BoA freezes Pertamina assets: Karaha

Karaha Bodas Company on Tuesday announced that Bank of America this week had frozen more than US$130 million of funds belonging to state oil and gas company Pertamina.

Karaha, whose principal investors are two U.S. companies, FPL Energy LLC and Caithness Energy LLC, also announced that courts in Singapore and Hong Kong had, like a U.S. court in Texas, entered judgments against Pertamina for $261 million. That is the amount of damages awarded in December 2000 by Swiss arbitrators under United Nations Commission on International Trade Law Arbitration Rules, an award that the Swiss courts refused to set aside.

?Although Pertamina has filed suit in Indonesia to annul the award and stop enforcement, Karaha will vigorously oppose that action,? Karaha said in a statement.

Karaha is an independent power developer that in 1994 entered into contracts with Pertamina and another Indonesian entity to develop the Karaha Bodas Geothermal Projects in Indonesia.

Karaha said it had invested over $100 million in developing the power projects, but in 1998 Indonesia suspended them. Unable to proceed, Karaha filed for arbitration in Switzerland and successfully obtained an award for $261 million.

As Pertamina has refused to pay any portion of the award, Karaha has begun seizing Pertamina's assets around the world to satisfy the award. Karaha emphasized that it is targeting Pertamina's assets, not assets that belong to Pertamina's production partners.

``Karaha obtained an arbitral award from a renowned panel under internationally approved rules, the Swiss Supreme Court refused to set aside the award, a U.S. federal district court, acting pursuant to a UN convention, confirmed it as a judgment, and now Hong Kong and Singapore Courts have entered judgments against Pertamina,'' said Christopher F. Dugan, Karaha's counsel. ``Still, Pertamina defies the courts and refuses to make any effort to keep its promise to pay the award. Instead, it has asked the Indonesian courts - which have no jurisdiction because Pertamina agreed that all disputes would be settled by arbitration - to prevent Karaha's lawful collection of its award. Pertamina is sending a message to foreign investors that Indonesian state-owned entities can breach or terminate their contracts at will and with impunity, and that it doesn't care what foreign courts rule. That attitude will seriously damage the investment climate in Indonesia.'' (alex)