GEM Investment in PT. Agis Tbk. Threatened by Court Dispute

  GEM Investment in PT. Agis Tbk. Threatened by Court Dispute

Business Wire

JAKARTA, Indonesia -- August 22, 2013

An IDR 200 billion investment agreement made by Global Emerging Markets
(“GEM”) with publicly listed electronics company PT. Agis Tbk. in 2010 is now
under dispute in a local Jakarta court, despite the fact that the agreement
calls for dispute resolution under the Rules of the ICC International Court of
Arbitration.

Under the signed Investment Agreement, GEM committed to subscribe for new
shares in PT. Agis Tbk. up to an aggregate subscription value of IDR 200
billion. The 3-year firm commitment agreed by the parties was under a
structure whereby PT. Agis Tbk. had sole control over the amount (based on a
median market price) and timing of any investment, through its issuance of a
series of draw down notices. On September 29, 2010 Pt. Agis Tbk. announced to
the market that it had successfully executed its first Draw Down pursuant to
the Investment Agreement. In addition, as part of the investment agreement,
PT. Agis Tbk. was legally bound to issue 1 billion warrants to GEM, which
would have meant an additional IDR 125 billion in funding for PT. Agis Tbk.,
if and when the warrants were exercised. It is the failure of PT. Agis Tbk. to
issue these warrants, which is one of PT. Agis Tbk.’ obligations under the
mutually signed investment agreement, which is currently under dispute.

Warren P Baker III, Managing Director at GEM, said: “GEM is still keen to
invest in and work with PT. Agis Tbk. moving forward; however, this
relationship is under threat given the arbitrary nature of the dispute that
has been brought against GEM in an Indonesian district court. The Investment
Agreement clearly spells out that any disputes would obligatorily be settled
by arbitration under the Rules of the ICC International Court of Arbitration.
PT. Agis Tbk. is now trying to circumvent the ICC arbitration process by
moving to a civil action in Jakarta under the Indonesian Civil Code.
Furthermore, if PT. Agis Tbk.’ actions go unchecked, it may discourage other
foreign investors in the Indonesian market, showing that Indonesian companies
can ignore their signed agreements and embroil investors in time-consuming
proceedings on the basis of false claims.”

International commentary has been critical of disputes such as these for
hampering Indonesia’s ability to capitalize on its investment-grade credit
rating in the private sector. Critics say access to new capital for local
businesses is limited when foreign investors sense that, if commercial
disagreements arise, they may be subject to protracted litigation in the
domestic courts, even though they and their Indonesian counterparties have
agreed to resolve all disputes in a neutral forum of their choice.

Foreign Direct Investment in Indonesia has seen significant growth in recent
years, hitting record levels in the first half of this year. In the second
quarter of 2013 alone, investment into Indonesia totaled US$6.5 billion,
representing a nearly 20% increase over the same period in the previous year.
In order to achieve this growth, Indonesia has signed 65 Bilateral Investment
Treaties. These treaties are intended to provide foreign parties with comfort
that their investments will be adequately protected.

Mr. Baker continued: “This is an important time for foreign investment in
Indonesia, as the world is watching to see if the country and its government
continue to be supportive of these international partnerships. While
disagreements are bound to arise, this dispute should be easily resolved under
the terms of the original agreement, which clearly calls for disputes to be
referred to arbitration under the auspices of the ICC International Court of
Arbitration. It would be a shame if this incident were to have a negative
impact on the ability of other local companies to attract and secure foreign
investment.”

- END-

Notes to editors

The current dispute (No.: 534/PDT.G/2012/PN.JKT. PST), is being heard by a
panel of Judges - Amin Sutikno, S.H., M.H., Annas Mustaqim, S.H., M.Hum.,
Robert Siahan, S.H., M.H. . The Registrar is Zuherna, S.H.. Representing the
plaintiff is AFS Lawyer Partnership. White & Case in Singapore and Hanafiah
Ponggawa & Partners in Indonesia are representing GEM Global Yield Fund
Limited and GEMIA Inc. The trial is scheduled to proceed from 21 August 2013.

For more information please contact: Warren P. Baker, III – wbaker@gemny.com

About GEM Group

Global Emerging Markets Limited, www.gemny.com, was founded in 1991. GEM is a
$3.4b investment group having completed 330 transactions in 65 countries. The
firm is an alternative investment group that manages a diverse set of
investment vehicles across the world. GEM's funds include: CITIC/GEM Fund; VC
Bank/GEM Mena Fund; Kinderhook; GEM Global Yield Fund; GEM India and the GEM
Brazil Private Equity Fund.

Contact:

GEM Group
Warren P. Baker, III, +1 212-582-3400
wbaker@gemny.com