Monday, February 08, 2010

Sudden Inspection by The Minister of Envorimental to Coal Mining Location

On Saturday according to Kompas newspaper of 8th February,2010, the Minister of Environmental had conducted a sudden inspection to several Coal Mining Location in South Kalimantan. Indication of violation against Law No.32 Year 2009 concerning the Protection and Management of Environmental consisting of non-reclamation on the ex Mining and non re-planting of such ex Mining area.  The Environmental Audit and correction and environmental restoration must be performed by such Mining Company says the Minister as quoted by Kompas newspaper. 

The Environmental Officers says that it does no longer talk about permit or administration but about pollution and damaging environmental. The Environmental Ministerial will sent letter to enforcement of the law to the control at the Regional and Central Government.  

The Investigation team have earlier verify the coal mining management environmental in South Kalimantan, 9 Coal Mining Companies at Kabupaten Kotabaru and 7 at Kabupaten Banjar. The Mining Area had been abandoned without reclamation, erosion control, drainage to the pool sediment, and the water at the mining area is below the quality standard which caused the pollution to the river according to Kompas Newspaper of 8th February 2010.

Note :

From the above news by Kompas, it shows that attention by the Mining Companies are needed to not ignore the reclamation obligation as required by the New Mineral and Coal Mining laws as well as the Laws concerning Protection and Management of Environmental to avoid being imposed of violating the Laws which might fall under Criminal as well as Civil Legal Exposures. 

The Minister of Environmental had indicated that the Government Regulation as implementation of the New Mineral and Coal Law shall be issued by the Government.

Construction Termination Issues

  • Constructions legal issues are really very interesting for Business Lawyers who are interested in the operations.We had an exiting experience relating to this Construction issues where there was a litigation case which occurred, due to the mishandling by the operations people who had one sided terminated a construction contract, without properly observing the manner in terminating a contract as ruled under the termination clauses under the Contruction Agreement .
  • This case erupted into a case where the Owner of the project was being sued 4 times in the Court; The Plaintiff succeeded in seizing the Bank Account of the Project Owner, where there were a significant amount of money in such Bank Account. The suit case involved claims for losses of material, moral, loss of business opportunities, reputation claimed being suffered by the Contractor.
  • The Contractor claimed, that they were not in default, since they were not given the proper manner and time to remedy the work which according to the Owner of the Project was not being properly performed by the Contractor. The lessons that we can take from such case is that, when, you want to terminate a Construction Agreement, due to a default by the Contractor, we have to make sure that the proper reminder had been submitted in writing by the Owner of the project in accordance with the rulings, and time frame, under the terms and conditions of the Construction Contract.
  • The Contractor has to be given the chance to remedy its wrong performance, pursuant to the terms and conditions under the Construction Contract. Even though there was a default due to non-performance by the Contractor, there is a mechanism under the Construction Contracts as to how,  we  can  legally terminate such Contract, to avoid more further losses of time and monies which could be suffered by the Project Owner.
  • Accordingly, we cannot just terminate such Contract without following the terms and conditions and the procedures which are ruled under such Construction Contract. The Contracts are the ruling provisions which had been mutually agreed by both the Contractor and the Owner of the Project, including agreeing as to how shall they handle the situation where the Contractor has conducted a default in performing its tasks under such Construction Agreement.
Agung Supomo Suleiman  
Law Firm Suleiman Agung & Co

Wednesday, February 03, 2010

The Need of Sinchronizing the Rulings and Laws To overcome Delay in Realization of Investment in Mining Sectors

According to Kompas Newspaper of 27 January 2010,  the  Indonesian Mining Association predicts that the realization of the Mining may be delayed at this current moment reaching USD 10 Billion. This is because the Investment Climate in Indonesia is not Conducive, particularly due to the Uncertainty of the Law.   The Head of the Indonesian Mining Association ( IMA) Arief S.Siregar had highlighted the above in front of the Hearing of the House People Representative Komisi VII ( Commission VII) in Jakarta on Tuesday 26/1 2010.

According to the Head of the Komisi VII ( Commission VII) Teuku Riefky Harsya the Government has to speed up the synchronization of the rulings which are issued. Several of the Laws that had to be synchronize are the Oil and Gas Law, Mineral and Coal New Law No. 4 Year 2009, The Environmental Law, the Forestry Law, The Spacial Law, and the Tax Law. This is needed to boost the Mining Investment in order to increase the energy endurance, state revenue and multiply effect to the Economy. The Mining Industry Sectors gives significant benefit through the management of the environment, the development of the area, the development of infrastructure and the absorb of the manpower. Te Mining Sector is dependent upon big capital with the return of capital relatively more longer than other Business Sectors. 

There are several Mining Investors who desires to bring their capital to Indonesia, however, since there is Un-Certainty in the Law in Indonesia, they had delayed their intention. In fact there is USD 10 Billion amount of capital that is planed to be realized in the Year 2009, but until this present moment is being delayed says Arif as quoted by Kompas Newspaper of 27th January 2010 page 18. Some of the Mining Investment Plan which had been delayed among others include Zinc Mining (seng) and Black Tin Diari Primas USD 500 Million and Nickel Rio Tinto USD 4 Billion. Nickel Weda Bay-Eramet in the  amount of USD 2Billion, Htdromet PT Aneka Tambang USD 1 Billion Dollar. Gold Mine Mearest Soputan USD500 million, FeNi4 Antam USD 320 million. and Coal Mining BHP Biliton.

The Regulation system in fact should brought in New Investment of USD 25 Billion in the period of 25 Years from now. But at this current moment there exist Overlapping land /area and Laws and Rulings says Arief as quoted by Kompas newspaper. Article 169 b of Law No.4 /2009 concerning Mineral and Coal regulated that the Holder of the Contract must adjust the Law at the latest 1 Year. But Article 169 a stipulates that the Contract is honored until the end of the Contract Period. This really creates confuseness. 

Under Law No. 32 Year 2009 concerning Environmental, the Department of Environmental has the absolute power to grant permit on top of other permits. We really hope for a clear implementation ruling which can gives Law Certainty. 

Brief Note : 

As we observe from the above circumstances,  we noticed that overlapping  rulings as well as desires and goals between the Forestry, Environmental and Mining activities, Departments,  and its Laws  and Rulings are frequently occurring  in Indonesia which caused the delay in the Realization of Mining Investments in Indonesia.   

This problem is added with the Autonomy Rulings where The Local Government frequently has its own agenda to increase its Regional Income and Budget  for developing its Region. I remember when  working for 5 Years(1993-1998) as in - House Legal Counsel in PT Freeport Indonesia Company  a  Copper Mining  Company,  the Mining Investor wanted the Bupati  to be given more power  to make decision upon the   contribution for  the  Community  Development which was imposed  upon  PT Freeport as a  Copper Mining Company pursuant to its COW,  to enable the Local Government to have  more grip upon its  Local Regional Budget for developing its Region.        

Based on the above circumstances, I believe that the New Mineral and Coal Mining Law No. 4 Year 2009, had accommodated the Concern of the Regional Government where the Mining Operation is Located.  We can see that   Article 129  of this New Mineral and Coal Law No. 4 Year stipulates that the Holder Of IUP operation production for mineral metal and coal is obligated to pay the amount of 4% to the Government and 6% to the Regional Government from its net profit  as of  such Mining Company is  producing.  The Regional Government Part as meant in sub article 1 is regulated as follows: The Provincial Government gets 1 %, The Regency Government/Producer Municipality get 2.5% and the Regency Government /other cities in the same province get 2.5%.

From the recent news we saw in the Kompas during these  recent days, it appears that the Regional Government  in Kalimantan are very aggressive in trying to boost its  Regional Revenue, which frequently is in collusion with the Rulings of the Ministry of Forestry where at a Certain Location such as in Kalimantan,  even though the land is rich with Coal Resources, but if  the Coal Resources is located in the Forestry Conversation Area, than  close coordination between the Department of Forestry in the Regional and Central Level and the Governor and the Directorate of Mineral  and Coal has to be conducted so that the Mining Companies are protected from uncertainty progress of overlapping policies and rulings.           


Tuesday, February 02, 2010

IUP ( Mining Business License)

( IUP /Mining Business Permit )
Chapter VII Part I 
Law No 4 Year 2009

Article 36
(1) IUP consists of 2 Stages :
a. IUP Exploration which  covers General Survey, Exploration and Feasibility Studies
b. IUP Production Operation which covers Construction activity, Mining, processing and purifying,  transportation and sales.
(2) IUP Exploration and the holder of IUP Operation Production can perform part or the entire of the activities as meant under paragraph (1)

Article 37

IUP is granted  by :

a) Bupati/Walikota if the WIUP ( Mining Business Permit Area)  is located  in 1(one)  Kabupaten/City Area 
b) Governor if WIUP is located in the Kabupaten ( Regency) /City Cross Area in 1 (one) province after obtaining recommendation from the Head of Regency/City of such place in accordance with the rules and law.
c. Minister if the WIUP is located in the province cross area after obtaining recommendation from the Governor/Bupati/Walikota(Mayor) of such place in accordance with the rules and law 

Article 38 
This IUP is granted to :
a. Legal Entity

Note :

Based on the above, it appears that the Granting of  the  IUP ( Mining Business Permit)  is not related to the measurement area of the Mining Area, but is more emphasized to the Location of such Mining Area or Mining Business Permit Area.

Coal Mining in IndonesiaINDONESIA: Construction plans for proposed $20,000,000 coal mining operation, PT TIMAH [Indonesia] - Order #: 064303.: An article from: WWP-Report on Mining, Metal Making and Conversion

For instance if a Mining Coal Area is located in 1(one) Kabupaten (Regency) /City(kota) than the Bupati or Major is the Authorized Officer who grants such IUP. The next question shall be whether such request for IUP is based on tender of such Mining Coal Area conducted by the Bupati/Major. In order to answer such question we have to check more further on the rulings under such New Mineral and Coal Law No 4 Year 2009.

From our research with the Directorate Technical Mineral and Coal, it appears that checking  must be made to the Directorate Pengusahaan within the Directorate Technical Mineral and Coal. It appears that there  is a  reorganization within the Directorate Technical Mineral and Coal, where there will be a Directorate of Mineral and Director Of Coal where at this present moment the Directorate of Coal according to the staff that I asked appears to be no longer existing.

We also found out from the information given by said staff  from  he Directorate Technical Mineral and Coal, that the PP or Governmental Regulation as the implementation of the Law No 4 Year 2009 had not yet been issued. Relating to the news in the Kompas which raised uncontrolled Coal Mining Activities in Kalimantan which was granted in the overlaping Forestry Conservation Area,  and the Non-Reclamation of the Holes left by the Coal Mining Area, we were informed by the staff of the Directorate Technical of Mineral  and Coal that the  Directorate Of Coal  were  the first  Government Institution to implement the Autonomy ruling on the issuance of this IUP or  formerly KP. He also indicated that inputs to the Newspaper usually came from the LSM (Non-Governmental Organization).  However, it seems that the Bupati in granting the Mining Authority does not observe and investigate  whether the location of the Coal  Mining KP which is granted to a Coal Mining Contractor is overlapping with the Forestry Conserve Area.

I  mentioned to the staff of the Directorate Technical of Mineral and Coal, that as a Business Lawyer we have to give clear certain legal data to our Clients who are Coal Mining Companies and intending  to invest their money in the Coal Mining Sectors in Indonesia, who needs legal certainty on the application of this IUP.

We have to be certain that the IUP (Mining Business License)  is granted by the proper Authority either from the Regional Level or at the Central Level, pursuant to the Mineral and Coal  Laws  No.4 Year 2009  and its implementation rulings to avoid overlapping with the Forestry Conservation Area, which could result loss of  monies  invested   in the Coal Mining Sectors in Indonesia suffered by the Coal Mining Investors as raised in the Kompas Media Newspaper recently dated around 26, 27 January 2010.

Drilling Rig

Drilling Rig
oil gas