of the power projects.
Karaha, which claims it invested $100 million in the project,
then filed a complaint with the international arbitration panel
in Switzerland, and won the case in 2000, requiring Pertamina to
pay the $261 million compensation.
In December last year, Karaha won a confirmation from a U.S.
court in Houston.
But instead of paying the compensation, Pertamina made an
appeal at the Jakarta court in a bid to annul the arbitration
ruling.
Karaha then moved to freeze Pertamina assets overseas. Last
week, the Bank of America, under a court order, suspended some
$130 million worth of funds assumed to be owned by Pertamina.
But Pertamina insisted that the money, coming from the sale of
crude oil and liquefied natural gas (LNG), belongs to the
government.
Pertamina also stressed that the international arbitration
ruling was not yet final because it had yet to obtain
confirmation from the local court, which is deemed necessary
because the power project contract was made based on Indonesian
law.
Karaha's lawyer was not available to comment on the Jakarta
ruling.
However, several lawyers earlier expressed concern that the
move by Pertamina to disregard the arbitration ruling could
further damage Indonesia's image in the eyes of international
investors.
Legal expert Amir Syamsudin said that Pertamina had no legal
basis to seek an appeal at the Jakarta court.
The development of the power projects is crucial to help avoid
an imminent power crisis in Java and Bali.
Regarding the restart of the Karaha Bodas power project,
Baihaki said Pertamina would continue to persuade Karaha to
recommence the project.
Karaha has refused the offer, saying that the project was no
longer prospective and it wouldn't compensate the damages
incurred by Karaha.
The Karaha Bodas project can be resumed now as Presidential
Decree No. 39/1997, which suspended power projects, has now been
lifted by the government.
The continuation of the power projects is crucial to help
avoid an imminent power crisis at home.
Separately, a senior executive of the Indonesian Geothermal
Association (API), Riki F Ibrahim, said in statement that the
Karaha Bodas project was not professionally carried out as its
budget had exceeded the internationally recognized standard limit
for the development of power plants.