Indonesian Supreme Court rules in favor of KBC

The Indonesian Supreme Court on Tuesday dismissed the ruling by the Central Jakarta District Court that annulled the decision by an international arbitration court ordering state oil and gas company Pertamina to pay damages to independent power producer Karaha Bodas Company (KBC).

“The Central Jakarta District Court has no right to examine and decide on the claim by the plaintiff (that is Pertamina) aimed at annulling the decision by the International Arbitration,” the Supreme Court said in its ruling.

The ruling was made on March 8, 2004 but copies of the ruling was only made available on Tuesday.

A Swiss arbitration court ruled in 2000 that Pertamina must pay about US$260 million damages to KBC for the suspension of the latter’s geothermal power project in West Java. The project was suspended by the government in the wake of the financial crisis in late 1997. KBC signed the contract with Pertamina to develop the project.

Following the arbitration court’s ruling, KBC filed the case with the U.S. courts in order to get an affirmation of the arbitration’s ruling. After a lengthy legal process, KBC won the U.S. court ruling ordering Pertamina to pay KBC damages of more than $290 million.

Meanwhile, Pertamina appealed to the Swiss Supreme Court against the arbitration's ruling. However, the Swiss Supreme Court upheld the arbitration's decision. Pertamina then filed a lawsuit with the Central Jakarta District Court, which in 2002 annulled the arbitration’s ruling.

The Indonesian Supreme Court argued that based on the Law No. 30/1999, since Pertamina had appealed to the Swiss Supreme Court, the Central Jakarta District Court had no right to examine and decide on Pertamina’s request for the annulment of the arbitration’s ruling.

“We are quite pleased with the decision by the Indonesian Supreme Court. This is an important step forward and makes us closer to the resolution of the case,” KBC’s lawyer Christopher F. Dugan said in a statement on Tuesday. (Bodega)