Canada / 09 December 2004 / Canada, Court of Queen's Bench of Alberta / Karaha Bodas Company, L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara and P.T. PLN (Persero) / 0203 03768
| Country | Canada |
| Court | Canada, Court of Queen's Bench of Alberta |
| Date | 09 December 2004 |
| Parties | Karaha Bodas Company, L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara and P.T. PLN (Persero) |
| Case number | 0203 03768 |
| Applicable NYC Provisions | V | V(1) | V(1)(b) |
| Source |
2004 ABQB 918 | online: CanLII |
| Languages | English |
| Summary | Karaha Bodas Company, L.L.C. ("KBC") and Perusahaan Pertambangan Minyak Dan Gas Bumi Negara ("Pertamina"), the Indonesian state oil company, concluded an agreement that bestowed Pertamina with management obligations for a geothermal project in Indonesia and KBC the responsibility for financing the project and building, owning, and operating the generating facilities. The same day, an agreement for the sale of energy from this project was concluded between KBC, Pertamina and P.T. PLN (Persero) ("PLN"), a state-owned electric utility company. Both agreements provided for the application of Indonesian law, and dispute settlement by arbitration in Switzerland pursuant to the Arbitration Rules of the United Nations Commission for International Commercial Law (“UNCITRAL Rules”). Four years later, the project was indefinitely suspended by Presidential Decree. KBC initiated arbitration in Switzerland against Pertamina and PLN for the breach of both agreements. In a preliminary award the tribunal rejected motions by Pertamina and PLN to consolidate the claims. The tribunal eventually decided the dispute in favor of KBC. Pertamina’s application to have the award set aside in Switzerland was unsuccessful. Pertamina then successfully annulled the award before a first instance court in Indonesia, but that decision was reversed by the Supreme Court of Indonesia. KBC subsequently obtained enforcement of the award in several countries, including Hong Kong and the United States. It then sought enforcement before the Alberta Court of Queen’s Bench. Pertamina and PLN argued that the composition of the arbitral tribunal was in a violation of the arbitration clauses in the two agreements, and that justified refusal to recognize and enforce the award pursuant to Article V(1)(d) NYC. Pertamina and PLN further argued that enforcement of the award would violate public policy because by finding that the defendants were liable for breach of contract, the arbitrators implied that the defendants should have performed under the contracts in defiance of the Presidential Decrees that had suspended the project. The Alberta Court of Queen’s Bench granted enforcement to the award. It noted that a party resisting enforcement has the onus of proving that one of the narrow grounds set out in Article V NYC is applicable. The Court held that the equestion of whether enforcement should be denied pursuant to Article V(1)(b) because the award had been set aside in the Indonesian courts was "moot" in light of the decision of the Indonesian Supreme Court reversing the first instance annulment decision. The Court denied the defendants' objections that the composition of the arbitral tribunal violated the arbitration clauses of the two agreements, holding that the two agreements were integrated contracts and were both subject to the Presidential Decree. The Court also rejected defendants' argument that enforcement of the award would violate public policy, without referring to Article V(2)(b). The Court referred to the agreements and found that KBC would be excuse for performance in cases of force majeure. Furthermore, Pertamina and PLN were state-owned and therefore could not claim that their liability for non-performance would violate public policy. Finally, the Court rejected defendants' argument that KBC's non-disclosure of its political risk insurance would be a violation of public policy. |
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Attachment (1)
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