Tempo Scan to end lawsuit against Roche

Tempo Scan to end lawsuit against Roche

JAKARTA (Dow Jones): Indonesian distributor PT Tempo Scan said Monday it has signed a preliminary agreement with partner PT Roche Indonesia to drop a Rp 280 billion (about US$30.2 million) lawsuit that led a Jakarta court to freeze Roche's fixed assets.

The out-of-court settlement between Tempo Scan and Roche Indonesia, a unit of Swiss pharmaceutical company Roche Holding AG, is the latest twist in a legal battle watched closely by other foreign investors embroiled in contract disputes in Indonesia.

In late May, the court had ruled in favor of Tempo Scan, saying Roche must compensate Tempo Scan for illegally ending a contract to distribute its over-the-counter drugs. Roche had begun using alternative distributors for these drugs, a business that generated sales of Rp 60 billion in 1999.

"This preliminary settlement is a much better solution for both parties," said Tempo Scan Corporate Secretary Hamonangan Nasution.

Both parties have instructed their lawyers to withdraw from litigation, he said.

Roche had protested the lawsuit, saying the contract signed Dec. 1996 allowed either party to terminate without compensation, and that any dispute should go to arbitration.

Nasution declined to give further details of the agreement, saying the two companies had yet to negotiate any terms of compensation.

An executive familiar with the deal said Roche hasn't committed to pay compensation and won't revert to Tempo Scan for its over-the-counter drugs, although the Indonesian firm distribute will continue to sell its prescription drugs.

"There is no financial payoff" in the agreement, the executive said.

The dispute began last August when Roche wrote a letter to Tempo Scan announcing the termination of its contract to distribute over-the-counter medicine, leaving in place a parallel agreement on prescription drug distribution.

Tempo responded with the lawsuit and successfully asked the South Jakarta district court to freeze Roche's assets including the company's 10 hectare factory grounds, machinery and raw and semifinished materials.

Roche complained that the court didn't have authority over the case and had overstepped the mark in freezing assets. It won backing from President Abdurrahman "Gus Dur" Wahid who said in March that Roche shouldn't be prevented from producing medicine.

"I hope the harassment of Roche is being lessened, but if not then I will still continue to impose my will and that is to respect the international law," Gus Dur said.

Analysts say Roche's plight highlights the problems inherent in attempts to resolve such disputes in Indonesia, where local courts often overrule foreign demands for independent arbitration hearings.

Officials at Tempo Scan insist that Roche's refusal to say why it terminated the contract had forced the Indonesian company to seek recourse through the courts, as it had to defend its reputation as a pharmaceutical distributor.