Senior legislator advises govt to honor arbitration ruling on Karaha Bodas

A senior member of the House of Representatives (DPR) on Wednesday advised the government to honor the decision of Switzerlands-based arbitration panel on the Karaha Bodas power project case which involves a Cayman Islands-registered firm and state oil and gas company Pertamina.

?The government should honor the arbitration ruling,? said Iwan Prayitno, chairman of DPR?s Commission VIII in charge of energy and mineral resources affairs.

Iwan expressed his regret why the government had not negotiated with Karaha Bodas Company well before the arbitration panel awarded Karaha US$261 million in compensation for the abrupt suspension by the government of the Karaha Bodas geothermal power project in West Java.

?Such decision might not have come out if the government had tried negotiations with Karaha,? Iwan told Petromindo.com and Koran Tempo daily.

A U.S. court, following the Swiss arbitration panel?s decision, had ordered Bank of America to freeze around $130 million worth of funds believed to belong to Pertamina.

Meanwhile, Pertamina president director Baihaki Hakim said recently it would ask an independent audit team to examine whether the $261 million award was reasonable.

Karaha in 1994 signed an agreement with Pertamina and state electricity company PLN to build the Karaha Bodas power project.

In 1998, the government suspended Karaha and many other power projects as part of an economic plan developed with the International Monetary Fund. (Godang)