Canada / 24 October 2007 / 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 | 24 October 2007 |
| 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(2) | V(2)(b) |
| Source |
2007 ABQB 616 | 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. KBC then obtained enforcement of the award before the Alberta Court of Queen’s Bench. Pertamina appealed that decision, arguing that enforcement of the award should be denied because the award had been obtained by fraud, and its enforcement should therefore be denied pursuant to Article V(2)(b) NYC because it would be contrary to public policy. The Alberta Court of Queen’s Bench allowed the appeal to proceed on the merits. However, it rejected Pertamina's defense to enforcement based on Article V(2)(b) NYC, considering that "it is not up to the Alberta courts to retry the matter” or to second-guess the findings of an arbitral tribunal in the course of an application to register and enforce a foreign award. According to the Court, Article V NYC expresses the presumption of validity of a foreign award, and only when a party can establish one of the enumerated defenses to enforcement can a court refuse to enforce it. According to the Court, enforcement of the award would only violate the public policy of the domestic jurisdiction if the award was patently unreasonable, and this standard had not been met by the fraud allegations in the case at bar. |
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