United States / 23 March 2004 / U.S. Court of Appeals, Fifth Circuit / Karaha Bodas Co. (Cayman Islands) v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Indonesia) / 02-20042, 03-20602
| Country | United States |
| Court | United States, U.S. Court of Appeals, Fifth Circuit |
| Date | 23 March 2004 |
| Parties | Karaha Bodas Co. (Cayman Islands) v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Indonesia) |
| Case number | 02-20042, 03-20602 |
| Applicable NYC Provisions | V | V(2)(b) | V(1)(e) | V(1)(d) | V(1)(c) | V(1)(b) |
| Source | 364 F.3d 274 |
| Languages | English |
| Summary | Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (“Pertamina”), a company owned by the Government of Indonesia, entered into a contract with Karaha Bodas Co. (“KBC”), a Cayman Islands company, to develop geothermal energy sources in Indonesia for electrical power generation. The parties executed two contracts, both of which contained an arbitration clause providing for the application of Indonesian law. A dispute arose and KBC initiated arbitration proceedings in Switzerland. The Arbitral Tribunal rendered an award in favor of KBC. KBC then filed suit in federal court in Texas to enforce the award under the NYC. Meanwhile, Pertamina applied to the Supreme Court of Switzerland to have the award set aside. Pertamina subsequently sought annulment before Indonesian courts which annulled the award. The award was enforced in United States federal district court. Pertamina appealed, arguing: (i) that Indonesian courts had primary jurisdiction to annul the award, providing a defense to enforcement in the United States pursuant to Article V(1)(e) NYC, (ii) that the Arbitral Tribunal improperly consolidated the claims into one arbitration proceeding (V(1)(c) NYC), (iii) that due process had been violated and therefore the enforcement should be refused pursuant to Article V(1)(b) NYC, (iv) that the composition of the Arbitral Tribunal was not in accordance with the parties’ agreement (V(1)(d) NYC), and (v) that the enforcement of the award would violate the public policy of the United States under Article V(2)(b) NYC, as the award violated the doctrine of abuse of rights. The United States Court of Appeals for the Fifth Circuit dismissed Pertamina’s appeal and enforced the award. It held that only Swiss courts had jurisdiction to annul the award since the seat of the arbitration was in Switzerland. It also found no violation of Article V(1)(c) NYC noting that the two contracts were closely related and the Tribunal properly consolidated arbitration proceedings. The Court dismissed the defense based on Article V(1)(d) NYC noting that Pertamina did not designate an arbitrator within thirty days, nor did it object to KBC's selection at that time. The Court held that there had been no violation of due process under the terms of Article V(1)(b) NYC, as both parties had an opportunity to be heard in a “meaningful manner”. Finally, the Court held that the award did not violate any basic notion of morality and justice and concluded that there was no public policy ground on which to refuse enforcement under Article V(2)(b) NYC. |
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Attachment (1)
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