U.S. court rules Pertamina in contempt

U.S. court rules Pertamina in contempt

Moch. N. Kurniawan, The Jakarta Post, Jakarta

The U.S. District Court in Houston, Texas, has issued a contempt
order against the state-owned oil and gas firm Pertamina for
using a Jakarta court to avoid paying damages to foreign
controlled power company Karaha Bodas Co. LLC.

"It's extraordinary for a U.S. court to find a civil party in
contempt, and it does so when a party's actions are extreme and
egregious.

"This shows once again that Pertamina and Indonesia appear to
be willing to do whatever they can to avoid their legal
obligations," Karaha legal counsel Chris Dugan said in statement
released on Thursday to The Jakarta Post.

Pertamina and Karaha have been involved in a legal bout over a
geothermal power project which was suspended by the government in
1998 due to the country's economic crisis.

The suspension of the project prompted Karaha, which claims it
has invested more than US$100 million, to file for arbitration
with a Switzerland-based arbitration body. The U.S.-controlled
power firm won the case in 2000, under which the arbitration
board ruled that Pertamina should pay some $261 million in
compensation. The ruling was latter confirmed by the Houston
District Court.

But instead of abiding by the ruling, Pertamina brought
proceedings in a Jakarta court, which on Monday issued the
surprising decision of annulling the award made by the
international arbitration body.

The next day, the Houston court declared Pertamina in
contempt.

Pertamina declined to comment on the U.S. court ruling.

Company spokesman Ridwan Nyak Baik would only say that
Pertamina wanted to settle the dispute with Karaha in an
Indonesian court as the project was subject to Indonesian law.

"One of the clauses in the contract stipulates that the
governing law is Indonesian Law.

"Therefore, every dispute must use Indonesian Law," he told
the Post.

Dugan urged Pertamina to honor the arbitration ruling.

He said that at present Bank of America and Bank of New York
had frozen over $200 million belonging to Pertamina as part of
the effort to recover the damages.