Indonesia Surprised, NAA to Seek Arbitration

Jakarta (Antara) - Nippon Asahan Aluminium (NAA) has sent a letter to the Indonesian government asking for the settlement of a dispute over the takeover of PT Indonesia Asahan Aluminium (Inalum) through international arbitration. In a press statement received by Antara here on Friday, the ministry of industry said the government received the letter on October 31, 2013 at 5.44pm notifying the government that the Japanese company wished to seek a settlement through the International Center for Settlement of Investment Dispute (ICSID). "We received the letter unexpectedly and we accepted it to mean a change to the takeover mechanism that has, so far, been agreed to during negotiations," the statement said. Following the notification, the government will need to change the compensation payment plan that it had prepared from a share transfer to an asset transfer, it said. PT Inalum is a joint venture project between Japan and Indonesia based upon the Master Agreement for the Asahan Hydroelectric and Aluminium Project, which expired on October 31, 2013. Following the expiration of the agreement, PT Inalum would receive from Indonesian government compensation based upon the agreement. In the negotiations, the two sides agreed to change the takeover mechanism from an asset to a share transfer mechanism and, therefore, Indonesia has prepared paying compensation based upon the share transfer mechanism until the end of the negotiations on October 31. The statement says that before the letter was sent on October 29, 2013, the NAA had asked for an extension of the expiration of the master agreement because they needed time to seek an internal agreement from the NAA consortium. It also explained that the company would continue operating without any stoppage, and all rights and obligations related to the operation of the power plant, smelter, supporting facilities, inventory, supply contract, sale contract and employees would continue to be carried out by PT Inalum. "The transfer of assets, including a power plant, a smelter and others, would fully be done in line with the master agreement," it said. (*)