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)