U.S. court of appeals upholds Pertamina?s motion on Karaha Bodas dispute

The U.S. Court of Appeals has upheld the motion of the Indonesian government and state oil and gas firm Pertamina that The Bank of New York and Bank of America (BoA) release their assets frozen by the banks in relation to the dispute between the Indonesian parties and Cayman Islands-registered company Karaha Bodas Company (KBC), Pertamina?s legal officer Simson Pandjaitan said on Tuesday.

Simson said that the US Court of Appeals had issued the ruling on December 10.

A US district court had this year issued a ruling instructing Bank Of New York and BoA to freeze some US$200 million in funds believed to belong to Pertamina, which the company claims to be owned by the Indonesian government.

Pertamina and KBC had been involved in a legal battle which centered on the suspension by the Indonesian government of KBC?s geothermal power project in West Java in 1998 shortly after Indonesia faced a serious economic crisis. KBC had signed a contract with Pertamina and state electricity firm PLN to build the power plant.

When suspended, the power project was still in the exploration and development phase.

In protest against the government?s move, KBC immediately took the issue to a Switzerland-based panel of arbitrators. In December 2000, the panel ordered Pertamina to pay KBC US$261 million for the project suspension, but Pertamina refused to do so and reported its case to the Central Jakarta district court. The court annulled the arbitration panel?s decision.

Pertamina said the suspension of the Karaha Bodas project had been force majeur and that the $261 million compensation was too big. (godang)