VZCZCXRO6669
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #2064 2120843
ZNR UUUUU ZZH
R 310843Z JUL 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 5602
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHKL/AMEMBASSY KUALA LUMPUR 2363
RUEHBK/AMEMBASSY BANGKOK 8057
RUEHGP/AMEMBASSY SINGAPORE 6102

UNCLAS JAKARTA 002064 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EAP/MTS, EB/TPP, EB/TPP/BTA 
COMMERCE FOR SBERLINGUETTE 
USTR FOR DKATZ 
TREASURY FOR IA-BAUKOL 
 
E.O. 12598: N/A 
TAGS: CASC EINV KIDE ECON OPIC PGOV ID
SUBJECT: INDONESIA'S 2007 SUBMISSION FOR 527 REPORT ON INVESTMENT 
DISPUTES AND EXPROPRIATION CLAIMS 
 
¶1. (SBU) Below please find Post's 2007 submission pursuant to the 
requirements of Section 527 of the FY 94-95 Foreign Relations 
Authorization Act (FRAA). 
 
¶2.  (SBU) The United States Government is aware of one (1) claim of 
United States citizens against the Government of Indonesia (GOI). 
This case occurred in the power industry and was the direct result 
of the 1997-1998 Asian financial crisis. 
 
(A)  Claimants: A, B and C 
 
(B) September 1997 and January 1998 
 
(C) Case History: 
      (i)  Claimants A, B and C are joint investors in a project 
company (Claimant A).  Claimant A entered into contracts with 
Government of Indonesia-owned (GOI) companies Claimant B and 
Claimant C, to construct, and provide electricity from, a geothermal 
power plant.  After the GOI cancelled the power plant project, 
Claimant A filed for international arbitration against Claimant B. 
In December 2000, an international arbitration panel in Geneva, 
Switzerland awarded Claimant A $261 million plus interest for the 
lost investment and potential future profits.  Between December 2000 
and June 2003, Claimant A succeeded in freezing approximately $600 
million of liquefied natural gas (LNG) revenues deposited in 
Claimant B and GOI trust accounts in New York.  Claimant B 
appealed. 
 
      (ii)  In January 2004, the US District Court for the Southern 
District of New York defined which funds Claimant A was entitled to 
receive out of Claimant B's frozen bank accounts.  The Court also 
denied the release of other frozen funds belonging to the GOI.  In 
March 2004, the Fifth Circuit denied Claimant B's request to nullify 
the original arbitration award, which had grown to approximately 
$294 million including interest.  Claimant B indicated publicly in 
April 2004 that it would pay the award, but began talks with the GOI 
to share in that payment. 
 
      (iii)  In May 2004, the Indonesian police began to summon and 
question former Claimant A employees and ex- Claimant B officials 
involved with the project.  Investigators from the anti-corruption 
squad of the national police suggested corruption was suspected in 
the business dealings between Claimant B and Claimant A.  Two former 
Claimant A employees (one US citizen and one Indonesian national) 
complained to Post of police intimidation.  The US citizen and 
family departed Indonesia as a result of a police summons.  The 
police have not made any arrests in connection with the 
investigation. 
 
      (iv)  In March, 2006, the U.S. Court of Appeals for the Second 
Circuit issued an order affirming the District Court's November 19, 
2004 judgment against Claimant B.  The Court of Appeals said that 
because the presumption that Claimant B owns the refinery funds 
situated in Bank of America is unrebutted, the District Court 
correctly held that those funds belonged to Claimant B, rather than 
to the GOI, and ordered the Bank of America to turn over the balance 
of the underlying money judgment to Claimant A. 
 
      (v)  On March 16, 2007, Claimant B abandoned its attempt to 
have a Cayman Islands court intervene in the dispute.  Claimant B's 
Managing Director told reporters after the verdict that the company 
will respect the court's decision.  With accrued interest, Claimant 
B currently owes Claimant A $319 million. 
 
¶3.  (SBU)  Claimant A: Karaha Bodas Company (KBC); Claimant B: 
Pertamina; Claimant C: PLN Persero. 
 
HUME