Government of the Province of East Kalimantan v. PT Kaltim Prima Coal and others
ICSID · Investment (ICSID and treaty) · Indonesia · 28 Dec 2009
Why it matters
This case underscores the strict jurisdictional requirements under Article 25 of the ICSID Convention for constituent subdivisions or agencies of a Contracting State. It clarifies that a regional government cannot unilaterally invoke ICSID arbitration without prior designation by the central government, even if the underlying contract contains an ICSID clause. The decision also highlights that estoppel cannot override objective jurisdictional prerequisites.
Summary
The Government of the Province of East Kalimantan (GPEK) initiated ICSID arbitration against PT Kaltim Prima Coal and its foreign shareholders, alleging breach of a divestment obligation under a Coal Contract of Work (CCOW) between PT KPC and the Government of Indonesia. The CCOW contained an ICSID arbitration clause. The respondents objected to jurisdiction, arguing that GPEK was not a party to the CCOW and had not been designated as a constituent subdivision under Article 25(1) of the ICSID Convention. The Tribunal agreed, finding no evidence that Indonesia had designated the province to ICSID. GPEK argued estoppel, claiming respondents had previously argued in Indonesian courts that the dispute must go to ICSID. The Tribunal held that even if estoppel applied, it could not cure the objective lack of designation. The Tribunal also denied a request to join the Regency of East Kutai. Ultimately, the Tribunal declined jurisdiction, noting the CCOW provided an alternative arbitration mechanism. Costs were shared equally, and each party bore its own legal fees.
The detail
Parties: Government of the Province of East Kalimantan v. PT Kaltim Prima Coal and others
Case number: ICSID Case No. ARB/07/3
Outcome: The Tribunal lacked jurisdiction over the dispute; costs shared equally, each party bears own legal fees.
Applicable law: ICSID Convention, Article 25; KPC Contract (Coal Contract of Work) governed by Indonesian law; Article 23 of KPC Contract providing for ICSID arbitration.
Issues in play: The key issue was whether the Province of East Kalimantan was a 'constituent subdivision' of Indonesia designated to ICSID under Article 25(1) of the ICSID Convention. The Tribunal found no evidence of designation, and estoppel could not cure this objective requirement.
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