Paiton says court lacks authority to hear case

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)