Saturday, May 17, 2014
Karaha Bodas Co v Perusahaan/Ministry of Indonesia case brief summary
Karaha Bodas Co v Perusahaan/Ministry of Indonesia (2nd Cir 2002)
§ P (US) and D (Indonesia) executed a contract
· D waived “any right of immunity”
· The contract didn’t address whether P had a right to attach particular assets in case of default or breach by D
§ Indonesia experienced a fiscal crisisàcontract was suspended
§ Indonesia Arbitration
· awarded P damages for lost investments and profits
· P got the award enforced and registered in the US
§ Dist Ct New York
· D was to pay P out of D’s Production Sharing Percentage (i.e. D’s share of the net income), which D was transferred directly to the Rep of Indonesia
· Ct concluded that the Rep of Indonesia did indeed own all the funds EXCEPT a 5% “Retention” portion, which belonged to D and which P could therefore attach
· D challenged, saying that the Rep of Indonesia owned ALL the funds, including the Retention
o Issue: Who owns the disputed Retention funds, and can those funds be attached under New York Law? (a Choice of Law analysis)
§ Holding: Indonesia law controls, and under that law most of the funds belong to Indonesia; the remaining funds (the 5% “Retention”) belong to D and can be attached
§ FSIA + Sovereign Immunityà
· A foreign sovereign shall be immune from having his U.S.-located property be attached, EXCEPT as provided in sections 1610 and 1611
o §§1610 + 1611: when a foreign sovereign’s property is used for a commercial activity within the US, it does not enjoy the immunity
o The contracts b/w P and D used the property for a commercial activity
o so D waived any right of sovereign immunity, and its share of the property is thus attachable
§ Determining D’s share: Choice of Law (NY v Indonesia?)
· We should use Indonesian law here, b/c
o 1) there is no actual conflict of law and Indonesia provides the only specific rules and
o 2) Indonesia has stronger Interests
· Under Indonesian law, D possesses the Retention funds
§ Attaching the Retention
· “Under NY law, a D has an interest in funds if any part of the money is within the present or future control of D.”
· That is the case here, so the Retention is validly subject to attachment
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