Govt appeals to U.S. Supreme Court in KBC case
The Jakarta Post, Jakarta
The government has filed an appeal with the U.S. Supreme Court to seek the release of funds frozen in American banks, in another twist in the legal saga between state oil and gas firm PT Pertamina and U.S.-owned power firm Karaha Bodas Company (KBC).
Minister of Finance Yusuf Anwar said on Wednesday a team of lawyers representing the government's interests in New York were working to secure the release of some US$271 million frozen in Bank of America and Bank of New York.
(In a report on Wednesday, we reported that $650 million was frozen. However, according to a source familiar with the case some $350 million was released in March of this year and another $29 million was released to KBC in October).
"We have prepared, through our lawyers in New York, a notice of appeal against the (previous) legal decision (by a U.S. court)," Yusuf said.
The banks froze the funds after a U.S. court issued a decision upholding an international arbitration ruling ordering Pertamina to compensate KBC for the suspension of a geothermal power project in Indonesia.
The government insists the funds are government revenue from oil and gas exports so they do not belong to Pertamina.
KBC is among dozens of independent power producers whose power projects here were suspended by the government in the wake of the 1997 Asian financial crisis. KBC, which signed a contract with Pertamina on the project, filed a lawsuit with an international arbitration court against Pertamina for breach of contract.
The Swiss-based arbitration court ruled in favor of KBC, ordering Pertamina to pay the firm $261 million. A U.S. court upheld the ruling and ordered Pertamina to pay $291 million in compensation, including interest.
Pertamina has refused to pay the compensation, prompting KBC to ask the U.S. courts to freeze Pertamina's funds in U.S. banks.
The government is now seeking an out-of-court settlement with KBC and an end to this costly legal battle that has dragged on for years.
Indonesia has also launched an investigation into alleged markups in the KBC power project.
The Directorate General of Taxation has also accused three top executives of KBC of failing to pay a total of Rp 12 billion in taxes. One of the executives, identified by the initials LSP, was placed in Cipinang penitentiary on Tuesday.
Hadi Purnomo, director general for taxation at the Ministry of Finance, told The Jakarta Post on Wednesday his office would confiscate the jailed executive's assets if he remained uncooperative.
"If LSP does not want to pay the taxes in installments over six months, then we will seize his assets to cover the bill. And if his assets are insufficient, LSP will remain in detention for two to six," Hadi said.
According to a guard at the penitentiary, LSP are the initials of Loedito Setyawan Poerbowasi. The son-in-law of former Indonesian vice president Sudharmono, he is one of the owners of PT Sumarah Daya Sakti, which partnered with American firms Caithness Energy and Florida Power & Light Co. to form KBC.
The other two executives, an American and Canadian, have not been arrested.