Appendix — Ministry of Finance of the Republic of Indonesia v. Karaha Bodas Co.
Supreme Court brief2003
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APPENDIX
KARAHA BODAS COMPANY, L.L.C.,
Petitioner-Appellee-Cross-Appellant,
Vv.
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS
BUMI NEGARA (“PERTAMINA’”),
Respondent-Appellant-Cross-Appellee,
Ministry Of Finance Of The Republic Of Indonesia,
Non-Party-Appellant-Cross-Appellee.
Docket Nos. 02-7513(L), 02-7515(CON), 02-7547(XAP),
02-7715(CON), 02-7717(CON), 02-7723(XAP).
United States Court of Appeals,
Second Circuit.
Argued: Aug. 7, 2002.
Decided: Dec. 10, 2002.
* * *
*75 Before: CALABRESI, POOLER, and SACK,
Circuit Judges.
SACK, Circuit Judge.
Respondent-appellant Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara (“Pertamina”) and non-
party-appellant the Ministry of Finance of the Republic of
Indonesia (the “Ministry”) appeal from an April 26, 2002,
memorandum and order issued by the United States
District Court for the Southern District of New York
(Thomas P. Griesa, Judge) insofar as it permits
petitioner-appellee Karaha Bodas Company, L.L.C.
(“KBC”) to execute against a portion of the funds in
several Bank of America trust accounts that are listed in
the district court’s order. KBC appeals the same order
insofar as it denies KBC’s motion to execute against the
remainder of the same funds. The question on appeal
concerns the ownership of the funds in the Bank of
America trust accounts, which derive from sales of
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Indonesian liquefied natural gas (“LNG”), and whether
such funds can be attached under New York law, as
applicable pursuant to the Foreign Sovereign Immunities
Act of 1976, 28 U.S.C. §§ 1330, 1602-1611 (“FSIA’).
KBC’s claim rests on the allegation that all such funds
belong to Pertamina, and on the alternative theory that
KBC was entitled to rely on Pertamina’s ownership
thereof. Pertamina and the Ministry respond that under
Indonesian law, the funds belong to the Republic of
Indonesia.
We agree with the district court’s disposition of the
ownership question. The district court correctly analyzed
the Indonesian law that controls the ownership of the
funds and correctly concluded that most, but not all, of
the funds belong to Indonesia. Accordingly, we affirm.
BACKGROUND
The Parties
KBC describes itself as “a Cayman Islands limited
liability company formed by two American power
companies and other investors, and is 90%-owned by U.S.
investors.” Petitioner-Appellee’s Br. at 2. The Ministry,
acting on behalf of the Government of the Republic of
Indonesia, is a “foreign state” within the meaning of the
FSIA, 28 U.S.C. § 1603(a).! Pertamina is an oil and gas
company owned and controlled by the Republic of
Indonesia. Pertamina engages in oil and gas exploration,
extraction, processing, marketing, transportation, and
distribution. The 1971 statute creating Pertamina, Law
1 28 U.S.C. § 1603(a) defines “foreign state” to include “a political
subdivision of a foreign state or an agency or instrumentality of a
foreign state.” Id. None of the parties dispute that the Ministry is a
foreign state for the purposes of the FSIA.
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8 of 1971, explains that the company’s goals are “to
develop and carry out the exploitation of oil and natural
gas * * * for the maximum prosperity of the People and
the State.”? Law of the Republic of Indonesia N umber 8
Year 1971, Art. 5. The Indonesian government owns all
of Pertamina’s equity and controls a supervisory board,
constituted pursuant to Law 8, that supervises
Pertamina’s management. Pertamina, for *76 purposes
of the FSIA, is therefore “an agency or instrumentality of
a foreign state.”4 28 U.S.C. § 1603.
2 Pursuant to Government Regulation Number 27 of 1968,
Pertamina was initially established as the National Oil and Gas
Mining State Enterprise, but was reorganized under Law 8. Prior to
Law 8’s issuance, the Republic of Indonesia had authorized different
state enterprises to extract and sell natural gas and oil pursuant to
Articles 5 and 6 of Law 44 of 1960.
3 Pertamina is currently in a state of legal flux because of changes in
its organic statute. Under Law 22 of 2001, Pertamina must, within
two years, change “from a state enterprise to a state-owned limited
liability company.” Decl. of Sudargo Gautama 9 37. Law 22 repeals
Law 8 and Law 44, but leaves in place implementing regulations that
supplement those laws. Draft Law of the Republic of Indonesia
Number 22 of 2001, Art. 66. But “Law 22/2001 has not yet been
implemented with respect to Pertamina.” Supp. Decl. of Sudargo
Gautama § 6. The parties’ experts on Indonesian law apparently
agree that this case should be decided according to the pre-Law 22
regulations. See Decl. of Sudargo Gautama { 36; Decl. of Robert N.
Hornick § 14.
* 28 U.S.C. § 1603 includes any entity in which a government has “a
majority of * * * shares or other ownership interest.” 28 U.S.C. §
1603(b). “A typical governmental instrumentality * * * is created by
an enabling statute that prescribes the powers and duties of the
instrumentality, and specifies that it is to be managed by a board
selected by the government in a manner consistent with the enabling
law.” First Nat'l City Bank v. Banco Para El Comercio Exterior de
Cuba, 462 U.S. 611, 624, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983).
Pertamina satisfies this description.
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The KBC-Pertamina Geothermal Energy Contracts
In November 1994, KBC executed two contracts—a
“Joint Operation Contract” and an “Energy Sales
Contract’—with Pertamina and another Indonesian
state-owned entity, Persero, for the development of
geothermal energy extraction facilities in the Karaha
area of West Java. In these contracts, Pertamina waived
“any * * * right of immunity (sovereign or otherwise)
which it or its assets now has or may acquire in the
future.” See, e.g., Karaha Geothermal Joint Operation
Contract, Art. 21.7(c); Karaha Geothermal Energy Sales
Contract, § 15.8(c). Pertamina also “consent[ed] in
respect of the enforcement of any judgment against it.”
Karaha Geothermal Joint Operation Contract, Art.
21.7(d); Karaha Geothermal Energy Sales Contract,
§ 15.8(d). The contracts did not contain any
representations about KBC’s right to attach particular
assets in case of default or breach. And KBC points to no
evidence, either within the contracts’ text or in pre-
contract negotiations, that Pertamina made any
representations regarding its ownership of LNG revenues
or its obligation to provide a security interest. Each
contract also contained a choice of law clause specifying
Indonesian law and provided that disputes would be
resolved by an international arbitral tribunal constituted
under the Arbitral Rules of the United Nations
Commission on International Trade Law.
In 1997 and 1998, Indonesia experienced a fiscal crisis
that induced political instability and the eventual
collapse, on May 21, 1998, of the regime led by President
Mohamed Suharto. In the course of the crisis, on
September 20, 1997, the KBC projects were suspended by
an Indonesian “Presidential Decree,” along with
approximately seventy-four other government-related
infrastructure projects. In November 1997, another
decree permitted the KBC projects to proceed again, but
ee ee eS ee ee a
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in January 1998, a third decree. terminated the KBC
projects once more, despite lobbying by KBC and
Pertamina, among others.
Arbitration on the Geothermal Energy Contracts
On April 30, 1998, KBC commenced arbitration in
Geneva, Switzerland, alleging that the project’s
termination constituted a breach of the geothermal
energy contracts. On September 30, 1999, the Swiss
arbitral panel issued a preliminary ruling rejecting
Pertamina’s objections to arbitration and concluding that
all of KBC’s claims could be addressed in a unitary
proceeding. The arbitral panel also rejected KBC’s
motion to treat the Republic of Indonesia *77 as a party
to the geothermal energy contracts.
In a December 18, 2000, award, the arbitral panel
concluded that KBC had been “prevented from pursuing
the performance of the binding contracts that it relie[d]
upon for reasons beyond its control * * * [and] should not
bear the consequences thereof.” Final Award in an
Arbitration Procedure Between KBC and Pertamina and
Persero, at 31. The arbitral panel awarded KBC damages
for lost investments of $111.1 million and lost profits of
$150 million plus interest and fees. Jd. at 35-47. On
February 1, 2001, Pertamina filed an appeal in the
Supreme Court of Switzerland. The appeal was
dismissed on April 24, 2002. Pertamina also asked an
Indonesian court to enjoin enforcement and annul the
award.5
5 Pertamina filed suit on March 14, 2002, in Indonesia requesting
both annulment of the arbitral award and an injunction preventing
KBC from enforcing the arbitral award. A court in J akarta, Indonesia
enjoined KBC from taking action to enforce the judgment anywhere in
the world, threatening a $500,000 per diem fine for violations.
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Proceedings in the Southern District of Texas
KBC sought enforcement of the award in the United
States District Court for the Southern District of Texas
pursuant to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958,
implemented by Chapter Two of the Federal Arbitration
Act, 9 U.S.C. §§ 201-208. Rejecting Pertamina’s
numerous asserted defenses, the district court (Nancy
Atlas, Judge) entered final judgment on Decémber 4,
2001, in the amount of $261.1 million and interest at the
rate of four percent per annum for KBC.* Karaha Bodas
Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara, 190 F.Supp.2d 936, 957 (S.D.Tex.2001).
Pertamina’s appeal of that order is pending before the
Fifth Circuit.
KBC, in an attempt to enforce the judgment, then
moved before the Southern District of Texas to register
that judgment in other judicial districts within the
United States pursuant to 28 U.S.C. § 1963.7 KBC filed
with the court, among other papers, an affidavit alleging
that Pertamina had assets in seven New York banks.
Judge Atlas held that KBC had fulfilled the requirement
of 28 U.S.C. § 1610(c), that a party seeking to attach a
foreign sovereign’s property refrain for “a reasonable
period of time” after judgment, and permitted KBC to
register the judgment in Delaware, New York, and
6 In response to the Indonesian order annulling the arbitral award,
see supra note 5, Judge Atlas issued her own injunction barring
Pertamina from requesting enforcement of the Indonesian order. Tr.
of March 29, 2002 Hearing Before Judge Atlas, at 5-6. Judge Atlas’s
injunction has been appealed to the Fifth Circuit.
7 28 U.S.C. § 1963 permits registration of a judgment “when ordered
by the court that entered the judgment for good cause shown.” Id.
Te ee ee et a ee ee ere ee a ee
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California federal district courts. On February 15, 2002,
Judge Atlas also granted KBC’s motion for an ex parte
writ of garnishment against Bank of America.
Proceedings in the Southern District of New York
On February 22, 2002, KBC presented the December
4, 2001, Southern District of Texas judgment for
registration to the United States District Court for the
Southern District of New York. The same day, the latter
court issued an ex parte writ of execution and order to
show cause pursuant to Fed. R. Civ. P. 69(a) and 28
U.S.C. § 1610(c) “author[izing KBC] to execute upon any
property of Pertamina within this jurisdiction in
satisfaction of the outstanding *78 final judgment,
amounting, to date, in total to the sum of $261, 166,654.92
plus interest from January 1, 2001.” Pursuant to Fed. R.
Civ. P. 69(a) and N.Y. C.P.L.R. § 5222(b),® the district
court issued restraining notices, which KBC subsequently
served upon Bank of America and several other banks.
The Nature of the Disputed Funds
This appeal concerns fifteen trust accounts at Bank of
America. These accounts contain funds from the sale of
LNG extracted in Indonesia under arrangements called
8 Rule 69(a) provides, “Process to enforce a judgment for the
payment of money shall be a writ of execution * * *. The procedure on
execution * * * shall be in accordance with the practice and procedure
of the state in which the district court is held * * *.” Fed. R. Civ. P.
69(a).
9 The district court’s analysis (and hence this appeal) does not
concern trusts “containing non-PSC Operating Income: the Musi II,
Exor I, Cilacap and the throughput fee portion of the East Java
Pipeline trusts.” Final Order 9 17. The district court concluded that
the record was “insufficient to determine whether KBC is entitled to
execution against these accounts.” Id. ¥ 18.
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Production Sharing Contracts (“PSCs”), which are
governed by Indonesian law.
As mandated by Indonesian law, Pertamina enters
into PSCs with private oil and gas contractors for the
extraction of Indonesian crude oil and natural gas.!° The
Republic of Indonesia is not party to the PSCs, but it
must approve them. Under a PSC, the private contractor
(the “PSC contractor”) is responsible for all exploration,
development, extraction, production, transportation, and
marketing operations related to a specified geographic
area under Pertamina’s management. As part of their
compensation, PSC contractors initially receive a share of
the oil or natural gas after extraction. They then transfer
the remaining oil or gas to Pertamina.
PSC contractors must deliver the extracted natural
gas to Pertamina, which then transports the gas for
domestic sale or for conversion into LNG at liquefaction
plants. Pertamina sells LNG to foreign buyers pursuant
to long-term sales contracts that contain choice of law
clauses specifying New York law as governing the
contracts. LNG sales were the “largest single source of
Pertamina sales revenue” in the last nine months of 2000.
Decl. of Robert N. Hornick § 22. Buyers of LNG remit
payment to specified trust accounts in New York. In all
such LNG sales, Pertamina, in its own name, purports to
transfer title to the LNG, or title to the refined product,
to the buyer. Pertamina warrants that it has “good title
to the [LNG], free of all liens and encumbrances of any
10 Geothermal energy contracts and PSCs are different. Pertamina
entered into geothermal energy contracts with KBC for the purposes of
developing extraction facilities. Pertamina entered into PSCs with
private oil and gas contractors for the purposes of extracting oil and
natural gas.
teeta SE BL aatag oth a
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kind.” Id. { 23(b). Revenues from sales of natural gas
are also sent to trusts in New York. The trusts
“distribute the proceeds in accordance with trust
agreements and ultimately to the [PSC contractor] in
accordance with their respective [PSCs].” Decl. of Sahala
L. Gaol § 9. However natural gas is sold, and whether or
not it is liquefied, proceeds from sales are first paid into
trust accounts such as those at Bank of America.
Bank of America is the trustee of the accounts
deposited with it. Before making any allocations or
distributions, it credits all LNG revenues from a
particular project, or subpart of a project, to a general
account. The general accounts and other subaccounts are
operated pursuant to contractual *79 arrangements
known as Trustee and Paying Agent Agreements
(“TPAA”) that define the trustee’s obligations. TPAAs are
signed by Bank of America, Pertamina, and relevant PSC
contractors, but only Pertamina has authority to direct
payment. See, e.g., Bontang V Trustee and Paying Agent
Agreement of July 1, 1995, Art. 3.5(b)(i). Like the LNG
sales contracts, the TPAAs also contain choice of law
clauses specifying New York law as governing. Jd. Art.
13.6.
. Before any distribution can be made to Pertamina or
the PSC Contractor, the TPAAs specify that production
expenses—which include debt service payments,
production costs, and trustee expenses—are paid first.
Id. Art. 3.3-3.4. After production payments are made,
the “PSC Revenue” or the “Net Operating Income”
remains in the general trust account. This remainder is
essentially the net profit from the PSC, after costs have
been deducted and debts have been serviced.
The PSC Revenue is then divided between Pertamina !
and the PSC Contractor for a particular project in
contractually specified portions known as “Production
Sharing Percentages.” These payments are made to
OO
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separate subaccounts or separate line accounts within the
general trust account. Jd. at 8. The funds at issue in this
appeal are, thus, Pertamina’s Production Sharing
Percentage or, in the terms used in the contracts,
Pertamina’s share of the Net Operating Income.
Pertamina’s Production Sharing Percentage is
transferred directly to the Republic of Indonesia. Indeed,
“Pertamina, at the direction of the Indonesian
Government, has issued standing instructions to the
Trustee to pay its Production Sharing Percentage to an
account of the Government of Indonesia at Bank
Indonesia.” Decl. of Ainun Naim § 23. Evidence
submitted by the Ministry and Pertamina suggests that
twenty percent of the Indonesian national budget derives
from oil and natural gas revenues. See Decl. of Sahala L.
Gaol § 11. The funds are typically used to maintain
Indonesia’s foreign exchange reserves, and thus to service
Indonesia’s foreign debt. Jd. J 12.
The LNG Security Arrangement
One noteworthy feature of the trust arrangements is
the mechanism whereby Pertamina borrows funds for the
construction of natural gas liquefaction facilities, without
requiring a counter-party lender to depend on
Pertamina’s willingness or ability to assure repayment.
For example, the record contains 1997 loan agreements
for funds to create a natural gas liquefaction facility. One
loan agreement explains that “certain proceeds of
liquefied natural gas” that are held in trust accounts at
Bank of America are the “sole source of repayment.”
Bontang VI Loan Agreement of March 4, 1997, at 2
(emphasis added). A fixed percentage of gross revenues
from LNG revenues in the trust accounts is therefore
allocated to loan repayment, and only after loan
repayments are complete can other disbursements be
made. Through this device, the LNG revenue stream
structure protects lenders’ interests.
lla
The District Court’s Opinion and Order
On March 23, 2002, Pertamina filed papers opposing
KBC’s order to show cause for a writ of execution on the
ground that none of the restrained accounts contained
property owned by Pertamina. The previous day, the
Ministry, purporting to be a “Non-Party with Interest,”
had also filed a memorandum of law arguing that the
restraining notices and writs of execution should be
quashed.
Following supplementary briefing, the district court
held a non-evidentiary hearing on April 5, 2002, and
delivered an oral *80 decision on the Ownership and
disposition of the restrained funds in the trust accounts.
According to the district court, “the ultimate ownership of
the money * * * does not have to appear in the trustee
and paying agent agreement,” so the TPAAs’ designation
of Pertamina as trust owner was not dispositive. Tr. of
April 5, 2002 Hearing, at 10-11. Nor could Pertamina’s
practice of paying the funds directly to the Republic of
Indonesia dispose of the question. Jd. at 51. The district
court reasoned instead that the ownership of the LNG
revenues in Pertamina’s subaccount was a matter of
Indonesian law, which explicitly allocated ownership
rights in the funds. Jd. at 80-81. Canvassing Indonesian
law, the court concluded that Article 5(2) of Government
Regulation 41 of 1982 vested ownership of all funds,
except for a portion called the “Retention,” in the
Republic of Indonesia. “What is decisive on the question
of property rights is a provision of Indonesian law which
became effective in 1982 and article 5 of that law.” Id. at
81. It allocated Pertamina’s Production Sharing
Percentage, less five percent of the Net Operating Income
(which is designated Pertamina’s “Retention”), to the
Republic of Indonesia. This 1982 law, noted the district
court, distinguished the Republic of Indonesia’s interest
from Pertamina’s tax and dividend obligations. Jd. at 83.
iliac
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Therefore, the only portion of the funds that KBC could
attach was the five-percent portion—i.e., the Retention—
which belonged to Pertamina. The district court
memorialized its decision in a written order on April 26,
2002.
This Appeal
Pertamina and the Ministry appeal the district court’s
order and challenge its conclusion that the Retention is
owned by Pertamina. The Ministry also contends that
once the district court had concluded that the remaining
funds belonged to the Republic ‘of Indonesia, sovereign
immunity foreclosed any further restraint of those funds.
KBC appeals the portion of the order that is based on the
district court’s conclusion that KBC could not execute
against the entirety of Pertamina’s Production Sharing
Percentage.
On June 18, 2002, we denied KBC’s motion to dismiss
the appeal, and permitted both the Ministry and
Pertamina to appeal pursuant to either 28 U.S.C. §
1292(b), the collateral order doctrine, or both. We
observed that the collateral order doctrine might apply
because this appeal raised an issue of sovereign
immunity, but expressly reserved judgment on the
jurisdictional issues. Finally, we modified the stay to
apply only to those funds that would be necessary and
sufficient to satisfy a judgment.
DISCUSSION
I. Standard of Review
In a proceeding under the FSIA, “[t]he standard of
review established for district court decisions regarding
subject matter jurisdiction is clear error for factual
findings and de novo for legal conclusions.” Filetech S.A.
v. France Telecom S.A., 157 F.3d 922, 930 (2d Cir.1998).
De novo review is appropriate even where the district
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court supplements the complaint with “undisputed facts
from the record,” as the court did here. Robinson v. Gov't
of Malaysia, 269 F.3d 133, 138 (2d Cir.2001) (citation and
quotation marks omitted).
“Likewise, pursuant to Fed. R. Civ. P. 44.1, a court’s
determination of foreign law is treated as a question of
law, which is subject to de novo review.” Curley v. AMR
Corp., 153 F.3d 5, 11 (2d Cir.1998). Finally, the district
court’s choice of law determination is also subject to de
novo review. Id.
*81 II. Subject Matter Jurisdiction
Prior to consideration of the appeal’s substance, we
address two threshold subject matter jurisdiction
questions: whether our statutory subject matter
jurisdiction properly obtains and whether the Ministry is
a proper party on appeal.
A. Statutory Appellate Jurisdiction
Ordinarily, appeals are permitted only from “final
decisions of the district courts.” 28 U.S.C. § 1291. One
exception to this rule, contained in 28 U.S.C. § 1292(b),
however, permits appellate jurisdiction over interlocutory
civil orders “[w]hen a district judge * * * [is] of the
opinion that such order involves a controlling question of
law as to which there is substantial ground for difference
of opinion and that an immediate appeal from the order
may materially advance the ultimate termination of the
litigation,” and so certifies in a written order. 28 U.S.C. §
1292(b). Upon entry of such an order, the court of
appeals has the discretion to accept or decline
jurisdiction. Id.
On April 24, 2002, the district court certified this case
for appeal under 28 U.S.C. § 1292(b). Final Order of
April 24, 2002, at 6. The prerequisites for appellate
jurisdiction are satisfied. First, the interaction of federal,
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New York, and Indonesian law poses “substantial ground
for difference of opinion.” 28 U.S.C. § 1292(b). Second,
our review of the district court’s order will advance the
litigation by resolving the disposition of funds that
allegedly belong to a foreign sovereign. Pursuant to our
discretion under 28 U.S.C. § 1292(b), we therefore accept
jurisdiction to hear this appeal.!!
B. The Ministry as Appellant
KBC did not name the Ministry as a party in its action
to enforce the Swiss arbitral award in the Southern
District of Texas. KBC, 190 F.Supp.2d at 939. Judge
Atlas’s final order names only Pertamina as a
respondent. And the order certified in the Southern
District of New York on February 22, 2002, again
mentions Pertamina alone. Not until March 22, 2002,
after the funds in the Bank of America trust accounts
were attached, did the Ministry appear in the district
court, then characterizing itself as a “Non-Party with
Interest.”
At first blush, the Ministry’s absence from the initial
proceedings and its failure to intervene pursuant to Fed. —
R. Civ. P. 24 seem to preclude its participation in this
appeal. “[O]nly parties to a lawsuit, or those that
properly become parties, may appeal an adverse
judgment.” Marino v. Ortiz, 484 U.S. 301, 304, 108 S.Ct.
586, 98 L.Ed.2d 629 (1988) (per curiam). But, as the
Supreme Court recently made clear, the Ministry is
11 Having accepted jurisdiction under 28 U.S.C. § 1292(b), we need
not determine whether the collateral order doctrine provides an
alternative vehicle to hear this appeal. See Excimer Assocs. v. LCA
Vision, Inc., 292 F.3d 134, 138 (2d Cir.2002) (describing the collateral
order doctrine). .
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indeed a “party” to the district court’s judgment for
present purposes, and can therefore properly appeal.
In Devlin v. Scardelletti, 536 U.S. 1, 122 S.Ct. 2005,
2008, 2013, 153 L.Ed.2d 27 (2002), the Court held that an
unnamed member of a class could appeal a class action
settlement at a fairness hearing even though he had
failed to intervene earlier. The Court cautioned that
“[t]he label ‘party’ does’ not indicate an absolute
characteristic, but rather a conclusion about the
applicability of various procedural rules that may differ
based on context.” Id. at 2010. To determine who may
appeal, *82 courts must ascertain whether putative
appellants are “bound by the order from which they were
seeking to appeal.” Jd. In Devlin, for instance, the
appellant faced a “final decision of [a] right or claim
sufficient to trigger his right to appeal.” Jd. (Citation and
internal punctuation omitted.)
Similarly, we have long allowed appeal “when the
nonparty has an interest that is affected by the trial
court’s judgment.” United States v. Int'l Bhd. of
Teamsters, 931 F.2d 177, 183-84 (2d Cir.1991) (quoting
Hispanic Soc’y v. N.Y. City Police Dep’t, 806 F.2d 1147,
1152 (2d Cir.1986), affd, Marino v. Ortiz, 484 U.S. 301,
108 S.Ct. 586, 98 L.Ed.2d 629 (1988)); accord West v.
Radio-Keith-Orpheum Corp., 70 F.2d 621, 624 (2d
Cir.1934). “The question therefore is whether the
putative appellant can identify an ‘affected interest.”
Kaplan v. Rand, 192 F.3d 60, 67 (2d Cir.1999). The
Ministry alleges that the Republic of Indonesia owns the
property encompassed by the garnishment order. Under
Devlin, Kaplan, and similar cases, this constitutes an
“affected interest,” which eniitles the Ministry to join this
appeal.
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III. Execution Against or Attachment of
Foreign Sovereigns’ Property
Attachment of a foreign state’s property in the United
States is governed by the FSIA. In relevant part, the
FSIA provides that “the property in the United States of
a foreign state shall be immune from attachment arrest
and execution except as provided in sections 1610 and
1611 of [the FSIA].” 28 U.S.C. § 1609. Section 1610
provides different regimes for sovereign states on the one
hand, and their agencies and instrumentalities on the
other. First, 28 U.S.C. § 1610(a) provides that any
property of a foreign sovereign that is
used for a commercial activity in the United States,
shall not be immune from attachment in aid of
execution, or from execution, upon a judgment
entered by a court of the United States * * * if * * *
(1) the foreign state has waived its immunity from
attachment in aid of execution or from execution
either explicitly or by implication, notwithstanding
any withdrawal of the waiver the foreign state may
purport to effect except in accordance with the
terms of the waiver.
Id. Second, § 1610(b), which concerns foreign states’
instrumentalities, such as Pertamina, provides in
relevant part that:
any property in the United States of an agency or
instrumentality of a foreign state engaged in
commercial activity in the United States shall not
be immune from attachment in aid of execution, or
from execution, upon a judgment entered by a court
of the United States * * * if * * * (1) the agency or
instrumentality has waived its immunity from
attachment in aid of execution or from execution
either explicitly or implicitly, notwithstanding any
withdrawal of the waiver the agency or
SO We SERRE pase
FRG he
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instrumentality may purport to effect except in
accordance with the terms of the waiver.
Id. Subsection (a) is generally thought to be narrower
than subsection (b). Connecticut Bank of Commerce v.
Republic of Congo, 309 F.3d 240, 252-65 (5th Cir.2002).
While subsection (b) applies to ail property of the
agencies and instrumentalities of foreign states,
subsection (a) applies only to the property of foreign
states that is “used in commercial activity.” Id.
In the appeal before us, sample geothermal energy
contracts between Pertamina and KBC state that
Pertamina “waive[s] any * * * right of immunity
(sovereign or otherwise) which it or its assets now has or
may have in the future.” Karaha Geothermal Joint
Operation Contract, *83 Art. 21.7(c); Karaha Geothermal
Energy Sales Contract, Art. 15.8(c). Pertamina, through
its use of the trust funds to channel LNG revenues,
engages in commerce in New York. Under 28 U.S.C. §
1610(b), Pertamina has thus waived its sovereign
immunity from attachment in United States courts. !2
A. Attachment Under the FSIA and New York Law
The FSIA states that when a foreign state is not
protected by sovereign immunity, “the foreign state shall
be liable in the same manner and to the same extent asa
private individual under like circumstances.” 28 U.S.C. §
1606. In attachment actions involving foreign states,
federal courts thus apply Fed. R. Civ. P. 69(a), which
requires the application of local state procedures. See
12 Because this is an appeal from an order executing a judgment
against the property of Pertamina—as opposed to the property of the
Ministry or the Republic of Indonesia—the sovereign immunity claims
of the Minis y or the Republic of Indonesia are not before us.
18a
Alliance Bond Fund, Inc. v. Grupo Mexicano De
Desarrollo, S.A., 190 F.3d 16, 20 (2d Cir.1999) (applying
Rule 69(a), and hence New York law, in an FSIA action).
In the instant action, the district court is located in
New York state. We therefore apply New York law to
determine what assets are “subject to enforcement, and
thus available to judgment creditors.” Alliance, 190 F.3d
at 20. “New York procedure for enforcement of
judgments is set out in Article 52 of the Civil Practice
Law and Rules. The first section of Article 52 describes
the assets that New York law has made subject to
enforcement, and thus available to judgment creditors.”
Id. The relevant provision, N.Y. C.P.L.R. § 5201(b),
states that:
Property against which a money judgment
may be enforced. A money judgment may be
enforced against any property which could be
assigned or transferred, whether it consists of a
present or future right or interest and whether or
not it is vested, unless it is exempt from application
to the satisfaction of the judgment.
Id. In New York, then, a party seeking to enforce a
judgment “stand[s] in the shoes of the judgment debtor in
relation to any debt owed him or a property interest he
may own.” Bass v. Bass, 140 A.D.2d 251, 253, 528
N.Y.S.2d 558, 561 (1st Dep’t 1988). Nonetheless, a party
cannot “reach * * * assets in which the judgment debtor
has no interest.” Jd. A determination of Pertamina’s
property interest in the disputed funds—i.e., whether
Pertamina can “assign or transfer” any of these funds—is
therefore dispositive of this appeal. N.Y. C.P.L.R. §
5201(b).
B. Ownership of the Disputed Funds
While the litigants agree that New York law governs
what property can be attached, they diverge on what law
19a
governs the property rights of the Republic of Indonesia
and Pertamina in the disputed funds. KBC argues that
under New York law, Pertamina owns the Production
Sharing Percentage because Pertamina controlled the
allocation of the funds within the trust accounts and
retained initial title to the LNG, which it sold to generate
the disputed funds. KBC finds no significance in the fact
that much of those funds flow to the Republic of
Indonesia. In KBC’s view, these funds merely represent
“various royalties, taxes, and dividends” which
“Pertamina is obligated to pay the Government.” Decl. of |
Robert N. Hornick § 24. KBC argues that before those
obligations are met, the funds belong to Pertamina.
KBC’s expert also argues that Indonesian *84 law does
not vest the Republic of Indonesia with any ownership
interest in these funds. See id. at [4 24—49.
Both Pertamina and the Ministry argue to the
contrary that Indonesian law deprives Pertamina of all
but a future property interest, limited to five percent of
the Net Operating Income, while the Republic of
Indonesia has the exclusive right to the rest of
Pertamina’s Production Sharing Percentage. They, like
the district court, identify Government Regulation 41 as
providing the dispositive rule of decision:
Article 5(1) The retention (fee) received by
Pertamina with regard to the Production Sharing
Contract shall be 5% (five percent) of the Net
Operating Income of the relevant Production
Sharing Contract.
(2) The difference between portions received by
Pertamina according to each Production Sharing
Contract and the retention (fee) received by
Pertamina as intended in paragraph (1) of this
Article shall be the Government's portion.
20a
Government Regulation of the Republic of Indonesia
Number 41 of 1982, Art. 5 (emphasis added). According
to Pertamina’s expert, “[t]his [provision] means that the
Government owns the Percentage Share due to
Pertamina under the PSC, but must pay Pertamina the
five percent fee,” or the Retention. Supp. Decl. of
Sudargo Gautama ¥ 4.
Pertamina also argues that even the Retention, which
equals five percent of the Net Operating Income, cannot
be attached. Pertamina contends that before it transfers
its Production Sharing Percentage to the Republic of
Indonesia, the latter owns all the PSC Revenue as a
result of Government Regulation 41. Only after the
revenue reaches Jakarta does Pertamina receive the
Retention. And even in Jakarta, Pertamina is not
entitled to the entire Retention. Regulation 41, in Article
5(3), subjects the retention to a sixty percent tax. A
second regulation, Government Regulation 73, then
mandates payment of a fifty percent dividend to the
government. In all, Pertamina actually receives one-fifth
of the Retention. !*
Resolution of this appeal requires that we determine
the legal ownership of the PSC Revenues. At the
threshold, we must consider which choice of law rule
governs the question of ownership.
13 For instance, if the PSC Revenue were $100, the Pertamina’s
retention would be $5, or five percent. Under the terms described in
Pertamina’s annual reports, though, the PSC Revenue would be
divided: $35 would go to the PSC contractor, and $65 would go to
Pertamina in New York, then be transferred immediately to the
Ministry in Jakarta. Once the $65 reached Jarkarta, Pertamina would
receive $5. After taxes and dividends, however, Pertamina would only
retain $1.
2la
IV. Choice of Law Analysis
A. Federal or State Choice of Law Rules
“[RJather than directing courts to apply the choice of
law rules of the place of [the relevant events], the FSIA
implicitly requires courts to apply the choice of law
provisions of the forum state with respect to all issues
governed by state substantive law.” Barkanic v. Gen.
Admin. of Civil Aviation of the People’s Republic of China,
923 F.2d 957, 959 (2d Cir.1991); accord Pescatore v. Pan
Am. World Airways, Inc., 97 F.3d 1, 12 (2d Cir.1996)
(“[T]he FSIA * * * operates as a ‘pass-through’ to state
law principles.”). In Barkanic, we reasoned that the
FSIA “expressly embraces the goal of holding foreign
states liable in the same manner and to the same extent
as a private individual under like circumstances.”
Barkanic, 923 F.2d at 960 n. 3 (internal *85 citation and
quotation marks omitted). Barkanic suggests that New
York choice of law rules govern.
The Ministry argues that Barkanic applies only to
questions of “liability,” and does not extend to questions
about “the amenability of the sovereign to suit.” Ministry
Reply Br. at 16. The latter questions, the Ministry
argues, are governed by federal common law choice of law
rules. Jd. (emphasis omitted). But in Barkanic, we
explained that in FSIA cases, we use the forum state’s
choice of law rules to resolve “qi issues,” except
jurisdictional ones. Barkanic, 923 F.2d at 959, 961
(emphasis added). Determining what property
Pertamina owns is not a jurisdictional question, which
would require application of federal law. Jurisdiction has
already been established pursuant to 28 U.S.C.
§ 1610(b)(1) by the contractual waiver of immunity. Like
22a
the Barkanic court, we now determine only the scope of
recovery.!4 New York choice of law rules therefore govern
our decision.
B. New York or Indonesian Property Law
Under New York law, “The first step in any case
presenting a potential choice of law issue is to determine
whether there is an actual conflict between the laws of
the jurisdictions involved.” In re Allstate Ins. Co. &
Stolarz, 81 N.Y.2d 219, 223, 613 N.E.2d 936, 937, 597
N.Y.S.2d 904, 905 (1993); accord Curley v. AMR Corp.,
153 F.3d 5, 12 (2d Cir.1998). In property disputes, if a
conflict is identified, New York choice of law rules require
the application of an “interests analysis,” in which “the
law of the jurisdiction having the greatest interest in the
litigation [is] applied and * * * the facts or contacts which
obtain significance in defining State interests are those
which relate to the purpose of the particular law in
conflict.” Koreag, Controle et Revision S.A. v. Refco F/X
Assoc. Inc., 961 F.2d 341, 350 (2d Cir.), cert. denied, 506
U.S. 865, 113 S.Ct. 188, 121 L.Ed.2d 132 (1992) (citation
omitted); see also Istim, Inc. v. Chemical Bank, 78 N.Y.2d
342, 348, 581 N.E.2d 1042, 1044, 575 N.Y.S.2d 796, 798
14 Any “resort to federal common law to fill the interstices of our
federated legal system, must be warranted by overriding and
compelling federal concerns.” Pescatore, 97 F.3d at 10 (citation and
internal quotation marks omitted); accord O'Melveny & Myers v. FDIC,
512 U.S. 79, 87, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994) (noting that
“cases in which judicial creation of a special federal rule would be
justified * * * are * * * few and restricted”) (citation and internal
quotation marks omitted). The Ministry’s proffered interest, the
uniform application of federal law, Ministry Reply Br. at 16, is
“insufficient to justify imposition of federal common law,” because of
its “generic” and “generalized” nature. Pescatore, 97 F.3d at 11 (citing
O'Melveny, 512 U.S. at 88, 114 S.Ct. 2048).
23a
(1991) (applying interests analysis); In re Estate of Clark,
21 N.Y.2d 478, 485-86, 236 N.E.2d 152, 156, 288
N.Y.S.2d 993, 998 (1968) (same); In re Crichton’s Estate,
20 N.Y.2d 124, 133, 228 N.E.2d 799, 805-06, 281
N.Y.S.2d 811, 819 (1967) (same); Indosuez Int'l Fin. B.V.
vu. Natl Reserve Bank, 279 A.D.2d 408, 408-09, 720
N.Y.S.2d 102, 103-04 (1st Dep’t 2001) (same).}5
I. Actual Conflict of Law. In the case at bar, the
Republic of Indonesia and the State of New York apply
the same general rules to property disputes. The
Republic of Indonesia offers the only specific rules—
Indonesian statutes and regu-*86-lations—that
determine the respective rights of Pertamina and the
Republic of Indonesia in the disputed funds. New York
law directs us to apply these Indonesian statutes and
regulations. There is thus no actual conflict of law.
Under New York law, the party who possesses
property is presumed to be the party who owns it. See
Pollock v. Rapid Indus. Plastics Co., 113 A.D.2d 520, 525,
497 N.Y.S.2d 45, 49 (2d Dep’t 1985) (noting that
“possession of tangible property * * * creates a rebuttable
presumption of ownership”). When a party holds funds in
a bank account, possession is established, and the
presumption of ownership follows. See Kolodziejczyk v.
Wing, 261 A.D.2d 927, 928, 689 N.Y.S.2d 825, 825 (4th
Dep’t 1999) Goint bank account creates rebuttable
presumption of ownership in joint possessors); Perkins v.
15 KBC argues that “the law of the situs of the disputed property
generally controls.” Appellee’s Br. at 34. (citing 19A N.Y. Jur.2d
Conflict of Laws §§ 26, 27, 31). But the New York Court of Appeals
explicitly rejected the “traditional situs rule” in favor of interest
analysis in Istim, 78 N.Y.2d at 347, 581 N.E.2d at 1044, 575 N.Y.S.2d
at 798.
24a
Guaranty Trust Co. of New York, 274 N.Y. 250, 261, 8
N.E.2d 849, 853 (1937) (possession of stock certificates
creates rebuttable presumption of ownership).
Similarly, the Indonesian Civil Code provides that
“whoever is in control of movable goods * * * shall be
deemed to be the owner of such goods,” Indonesian Civ.
Code, Art. 1977, and the phrase “movable goods” includes
cash held in bank accounts, Decl. of Robert N. Hornick {
34.
Pertamina possesses the disputed funds. Under both
New York and Indonesian law, we therefore proceed from
the presumption that Pertamina owns the disputed
funds. It is clear, however, that this presumption may be
rebutted by evidence that the Republic of Indonesia
actually controlled the disputed funds, or that Pertamina
merely held the funds for the Republic of Indonesia, in
the manner of a trustee.'®© See Fragetti v. Fragetti, 262
A.D.2d 527, 527-28, 692 N.Y.S.2d 442, 443 (2d Dep’t
1999) (holding that joint bank account created
presumption of joint ownership, which was rebutted by
contrary evidence of the parties’ intentions and relative
control over the funds); Vergari v. Kraisky, 120 A.D.2d
739, 740, 502 N.Y.S.2d 788, 789 (2d Dep’t 1986) (holding
that certificate of title constituted prima facie evidence of
ownership of a vehicle, which was rebutted by contrary
evidence of the parties’ relative dominion and control over
the vehicle); Kurtish v. Iskokovic, 204 A.D.2d 847, 848,
16 As the district court stated, Pertamina’s possession of the disputed
funds “is not the end of the story. Under absolute Hornbook law, the
Court must look past that and must recognize any property rights in
that money which belong to any other parties * * * such as the right of
a beneficiary to a trust or some similar kind of property right.” Tr. of
April 5, 2002 Hearing, at 80. KBC does not advance any contrary
proposition of Indonesian law. See Petitioner-Appellee’s Br. at 41, 44.
25a
612 N.Y.S.2d 263, 264 (3d Dep’t 1994) (holding that a
“constructive trust” exists between two parties when
there is: (1) a confidential or fiduciary relation, (2) a
promise, (3) a transfer in reliance thereon and (4) unjust
enrichment); Mendel v. Hewitt, 161 A.D.2d 849, 850, 555
N.Y.S.2d 899, 900 (3d Dep’t 1990) (stating that to
determine whether a “constructive trust” exists, courts
conduct “flexible” factual inquiries into the relationships
between parties); cf. Decl. of Robert N. Hornick q 34
(stating that under Indonesian law, possession
establishes a presumption of ownership, but not stating
that the presumption is irrebuttable). Under New York
law, then, the property rights are determined by the
underlying relationship between Pertamina and the
Republic of Indonesia.
KBC urges us to apply New York law to this
relationship, and thus, to the property rights in the
disputed funds. Yet KBC has not pointed to any New
York cases or statutes that purport to govern this kind of
*87 arrangement. The Republic of Indonesia is a foreign
state, and Pertamina is a corporate entity of Indonesia,
created by the legislative enactments and executive
orders of the Republic of Indonesia. The relationship was
created neither by contract nor by any other mechanism
familiar to the laws of New York. It was established
instead by provisions of Indonesian law uniquely
applicable to the relationship itself: Law of the Republic
of Indonesia Number 8 Year 1971 and Government
Regulation of the Republic of Indonesia Number 41 of
1982. Under New York law, the meaning of these two
provisions of Indonesian law determines the property
rights of the parties. There is thus no actual conflict
between the laws of New York and the laws of Indonesia.
2. Interests Analysis. In any event, even if there were
such a conflict, we are confident that Indonesian law
would govern under the “interests analysis” that would be
26a
applicable under New York choice of law rules. (Cf.
Allstate, 81 N.Y.2d at 225, 613 N.E.2d at 938, 597
N.Y.S.2d at 906 (holding that “there is no conflict
between New York and New Jersey law,” and that even if
there were a conflict, “New Jersey law [would] govern
* * *”) As the New York Court of Appeals has explained,
Applying interests analysis, we first look to the
purposes of the statutes in conflict and identify the
policies which the States seek to promote through
application of their laws. Then, based upon the
facts of the case which relate to the statutes’
purpose, we determine which State has the greater
interest in having its law applied.
Istim, 78 N.Y.2d at 348, 581 N.E.2d at 1044, 575
N.Y.S.2d at 798. In the case at bar, Indonesian law sets
forth a set of rules specifically resolving the ownership
and disposition of the particular funds in dispute. See,
e.g., Government Regulation of the Republic of Indonesia
Number 41 of 1982, Art. 5; Law of the Republic of
Indonesia Number 8 Year 1971, Art. 15; see also Decl. of
Sudargo Gautama 94 29-39 (describing the regulation of
PSC revenues). More generally, Indonesian laws also
reflect a significant national interest in the eventual fate
of funds from LNG exploitation. An Indonesian
Constitution “Elucidation” observes, “The earth and the
waters and the natural riches contained therein are the
fundamentals of the people’s prosperity. Therefore they
should be controlled by the State and be made use of for
the greatest possible prosperity of the people.”
Elucidation of the Indonesian Const., Art. 33. Other
Indonesian laws evince similar concerns. See Law
Substituting Gov't Regulation No. 44 Year 1960; Law of
the Republic of Indonesia Number 8 Year 1971. And,
unlike New York’s interests, Indonesia’s interests
implicate the particular circumstances at issue: the use
of an Indonesian governmental instrumentality to
27a
generate funds in order to maintain satisfactory foreign
exchange reserves.
In contrast, the New York statutory interests
implicated here are relatively attenuated: (i) the creation
and operation of trusts under New York law; (ii) the
execution of sales contracts that operate under New York
law to obtain funds for deposit in these trusts; (iui) New
York’s general interest “in defining and protecting the
property interests of its citizens and those who do
business there,” Koreag, 961 F.2d at 351; and (iv) New
York’s “interest as an international clearinghouse and
market place,” Indosuez, 279 A.D.2d at 408-09, 720
N.Y.S.2d at 104 (citation and internal quotation marks
omitted).
Moreover, these generic interests are only minimally
implicated in this case. Both the LNG sales contracts
and the *88 trust mechanism complete their operations
before funds arrive in Pertamina’s subaccount. Whatever
interest New York has in proper application of its
contract or trust law has de minimis application here.
And we do not see how a decision to apply New York law
would materially further New York’s reputation as a
cosmopolitan, as opposed to insular and _ provincial,
financial center. Indeed, if this latter reason alone
sufficed to mandate New York law, courts would never
apply foreign law to cases involving property located in
New York bank accounts, which has clearly not been the
case. Cf, e.g., Clark, 21 N.Y.2d at 485-86, 236 N.E.2d at
156, 288 N.Y.S.2d at 998 (applying Virginia law to
determine the ownership of property located in New
York).
We conciude that even if there were a conflict between
New York and Indonesian law, New York choice of law
rules would mandate application of Indonesian law to
determine the relative property interests of Pertamina
and the Republic of Indonesia in the disputed funds.
28a
V. The Property Interests of the Republic
of Indonesia and Pertamina in the
Restrained Funds
There is some uncertainty about the theory pursuant
to which KBC presses its claim to the attached funds. On
the one hand, KBC argues that the disputed funds belong
to Pertamina even as a matter of Indonesian law, and
consequently can be attached. This theory of recovery
therefore rests on the ownership of the disputed funds.
On the other hand, KBC, ‘n its brief and at oral
argument, also suggested that it had been entitled to rely
on Pertamina’s ownership of the LNG funds, and due to
that reliance. is now entitled to attach those funds,
without regard to the funds’ legal ownership.
We reject both arguments. Like the district court, we
conclude that under Indonesian law, all of the disputed
funds except for the Retention belong to the Republic of
Indonesia, and that it would have been unreasonable for
KBC to rely on the notion that Pertamina owned those
funds.
A. The Reliance Argument
KBC’s reliance argument appears to run as follows:
The Republic of Indonesia has established Pertamina as a
separate legal entity, comparable to a private corporation,
in order to do business with various other entities in
international markets. When those entities make serious
claims against Pertamina’s assets, however, Pertamina
disclaims ownership, and invokes the sovereign immunity
protections of the Republic of Indonesia. KBC hints that
Pertamina was a vehicle for the Republic of Indonesia to
participate in international markets without fairly
accepting the consequences of such participation.
This argument rests on the premise that when KBC
entered into the geothermal energy contracts, KBC relied
upon Pertamina’s ownership of the disputed funds, and
29a
that it was reasonable for KBC to do so. We can find no
evidence in the record to support these claims.
KBC has not elicited evidence from which a court could
conclude that KBC actually relied upon any
representation that Pertamina made about KBC’s ability
to recover from the disputed funds in the event of default.
KBC does not allege that before or during the negotiation
of the geothermal energy contracts, Pertamina made any
oral or written representation about recovery in the event
of default. The geothermal energy contracts contain no
reference to Pertamina’s obligations to make funds
available in the event of default, nor do they make any
mention of *89 LNG revenues. Neither Pertamina’s
separate legal status nor its previous title to the LNG
supports the notion that Pertamina represented that it
owned the disputed funds, or that the funds were
available to KBC to satisfy a default. Moreover, neither
fact establishes that Pertamina owns the proceeds from
LNG sales, free of any prior obligations to the Republic of
Indonesia. !7
None of Pertamina’s representations and actions, as
reflected in the record, support the inference that
7 Nor can KBC rely on the structure or denomination of the disputed
accounts at issue here to establish reliance. There is no evidence that
KBC knew of the existence of the Bank of America trust accounts, let
alone that it relied on their existence when contracting. KBC sought
permission from the United States District Court for the Southern
District of Texas to register its judgment in Delaware and California
in addition to New York. Memorandum and Order of February 20,
2002, at 7. In New York alone, KBC served restraining notices on no
less than seven banks. Writ of Execution and Order to Show Cause of
February 22, 2002, at 5. This broadside approach suggests that KBC,
while perhaps aware that LNG revenues existed and flowed through
New York, knew nothing of these accounts, let alone who established
or controlled them.
30a
Pertamina had an ownership interest in the disputed
funds. To the contrary, Pertamina seems to have been
entirely forthright about its lack of ownership rights.
Pertamina’s annual report, for example, states that
“[rlevenue from LNG sales, after deduction of
contractually agreed cost items, is shared between the
Government (65%) and the contractor (35%). From the
LNG operations PERTAMINA earns one thirteenth (1/13)
or approximately 5% from the Government's share.”
Pertamina Annual Financial Report 2000, at 17
(emphasis added).
Although the TPAAs do not denominate the Republic
of Indonesia as owner of the LNG proceeds, Pertamina
presents undisputed evidence that it has consistently
transferred all of its Production Sharing Percentage to
the Republic of Indonesia’s account at the Federal
Reserve Bank of New York. And it was widely
understood that the Republic of Indonesia relied on LNG
funds to maintain its foreign currency reserves, which
would have been more difficult had the funds belonged to
Pertamina, rather than the Republic itself. See Decl. of
Sahala L. Gaol. 4 11-12.
Further, the evidence of the LNG contracting process
suggests that other persons dealing with Pertamina
thought that Pertamina could not be relied on as a
creditor. The LNG financing structure was designed to
assure parties contracting with Pertamina that—while
doing LNG business with Pertamina—they would not be
left without financial recourse in the case of default. For
instance, when money was needed to construct
Pertamina’s liquefaction facilities, the loan was not made
directly to Pertamina. Rather, it was made to the
trustee, Bank of America. The loan contracts described
the “Borrower” as “Bank of America National Trust and
Savings Association, solely as Trustee under the Trust
Agreement [but] not in its individual capacity” and not
3la
“any one or more of the Producers [defined to include
Pertamina].” Bontang VI Loan Agreement of March 4,
1997, at 4. The loan agreements further specified that
debt payments must be made from the LNG proceeds in
the trust before Pertamina or the PSC contractor
obtained any profit. Jd. at 18-19. The loan agreements
therefore warranted that the borrowers’ interest had
priority over all other “obligations and liabilities,” Id. at
38, and the TPAAs provided for payment to Pertamina
and the PSC contractor only after such debts were
satisfied, see, e.g., Bontang VI Trustee and Paying Agent
Agreement of March 4, *90 1997, at 39. PSC contractors’
interests were also protected through the trust such that
they did not need to rely on access to Pertamina’s assets
in order to be paid. See Decl. of Ainun Na’im § 22; Decl.
of Robert Hornick § 23(c). The TPAA mechanism thereby
ensured that parties involved in the production of LNG
never needed to rely on the independence and financial
viability of Pertamina nor contend with Pertamina’s
potential sovereign immunity assertions, nor its
willingness to comply with adverse judgments.
Other sophisticated commercial counter-parties thus
expressly sought contractual mechanisms to guarantee
recovery without reliance on the accessibility of
Pertamina’s assets. This suggests that even if KBC had
actually relied upon Pertamina’s ownership rights, such
reliance would not have been reasonable. Others were
aware of complexities in the relationship between
Pertamina and the Republic of Indonesia, and consequent
limits on Pertamina’s ability to satisfy judgments against
it. We would think that KBC, no less than others, could
have arranged similar protections. Having failed to
bargain for such protection before the fact and having
failed to identify any actual reliance, KBC now asks us in
effect to rearrange nunc pro tunc the relations of
Pertamina and the Republic of Indonesia in KBC’s favor.
In these circumstances, we see no reason why a
32a
sophisticated commercial entity should not be required to
abide by the consequences of its bargain. We therefore
reject KBC’s reliance argument.
B. The Property Interest Argument
As described above, the crux of the parties’
disagreement about Indonesian law hinges on a provision
of Government Regulation 41:
Article 5(1) The retention (fee) received by
Pertamina with regard to the Production Sharing
Contract shall be 5% (five percent) of the Net
Operating Income of the relevant Production
Sharing Contract.
(2) The difference between portions received by
Pertamina according to each Production Sharing
Contract and the retention (fee) received by
Pertamina as intended in paragraph (1) of this
Article shall be the Government’s portion.
Government Regulation of the Republic of Indonesia
Number 41 of 1982, Art. 5. This provision, by using the
possessive “Government’s,” mandates that all of the
disputed funds, with the exception of the five percent that
constitutes Pertamina’s Retention, belong to the Republic
of Indonesia. Thus, we agree that most of “the share
denominated as ‘Pertamina’s’ share under the PSCs
belongs entirely to the Government,” Decl. of Sudargo
Gautama § 4, with the exception of the Article 5(1)
Retention. KBC responds that “the ‘Government’s
Portion’ referenced in [Government Regulation 41] is not
a property interest [but] simply a reference to the
‘indebted obligations’ [already] owed by Pertamina to the
Government of Indonesia.” Petitioner-Appellee’s Br. at
46 (emphasis omitted). KBC contends that Law 8, the
statute under which Regulation 41 was passed, creates
these “indebted obligations.” Jd. at 14-16. Article 15 of
Law 8 states that Pertamina’s deposit of sixty percent of
33a
Net Operating Income from PSCs “shall constitute the
payment” of corporate tax, various levies, and other
contributions. Law of the Republic of Indonesia Number
8 Year 1971, Art. 15. KBC argues that the amount that
Pertamina owes to Indonesia in taxes, levies, and
contributions is the “Government’s portion.” The
disputed funds are, in KBC’s view, owned by Pertamina
and owed to Indonesia.
*91 But KBC’s interpretation of Article 5 of
Government Regulation 41 is inconsistent with the
surrounding statutory text. While Article 5(2) identifies
in mandatory terms what “shall be the Government’s
portion,” the very next provision imposes a “tax,” which it
explicitly labels as such. Government Regulation of the
Republic of Indonesia Number 41 of 1982, Art. 5(3). The
presence of a parallel provision explicitly referencing
“tax” obligations suggests that Article 5(2) describes a
different kind of obligation. The terminology of Article 15
of Law 8 underscores this inference: It refers to
payments that “constitute” corporate taxes, customs
levies, and the like, Law of the Republic of Indonesia
Number 8 Year 1971, Art. 15, which are distinguished
from other obligations.
Further, Article 5(2) of Government Regulation 41 and
Article 15 of Law 8 refer to different amounts. The
former, which creates the “Government’s portion,” refers
to the “difference between portions received by Pertamina
according to each Production Sharing Contract and the
retention (fee) received by Pertamina.” Government
Regulation of the Republic of Indonesia Number 41 of
1982, Art. 5 (emphasis added). That is, the Government
portion comprises, with respect to each PSC, the total
amount of the Net Operating Income, less the amount to
which the particular PSC contractors are entitled, less
five percent of the Net Operating Income—a sum that
depends upon the exact percentage to which contractors
34a
are entitled under the PSC. And, as KBC’s counsel
explained at oral argument, this percentage varies from
contract to contract, so that the “Government’s portion”
also varies above and below sixty percent of Net
Operating Income. Thus, the “Government’s portion” is a
varying amount.
Article 14 of Law 8, in contrast, refers to a fixed “sixty
percent of the net operating income from the operations
of Production Sharing Contracts prior to the division
between the Enterprise and the Contractor.” Law of the
Republic of Indonesia Number 8 Year 1971, Art. 14. The
fixed sixty percent that is Law 8’s “indebted obligation”
therefore cannot be the same thing as the varying
percentage of the Net Operating Income that is the
“Government's portion.” 8
18 Despite this discrepancy, KBC’s expert argues that “Article 14 and
15 [of Law 8] were implemented by [Government Regulation 41].”
Decl. of Robert Hornick § 27. But as a matter of Indonesian law,
government regulations are not implementing mechanisms for
legislation. Indonesi2n law contains “a bewildering variety of types of
laws—statutes, regulations, decrees, circulars, etc.” Eddy Damian &
Robert N. Hornick, Indonesia’s Formal Legal System: An Introduction,
20 Am. J. Comp. L. 492, 523 (1972). Among the varieties of law
enumerated in the aforementioned article are “Government
Regulation[s],” “Presidential Decision[s],” “Regulation[s] of the
Minister,” and “internal memoranda.” Id. at 524-25. This plethora of
legal instruments in part ensues because the Indonesian executive
branch has “considerably more executive law-making discretion than
is the case, e.g. in the legal system of the U.S.” Jd. at 529. And under
Indonesian law, “[e]ven statutes passed by the House of
Representatives commonly looked to the executive orders and
Presidential speeches for their inspiration and legal base.” Id. at 507.
Given the discrepancy in meaning between Law 8 and Government
Regulation 41, we conclude that these rules do not exist in the
hierarchal relationship described by KBC’s expert’s declaration.
35a
The record also contains uncontroverted evidence that
Pertamina’s share of the Net Operating Income is
transferred directly to the Ministry's account at the
Federal Reserve Bank of New York.!9 While this *92
does not prove that the Republic of Indonesia has an
ownership interest in such funds, it is consistent with
such a conclusion.
We also agree with other Courts of Appeals that have
suggested that a foreign sovereign’s views regarding its
own laws merit—although they do not command—some
degree of deference. See, e.g., Access Telecom, Inc. v. MCI
Telecommunications Corp., 197 F.3d 694, 714 (5th
Cir.1999), cert. denied, 531 U.S. 917, 121 S.Ct. 275, 148
L.Ed.2d 200 (2000) (“Recognizing the difficulty of
interpreting foreign law, courts may defer to foreign
government interpretations.”); see also In re Oil Spill by
the Amoco Cadiz, 954 F.2d 1279, 1312 (7th Cir.1992) (“A
court of the United States owes substantial deference to
the construction France places upon its domestic law.”).
That Indonesia is a party to the case does not blunt this
comity concern. See Société Nationale Industrielle
Aérospatiale v. United States Dist. Court for the S. Dist. of
Iowa, 482 U.S. 522, 546, 107 S.Ct. 2542, 96 L.Ed.2d 461
(1987) (“[W]e have long recognized the demands of comity
in suits involving foreign states, either as parties or as
19 Pertamina introduced testimony that its long-standing practice has
been to hand over funds from PSCs directly to the Republic of
Indonesia through a transfer to the Federal Reserve Bank of New
York. See Decl. of Ainun Na’im { 23 (noting that “standing
instructions to [Bank of America exist] to pay its Production Sharing
Percentage to the account of the Government of Indonesia”); Supp.
Decl. of Sahala L. Gaol. 4 3 (same). Such standing instructions were
given in March 1997, prior to the Swiss arbitration in the case at bar.
Id.
36a
sovereigns with a coordinate interest in the litigation.”
(emphasis added) (citing Hilton v. Guyot, 159 U.S. 113, 16
S.Ct. 139, 40 L.Ed. 95 (1895))). Where a choice between
two interpretations of ambiguous foreign law rests finely
balanced, the support of a foreign sovereign for one
interpretation furnishes legitimate assistance in the
resolution of interpretive dilemmas. The Republic of
Indonesia, of course, insists that Pertamina’s reading of
the relevant Indonesian law is correct. We thus conclude
that Pertamina does not own any portion of the disputed
funds, with the exception of the Retention. Like a
trustee, Pertamina possesses the remaining funds but
has no ownership interest in them. Cf. Wulff v. Roseville
Trust Co., 164 A.D. 399, 404-05, 149 N.Y.S. 683, 687 (1st
Dep’t 1914) (“Property which a debtor holds in trust for
others * * * is not subject to an attachment issued against
his property.”).
C. The Retention
Pertamina also argues that it has no right to the
Retention, or, at a minimum, no right to eighty percent of
the Retention. We disagree. While Pertamina may be
under an obligation to transfer the Retention to the
Ministry’s account in New York, this fact does not alter
the extant allocation of ownership interests. Pertamina
has not identified any Indonesian statute or regulation
that grants the Republic of Indonesia ownership rights in
the Retention. “[U]nder New York law, a defendant has
an interest in * * * funds if any part of the money is
within the present or future control of the defendant.”
Gala Enterprises, Inc. v. Hewlett Packard Co., 970
F.Supp. 212, 217 (S.D.N.Y.1997) (citation and internal
punctuation omitted); accord Leon v. Martinez, 84 N.Y.2d
83, 88 n. 1, 638 N.E.2d 511, 513 n. 1, 614 N.Y.S.2d 972,
974 n. 1 (1994) (“An assignment may properly relate to a
future * * * right which is adequately identified * * *.”).
As property within Pertamina’s control, which only
37a
Pertamina controls, the Retention is validly subject to
attachment.
CONCLUSION
The district court correctly adjudicated the relative
ownership interests of the Republic of Indonesia and
Pertamina. We therefore affirm the district court’s order
*93 granting KBC’s motion to attach the Retention, and
denying KBC’s motion to attach the remainder of the
disputed funds. Because this is not an appeal from a
final judgment, proceedings in the district court will
presumably move on to other matters. We direct the
district court, in the course of those proceedings, to
continue the stay presently in force or to substitute one
similar until such time as the parties’ rights to the -
disputed funds are finally determined.
38a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Dated: April 24, 2002
FINAL ORDER
No. M-18-302 (TPG)
In The Matter Of An Arbitration Between Karaha Bodas
Company, L.L.C.,
Petitioner,
V.
Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara (“Pertamina’”),
Respondent
Before: GRIESA, Judge.
1. On February 22, 2002, petitioner Karaha Bodas
Company, L.L.C. (“KBC”) registered in this District a
final judgement against respondent Perusahaan
Pertambangan Minyak Dan Gas Bumi Negara
(“Pertamina”) that was entered on December 4, 2001 by
the United States District Court for the Southern District
of Texas (the “Texas Judgment”). The Texas Judgment
confirmed the final arbitral award entered in Karaha
Bodas Company v. Pertamina & Others, YD/IS 60 319,
pursuant to the Convention for the Recognition and
Enforcement of Foreign Arbitral Awards of 1958, U.S.T.
2517, T.1.A.S. No. 6997, codified at 9 U.S.C. §§ 201-208,
which awarded KBC $261,166,654.92, plus interest from
January 1, 2001. Pertamina is an Indonesian state-
owned oil and gas enterprise.
2. On February 22, 2002, this Court issued on an ex
parte basis two Writs of Execution and Orders to Show
39a
Cause, pursuant to which the Court: (a) permitted KBC
to issue restraining notices (the “Restraining Notices”),
which KBC served pursuant to Rule 69(a) of the Federal
Rules of Civil Procedure and Article 52 of New York Civil
Practice Law and Rules (“CPLR”) upon the banks listed
in paragraph 3 (the “Garnishee Banks”), which Garnishee
Banks KBC alleged held funds owed to Pertamina or in
which Pertamina had an interest; (b) authorized certain
discovery; and (c) ordered Pertamina to show cause why
KBC could not execute upon any property of Pertamina
within this jurisdiction in satisfaction of the judgement.
3. KBC served the restraining notices upon the
following garnishee banks in New York:
Bank of America Corporation f/k/a Bank
International
Bank of America National Association
Bank of America Securities
Bank of New York
Chase Securities, Inc.
Dai-Ichi Kangyo Bank, Ltd.
JP Morgan Chase Bank
Bank Indonesia
Bank of Montreal Trust Company
Bank of Taiwan New York Agency
Bank Rakyat Indonesia
PT Bank Central Asia (Persero)
PT Bank Negara Indonesia (Persero) Tbk
PT Bank Mandiri (Persero)
4. On March 25, 2002, the Ministry of Finance of
the Republic of Indonesia (the “Ministry”) appeared to
contest ownership of the restrained assets, and to that
end filed a motion to quash (the “Motion to Quash”) the
Restraining Notices, the Writs of Execution and Orders to
Show Cause, and the subpoenas issued by KBC seeking
40a
discovery from the Garnishee Banks. The Motion to
Quash was fully briefed. '
5. On March 23, 2002, Pertamina filed an
Opposition to KBC’s Writs of Execution and Orders to
Show Cause. KBC filed a reply on April 2, 2002.
6. On April 5, 2002 this Court conducted a hearing
on: (i) the Order to Show Cause, and (ii) the Ministry’s
Motion to Quash.
7. For the reasons stated in open court on April 5,
2002, IT IS HEREBY ORDERED, ADJUDGED AND
DECREED:
A. Trust Accounts Holding Pertamina’s Production
Sharing Percentage of Gas Sales Revenues
8. The trust accounts listed in this paragraph at the
identified Garnishee Bank below: (a) are established
pursuant to various Trustee and Paying Agent
Agreement; (b) relate to natural gas production projects
in Indonesia conducted pursuant to Production Sharing
Contracts; (c) contain revenues from natural gas,
liquefied natural gas (“LNG”) and liquid petroleum gas
(“LPG”) sales by Pertamina; and (d) are held in
Pertamina’s name and are subject to the Retention Fee as
described in paragraph 12. These trust accounts are
restrained under the Restraining Notices:
Trust accounts at Garnishee Bank of America, N.A.::
ARUN II Trust
ARUN III Trust
Bontang Excess Sales MCGC Trust
Bontang Excess Sales AQP Trust
Bontang Excess Sales Korea II Trust
Bontang Excess Sales KCO Trust
Bontang LPG PKG V Trust
Bontang LPG PKG VII Trust
4la
Bontang II Trust
Bontang III Trust
Bontang IV Trust
Bontang V Trust
Bontang VI Trust
East Java Pipeline (PSC Revenue) Trust
ONWJ Trust
9. Each Trust identified in paragraph 8 above
receives the sales proceeds arising out of specific
Production Sharing Contracts; these sales proceeds are
deposited by buyers into the appropriate trust fund
account as required by contract. Pursuant to a specific
Trustee and Paying Agent Agreement, the Trustee first
makes payments and accruals for debt service, reserves,
and other expenses and costs. The excess amount left in
each general trust account after these payments are
made (the “Net Operating Income”) is distributed by the
Trustee in accordance with the Production Sharing
Percentages specified in the Production Sharing
Contracts for each producer, a term defined for the
Trustee and Paying Agent Agreements to include both
Pertamina and the foreign contractors. A Trustee
deposits each producer’s share of the Net Operating
Income in that producer’s trust sub-account. Pertamina,
as a producer, receives a share of each Production
Sharing Contract.
10. The only trust and payment accounts and sub-
accounts restrained are those maintained in Pertamina’s
name or for Pertamina’s benefit.
11. Article 5(2) of Indonesian Government Regulation
41/1982 provides that the difference between the share
nominally received by Pertamina according to each
Production Sharing Contract and a Retention Fee payable
to Pertamina as intended in Article 5(1) “shall be the
Government’s portion.” (the “Government’s Portion”)
42a
12. Article 5(1) of Indonesian Government Regulation
41/1982 provides that Pertamina receives a retention fee
out ot ithe proceeds of each Production Sharing Contract.
The Retention Fee is equal to five percent (5%) of the Net
Operating Income that is generated from each such
contract and that is paid to Pertamina and its production
sharing partners (the “Retention Fee”).
13. The Court finds that Pertamina has a property
right in the trust accounts identified in paragraph 8
above, to the extent of its five percent (5%) Retention Fee,
which can be executed upon in the manner allowed under
New York C.P.L.R. 5222(b).
14. The Court finds that the Government of
Indonesia does not have an ownership interest in any of
the five percent (5%) Retention Fee, and that the
provisions of Indonesian law providing for a tax and a
dividend to be paid out of the five percent (5%) Retention
Fee do not confer an ownership interest on the
Government of Indonesia.
15. The Court finds that the Government of
Indonesia has a property right in the “Government’s
Portion” under Article 5(2) of Government Regulation No.
41/1982 with respect to those funds held in Pertamina’s
name in the trust accounts identified in paragraph 8
above, and therefore, is entitled to these funds. The trust
accounts cannot be executed upon to the extent of the
Government’s Portion.
16. Accordingly, the Ministry's Motion to Quash is
GRANTED and KBC’s Motion is DENIED with regard to
the trust accounts listed in paragraph 8, as to the
Government’s Portion. KBC’s Motion is GRANTED and
the Ministry’s Motion to Quash is DENIED only as to the
amount of Pertamina’s Retention Fee with regard to the
trusts listed in paragraph 8.
43a
17. In addition, to the trust accounts listed in
paragraph 8, restraints have been placed on the following
accounts:
Trust Accounts at Garnishee Bank of America, N.A.:
BLRE Trust
Cilacap Trust
Corridor Trust
East Java Pipeline (Throughput Fee) Trust
KMI Trust
South Sumatra Trust
West Natuna Trust
Trust Accounts at Garnishee Bank of New York:
Exor I Trust
MUSI II Trust
_ 18. The Court finds that the present record is
insufficient to determine whether KBC is entitled to
execution against these accounts. These accounts, to
some extent, raise individual factual issues and, in any
event, do not involve the same uniform questions of law
raised with respect to the trust accounts listed in
paragraph 8.
19. The Court certifies that the order contained in
paragraphs 8-16 involves controlling questions of law as
to which there is substantial ground for difference of
opinion and that an immediate appeal from this order
may materially advance the ultimate termination of the
litigation.
44a
20. The order contained in paragraphs 8-16 is stayed
pending the conclusion of proceedings in the Court of
Appeals.
/s/
United States District Court Judge,
Thomas P. Griesa
45a
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Dated: June 18, 2002
No: 02-7513 (L), 02-7515 (C), 02-7547 (c);
02-8014 (L), 02-8015 (C), 02-8016 (C)
Karaha Bodas Company, LLC,
Petitioner-Appellee,
v.
Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara,
Respondent-Appellant
Ministry of Finance of the Republic of Indonesia,
Non-Party Appellant.
Before: WALKER, Jr., Chief Judge, MINER and
CABRANES, Circuit Judges.
Non-party appellant, the Ministry of Finance of the
Republic of Indonesia (“the Ministry”), and appellant
Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara (“Pertamina”), move for leave to appeal, pursuant
to 28 U.S.C. § 1292(b), an order by the district court
dated April 26, 2002 which decided that 95% of funds
contained in several Bank of America accounts belonged
to the Ministry, and 5% belonged to Pertamina. The
Ministry further moves to vacate a stay imposed by the
district court of its decision to release 95% of certain
funds contained in several Bank of America accounts.
Karaha Bodas Company, LLC (“Bodas”), opposes the
motions, and in the alternative conditionally moves for
leave to appeal, pursuant to § 1292(b), the district court’s
46a
order. Bodas further moves to dismiss the Ministry’s and
Pertamina’s appeals for lack of appellate jurisdiction on
the grounds that (1) the Ministry lacks standing to
appeal the district courts order; and (2) the order being
appealed from is non-final.
The district court certified its order for immediate
appeal pursuant to § 1292(b). Additionally, because the
order addresses concerns of sovereign immunity, it may
be cm to — bed the collateral order ee
See
Foreign Trade Corp., 204 F.3d 384, 387 (2d Cir. 2000).
Consequently, we grant leave to appeal but note that the
merits panel is free to reconsider the jurisdictional
questions presented by this appeal.
We review the district court’s decision to stay its order
pending appeal for abuse of discretion. See Kovlum Inc.
v. Peksen Realty Corp., 272 F.3d 138, 147 (2d Cir. 2001).
We note that Bodas faces irreparable harm if the assets
belong to Pertamina and are removed from the United
States, while the Ministry and Pertamina do not appear
to face a danger of substantial injury. Because Bodas
also has a substantial possibility of success on the merits,
we conclude that the district court did not abuse its
discretion. However, we modify the stay to apply only to
sufficient funds to satisfy the judgment, because no
legitimate interests are served by tying up funds beyond
what would be necessary to make Bodas whole if it
prevails on appeal.
Therefore, upon due consideration, and for the reasons
set forth above, it is ORDERED that the motions by the
Ministry and Pertamina for leave to appeal pursuant to §
1292(b) or the collateral order doctrine are granted, and
Bodas’s motion to dismiss the appeals for lack of
appellate jurisdiction is denied. Bodas’s alternative
motion to cross-appeal is granted. The motions to vacate
the stay pending appeal are denied, except that the stay
47a
is only maintained as to funds up to the amount of
Bodas’s judgment. Argument of the appeal is expedited
to the calendar for the week of August 5th.
FOR THE COURT:
Is/_
Roseann B. MacKechnie, Clerk
48a
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Dated: January 13, 2003
No. 02-7513(L); 02-7515(CON); 02-7547(XAP);
02-771 5(CON); 02-771 7(CON); 02-7723(XAP)
KARAHA BODAS COMPANY, L.L.C.,
Petitioner-Appellee-Cross-Appellant,
v.
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS
BUMI NEGARA (“PERTAMINA’”),
Respondent-Appellant-Cross-Appellee,
MINISTRY OF FINANCE OF THE REPUBLIC OF
INDONESIA,
Non-Party-Appellant-Cross-Appellee.
A petition for panel rehearing, having been filed herein
by appellant, Perusahaan Pertambangan Minyak Dan
Gas Bumi Negara (“Pertamina’”).
Upon consideration by the panel that decided the
appeal, it is ordered that said petition for rehearing
is DENIED.
FOR THE COURT
ROSEANN B. MACKECHNIE
Is/
Arthur Heller
Administrative Attorney
49a
EXCERPTS FROM THE
FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976
§ 1603. Definitions
(a) A “foreign state”, except as used in section 1608 of
this title, includes a political subdivision of a foreign state
or an agency or instrumentality of a foreign state as
defined in subsection (b).
(b) An “agency or instrumentality of a foreign state”
means any entity—
(1) which is a separate legal person, corporate or
otherwise, and
(2) which is an organ of a foreign state or political
subdivision thereof, or a majority of whose shares or
other ownership interest is owned by a foreign state or
political subdivision thereof, and
(3) which is neither a citizen of a State of the
United States as defined in section 1332(c) and (d) of this
title, nor created under the laws of any third country.
kkk
1604. JImmuni ign s from jurisdiction
Subject to existing international agreements to which
the United States is a party at the time of enactment of
this Act a foreign state shall be immune from the
jurisdiction of the courts of the United States and of the
States except as provided in sections 1605 to 1607 of this
chapter.
§ 1606, Extent of liabili
As to any claim for relief with respect to which a
foreign state is not entitled to immunity under section
1605 or 1607 of this chapter, the foreign state shall be
liable in the same manner and to the same extent as a
private individual under like circumstances; but a foreign
50a
state except for an agency or instrumentality thereof
shall not be liable for punitive damages; if, however, in
any case wherein death was caused, the law of the place
where the action or omission occurred provides, or has
been construed to provide, for damages only punitive in
nature, the foreign state shall be liable for actual or
compensatory damages measured by the pecuniary
injuries resulting from such death which were incurred
by the persons for whose benefit the action was brought.
§ 1609. Immunity from attachment and execution of
property of a foreign state
Subject to existing international agreements to which
the United States is a party at the time of enactment of
this Act the property in the United States of a foreign
state shall be immune from attachment arrest and
execution except as provided in sections 1610 and 1611 of
this chapter.
§ 1610. Exceptions to the immunity from attachment
or execution
(a) The property in the United States of a foreign
state, as defined in section 1603(a) of this chapter, used
for a commercial activity in the United States, shall not
be immune from attachment in aid of execution, or from
execution, upon a judgment entered by a court of the
United States or of a State after the effective date of this
Act, if—
(1) the foreign state has waived its immunity from
attachment in aid of execution or from execution either
explicitly or by implication, notwithstanding any
withdrawal of the waiver the foreign state may purport to
effect except in accordance with the terms of the waiver,
or
(2) the property is or was used for the commercial
activity upon which the claim is based, or
5la
*kEREX*
(6) the judgment is based on an order confirming
an arbitral award rendered against the foreign state,
provided that attachment in aid of execution, or
execution, would not be inconsistent with any provision
in the arbitral agreement, or
**e*
(b) In addition to subsection (a), any property in the
United States of an agency or instrumentality of a foreign
state engaged in commercial activity in the United States
shall not be immune from attachment in aid of execution,
or from execution, upon a judgment entered by a court of
the United States or of a State after the effective date of
this Act, if—
(1) the agency or instrumentality has waived its
immunity from attachment in aid of execution or from
execution either explicitly or implicitly, notwithstanding
any withdrawal of the waiver the agency or
instrumentality may purport to effect except in
accordance with the terms of the waiver, or
*k*ex*
(c) No attachment or execution referred to in
subsections (a) and (b) of this section shall be permitted
until the court has ordered such attachment and
execution after having determined that a reasonable
period of time has elapsed following the entry of
judgment and the giving of any notice required under
section 1608(e) of this chapter.
kke*
§ 1611. Certain types of property immune from
execution
(a) Notwithstanding the provisions of section 1610 of
this chapter, the property of those organizations
designated by the President as being entitled to enjoy the
privileges, exemptions, and immunities provided by the
52a
International Organizations Immunities Act shall not be
subject to attachment or any other judicial process
impeding the disbursement of funds to, or on the order of,
a foreign state as the result of an action brought in the
courts of the United States or of the States.
(b) Notwithstanding the provisions of section 1610 of
this chapter, the property of a foreign state shall be
immune from attachment and from execution, if—
(1) the property is that of a foreign central bank or
monetary authority held for its own account, unless such
bank or authority, or its parent foreign government, has
explicitly waived its immunity from attachment in aid of
execution, or from execution, notwithstanding any
withdrawal of the waiver which the bank, authority or
government may purport to effect except in accordance
with the terms of the waiver; or
(2) the property is, or is intended to be, used in
connection with a military activity and
(A) is ofa military character, or
(B) is under the control of a military authority -
or defense agency.
(c) Notwithstanding the provisions of section 1610 of
this chapter, the property of a foreign state shall be
immune from attachment and from execution in an action
brought under section 302 of the Cuban Liberty and
Democratic Solidarity (LIBERTAD) Act of 1996 to the
extent that the property is a facility or installation used
by an accredited diplomatic mission for official purposes.
53a
DECLARATION OF MR. SAHALA GAOL
I, Sahala L. Gaol, PhD., state as follows:
1. I am currently Director of Oil and Non-Tax
Revenue within the Directorate General of Financial
Institutions of the Ministry of Finance of the Republic of
Indonesia. This Declaration is submitted with respect to
the appeal by the Ministry of Finance and the Indonesian
state-owned oil and gas enterprise, Respondent
Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara (“Pertamina”), from the Order (“Order”) of the
United States District Court for the Southern District of
New York (J. Greisa) in the action entitled Karaha Bodas
Company, LLC v. Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara (“Pertamina”), No. M 18-302.
Specifically, I submit this Declaration in support of the
Ministry of Finance’s request (a) that execution upon the
gas revenues that the District Court, in its Order, held
belong to Respondent-Appellant Pertamina, i.e., those gas
revenues constituting five percent of the net operating
income of the relevant Production Sharing Contract that
are held in the name of Pertamina by a trustee at the
Bank of America, continue to be restrained pending
appeal of the District Court’s Order, and (b) for the
immediate release of the gas revenues that the District
Court held belong to the Government of Indonesia, 1.e.,
the remainder of such gas revenues from the relevant
Production Sharing Contract that are held in the name of
Pertamina by a trustee at the Bank of America.
2. The relevant trust accounts at the Bank of
America now contain approximately US$ 230 million in
restrained gas revenues. These revenues are from the
sale of natural gas, liquefied natural gas (“LNG”), and
liquid petroleum gas (“LPG”) by Pertamina on behalf of
the Government, and are a key element of Indonesia’s
foreign exchange and cash dollar reserves. All of these
funds have been allocated to the budget of the
54a
Government of Indonesia. This significant amount of
money in U.S. dollars is also included in the calculation
and predictions in the cash management plan of the
Ministry of Finance. Without the immediate distribution
of the funds held in the relevant trust accounts that
belong to the Government of Indonesia, the Ministry of
Finance would have insufficient cash and be unable to
transfer the oil and gas revenue share to the regional
provinces and counties that is required under Law Nos.
22 and 25 of 1999, and the entire budget of the
Government of Indonesia would be placed in jeopardy,
including the Indonesian Government’s ability to meet
foreign debt obligations. Hence, the failure to pay to the
Government of Indonesia now all of the gas revenues
belonging to it will have devastating consequences for
Indonesia’s foreign exchange reserves, cash reserves, the
government's budget and its economy.
3. The failure to pay this money to the Government
of Indonesia immediately may well create significant
political instability, in addition to exacerbating
Indonesia’s economic problems. Specifically, two
provinces where a significant amount of the liquid
natural gas that is sold to generate the revenues at issue
is produced, have been contacting the Ministry of Finance
and demanding their share of gas revenues. In fact, upon
receipt of the oil and gas revenue, the Indonesian
Government is required under the Indonesian laws
mentioned in Paragraph 2 above, to share the oil and gas
revenue with approximately 15 provinces in Indonesia
and approximately 250 counties. The next cash payment
of the oil and gas share to the provinces and counties is
now past due. Accordingly, the Government of Indonesia
must have this cash in its accounts immediately to make
these payments to the local governments. The
Government of Indonesia is very concerned that if these
payments are not made, it could intensify political
instability throughout the country. Such instability and
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55a
economic hardship could adversely affect investor
confidence in Indonesia which, in turn, will adversely
effect Indonesia’s economic recovery and budget.
4. I also have addressed the economic and potential
political harm resulting to Indonesia from the continued
restraint of the gas revenues belonging to the
Government of Indonesia in my Declaration and
Supplemental Declaration submitted to the District
Court as part of the Ministry of Finance’s Motion to
Quash Restraining Notices, Writs of Execution, and
Subpoenas Seeking Discovery. The Ministry of Finance
urgently requires that the gas revenues belonging to the
Indonesian Government be released immediately.
I hereby declare, under penalty of perjury under the
laws of the United States of America, that the foregoing
is true and correct.
Executed this 10 day of April 2002, in Washington
D.C.
/s/
Sahala L. Gaol, PhD.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.