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.