Churchill Mining PLC (LON:CHL) was dealt a hammer blow today after an international tribunal threw out its US$1bn-plus damages claim against the Republic of Indonesia and ordered the firm to pay around US$9.5mln in costs.
The firm was seeking a ruling from the International Centre for Settlement of Investment Disputes (ICSID) tribunal for US$1bn-plus damages from the Indonesian government after the expropriation of the firm's rights over the huge East Kutai coal mine in the country.
Churchill Chairman David Quinlivan said the firm was “obviously extremely disappointed by the Tribunal's decision.”
He added: “Indonesia has always conceded that the EKCP exploitation licenses were validly issued and signed and it is difficult to understand how the Tribunal found otherwise on the evidence available."
Churchill has been ordered to pay a total of US$9.446mln in costs and arbitration tribunal fees.
However, the firm believes there are grounds to annul the decision and said it is working with its lawyers Clifford Chance to determine which grounds may be best to pursue.
As part of that application, Churchill said it would seek a stay of the costs orders that have been made.
The group added that the suspension in trading of the company's shares on AIM, which it requested from yesterday ahead of the decision being made, will remain in place pending clarification of the company's financial position
The legal dispute over the seized asset has been long and convoluted. Proceedings began in May 2012 when Churchill took the case to the ICSID.
Churchill’s 100%-owned Australian subsidiary Planet Mining Pty, which via its 5% shareholding in PT Indonesia Coal Development also held an interest in the East Kutai Coal Project, has also filed for arbitration at ICSID.
In February 2014, the ICSID ruled in Churchill’s favour, enabling it to pursue the claim for damages against the Indonesian government.
Four months later, following an independent valuation of the project by experts FTI Consulting, Churchill filed a total claim for damages of US$1.315 bn.
In June 2015, the Indonesian government dropped its own fraud claim against Churchill after it accepted that the Ridlatama Group - Churchill’s former business partner - were the sole perpetrators of the alleged fraud at the East Kutai coal mine.
The ICSID tribunal also concluded that there was no finding that Churchill or its officers were involved in any forgery of documents.
It said the forger of the disputed documents was most likely a person or persons acting for or on behalf of Ridlatama in collusion with a person inside the East Kutai Regency;
However, because Churchill's due diligence investigations conducted at the time of acquiring the East Kutai Coal licenses were insufficient, it has dismissed the damages application.
Churchill’s shares were suspended at 36.5p yesterday, having rallied strongly in the year to date since hitting a low of 12.5p in March on hopes for a positive decision from the tribunal.
The ICSID is an international arbitration institution established in 1965 for legal dispute resolution and conciliation between international investors. The ICSID is part of and funded by the World Bank Group, headquartered in Washington DC.