Govt ups the ante in struggle against KBC
The Jakarta Post, Jakarta
The government on Tuesday put an executive of American- controlled Karaha Bodas Company (KBC) into jail, and is ordering its lawyers to continue legal battles in the United States to prevent KBC from obtaining compensation for its suspended power project.
The seemingly-desperate move came on Tuesday, as KBC distributed copies of the ruling by the Supreme Court annulling the previous decision by the Central Jakarta District Court that nullified the ruling by the Swiss arbitration court ordering Pertamina to pay damages to KBC.
The Supreme Court ruling, which some analysts say is tantamount to an order for Pertamina to abide by the arbitration ruling, comes as another blow to Pertamina and the government's years-long struggle to avoid paying compensation to KBC.
The directorate general of taxation announced on Tuesday that it had put an Indonesian executive of KBC into the Cipinang penitentiary on charges of tax evasion.
The office itself refused to identify the person, but a guard at the penitentiary told The Jakarta Post the man was named Loedito Setyawan Poerbowasi. 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.
Djangkung Sudjarwadi, a staff expert on human resources at the directorate, said on Tuesday that his office was still hunting for two other KBC executives, an American and Canadian citizen respectively, whose arrests have been ordered by the government on the same charges. Many believe the two have fled the country.
The tax office has accused KBC of failing to pay taxes amounting to more than US$180 million.
Aside from launching tax fraud charges, the government is also probing possible corruption committed by KBC to obtain the contract to develop its geothermal project in West Java.
State Minister of State Enterprises Sugiharto said on Tuesday that the government would use the tax fraud and corruption charges to press KBC to accept an out-of-court settlement in its dispute with Pertamina.
KBC is among dozens of independent power producers whose projects were suspended by the government in the wake of economic crisis in 1997. KBC then filed an arbitration suit in Switzerland, demanding Pertamina, as the agency that gave it the contract, to pay compensation.
The arbitration court ruled in favor of KBC, ordering Pertamina to pay $261 million to KBC. Later, the U.S. courts upheld the arbitration ruling and ordered Pertamina to pay $291 million in compensation. On the court's order, American banks froze funds worth about $650 million owned by Pertamina and the Indonesian government.
Sugiharto said the government is asking the law firm representing its interests to file an appeal to the U.S. Supreme Court for the release of funds belonging to the Indonesian government.
Elsewhere, Sugiharto played down the ruling by the Indonesian Supreme Court annulling the Central Jakarta District Court's decision, saying the ruling only decided on the "right" of the Central Jakarta District Court and did not address "the content" of Pertamina's complaint.
At the request of Pertamina, the Central Jakarta District Court ruled in 2002 to annul the arbitration ruling. However, the Supreme Court said in its ruling dated March 8, 2004 that since Pertamina had appealed to the Swiss Supreme Court against the arbitration ruling, the Central Jakarta District had no further right to decide on Pertamina's request to annul the ruling.