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.