Pertamina goes ahead with its appeal in Karaha Bodas case

State owned oil and gas company Pertamina has pledged to continue its legal fight against the U.S. court decision to freeze its accounts in Bank of New York and Bank of American despite the U.S. Court of Appeals? Thursday decision to upheld the district court?s decision on the freeze of the funds.

Pertamina?s spokesman Ridwan Nyak Baik said in Jakarta on Thursday that the state owned oil and gas company would go ahead with its efforts to appeal the freeze of the funds in the higher court despite the decision.

"Although we have not yet received the decision (of the U.S. Court of Appeals), we will continue with our appeal," he told reporters. He stressed that the decision of the U.S. Court of Appeals was not final. "I regret newspaper reports as if the decision has been final," he added.

The U.S. Court of Appeals on Thursday upheld a freeze on approximately US$275 million of more than $520 million frozen in trust accounts of Pertamina. In doing so, the court denied a motion by the government of Indonesia, which had argued for the release of 95 percent of the frozen funds.

The decision represents another in series of legal victories for Karaha Bodas Company, and upholds the ruling of the lower court.

According to Ridwan, Pertamina would continue to reject the appeal decision because the validity of KPC?s claim should have to be reviewed. "More over the government has formed facilitator team to find out a solution that will benefit both Pertamina and KBC," he added.

The dispute centers on Karaha, which is principally backed by U.S. companies FPL Energy and Caithness Energy, entering into contracts with Pertamina and another local company in 1994 to develop the Karaha Bodas geothermal project in West Java.

The Indonesian government, however, cancelled the project as part of the retrenchment program to cope with the impact of the crisis hit Indonesia in late 1997. KBC, which claimed to have invested some $100 million in the geothermal project, sued Pertamina through international arbitrators.

In February 2002. KBC served restraining notices on the Bank of New York and Bank of America, which serve as trustees for Pertamina and its production sharing partners. Pertamina and the Indonesian government opposed the restraining notices, saying that the funds belong to the government of Indonesia.

In April this year, the US District Court for Southern District of New York ruled that KBC is entitled to seize what is known as Pertamina?s Retention Fee which may represent as much as 20 percent to 30 percent of the frozen funds, while the government of Indonesia has a property interest in the remaining funds. (Godang)