Local textile firm brings complaint to arbitration

Local textile firm brings complaint to arbitration

JAKARTA (JP): Earlier this year, textile companies complained
they were hit by defective cotton imports from the United States.
Their claims were solid, the evidence was there and the importer
even admitted the inferior quality of the cotton.

The Indonesian firms, however, preferred to deal with the
issue on a bilateral basis -- through negotiations -- and avoided
arbitration, which they claimed would be disadvantageous to them.

Observers justified this, saying that the Liverpool Cotton
Association (LCA) -- the international arbitration body for
cotton trade disputes -- was controlled by the seller's
interests, with little influence from the buyer's side.

One of the companies, PT Putra Sejati Spinning Mills Ltd.,
however, decided to "brave" the LCA by bringing the case to
arbitration. Under the contract, the LCA is authorized as the
only body to handle any disputes which may occur between cotton
sellers and buyers.

Heinz Schadach, an adviser to the board of Putra Sejati, said
the company was pursuing a quality arbitration for one item and a
technical arbitration for three items.

"Negotiations are currently underway, but the seller has
refused to compensate (for defective cotton delivered last year),
although the samples indicate the cotton is bad and the seller
has admitted to its poor quality," Schadach told The Jakarta Post
in a recent interview.

The total value of Putra Sejati's claim is around US$300,000.

"It is a clear-cut case and the evidence is there ... if Putra
Sejati does not win, there must be something wrong with the
system, and we should reconsider how to carry out cotton trade in
a fair way," he said.

Schadach, whose company has hired a foreign lawyer to handle
the case, said that the other seven companies which complained of
similar problems should also go to arbitration, as this was not
the first time they had received off-grade cotton.

Chairman of the Indonesian National Board of Arbitration
Priyatna Abdurrasyid was not surprised at the reluctance of
Indonesian companies to bring the dispute to the LCA.

"Many Indonesian companies feel uneasy about moving in foreign
territory and facing unfamiliar rules, which often poses
communication and cultural problems," he said.

Priyatna said Putra Sejati's decision to hire a foreign lawyer
familiar with Liverpool laws was appropriate.

He said, however, that the company would have to spend a lot
of money for the arbitration process, as it would have to be
conducted outside Indonesia.

"To make things easier, the parties in the dispute could agree
to arbitrate in Indonesia or in a third country such as
Singapore. This would be an advantage for the Indonesians, not
only because it would mean a lot of money saved, but also because
they would be more comfortable dealing with things in a familiar
atmosphere," he said. (pwn)