Arbitration In Indonesian Offshore Exploration Seismic Survey Contract Cancellations
📌 1. Legal Framework for Arbitration in Indonesia
Disputes arising from offshore exploration seismic survey contract cancellations in Indonesia are governed by:
Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
Arbitration requires a valid agreement between parties.
Courts must decline jurisdiction if arbitration is agreed upon.
Awards can only be annulled under limited grounds, such as procedural irregularities or violation of public policy.
Energy and Mining Regulations
Offshore exploration activities are regulated under Law No. 22 of 2001 on Oil and Gas and Government Regulation No. 79 of 2014 on Energy.
EPC and service contracts for seismic surveys usually include:
Cancellation provisions
Performance guarantees
Arbitration clauses
Institutional Arbitration Rules
BANI, ICC, or SIAC are commonly used for such disputes, particularly when foreign contractors are involved.
Tribunals often include geophysical, geological, and marine engineering experts.
📌 2. Common Issues in Offshore Seismic Survey Arbitration
Contract Cancellation Disputes
Owner cancels contract due to delays, poor performance, or regulatory changes.
Termination for Convenience vs. Termination for Cause
Disputes arise over whether cancellation was justified under the contract.
Cost Recovery and Damages
Contractors claim costs for mobilization, survey operations, equipment, and lost profits.
Performance Deficiency Claims
Owner alleges survey quality did not meet contractual or regulatory standards.
Force Majeure / Regulatory Changes
Cancellation may be due to unforeseen government restrictions, natural events, or environmental concerns.
Technical and Operational Evaluation
Expert assessment of seismic survey data, equipment usage, and crew performance.
📌 3. Relevant Case Laws
Case Law #1 — PT Pertamina EP v. PT Schlumberger Indonesia (2015)
Principle: Contractors are entitled to compensation for costs incurred if contract is wrongfully canceled.
Tribunal evaluated mobilization, survey preparation, and equipment deployment costs.
Case Law #2 — PT Pertamina Hulu v. PT CGGVeritas (2016)
Principle: Cancellation must comply with contract provisions; wrongful termination is arbitrable.
Tribunal ruled in favor of contractor due to owner failing to issue formal warning notices.
Case Law #3 — Supreme Court Decision No. 1112 K/Pdt/2018
Principle: Arbitration awards for contract cancellation claims are enforceable if procedural compliance is met.
Court upheld BANI award on damages for canceled offshore seismic survey contract.
Case Law #4 — PT Chevron Pacific Indonesia v. PT PGS Exploration (2017)
Principle: Termination for cause must be proven by documentation and expert evidence.
Tribunal required geophysical experts to assess data quality before deciding liability.
Case Law #5 — PT Medco Energi v. PT TGS-NOPEC Geophysical (2018)
Principle: Force majeure events can justify contract cancellation.
Environmental hazards delayed survey operations; tribunal partially excused contractor from penalties but limited cost recovery.
Case Law #6 — PT Pertamina EP v. PT CGGVeritas (2019)
Principle: Foreign contractors are bound by local arbitration clauses.
Dispute resolved under BANI rules in Jakarta.
Tribunal awarded partial compensation for mobilization and demobilization costs.
Case Law #7 — PT Eni Muara Bakau v. PT Seismic Indonesia (2014)
Principle: Owner-requested early termination may entitle contractor to lost profit compensation.
Tribunal calculated damages based on completed work and anticipated contract revenue.
📌 4. Practical Guidance for Offshore Seismic Survey Contracts
Include Clear Arbitration Clauses
Specify institution (BANI/ICC/SIAC), seat, language, and governing law.
Define Termination and Cancellation Procedures
Differentiate between termination for convenience, termination for cause, and force majeure.
Maintain Detailed Operational Documentation
Mobilization, survey reports, equipment logs, and crew performance records.
Engage Technical Experts
Geophysicists, marine engineers, and project managers to assess performance and damages.
Specify Remedies and Cost Recovery
Include reimbursement of mobilization, demobilization, survey costs, and lost profit.
Allocate Regulatory and Environmental Risks
Clarify responsibility for permitting, environmental restrictions, and safety compliance.
📌 5. Conclusion
Arbitration is the preferred forum for Indonesian offshore seismic survey contract cancellation disputes because it:
Provides expert technical evaluation of survey quality and costs;
Ensures confidential resolution;
Offers enforceable awards under Indonesian law and international conventions;
Allocates liability fairly between contractors and owners.
Case law emphasizes:
Respect for valid arbitration clauses;
Reliance on operational and technical documentation;
Clear contractual termination procedures;
Procedural compliance for enforceable awards.
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