Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara

335 F.3d 357, 2003 U.S. App. LEXIS 12267, 2003 WL 21398962
CourtCourt of Appeals for the Fifth Circuit
DecidedJune 18, 2003
Docket02-20550
StatusPublished
Cited by137 cases

This text of 335 F.3d 357 (Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357, 2003 U.S. App. LEXIS 12267, 2003 WL 21398962 (5th Cir. 2003).

Opinion

WIENER, Circuit Judge:

Defendant-Appellant Perusahaan Per-tambangan Minyak Dan Gas Bumi Negara (“Pertamina”) appeals the district court’s preliminary injunction prohibiting it from prosecuting an action it instituted in Indonesia (1) to annul a Swiss arbitration award (the “Award”) to Appellee, Karaha Bodas Company, L.L.C. (“KBC”) and (2) to enjoin KBC from taking steps to enforce the Award. 1 In addition, Pertamina challenges the district court’s order holding it in contempt for continuing to pursue the Indonesian action in violation of the court’s initial temporary restraining order (“TRO”). 2 Given the structure and pur *360 pose of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention” or the “Convention”), 3 and the responsibilities of the United States under that treaty, we conclude that the district court abused its discretion 4 in granting the preliminary injunction in favor of KBC, requiring that we vacate that injunction and, to the extent necessary, the district court’s order holding Pertamina in contempt.

I. FACTS AND PROCEEDINGS

The origins of this dispute he in two contracts to construct a power plant in Indonesia. Pertamina is an oil, gas, and geothermal energy company that is wholly owned by the Government of Indonesia (“GOI”). KBC is a Cayman Islands limited liability private power development company established to develop geothermal resources, including the construction and operation of electric power generating facilities. 5 In November 1994, KBC entered into two contracts with Pertamina to develop the Karaha-Bodas Geothermal Project (the “Project”), which included the building of a geothermal power plant in West Java, Indonesia. Under the first agreement, the Joint Operation Contract (“JOC”), KBC contracted with Pertamina to develop geothermal energy resources from two geothermal fields in Indonesia. In the second agreement, the Energy Sales Contract (“ESC”), KBC, Pertamina, and Pt. PLN (Persero) (“PLN”), an electric company wholly owned by the GOI, 6 agreed that Pertamina would sell the KBC-produced electricity to PLN.

In 1997, the Indonesian economy suffered during the Asian financial crisis. In January 1998, after a brief suspension and a temporary restoration of the Project, the President of Indonesia issued a decree suspending the Project indefinitely as part of a national effort to stabilize the Indonesian economy. KBC declared force majeure and ceased performance under the contracts.

The contracts contained almost identical comprehensive consultation and arbitration clauses which required the parties to arbitrate any disputes in Switzerland pursuant to the Arbitral Rules of the United Nations Commission on International Trade Law (the “UNCITRAL Rules”). In April 1998, KBC initiated arbitration proceedings in Switzerland, claiming that Pertami-na had breached the contracts. Pertamina opposed arbitration on various grounds, which included a challenge to the composition of the arbitration panel. The panel rejected those objections and proceeded to conduct a hearing on the merits in June 2000. In December 2000, the panel ruled *361 that Pertamina and PLN had breached the contracts and awarded damages to KBC exceeding $260 million. 7

In February 2001, Pertamina appealed the Award to the Supreme Court of Switzerland. While that appeal was pending, KBC initiated the instant proceedings in federal district court to enforce the Award. Pertamina responded by challenging enforcement on four grounds under Article V of the New York Convention: (1) The arbitration panel was improperly composed (Article V(l)(d)); (2) the arbitration procedures were not otherwise in accordance with the agreement (Article (V)(l)(d)); (3) Pertamina was deprived of its right to present its case (Article V(l)(b)); and (4) the arbitral award violated United States public policy (Article V(2)(b)). 8 The district court denied Pertamina’s motion to stay pending its appeal to the Supreme Court of Switzerland and directed the parties to proceed with summary judgment briefing. The court acknowledged, however, that it slowed the proceedings in deference Pertamina’s request. The Swiss court eventually dismissed Pertamina’s appeal on procedural grounds and denied its motion for reconsideration. 9 In December 2001, the district court granted KBC’s motion for summary judgment (the “Judgment”) to enforce the Award.

Pertamina appealed the Judgment but declined to post a supersedeas bond. In January 2002, the district court entered an order allowing KBC to commence execution of the Judgment, and the following month that - court granted KBC leave to register the Judgment in New York, Delaware, and California. KBC also brought actions under the Convention in Hong Kong, Canada, and Singapore to enforce the Award in those jurisdictions.

In March 2002, Pertamina filed an application in the Central District Court of Jakarta to annul the Award (the “Indonesian annulment action”). Pertamina also sought an Indonesian injunction and penalties to prevent KBC from seeking to enforce the Award (the “Indonesian injunction”). The Indonesian court scheduled a proceeding for 10:00 a.m. on Monday April 1, 2002 to hear argument on the proposed injunction. In advance of the Indonesian hearing, however, KBC filed a motion in the district court on Friday, March 29, 2002, for a temporary restraining order to enjoin Pertamina from seeking injunctive relief in Indonesia. In a telephonic hearing that same evening, 10 the court determined that KBC would suffer irreparable harm if the Indonesian court issued an injunction to prevent KBC from “enforcing or executing” the Judgment. The district court orally ordered Pertamina to withdraw its application for injunctive relief at or before the hearing in the Indonesian court and to take no substantive steps in that court. The district court did not, however, prohibit Pertamina from proceeding in Indonesia entirely; rather, it prohibited Pertamina from taking any sub *362 stantive steps (e.g., submitting legal arguments) but permitted Pertamina to take any ministerial steps necessary to maintain the cause of action. The court subsequently explained that it issued the TRO (1) to preserve the integrity of its judgment, which had become final and was on appeal to us without bond, and (2) to maintain the parties’ positions as they stood prior to Pertamina’s initiation of the Indonesian annulment action.

Claiming that it lacked sufficient time to do so, Pertamina did not withdraw its request for injunctive relief, and the Indonesian court issued a provisional injunction prohibiting KBC from seeking to enforce the Award.

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335 F.3d 357, 2003 U.S. App. LEXIS 12267, 2003 WL 21398962, Counsel Stack Legal Research, https://law.counselstack.com/opinion/karaha-bodas-co-v-perusahaan-pertambangan-minyak-dan-gas-bumi-negara-ca5-2003.