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60

Legal Focus

JUNE 2012

Disputes in the Energy Sector Indonesia

Political and economic uncertainty in the energy industry has led to a significant rise in complex high value disputes. For an insider’s insight into the issues that surround disputes in the energy sector, Lawyer Monthly speaks to Mohamed Idwan (‘Kiki’) Ganie, the Managing Partner of Lubis Ganie Surowidjojo (LGS), the largest corporate transactions and corporate litigation firm in Indonesia.

can you please give me an overview of the disputes in the energy industry and current trends your jurisdiction?

Contract disputes are an always prevalent feature of the broader Indonesian business climate, and in particular in the natural resource and energy sector, due to its exposure to regional governance issues and a wide range of participants in this lucrative business area.

Disputes with the government are also not a rare occurrence, considering the sometimes dynamic legal

landscape of

Indonesia and the increasingly

populist

attitudes of certain politicians towards the natural resources sector.

Also of note is the increased scrutiny of the Indonesian antitrust body, Commission for

the the

Supervision of Business Competition (KPPU), which has been increasingly active across a number of business sectors in the recent past, a focus that has not bypassed the energy sector. In fact, the KPPU has on a number of occasions sought to expand the types of arrangements that can fall under its purview. An example of this is the Medco Energy case being handled by LGS, where the KPPU has sought to review the selection of a partner by Pertamina, the state oil and gas firm.

What are the main causes of dispute in the Energy sector?

Except for the above-described contractual disputes, increased regulatory scrutiny is emerging as an issue of increasing importance in

we work with our client to help them make a realistic analysis of the legal position and how Indonesian courts would decide the relevant legal issues.

Indonesia. This includes such cases as the attention of the antitrust body, but also of a number of other government agencies, especially those relating to environmental compliance, and increasingly so in relation to corruption issues. On the environmental front, this is due to the increased importance of environmental compliance, breaches of which have the potential to result in revocation of licenses and permits. And in relation to corruption issues, the increased scrutiny is enabled by a broadly worded anti-corruption law, and increasing scrutiny from the specialist prosecutor (Corruption Eradication Commission / KPK), which has been widening its scope from pursuing not only the public servant recipients of illicit payments but increasingly the companies involved with a range of infringing conduct (broadly defined as “having the potential to cause losses to the state”).

can you please talk about any recent cases you have been involved in?

Foreign plaintiffs often have a perception that they lose cases in Indonesia due to inappropriate conduct by the courts, while in fact the reasons are usually more closely linked to a lack of understanding of the Indonesian legal system and insufficient documentary preparation. As such, it is increasingly important for foreign plaintiffs to understand the Indonesian dispute resolution process rather than attempting to import western legal concepts that are often not recognized by the Indonesian legal system.

Due to the differences of legal systems and legal realities, foreign clients need to have a close and intense working relationship with their Indonesian

attorneys to better understand any legal impact and options available under Indonesian law (which might not be similar to the impact and options in their own jurisdictions in the same situation), so that results and options can be realistically analysed and also commercially ‘translated’ at each stage of the proceedings.

Considering this, we work with our client to help them make a realistic analysis of the legal position and how Indonesian courts would decide the relevant legal issues. We ensure that the client is involved, and obtains reports, on all stages and developments of the proceedings in order to issue instructions as and when needed. LM

contact details

dr. Mohamed Idwan (‘Kiki’) Ganie Managing Partner Lubis Ganie Surowidjojo

address:

Menara Imperium 30th Floor Jl. H. R. Rasuna Said Kav. 1 Kuningan Jakarta 12980, Indonesia

tel: +62 21 831-5005, 831-5025 Fax: +62 21 831-5015, 831-5018 Email: ganie@lgslaw.co.id Website: www.lgsonline.com

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