Court rejects Lirik's defense of arbitration ruling

The Central Jakarta District Court has rejected the defense by PT Lirik Petroleum (LP)over the ruling by an international arbitration panel that calls on state owned oil and gas firm PT Pertamina to pay US$34.4 million in compensation to the firm.

?Thus, we have an opportunity to see the verdicts (by the arbitration panel) cancelled,? PT Pertamina Exploration and Production's (EP) spokesman Muhammad Harun was quoted by Koran Tempo as saying in Jakarta Saturday.

Harun said that Pertamina would show new evidences in the coming trial session on July 28, 2009. ?We are ready to show some points in the (arbitration) verdict that we think unusual,? he said.

Any verdicts by international arbitration panels should be confirmed by local courts in order to get legal power. In Indonesia, the court that is assigned to confirm the arbitration panel is the Central Jakarta District Court.

The dispute between Lirik and Pertamina surfaced after both firms formed a joint operating body (JOB) in 1995 to develop the Lirik block. The block belonged to Pertamina. Pertamina often invite other parties to jointly develop its blocks under the JOB or TAC (Technical Assistance Contract) arrangements

Lirik Petroleum later proposed to develop four fields in the block, that is Lirik, North Pulai, South Pulai and Molek but Pertamina, which then also acted as industry regulator (the job now carried by BPMIGAS) only gave it a go-ahead to develop the Lirik field. This led Lirik Petroleum to file an arbitration suit against Pertamina, citing that the latter's move had caused potential losses.

The suit filed by the firm with the International Chamber of Commerce (ICC) International Court of Arbitration in 2008, that is more than ten years after the case happened. And the arbitration panel issued the verdict on Feb. 27, 2009, calling on Pertamina to pay $34.4 million in damages. (*)