Paiton says court lacks authority to hear case
JAKARTA (JP): Independent power producer PT Paiton Energy's lawyer said on Wednesday he would ask the Central Jakarta district court to stop the trial of its dispute with state-owned electricity company PT PLN, saying the forum did not have any authority to try the case.
Frans Hendra Winarta told reporters that under the power purchase agreement (PPA) signed by the company and PLN in 1994, only the arbitration panel in Stockholm had the right to resolve both parties' dispute.
"I will tell the court in the hearing tomorrow (Thursday) that it has no right to try the dispute in light of the PPA," Frans said.
The court issued a injunction earlier this month for Paiton to desist from pursuing the arbitration litigation while the trial of its dispute with PLN was in progress.
The court threatened Paiton with US$600 million in penalties if it did not comply with the ruling.
The court made the provisional ruling at the request of PLN, which filed a lawsuit against Paiton in October this year following months of unproductive negotiations on the changes of the PPA.
PLN said the suit was not in conflict with the PPA, citing a clause therein which stipulated that Paiton had to follow the local law in its operations.
Based on the clause, PLN believed it could ask the local court to resolve its dispute with Paiton.
Paiton began the arbitration process against PLN soon after the lawsuit was filed, but Frans said the company hesitated to pursue the process after the court ordered it to discontinue.
"The company's shareholders are still in discussions whether or not to pursue the arbitration litigation," he said.
Frans said Paiton preferred to settle the dispute through an international arbitrator rather than the national court as it considered the forum was fairer.
"Who trusts our courts? Even the Indonesian people do not trust them," Frans said.
He said in an international arbitration process, a dispute would be examined by a panel of arbitrators, including two arbiters respectively chosen by conflicting parties and a lead arbiter chosen by the two arbiters.
The three arbiters would examine the case for about one year in accordance with the guidelines set by the United Nations Commission on International Trade (UNCITRAL).
According to Frans, Paiton had nominated Stephen Schwebel, president of the International Court of Justice in the Hague, as its arbiter, while PLN had appointed M. Sonarjah, an international law professor at the National University of Singapore, as its arbiter.
Paiton Energy is owned by Japan's Mitsui (32.5 percent), Edison Mission of the United States (40 percent), General Electric, also of the U.S. (12.5 percent) and local firm PT Batu Hitam Perkasa (15 percent), controlled by tycoon Hashim Djojohadikusumo.
The company has developed a 1,230 Megawatt (MW) coal-fired power plant, called Paiton Swasta I, in Probolinggo, East Java.
PLN filed a lawsuit in the Central Jakarta court to nullify the contract with Paiton, claiming the contract violated existing laws and was in contravention of "morality" and "public interest".
Under the contract, Paiton sells its power to PLN at the price of between 5.5 cents and 8.5 cents per kilowatt hour (Kwh), higher than the average price of 6.4 cents per Kwh set by other independent power producers and much higher than PLN's selling price of Rp 240 (about 3 cents). (jsk)