Thanks Ian & Matty, the Indonesian contingent as they shall be known albeit Ian's heading to Morocco where I am setting off for tomorrow! It's rumoured that Indonesia has also considered the possibility of 'early settlement do avoid egg on face and possibly further damaging their miner sector.' More interestingly, there's Indonesia's 'other similar case' that went to Arbitration & Conclusion in 2000.
Publication Date : 29-06-2012
Indonesian President Susilo Bambang Yudhoyono is telling his ministers to prepare for the worst after the government recently entered into arbitration with an international mining company.
During a Cabinet meeting yesterday, Yudhoyono told relevant ministers to take needed steps to prevent such arbitrations in the future, as the case had affected him personally as the head of state.
Yudhoyono was referring to an arbitration filed by London-listed Churchill Mining Plc. that was registered with the International Centre for Settlement of Investment Disputes (Icsid) in Washington, DC, on June 22.
"Please note that this case began at the regency level. But when it’s brought to arbitration, the President is the one who becomes the first defendant," the President said.
"Imagine if such cases happened in hundreds of regencies in the country, and the President was named the defendant," Yudhoyono said.
Churchill turned to arbitration after the Supreme Court rejected its appeal of a decision favouring East Kutai regency that was reached by the Samarinda Administrative Court in East Kalimantan.
The mining giant sought US$2 billion in compensation from the government for granting another firm the right to operate in Churchill’s concession.
"Don’t let us be on the losing or the wrong side, because the implications will be very large," Yudhoyono said.
"I do not want those multinational companies to do anything they desire with their international back-up and put pressure on developing countries such as Indonesia," he said.
"As long as we are sure that we are on the right path, the East Kutai regent [Isran Noor] must uphold the truth, justice and our pride. That’s the principle."
Yudhoyono assembled his Cabinet members for a one-hour meeting specifically to discuss the arbitration.
Coordinating Economic Minister Hatta Rajasa declined to discuss the results of the meeting. "Things are still underway. Let’s not talk too much about something that is still in process."
According to the Icsid’s website, the Indonesian government is represented by the Attorney General Basrief Arief.
In a statement released on Churchill’s website, chairman David Quinlivan said the Icsid had confirmed that it had jurisdiction to handle the dispute under the Bilateral Investment Treaty between the United Kingdom and Indonesia.
"The board of Churchill is pleased that the Icsid has registered the request for the arbitration, and that the arbitrary proceedings have been formally initiated. Churchill will be seeking the full relief owed to it under the provisions of the bilateral treaty and under international law," Quinlivan said.
The case began in 2008 when Churchill started coal exploration in Kalimantan by acquiring a 75 per cent stake in a concession held by local firm Ridlatama Group.
However, the East Kutai regency administration later declared the mining concessions owned by Ridlatama invalid after it revoked the firm's mining permit.
The Churchill case is not the only dispute involving the government in international arbitration. The Icsid is considering another case filed by British national Rafat Ali Rivzi, a former shareholder of Bank Century, now Bank Mutiara.
Rivzi reportedly is seeking compensation for his losses stemming from the government’s 2008 decision to spend 6.76 trillion rupiah ($716.5 million) to bail out the ailing bank.
Rivzi was sentenced to 15 years’ imprisonment in absentia by an Indonesian court last year for his role risking the bank.
The government has taken international arbitration issues seriously after a case in 2000, when state oil and gas company PT Pertamina was ordered by the International Arbitration Institute in Switzerland to pay around $300 million sis in 1997. Karaha Bodas was controlled by US-based Florida Power Energy LLC and Caithness Energy LLC.
During a Cabinet meeting yesterday, Yudhoyono told relevant ministers to take needed steps to prevent such arbitrations in the future, as the case had affected him personally as the head of state.
Yudhoyono was referring to an arbitration filed by London-listed Churchill Mining Plc. that was registered with the International Centre for Settlement of Investment Disputes (Icsid) in Washington, DC, on June 22.
"Please note that this case began at the regency level. But when it’s brought to arbitration, the President is the one who becomes the first defendant," the President said.
"Imagine if such cases happened in hundreds of regencies in the country, and the President was named the defendant," Yudhoyono said.
Churchill turned to arbitration after the Supreme Court rejected its appeal of a decision favouring East Kutai regency that was reached by the Samarinda Administrative Court in East Kalimantan.
The mining giant sought US$2 billion in compensation from the government for granting another firm the right to operate in Churchill’s concession.
"Don’t let us be on the losing or the wrong side, because the implications will be very large," Yudhoyono said.
"I do not want those multinational companies to do anything they desire with their international back-up and put pressure on developing countries such as Indonesia," he said.
"As long as we are sure that we are on the right path, the East Kutai regent [Isran Noor] must uphold the truth, justice and our pride. That’s the principle."
Yudhoyono assembled his Cabinet members for a one-hour meeting specifically to discuss the arbitration.
Coordinating Economic Minister Hatta Rajasa declined to discuss the results of the meeting. "Things are still underway. Let’s not talk too much about something that is still in process."
According to the Icsid’s website, the Indonesian government is represented by the Attorney General Basrief Arief.
In a statement released on Churchill’s website, chairman David Quinlivan said the Icsid had confirmed that it had jurisdiction to handle the dispute under the Bilateral Investment Treaty between the United Kingdom and Indonesia.
"The board of Churchill is pleased that the Icsid has registered the request for the arbitration, and that the arbitrary proceedings have been formally initiated. Churchill will be seeking the full relief owed to it under the provisions of the bilateral treaty and under international law," Quinlivan said.
The case began in 2008 when Churchill started coal exploration in Kalimantan by acquiring a 75 per cent stake in a concession held by local firm Ridlatama Group.
However, the East Kutai regency administration later declared the mining concessions owned by Ridlatama invalid after it revoked the firm's mining permit.
The Churchill case is not the only dispute involving the government in international arbitration. The Icsid is considering another case filed by British national Rafat Ali Rivzi, a former shareholder of Bank Century, now Bank Mutiara.
Rivzi reportedly is seeking compensation for his losses stemming from the government’s 2008 decision to spend 6.76 trillion rupiah ($716.5 million) to bail out the ailing bank.
Rivzi was sentenced to 15 years’ imprisonment in absentia by an Indonesian court last year for his role risking the bank.
The government has taken international arbitration issues seriously after a case in 2000, when state oil and gas company PT Pertamina was ordered by the International Arbitration Institute in Switzerland to pay around $300 million sis in 1997. Karaha Bodas was controlled by US-based Florida Power Energy LLC and Caithness Energy LLC.
to power company Karaha Bodas Company after the government annulled the contract due to the Asian financial cri
Hi Frase, its important this story is put in context - there was no motivation to settle previously as nothing had been determined within the process-when jurisdictional issues are clarified Indonesia has no choice but to at least consider a sensible settlement. the reason for the above link is the story has re-appeared as you rightly said on markets live with the government alleged to be open to a more amenable settlement. Cheers Matt
ReplyDeleteThanks guys- just a personal opinion- I cant see ROI even contemplating settling here until the court decision on jurisdiction is made (hopefully soon, but no timescale given) at the very earliest. If this goes against CHL (hopefully v unlikely, but you never know), all bets are off, but lets hope we would get confirmation we can continue down the ICSID route, and then we would move onto the court timetable for a final hearing etc, which could be 2015, which may move any payday back until 2016.
ReplyDeleteI would expect ROI to play the long game here, maybe not looking at settling until the final hearing have taken place, which means another year or two in my view. Why settle now when they could get the whole thing thrown out if the court accept their jurisdiction argument?
Feel free to comment as I may have misread this situation.
TheLeggie
TheLeggie, hope the weekend is panning out well for you and in light of AAL results you're short, and POlY crap with cash outflows for 'expansion.'
DeleteRe: Indo's best interests I'd be inclined to agree till chatter in Indo repeated the above from last hear with quite a few positives. The pertinence of the 'old' news is Indonesia are seeing their risks of business increase the longer it goes on. We'll see, I'm sure CHL are 'discussing it at the moment' but it doesn't mean the Government are considering an approach to resolve the matter! Tc F
@Fraser- yes- good weekend started here already- AAL figures aren't great are they :-)) I guess that if the first jurisdiction issue goes against ROI (which it should, all things being equal), then ROI would be advised to come in with a lowball offer (perhaps 20/25% of the CHL claim) at that stage, which I would assume CHL will reject out of hand. We are then looking at 2015 for final hearing and 2016 settlement, but ROI would have a second offer in hand after the final hearing (perhaps double the initial offer) having assessed the likelihood of their winning the case.
ReplyDeleteNYO getting panned this morning but 1p looks about right pre 15/11 meeting.
Have a great weekend!! and happy birthday!! Planning my 50th do in a few months at Langar Hall at present.
TheLeggie