PLN files lawsuit to counter arbitration ruling

PLN files lawsuit to counter arbitration ruling

JAKARTA (JP): State electricity company PT Perusahaan Listrik
Negara (PLN) said on Tuesday it had filed a lawsuit at the
Central Jakarta District Court to annul the recent ruling by an
international arbitration panel on its dispute with U.S. power
contractor MidAmerican Energy Holdings.

Company president Adhi Satriya said PLN took the action
because it thought the arbitration panel, which had been overseen
by the United Nations Commission on International Trade Law
(UNCITRAL), had infringed upon its legal rights.

The lawsuit was filed on May 26.

"PLN has received definitive advice from its Indonesian and
International legal advisers that the tribunal gravely prejudiced
PLN's legal rights by ignoring or misinterpreting the Indonesian
laws," Adhi said in a statement made available to The Jakarta
Post.

He said the provisions of the power purchase contracts signed
by PLN and MidAmerican's subsidiaries Himpurna California Energy
Ltd. and Patuha Power Ltd. were clearly specified to be subject
to the sovereign laws of Indonesia.

Himpurna California and Patuha Power have each developed
geothermal power projects respectively located in Dieng, Central
Java and Patuha, West Java.

Adhi argued that the arbitration panel that had examined the
dispute had an "expired" authority.

He also dismissed several articles in its ruling as
"exaggerated, not in line with the claim, containing
contradictions and out of the compromise limit".

"In addition, there were also violations of due process under
the UNCITRAL rules of arbitration," Adhi said, but did not
specify the rules that had been violated.

The arbitration panel in its hearing in Jakarta last month
found PLN had breached the power purchase contracts it had signed
with Himpurna and Patuha.

The panel ordered PLN to pay US$572 million in damages caused
by its negligence.

The panel was presided over by an international attorney, with
panel members including an Australian businessman and an
Indonesian judge.

MidAmerican, formerly known as CalEnergy, charged PLN with
breaching contracts by refusing to buy power from its Dieng power
plant and postponing its Patuha project.

PLN has refused to buy power from the independent power
producers (IPPs) due to financial problems caused by the economic
crisis.

The government has also put on hold most of the power
projects, including Patuha, as part of the retrenchment measure
to cope with the economic crisis.

Adhi said the ruling by the arbitration panel is damaging to
PLN as well as the electricity consumers of Indonesia who depend
on the state company for power supplies.

He said PLN would resist legal attempts to enforce the ruling,
calling it "incorrect" and "unjust".

"Therefore, PLN has requested the aforementioned court of
justice to annul the arbitration verdict of May 4, 1999, or that
the verdict be declared void and legally unenforceable," Adhi
said.

"PLN regrets having to take this action since it prefers
mutual negotiations as the best means to resolve disputes instead
of litigation in the form of arbitration or court proceedings."

PLN has signed power purchase contracts with 26 IPPs, which
are mostly international power producers in partnership with
businesses with connections to former president Soeharto's
administration.

Aside from MidAmerican, another American IPP, Florida Power &
Lights, has filed a lawsuit at the arbitration court in Geneva,
accusing PLN of breaching its contract. The result of the
arbitration is not yet known.

Thus far, most of the IPPs remain committed to the contractual
renegotiation program embarked on by PLN, but some demanded that
"the government be involved in the renegotiation".

However, Adhi turned down the request, citing an agreement
between the Indonesian government and the International Monetary
Fund (IMF), "All negotiations with the IPP's are being conducted
by PLN on a commercial basis without direct government
involvement." (jsk)