Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara

Karaha Bodas Company, L.L.C. (KBC) (plaintiff), a Cayman Islands limited-liability private power-development company, and Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) (defendant), an oil, gas, and geothermal energy company that was wholly owned by the government of Indonesia, entered into two contracts to construct a power plant in Indonesia (the project). Each of the contracts contained arbitration clauses requiring arbitration of any disputes in Switzerland. A few years later, the president of Indonesia issued a decree suspending the project indefinitely. Thereafter, KBC initiated arbitration proceedings, claiming that Pertamina had breached the contracts. The panel issued an award in favor of KBC. Pertamina appealed the award to the Swiss Federal Supreme Court. While the Swiss appeal was pending, KBC filed suit in the United States federal district court to enforce the award. The Swiss court dismissed Pertamina’s appeal, and shortly thereafter, the United States district court granted KBC’s petition to enforce the award. Pertamina appealed the district court’s ruling and also filed an action in Indonesia to annul the award and for an injunction to prevent KBC from enforcing the award. Before Pertamina’s application to the Indonesian court could be heard, KBC filed a motion in the United States district court for a temporary restraining order to enjoin Pertamina from seeking injunctive relief in Indonesia. The district court ordered Pertamina to withdraw its application for injunctive relief in Indonesian court. However, Pertamina did not withdraw its request for injunctive relief, and the Indonesian court issued an injunction prohibiting KBC from seeking to enforce the award. KBC filed a motion in the United States district court to hold Pertamina in contempt of the order restraining Pertamina from seeking injunctive relief in Indonesia. The district court again ordered Indonesia to withdraw its request for injunctive relief in Indonesia and found Pertamina in contempt of the prior order. Pertamina appealed the district court’s orders, and in the interim, the Central Jakarta District Court annulled the award on the grounds that it was contrary to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and Indonesian arbitration law. The Indonesian court also enjoined KBC from seeking enforcement of the award. On appeal, Pertamina argued that the United States district court lacked authority or, alternatively, abused its discretion in issuing the preliminary injunction preventing Pertamina from seeking relief in Indonesian court.