Internet v. Telecommunications and Informatics Financing Provider and…

Background

PT Rahajasa Media Internet is an Indonesian company that provides fiber-optic internet service in Indonesia. It entered five contracts with the Center for Provision and Management of Telecommunications and Informatics Financing, identified in the opinion as BAKTI, to provide internet access. Rahajasa alleged that it completed pre-operational work but was not paid because payment depended on approval of the budget by the Indonesian Parliament.

The parties submitted the payment dispute to the Indonesian National Board of Arbitration. In 2017, the arbitrator issued an award in Rahajasa’s favor, ordering Defendants to pay the equivalent of $16,948,937.28. The award was registered with the South Jakarta District Court. That court later granted Rahajasa’s application for a writ of execution. Defendants did not pay the award, and Rahajasa filed this action seeking recognition and enforcement of the foreign judgment under New York’s Uniform Foreign Country Money Judgments Act.

Defendants moved to dismiss on grounds including improper venue, lack of subject-matter and personal jurisdiction, lack of standing, and failure to state a claim. The court resolved the motion on subject-matter jurisdiction.

Foreign Sovereign Immunities Act

The Foreign Sovereign Immunities Act generally protects foreign states from jurisdiction in United States courts, subject to specified exceptions. Those protections also cover a foreign state’s political subdivisions, agencies, and instrumentalities, including BAKTI.

Rahajasa relied on two exceptions. First, it argued that Defendants had expressly or implicitly waived sovereign immunity. The court rejected that argument. The amended complaint merely referred to the waiver provision and provided no supporting facts or argument. The arbitration agreement contained no immunity waiver, and BAKTI’s participation in arbitration in Indonesia did not establish an implicit waiver under the circumstances presented.

Second, Rahajasa relied on the commercial-activity exception. That exception requires showing that Defendants engaged in commercial activity, that the action was based on that activity, and that the activity caused a direct effect in the United States. Defendants did not dispute that they engaged in commercial activity. The court also held that Rahajasa adequately alleged that its claim was based on the contracts because those contracts had a significant connection to the claim.

The court nevertheless held that Rahajasa did not allege a direct effect in the United States. The contracts were performed in Indonesia, Defendants’ alleged refusal to pay occurred in Indonesia, and the payment dispute was arbitrated there. Rahajasa relied on allegations that BAKTI invested revenue from the internet-access program with a bank in the judicial district. The court found that connection too indirect because the alleged effect did not immediately follow from the commercial activity at issue.

Disposition

The court held that it lacked subject-matter jurisdiction and granted Defendants’ motion to dismiss. It concluded that allowing Rahajasa to amend would be futile because the dispute concerned commercial activity that took place in Indonesia and the court could not exercise jurisdiction over it. The action was dismissed with prejudice, the pending motion was terminated, and the case was closed.