The $2 billion lawsuit launched by British mining company Churchill Mining is another test of Indonesia’s adherence to the rule of law and of its aility to provide legal certainty to foreign investors.
Alleging that the East Kalimantan provincial government seized its assets without proper compensation, the company has filed a lawsuit against the president of Indonesia, East Kutai Regent Isran Noor, the Ministry of Foreign Affairs, the Ministry of Energy and the Investment Coordinating Board (BKPM).
President Susilo Bambang Yudhoyono has expressed his government’s readiness to face the lawsuit in international arbitration.
“I hope to win because I do not want such a multinational corporation with its international force to suppress a developing country like Indonesia,” he said. His words are meant to send a strong signal to the international community that the government will defend its rights.
Foreign companies operating in Indonesia must adhere to the country’s laws. But the government must also ensure a level playing field and protect the rights of all investors.
The case concerning Churchill is complex and there is a more than a whiff of the presence of groups with vested interests. It is in the country’s long-term interest, especially as it begins to play a more prominent role on the global stage, to ensure that it remains open to foreign investors.
How the market perceives the lawsuit and its outcome will matter greatly for Indonesia. If the government can put together a strong case and prove that it has done nothing wrong it will reassure investors, both foreign and domestic, that they can operate with confidence.
It is critical that this case be given full attention by the government and that all details are made public.