Third-Party Risk in the Availability Payment: The Palapa Ring Western Package

Main Article Content

Andrew William John Nathaniel
Yetty Komalasari Dewi
https://orcid.org/0000-0003-1901-4405
Shatila Dhiyaannisaa Sani

Abstract

The Palapa Ring Western Package is the first Public Private Partnership infrastructure project in Indonesia implementing Availability Payment (AP). Prevailing regulations allow the Government Contracting Agency (GCA) and Implementing Business Entity (IBE) to determine the system of incentives and penalties of AP in their project contract. This research explores two main issues: (1) whether the IBE has obligation for contingent cost liabilities outside of the contractually determined AP amount in the occurrence of damage caused by a third party which interrupts or disrupts infrastructure service availability and (2) whether the GCA has the right to penalize AP amount to the IBE in the occurrence of damage by a third party which interrupts or disrupts service availability. By applying normative legal research using the statute approach, this research concludes that in this project, the IBE has obligation for contingent cost liabilities outside of contractually determined AP amount in the occurrence of damage by a third party and the GCA has the right to penalize AP amount if the IBE fails to maintain service availability. The contractual allocation of operational and maintenance risk to the IBE creates obligation to bear costs during the project lifetime including those due to third-party risk. Further, the use of formula to calculate AP to IBE is solely based on performance data in maintaining service availability according to contractually agreed standards. Thus, the use of AP in the Palapa Ring Western Package may be a point to reference for future Public Private Partnership infrastructure projects.

Article Details

How to Cite
Nathaniel, A. W. J., Dewi, Y. K., & Sani, S. D. (2022). Third-Party Risk in the Availability Payment: The Palapa Ring Western Package. Journal of Indonesian Legal Studies, 7(1), 339-390. https://doi.org/10.15294/jils.v7i1.55184
Section
Research Articles
Author Biographies

Andrew William John Nathaniel, Faculty of Law, Universitas Indonesia

Andrew William John Nathaniel  (Andrew) is a graduate of the Faculty of Law, Universitas Indonesia. He has previously assisted research at his faculty on various issues such as international investments, project financing, and helped in a large-scale project research commissioned by the Ministry of Transportation to advise on private sector investment for airports and services infrastructure development through Public-Private Partnership financing and contracting. During his studies, Andrew was selected to represent the Faculty of Law, Universitas Indonesia at the 21st International Maritime Law Arbitration Moot (IMLAM) Competition hosted by Singapore Management University School of Law. Andrew’s scope of experiences outside of academic research includes working on public policy at the Executive Office of the President of the Republic of Indonesia, defence industry advisory, business development, and trade negotiation. Beyond law, he has strong interests in banking, market analysis, investments, trade, project financing, corporate strategy, and M&A. At the time of this publication, Andrew is working professionally as part of a global market research consultancy firm and will soon be joining an international bank.

Yetty Komalasari Dewi, Faculty of Law, Universitas Indonesia

Yetty Komalasari Dewi (Yetty) earned her Bachelor degree (SH) and Doctoral degree (Dr) from Faculty of Law, Universitas Indonesia (UI) in 1993 dan 2011; and her Master of Legal Institution (ML.I) from School of Law, University of Wisconsin-Madison, the United States of America in 2003. Currently, she is in charge for numbers of course namely Trade/Commercial Law, Corporate/Company Law, Investment Law, Arbitration (Commercial/Investment), International Trade Law (WTO Law), both in undergraduate and graduate levels. She was an Exchange Professor at Kumamoto University, Japan (2016). She is member of subject editors of Asian Journal of Comparative Law (2018-2021) published by the National University of Singapore, and member of Reviewer Boards in several law school in Indonesia. Yetty’s area of research is corporate/company law, commercial/trade law and investment law. She is actively involved in research activities funded by Ministry of Higher Education, UI, and other institutions, such as the Indonesian Coast Guard, Bank of Indonesia, Indonesian Investment Coordinating Board, Ministry of Industrial Affairs, Corruption Eradication Commission, Regional Representative Council, Ministry of Trade, Ministry of Transportation, etc. Yetty’s publications include books and articles. Her books among others are: Indonesian Partnership Law: Theory and Cases, A New Paradigm on Commanditaire Vennotschap (CV): A Comparative Study with the Indonesian Commercial Code and the Netherland Commercial Code as well as Court Decisions in Indonesia and the Netherlands, Introduction to Commercial Law, Alternative Defense Mechanism in International Trade for Domestic Industries, The Development of Commercial Law in Indonesia: Limited Liability Partnership (LLP) and Civil Company/Partnership (Maatschap) as a Business Organization (book-chapter). Some of her articles are: The Need to Adopt a Limited Liability Partnership for the Legal Profession in the Partnership Law: A Critical Review From Indonesia’s Perspective; Cost of Maritime Security Inspection to Merchant Ship Operator – The Indonesian Shipowners’ Perspective; A Critique Towards Australian Work and Holiday Visa Subclass 462: Where Does It leave Indonesian Citizen?; Abuse of Rights by Majority Shareholders in Indonesian Family Owned- Company: Is It Likely?; Dispute Settlement Mechanism in Bilateral Investment Treaties; Readiness of Indonesia in Facing the ASEAN Economic Community (MEA) 2015.

Shatila Dhiyaannisaa Sani, School of Law, University of California-Berkeley

Shatila Dhiyaannisaa Sani (Shatila) earned her Bachelor of Laws (LL.B.) degree from The London School of Economics and Political Science (LSE) in 2015 and her Master of Laws (LL.M.) degree from University of California, Berkeley – School of Law (Berkeley Law) in 2022 with certificate of specialization in business law. Shatila is currently working as a corporate lawyer in a private practice and has worked on various domestic and cross-border corporate deals. Shatila’s area of interest is corporate, company, finance, capital market and technology-related laws. During her time at LSE, she served as the committee member of the LSE Students’ Union Law and Financial Markets Society. While at Berkeley Law, she actively attended events and discussions held by Berkeley Center for Law and Business. Shatila had written on (i) U.S. Securities and Exchange Commission’s Proposed Amendments to Beneficial Ownership Reporting Obligations under Schedule 13D, (ii) Assessing the Potentials, Obstacles and Risks of Using DeFi to Fill the MSME Finance Gap in Indonesia and (iii) misappropriation of trade secrets under California Civil Code Section 3426.

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