LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Risk factorsparties are free to arrange their relationship in the BOTAgreement or Cooperation Agreement (freedom ofcontract) subject to, among others, the prevailing laws and regulations, the good faith of the contractingparties and public policy principles.The terms of the BOT Agreements range from 20 years to 30 years. Since the BOT Agreement is acontractual arrangement, the term of the respective BOT Agreement may be extended based onagreement between the BOT Grantor and the BOT Grantee. Except for the BOT Agreement relating toThe Plaza Semanggi, which provides for automatic extension for an additional term of 20 years, upon sixmonths prior written notification, there is no assurance that the respective BOT Grantor will agree to extendthe term of the BOTAgreements. If there is no agreement to extend the BOTAgreement(s), the operationsof the Properties could be adversely affected or LMIR Trust could lose its indirect ownership of theProperties.If the ownership of the BOT land is transferred, there is no assurance that the transferee of theland will recognise the right of the BOT Grantee.Five of the seven Retail Malls, namely, Cibubur Junction, The Plaza Semanggi, Ekalokasari Plaza,Bandung Indah Plaza and Istana Plaza, are held via BOT Schemes. Pursuant to BOT Schemes, the BOTGrantor has granted the relevant Retail Mall Indonesian SPC (as the BOT Grantee), a right to build andoperate the Retail Mall for a particular period of time as stipulated in the BOT Agreement. Based on theBOT Agreement, the BOT Grantor is obliged to provide the BOT Land and the BOT Grantee is obliged tobuild and operate the building over the BOT Land and to pay a certain amount as compensation to the BOTGrantor. Therefore, if the BOT Grantor transfers the BOT Land to another party (the “Transferee”) duringthe term of the BOT Agreement, the BOT Grantee can make a claim against the BOT Grantor based on abreach of contract.Under the Indonesian Civil Code, there are four principal sanctions to a breach of contract:(i) compensation of costs, damages and lost profits; (ii) cancellation of the contract; (iii) transfer of riskor responsibility for the object of the contract; and (iv) payment of court costs (which would usually excludelegal expenses) in the event of a court claim.Damages may include consequential damages unless expressly excluded by agreement. The partiesmay, by specific contractual provision, limit damages to a certain amount, or they may agree on a particularmethod of calculating damages. In all cases, the existence of monetary damages suffered and the amountof such must be proven.Under Articles 1247, 1248 and 1250 of the Indonesian Civil Code, the following limitations apply to thetypes of costs, damages and interest recoverable:(a)(b)(c)damages which could have been foreseen or anticipated at the time the contract was formed.According to case law, the scope of the loss as well as the possibility of injury must have beenforeseeable;damages directly and immediately flowing or resulting from the breach of contract; andin a case where performance involves the payment of money, damages may include interest.According to generally accepted rules of jurisprudence in Indonesia, a creditor is required to do what canreasonably be done to prevent or to reduce the damages (i.e. mitigate damages).Should the BOT Grantor be wound up, any claims by the BOT Grantee may not be satisfied in part or at allby the BOT Grantor. In addition, there is no assurance that the Transferee of the BOT Land will recognisethe right of the BOT Grantee to build and operate a Retail Mall on the BOT Land. Under suchcircumstances, the BOT Grantee may be required to surrender the ownership of the Retail Mall to theTransferee of the BOT land and this could have a material adverse effect on LMIR Trust’s financialcondition and results of operations. (See “Profit Forecast and Profit Projection—Sensitivity Analysis—Retail Malls held via BOT Schemes”.)74