RI not ready to face arbitration court: Experts
RI not ready to face arbitration court: Experts
Fitri Wulandari, The Jakarta Post , Jakarta
Legal experts lamented the lack of awareness evident among
many government officials and even the corporate community about
the international arbitration court, which now plays a greater
role in resolving commercial disputes.
The recent loss suffered by state-owned oil and gas company PT
Pertamina in a protracted legal battle with American power
producer Karaha Bodas Co. came as the government faces another
major battle at an international arbitration court, along with
other similar cases.
The legal battles will be costly for the cash-strapped
government, especially if it loses its cases.
"I am concerned that many people in Indonesia who claim to be
aware of arbitration clauses, in fact, do not really understand
them," lawyer Todung Mulya Lubis told The Jakarta Post over the
weekend by phone.
"They only become aware when they lose the case, even though
nowadays, an arbitration court is a common tool to resolve
commercial disputes," he added.
He stressed that solid preparations were essential in facing
an international arbitration court, because its procedures were
more rigid than those of local courts.
"One cannot bribe the arbitration court and must abide by its
ruling," said Todung, who is also an international arbiter for
the Paris-based International Chamber of Commerce.
Meanwhile, lawyer Luhut Pangaribuan said ignorance of the
workings of international arbitration was exemplified in the
general belief among businessmen that an international
arbitration ruling did not have jurisdiction over Indonesia and
thus could not be executed.
"Arbitration court ruling can be executed in any country,"
Luhut said.
He urged companies to be well prepared when signing business
contracts based on arbitration clauses, as their assets could be
seized if they lost at the international arbitration court.
Pertamina lost its case against Karaha at the Geneva
Arbitration Court in 2001, when the court ruled against Pertamina
for a breach of contract and ordered it to pay Karaha US$261
million in compensation for canceling Karaha's local power
project following the 1997-1998 financial crisis.
Karaha then filed a motion at a U.S. court to freeze
Pertamina's cash assets at U.S. banks, which Pertamina countered
by requesting an Indonesian court to nullify the arbitration
ruling and by appealing to the U.S. court.
On March 23, Pertamina lost its appeal and finally agreed late
last week to compensate Karaha as ruled by the international
arbitration court.
Pertamina's loss came as the government faces another
arbitration case involving Mexican cement maker Cemex S.A., which
was not awarded a controlling stake in state-owned cement giant
PT Semen Gresik as agreed in a 1998 privatization deal with the
government.
Nine mining companies that have been banned from resuming
operations in a protected forest are also planning to file a
litigation at an international arbitration court in what could be
a multibillion-dollar lawsuit against the government.