## Facts

- Karaha Bodas Company, L.L.C. (KBC), a Cayman Islands entity, contracted in 1994 with Pertamina, an Indonesian state-owned energy company, to develop and sell geothermal energy from fields in West Java, Indonesia.
- The contracts required arbitration in Geneva, Switzerland under the UNCITRAL Arbitration Rules.
- During the 1997–1998 Asian financial crisis, the Indonesian government suspended several power projects, including the KBC project, and KBC initiated arbitration alleging breach.
- Pertamina failed to timely appoint an arbitrator; an arbitrator was appointed in its stead, and the arbitral tribunal consolidated claims arising under the two contracts.
- The tribunal issued a final award against Pertamina for approximately $261 million plus interest and costs.
- Pertamina sought to set aside the award in Swiss courts and did not succeed.
- Pertamina later obtained an Indonesian court judgment purporting to annul the award.
- KBC pursued recognition and enforcement in multiple jurisdictions, including a proceeding in the Southern District of Texas, which confirmed the award under the New York Convention and entered judgment for KBC.
- Pertamina appealed both the confirmation judgment and the denial of its Rule 60(b) motion seeking relief based on the Indonesian annulment and asserted newly discovered evidence related to political risk insurance and alleged double recovery.

## Issues

1. Whether Switzerland (the arbitral seat) or Indonesia had primary jurisdiction to annul the award, and which nation’s procedural law governed the arbitration’s validity for New York Convention purposes.
2. Whether the Indonesian court’s purported annulment triggered the New York Convention defense in Article V(1)(e) (award “set aside” by a competent authority).
3. Whether alleged procedural defects (tribunal constitution, consolidation, and conduct of proceedings) established defenses under Article V(1)(b) or V(1)(d).
4. Whether enforcement would violate U.S. public policy under Article V(2)(b), including arguments framed as “abuse of rights.”
5. Whether Rule 60(b) relief was warranted based on the Indonesian annulment decision or purported newly discovered evidence concerning insurance and double recovery.

## Decision

- The Fifth Circuit affirmed the district court’s confirmation of the arbitral award and affirmed denial of Rule 60(b) relief.
- The court held Switzerland, as the seat of arbitration, had primary jurisdiction; Swiss procedural law governed annulment authority relevant to Article V(1)(e).
- Because the award was not set aside by the competent authority at the seat, the Indonesian annulment judgment did not supply an Article V(1)(e) defense to enforcement in the United States.
- The court rejected Pertamina’s procedural objections, finding no showing that Pertamina was denied a fundamentally fair hearing or that the arbitration departed from the parties’ agreed procedures in a way that satisfied Convention defenses.
- The court rejected the public policy defense, concluding enforcement did not offend the forum’s most basic notions of morality and justice.
- The court upheld denial of Rule 60(b) relief, treating such relief as extraordinary and finding the asserted insurance-related evidence insufficient to undermine the judgment confirming the award.

## Legal Principles

- Under the New York Convention, courts of the arbitral seat exercise “primary jurisdiction” to annul or vacate an award; courts where enforcement is sought exercise “secondary jurisdiction” and may refuse enforcement only on enumerated, narrow grounds.
- Article V defenses are construed narrowly, and the party resisting enforcement bears a heavy burden to prove a specified ground for refusal.
- Article V(1)(e) applies to annulment or set-aside by the competent authority of the seat (or the procedural law governing the arbitration as tied to the seat); a foreign court outside primary jurisdiction cannot, by itself, create an Article V(1)(e) bar to enforcement in the enforcing forum.
- Procedural challenges under Article V(1)(b) and V(1)(d) require a showing of serious unfairness or material departure from agreed arbitral procedure; reviewing courts do not reweigh arbitral case-management decisions absent fundamental unfairness.
- The Article V(2)(b) public policy defense is limited to situations where enforcement would violate the enforcing state’s most basic notions of morality and justice.
- Rule 60(b) relief from a judgment confirming an award is discretionary and exceptional; newly discovered evidence must be material and likely to change the outcome, not merely suggest collateral recovery issues.

## Conclusion

The Fifth Circuit enforced a Geneva-seated UNCITRAL award against an Indonesian state enterprise, holding that only Swiss courts had primary jurisdiction to set aside the award for Article V(1)(e) purposes; an Indonesian annulment judgment therefore did not bar U.S. enforcement, and Pertamina’s procedural, public policy, and Rule 60(b) arguments failed under the Convention’s narrow defenses and the demanding standard for post-judgment relief.


Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274 (5th Cir. 2004)