Indonesia vindicated in international arbitration
INDONESIA’S victory in a case brought by London-listed Churchill Mining at an international tribunal is expected to become a precedent for future international disputes.
The International Centre for Settlement of Investment Disputes (ICSID) announced on Wednesday that it had rejected Churchill’s claim for compensation against Indonesia of 26 trillion rupiah (Bt69.6 billion) and even ordered the company to pay a total of US$9.45 million (Bt336 million) in costs to the country.
“We were worried, but we kept fighting over and over again because we were sure that we had a solid argument to win this case. Now, I’m proud to say that we did it,” Indonesian Law and Human Rights Minister Yasonna Laoly told journalists on Thursday.
Churchill and its Australian subsidiary Planet Mining took Indonesia to the ICSID in 2012 after the East Kutai administration in East Kalimantan province revoked its coal-mining permits for what had been billed as the world’s seventh-largest undeveloped coal resource.
Churchill began operating in Indonesia in 2008 by acquiring a 75-per-cent stake in its local partner, the Ridlatama Group. Two years later, the East Kutai administration revoked Ridlatama’s mining permits over its alleged involvement in illegal logging and operations, and for forging permits.
Churchill claimed that such actions had resulted in losses amounting to $1.3 billion.
However, the ICSID, which is a part of and financed by the World Bank, found that as many as 34 disputed documents were not authentic and they were most likely forged by “a person or persons acting for or on behalf of Churchill’s Indonesian partner the Ridlatama Group in collusion with a person inside the East Kutai regency”.
In the end, the ICSID found that Churchill’s due-diligence investigations conducted at the time of acquiring the East Kutai Coal licences were insufficient, and the claims brought by Churchill in the arbitration were therefore dismissed.
As a result, Churchill was ordered to pay $8.64 million, or 75 per cent of Indonesia’s total legal costs, plus $800,000 in arbitration tribunal fees paid by the country over the past four years.
“Many foreign investors come to Indonesia with malevolent intentions, as they try to benefit from regulatory loopholes and want to make a fortune from it. Therefore, the decision made by the ICSID should be a good warning to them,” Yasonna said.
However, he acknowledged that such situations could arise because regional administrations across the archipelago often issued problematic mining permits.
Many analysts believe the 2009 Mining Law is the source of authority misuse at the regional level because it grants local administrations the authority to issue licenses, even to inexperienced mining companies.
Renowned legal expert Frans Hendra Winata said the ICSID’s decision would restore the faith of global investors in Indonesia.
“It shows the world that Indonesia is still a favourable place to invest in, as it manages businesses fairly, including that involving Churchill,” Frans said.
University of Indonesia international legal expert Hikmahanto Juwana, however, said the irresponsible issuance of permits by regional administrations could not be tolerated as they created a mess for the central government to deal with.
“Maybe it’s about time for Indonesia to exit the ICSID. There will be too many mischievous investors that want to trick Indonesia with false claims. Just look at the Churchill case,” he warned.
