Business Lawyers Attitude

As a Business Lawyer you have to establish and develop a positive attitude in maintaining your integrity. You have to be honest and must keep your business ethics and morals to protect the business interests of your Clients. Remember that your Clients are business players who seeks profits in their venture.

You must overcome the legal problems to maintain the  smoothness  business operations of your Clients. You have to seek solution to overcome obstacles which may delay your Clients business achievements and goals. You have to master yourself with the business sense and desires of your Clients. You must not be blocking the wants of your Clients Business Objectives to the extent that you must  advise your Client to observe and comply with the legal requirements as regulated by the laws and regulations surrounding the business activities of your Clients as may be advised by you. 

You must lead the smooth path and advise the rules, laws and policies that have to be taken into considerations by your Clients. You must seek solutions to solve the obstacles that may be faced by the uncertainty of the laws and rules which may occur in a certain circumstances and situation. As a Business Lawyer you have to have a positive attitude  in bridging the communications between the Local Government , Central Government and your Clients business desires particularly relating to the legal aspects surrounding  the business operation of your Client in such Area .     

Insurance Clauses Coverage

If you are a Business lawyer drafting Business Contracts you may be requested to review the Insurance Coverage Clauses that have to be covered by the Contractor of your Client. You must ensure to protect your Clients from unforeseen losses and significant financial burdens. In organizing an insurance  program  it is advisable that you may request your Client to engaged for an Insurance Broking and Consultancy Services who may be ready to advise your Business Clients for guidance and consultation with the Insurance Program and Plan that have to be covered by your Client or the Contractor of your Clients who are providing services to your Clients Business Activities.

There may be 3(three) basic considerations which have to be viewed in organizing an insurance program, namely  :

1. Recognize the perils facing the business and potential loss surrounding or which may occur in your Clients Business Operations.

2. Investigating the methods by which the costs of  the Insurance coverage can be reduced, which includes "exploring" for appropriate insurance plans.

3. Prepare and insurance plan that is compatible with the operation and goals of Your Clients Business 

Whereas relating to the Insurance Coverage there are several Insurance Coverage which may be covered to cover the Assets as well as the Personal which are engaged and may be found and exposed suffering such losses among others : fire, liability, vehicle, equipments, workers compensation and some other desirable insurance coverage which may include Business Interruption, Crime and Key Employees.     

The above insurance coverage really depends on the nature and specific character involved and attached to the business operations of your Client. If your Client is in the Oil and Gas Business Operations there may be insurance Coverage for the Drilling Rig of the Drilling Contractor and other Services and Supporting of Such Drilling Operations activities among others the Cementing, Perforating,Well Logging, Drill Stem Testing,  Fishing, Completing the Well.

You have to ensure that the Insurance Company are competent to cover such Insurance Coverage. As a Business lawyer you have to make sure upon the wordings and sentence of the Insurance Coverage, the Period of the Insurance Coverage, The Insurance Policy, The Waiver of  Subrogation Clause to ensure that the Insurance  Company will Waive their  Right to Subrogate ( take over in claiming) or the Right to Claim against your Client or their employees and directors, after the Insurance Coverage had been claimed and paid  to your Client as the Beneficiary, Assured or Co Assured  of such Insurance  Coverage in event such unforeseen perils occurred.  

There are also occurrence where Insurance Company are reluctant to cover the loss due to the high risks exposure such as the Lost of Down Hole Equipment which are lost down deep in the Well. There may be Business Interruption Insurance where damage to your Client's property or machinery or stock could seriously disrupt the business income or profit and extra cots of your Client Business. The loss of your Clients Contractors and Suppliers may also impact Your Clients Business for which you may advise your Clients to cover the Business Interruption Insurance to cover the short-fall of the gross profit of your Client.

Those above are some glance view and picture of the Insurance Exposures that have to be explored and checked by the Business lawyer in coordination with the Insurance Broker and Insurance Consultant and your Client.          

Maintaining Business Relation

It is really interested to learn and practice how to maintain your business relation with the Business Community. We are really lucky to have the experience in mastering a certain professional who are needed by the Business Community. You can build and maintain such relation after you are fully aware what is your function and what does the Business Community Needs. 

Every Business Community needs growth and ideas how to survive, establish continuity of cash flows,  make profit,   expand and  and grow. If you are eager to assist your Business Clients  desires and wants you have to be aware what they want to achieve success in their business objectives.     

You have to have certain value added to your business community. Business players needs funds or investors to establish their business desires and goals  which needs customers to purchase their products.  

Networks are really significant and important to get their business dreams comes true. You have to be patient in the process of learning and you have to be prepared to educate yourself to tune in the business community. Besides being a Business Lawyer you must have to continuously  expand your networks so that you can link and match the various stakeholders in the business community. 

You have to go out and make contact to your networks and serve the needs they required to start and make actions and steps to perform the desires and wants of the relevant business players. Business Lawyers does not stand by itself but has to develop and maintain contacts with the various business stackhloders. You have to be active and not pasive. You have to meet people and check what they need and require. Do not loose the momentum but create and make the momentum.

You will be amazed on the outcome of your making contacts and relations with the networks that you are linking and matching.  The results needs some time but you have to be consistent in developing the added value of your self in the business community.  Keep on maintaining and increasing your potential ability to establish and mainain such business relation so that a deal for the business transactions can be achieved and result a positive path.

Seeking Investors and Funds

You may notice that in the real business world, business players frequently are seeking funds or investors to expand their production capacity or pursuing new projects. In seeking there funds we as Business Lawyers might have an active role to assist our Clients in seeking such funds or investors. The mechanism of seeking such funds is that you must have networks who can advise you who to contact such Investors or Funds. 

The Funding or investors might be from your local area Country but they may also be from outside of your Country. The first thing that you must do is just ask one of your Business Investors Network who you can trust and ask whether they have some relevant contacts or experiencing in seeking such Funds or Investors. Your network may be some Capital Investment Consultants who have a wide range of networks in several countries.   There may be the Big players but there also may be middle class or boutique players. 

Your  Business Consultant Management Group may request you to contact your Clients who are seeking such Investors or Funds. When a specific date for a meeting had been set up you  may  coordinate  both of them to meet in  a certain place such as for instance in a coffee shop in a Hotel or in the office of your Business Management Consultant. In such first meeting  you will introduce each other and discussions will be held. In such meetings if both  parties had been acquainted with  each other  and communication has taken place,   the Business Consultant may request the Business Player to deliver what they want and might raise some questions which  usually relates to the capacity of the current production and the equipments and supporting infrastructure which they plan to develop to achieve their desire toincrease their production level capacity

 The Business Management Consult or the Investment Capital Company might also request the Business Player to provide them with the written Info Memo or Business Plan which requires such funding  or Investors. There may also be questions on what kind of cooperation or business relation is going to be established  and worked out relating to the need of such new Funds or Investors. These maybe Equity Share, cooperation, or split of the Profit and risk.

So it is quite interesting and exiting to make such contacts for which you as a Business Lawyer not only functioned as Business Lawyer giving Legal Advise,  but you may also seek, contact fund raiser  or Investors to your Clients,  for which you may also have the chance to get some fee payments for your services and also a certain Success Fee if such Business Contacts succeed in making a Business Deal.  

As the Business Players they may be able to seek the investors or funds by themselves, but if there is a media between them who can arrange and assist them professional in handling such business opportunities, it will for sure be benefit to safe their financial problems and difficulties, where  there might be someone out there, who can solve their business problems in a professional manner. These also depends upon your networks as to whether they are pro-active in striving to get their business deal succeed.

Well folks the above are some brief glance relating to seeking Investors and Funds to support your Client's Business Activities;

Cheers
Agung Supomo Suleiman 
     

New Decree Cost Recovery Scheme Oil and Gas

From reading some sources it appears that Indonesia will issue a government decree which will clarify what oil and gas contractors can claim under a scheme to reimburse their operational costs, including exploration spending. 

Cost Recovery Scheme.

As we are aware under the Indonesian system for the oil and gas operations it  adopts Cost Recovery mechanism for all the costs for exploration and production costs, incurred  by the Oil and Gas Contractors where it consists operation costs for the expenditure of current year and the capital costs which will recover based on the life time use of such capital item depending on the Group under the Accounting Clauses as Appendix in the PSC ( Production Sharing Contracts.    

Intervened by the DPR ( Parliament)to Limit The Cost Recovery Items

The House of the People's Representative has intervened for having limits on such  Cost Recovery. As we may noticed some of the Technical Assistance Agreement (TAC) in the Oil and Gas  previously  has a  certain cap for the Cost Recovery for the running Year. To guarantee the Government's cash in for its State Budget the  FTP or First Tranche Petroleum was adopted where the value is  equal to  20% of the Total Oil and Gas  production of the current Year  has to be  firstly deducted before Cost Recovery  is done to reimburse such costs  during the current running  Year.  So the Reimbursement is taken out from the remaining 80% of such Current Year Oil and Gas production.

We understand from reading the news that the Finance Minister Sri Mulyani  said  in a parliamentary hearing that such Decree will contain special rules for oil and gas, especially on cost recovery to calculate (production) sharing and tax. 

The Minister said that in this decree, the costs will be based on normal principles of business and tax rules.

Furthermore she said  that the government had previously issued sort of a "negative list of items and services that oil and gas contractors working in Indonesia could not be reimbursed for.

The list includes the cost of employees, expatriate costs, as well as costs for legal and tax consultants, and community development expenditure.

However according to the sources the Minister said that the decree is not aimed to intimidate those claiming costs. If the costs are related to exploration, exploitation and development, it can be claimed from the government.

It is noted that Indonesia expects the spending by  the Oil and Gas Contractors for  exploration in the  Indonesian Oil and Gas Fields Area will fall to $2.3 billion this year, which is down  to about 15  %  from the Estimated $2.7 billion in the Year  2009.

The Crude production, which was about 1.5 million barrels per day (bpd) in the 1990s, has nearly halved for which Indonesia has in the current years become a net importer of crude oil. We are aware that the Major Global Oil and Gas Players such as ConocoPhillips, Chevron (CVX.N), (COP.N) and Total (TOTF.PA) are operating  in Indonesia,  however the country  appears to be struggling  to attract fresh investment to develop new fields.

Indonesia is Producing  949,100 Bpd of crude oil and condensate in the Year 2009, which is missing a target of 960,000 Bpd in  such Year.

A certain sources said that the target of producing 965,000 Bpd  of crude and condensate this year would be very difficult to be accomplished  since  the Output from  the Older wells was falling  to about 10-15 percent per year. In order to encourage the Exploration we understand that The Government  has offered New  Exploration  Rights and  will provide new incentives to oil and gas investors, including more favorable tax treatment and a better production split.

However there are others saying that the incentives may not be sufficient for the Oil and Gas Investors  since many of the unexplored fields are in the Remote Locations and often in deep water, and so expensive to develop.

We can observe in practice that incentives issues are always brought up when a certain Oil and Gas Investors are having a negotiation with the Government Team in the process of getting a deal in a new contract in the Oil and Gas such as PSC, TAC or JOB. The Oil and Gas are taking all the Risks for the sinking funds if oil and gas is not commercially discovered. However, as we also note that pursuant to the spirit of  the  principles under the Indonesian Basic Constitutional  Law Article 33 (3)  the Resources which are owned by the public has to be managed for the social best welfare to increase the quality life of the people of Indonesia as a whole. Thus the concept of treating oil and gas Resources in Indonesia has a different approach with countries adopting the Concession Right where any person / party  can own the oil and gas which is discovered under the land such party/person owns.     

Accordingly, besides the Commercial side and consideration that had to be considered by the Oil and Gas players in Indonesia, we have to remember that  the Government of Indonesia as well as the House of Representatives  has to balance  the commercial side and the public function aspects.   

Review Contracts

As a Business Lawyer you are frequently requested to review and draft business contracts which are needed to cover the terms and conditions of your Business Clients who are dealing and enggaging contractual relation with their co partner in pursuing their Business. We have to be experienced in handling this kind of business transactions. You have to identify and explore their business venture and the legal exposures which are attached to their business relation. As a Business Lawyer besides practicing your skills in drafting such Business Contracts you may also purchase books which gives you some knowledge on Drafting Contracts.

 In drafting contracts you have to dig all the relevant data that Your Clients desires to pursue their business goals. You have to identify what your Clients wants out of the business. We have to check the rights and obligations of each party. Who will be responsible to do what, who is responsible on seeking the funds or investors to fund the investment. Is the Business deal in the form of cooperation between such Business players. Are there going to be a joint venture or setting up a new company. Is there going to be partnership, acquisition or merger between the companies.

Where are the business operations going to be performed. Is it in the manufacture of products. What are the products ? is it Customer Goods  ?  Is there a Principal and Agent or Distribution arrangements ? There are many several data and business information which you as a Business Lawyer have to dig out from your Client. You have to conduct legal research upon the corporate documents of your Clients Business Counter part.

The business licenses and permits they have. Are they engaged with other business investors in the field of business that your Clients desires to cooperate with such Co Prospective Investors.  Does such company received  loans with bankers which still outstanding ? Is their any collateral which are attached to their assets which shall be used in such Cooperation or Co Ventures ? Those are among others the relevant elements that have to be checked  by the Business Lawyer who are assisting their Clients in  drafting contracts to pursue a cooperation or joint venture arrangements with a prospective Investors / partner.             

Legal Marketing Strategy

As a Business Lawyer you have to seek a Legal Marketing Strategy. You have to be honest to your Customers and Client.  You have to put trust to your Client. Even you start your Law Firm from scratch since more than  11  3/4 Years ago, you have the real experienced in establishing your Track Records in handling and giving Business Legal Services to your Clients. As a Partner of your Firm you have gained the Professional Skills as Business Lawyer and you also have experienced in performing, operating your own Law Firm now called Suleiman Agung & Co (SACO Law Firm) where there is no school education but you have to experienced by yourself.

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• You have to be consistent in always learning and experiencing the legal aspects that must be highlighted to your Clients. Your Clients interests is to get their  Business Ventures succeed. You as a Business Lawyer are responsible to high light the Legal exposures and aspects that might occur where your Business Clients desires to pursue their Business. You have to advise your Clients upon the relevant Laws and Rules that are surrounding and may have to be high lighted to your Clients. 

You have to advise your Clients on the rules and laws that have to be abide by your Clients starting from the Permits, licenses required to operate their business.The rules relating to Foreign Investors including the manpower for the Expatriates. The Policies from the Relevant Government and Authorities. Since Indonesia consists of many Islands which are scattered you have to advise your Clients on the Policies and Rules between the Central Government and the Provincial/ Regional Governments. 

• The distributions of Authorities in granting the Business Licenses, Business Operating Permits  and distributions of revenues, levies, charges imposed against the Business Operations  between the Central Government and the  Provincial/ Regional Governments.  

The Land / Building title and Rules on Land and Building rights title to use governed by the Land Regulations. The Relevant Technical Departments involved in the operations of the Business and Investments of such Company. The Community Development Program as well as the Environmentl aspects that have to be taken into considerations.        

NATIONALIZATION 

The risk factor that  have to be looked out is the possibility of Nationalization by the Government. Although the Foreign Investment Law ( FIL) explicit stated that the Government will not nationalize or expropriate the investment or the right to manage the investment company, in exceptional circumstances we have to observe whether there is a ruling which regulates that it could be done according to the Law in the interest of the State   ( as was regulated in Article 21 Foreign Investment Law No.1 Year 1967).

Washington Convention 

As we are aware Indonesia is a member of the International Washington Convention which is the Convention on the International Centre for the Settlement of Investment Disputes ( "ICSD"), the International Centre fo Settlement of Investments Dispures between Staes and nationals of other States sponsored by the World Bank based on Law No.5 Year 1968. In case a dispute will arise between the foreign investor and the Indonesian Government, such dispute will be referred to ICSD, arbitration in Washington. One of the concrete example  of such investment dispute had caused a premature withdrawal of the investment licence in the case of Amco vs Indonesia filed in 1981 and is ultimatel finalized after 12 Years of arbitration proceedings.

Good Signs of Outlet Retail Store Sport Shoes Business in Indonesia

If you are starting from scrap bottom Rock, even though you have established and operate your Firm for more than 11 and a quarter Years of life time since June 1998, it is not easy to maintain continuous Clients with the right selling prices that could maintain your cash flow. You have to be tough and have strongly motivated spirit to survive in operating your Firm now called Law Firm Suleiman Agung & Co .  

Your Firm actually has a long term Track Records and have lots of experience in conducting various legal services and works in the Business Community. However  it is not that easy to perform growth to your Firm. Your cash Flows are actually from Clients  who are using your legal services. But  some of our Clients which are using us, they are  experiencing cash flows issues and are struggling hard to survive and really needs and seeks  funds or investors to assist them to continue  or expand their  business.

Accordingly some of the Businessmen experienced cash flow problems, which resulted delaying the  payments of  our  legal services fee, for which these in reality disturb our cash flows during the running operating years. 

It had been more than 11 Years that Indonesia had survive from the Economic Crisis since June 1998. I thought that after restructuring loans faced by the Indonesian Investors it will be much better, since their debts and loans had been rescheduled. However,  perhaps due to the Politics situation in Indonesia particularly relating to the Bank Century issues,which involve politicians in the Indonesian Parliament, who are  controlling the Policy of the Government in Bailing out Bank Century,  these conditions has affect the healing situation  of  the Indonesian Businessmen who suffered  turbulence caused by the Economic Crisis.  These situation occurred after Indonesia had experienced completing its Presidential Election and Parliament election. 

Positive Signs

However,  there are also signs  that several of  our Business Networks who are conducting  Outlet Retail Sport Shoes Consumer Goods in Indonesia are on their good business stage and phase, which could be indicated by their employees purchasing power and expansion of their Outlet Retail Sport Shoes Business in Indonesia. One of our Networks is engaged in the the Outlet Retail Consumer  of Sport shoes in Indonesia with their website address at  where it appears that they are in a good expansion condition. So in the Retail Consumer Goods in Indonesia it shows good expansion business progress. 

We really can learn from their good high spirits as Indonesian Entrepreneurs.  If you are really interested in purchasing such Sport Shoes you can  visit their above websites or you may contact us  for which  we  can contact you with the proper right persons  at PT Star who are operating and selling such sport shoes through their inter connection Retail Store  Outlets  Sport Shoes within several cities throughout Indonesia.  

Agung Supomo Suleiman 
Mobile Phone 0816830647
 

Brief Legal Notes on Preparing Drilling Contracts

When you enter and try to draft Drilling Contract,  you must be aware that the relation between the owner of the Drilling Unit, or Contractor and the Company  who requires such Drilling Operation  is governed by The Drilling Contract.  It is really  interesting as a Business Lawyer to be requested by  the end-user  to draft such Drilling Contract Agreement.

Within the petroleum industry, the drilling of wells is significantly important, since without a well - a simple yet complex ) hole in the ground -there is no way to get the oil and gas.  Basically the people directly involved in drilling are employed by operating companies, drilling contractors and various services and supply companies. The Operating Companies are the financiers of the industry and the principal users of the services provided by Drilling Contractors and Services Companies.

An operating company often called an Operator, is a person or company who actually has the right to drill and produce the petroleum that may exist at particular Site.  In Indonesia this Operator has to enter into a certain contract called  i.e.  Production Sharing Contracts (PSC) with  BP Migas pursuant to the terms and conditions under the PSC.  This Operator based on the PSC  who shall be the Oil and  Gas Company shall than enter into a Drilling Contract with a Drilling Company. The Oil/Gas Company itself under the PSC  has the right to explore, exploit, produces such Oil and gas in a certain Block Area as described under the PSC.   
 
At one time when I was experienced working as In House Legal Counsel for 5 Years in one of the Oil and Gas Companies in Indonesia called Huffco Indonesia (Vico), where such Oil and Gas Company were engaging 8 Drilling Rigs  to conduct the Drilling activities in the Contract Area of its PSC.

We must understand that in this kind of Drilling operations, there are high risks involved since the well which are being drilled are really deep wells  containing High Pressure  for instance 1,000 feet.  The oil, gas with such high pressure will flow and push  the casing and tries to found out a way to seek  places with lesser pressure to relieve its high pressure from  the hole below the Rotary Table. On land rigs Blow Out Preventers  (BOPs) are attached to the top of the well beneath the rig floor for preventions. The preventions are nothing more than large, high pressure valves  capable of being remotely controlled. When closed, they form a pressure tight seal at the top of the well and prevent the escape of the fluids. Without such BOP, if blow out occurs, gas, oil; and salt water spew on the air with a tremendous roar.

If there are gas, the whole thing will probably be on fire, and the Rig will lie as melted, twisted mess of junk.Human lives are threatened, pollution may occur,  precious Oil and Gas are wasted, and a Rig worth of  thousands or even million dollars maybe at a total Loss. Thus, obviously, it is desirable not to allow a blow out occur, and in fact not many occur. However, since a blow is spectacular, blow events becomes a media event. In reality according to the oil and gas expertise, Rig Crews will do their best and up most with great efforts that the well they are drilling remains under control. A hole with full of mud that weights the right amount or has the proper density, will not blow out.But sometimes the unexpected occurs.          

Having taking into the above consideration, as Business Lawyer / In-House Legal Counsel we have to ensure that a proper Drilling Contract is drafted and prepared to cover any and all such above risks, which may involved the loss of personal, equipments and event the Wells, for which we have to make sure that the rules concerning the liabilities, indemnities and risks relating to such  losses and damages which imposed legal exposures have to be covered and taken care under the Drilling Contracts. 

In the preamble of the Drilling Contract it shows how the contracting parties may describe the nature of the Drilling Task to be conducted by the Drilling Contractor. 

The Oil / Gas Company desires to have wells drilled in the Contract Area of the Company in Certain part of  Kalimantan as described under the Oil and Company Production Sharing Contract with the Government formerly Pertamina and now BP Migas. We as the Business Lawyer must emphasized in such Drilling Contract  that the Drilling Contractor has the expertise and experiences in the business of drilling, testing, completing. work over, and deepening wells. Such Drilling Contractor represents that it has adequate resources and equipment in good working order and has fully trained personnel capable of efficiently operating such Drilling Rig.

We have to make sure that the Drilling Contractor is ready, willing and able to drill said wells and carry out the said auxiliary operations and services for the interest and satisfactory of the Company. We also  have to stressed out that the Drilling Contractor agrees and is obligated to furnish the Drilling Unit with the Drilling and other equipment and personnel as described in detailed in the Appendix attached to such Drilling Contract.

 

The Contractor shall without prejudice comply with all instructions made by the Company consistent with the provisions under the Drilling Contract, which may from time to time be given by the Company. However, in performing the Drilling Work such Contractor shall be an independent Contractor with the authority to control and direct the performance of the detailed work, subject to Company's right to give instructions and of inspections and supervision by the Company's representatives at the Site Location where the Drilling operations is conducted and shall not relieve Contractor from Contractor's obligation and responsibilities. 

We have to be aware that many service companies such as Cementing Services, Mud, Well Testing, are also at the Location of the Rig Site, for which,  we have to make sure that the liabilities, indemnification,  and insurance clauses covering their respective properties and personal are properly covered with respect to loss and damages that might occur during the Drilling Operations. If there are tools stuck deep in the hole, usually the Insurance Company does not want to cover such down hole equipment loss. If there are losses to the structure of the well causing damages to the well or oil and gas reservoir, the Drilling Company, may request  that the Company absorb such well reservoir loss.           

Well, those are some brief provisions which the In-House Legal Counsel of an Oil and Gas Company must take into consideration in preparing and drafting a Drilling Contract to support the Drilling Operations conducted in the oil and gas operations in Indonesia. 

Probability Foreigners Allowed to own Property in Indonesia

New Hopes within the Entrepreneur relating to the probability of Foreigners to own property in Indonesia. This news emerged as good hopes for the Property Business players in Indonesia. During the Year of 2008 - 2009 according to Rhenald Kasli in Kompas Newspaper of  8 February 2010 there are property owners who are still hit by Crisis. However, if it is open according to the Minister of Peoples Housing there will be Foreign Investment coming in to Indonesia in the amount of USD 3 billion - 6 Billion per Year. 

The question which arises is as to whether is it true that Property are attractive for Foreigners and whether this plan is attractive to the business players in Indonesia says Rhenaldi Kasali in his Economic Analysis in Kompas News Paper of 8 February 2010. According to him, The Foreign Buyers of property in Indonesia in fact is not a new issue. In Karawang and Bekasi, West of Jawa there are plenty of Indian and Korean who are staying in said area. They said that they are the owner of such property. However,  from the answer  upon question to the developer,  it shows that such foreigners  which had already stayed for 10 Years is purchasing such property on behalf of the Company according to Rhenald Kasali.

In  Bali there are also many of Properties being build by Italian, French, Australian and Brasil. However, according to Rhenaldi the lands and buildings are on the name of certain person. These are also found in Batam and Bintan, where the owners are from Singapore and HongKong     In the island of Mentawai where the waves are good for surfing,  according to Rhenaldi,  many tourists are staying in the Boats. This is not because it is more comfort but since it is not easy to build or own property whch is suitable for  foreign tourists  who are regularly traveling there. 

If the above are ignored, the state for sure will loose the opportunity to get tax income since there are so much opportunities which are thrown away and loose from attention.

Regulations 

That Foreigners are not prohibited to own  property is actually known. However, according to Rhenaldi, we are used to make rulings which are blocking rather then opening. In the old rulings it is said that

Foreigners who  are allowed to buy property are those " who is domiciled in Indonesia". The words " domiciled in Indonesia" if we further check is more saying "No" then "Yes". Why is in not just shortened to become " Person who are allowed to purchase property. Point ?.

Furthermore according to Rhenaldi, the Right to use is limited only for 25 Years. For buyers which viewed the property as instrument for Investment, this ruling for sure is less attractive if compared with the rulings  applied in other countries within the similar Area. 

In Malaysia and Singapore, they can be provided with 99 Years, there are even being granted the rights for 900 Years. 

Furthermore countries which are desiring for the incmoing of foreign investment, the Property Policy are in line with other Policies, such as imigration, Buisiness Licenses/Permits, citizen status etc. In Indonesia such vision is not yet in line.

" Debottlenecking Mindset"

Rhenaldi says that there are lots of reasons why foreigners are attracted to purchase property in a country. Besides the need of having a place to stay, is for the schooling of their children, health care or medicare, working placement, or trading and also for investing.

There are lots of foreign traders who frequently entry and exit carrying products made in Indonesia to abroad electing to have a house in Indonesia by doing illegal manner rather then staying in the Hotel.

However, on the other side, the property in Indonesia is in fact attractive for Investors in the Asean Region. The pricing of property in Indonesia    in the main roads with the average quality is still ranging 20% of the similar property in Singapore.

Rhenaldi syas that as a comparison the pricing of 5 star Property in Singapore had reached Rp.150 million per square meter. In Indonesia with the same Class maximum  price is only Rp 30 million per square meter. Besides that the increasing price of property is interesting. Thus the potential is there according to Rhenaldi above writing.

For Japanese who had retired, felt that  the expensive living cost in their Country had driven such retired  person to seek for a staying place location in other country. Indonesia is included as the country who they are interested., however they frequently failed to get, resulting they choose Philipine and Thailand.  

The existing experienced shows that there are still " plenty of Bottle necking Mindset" which has to be solved to guide the new Governments Regulation, to enable the incoming of new investments within the property sector says Rhenaldi.

These Bottle necking Mindset is founded in several sectors in the Government, Parliament (DPR and DPRD/The House People Representative), The Chamber of Commerce and Industry ( Kadin), the entrepreneurs, and public.

• Firstly,  the new rules and regulations must be attractive enough by the Investors. The Use Right does not need to added other words which gives the perception that it is just making up something which in unnecessary, for instance it is said " can be extended 2 times each 20 Years after certain Years.

• Secondly, Bottlkenecking mindset in the elevant department, such as immigration, manpower, financing and banking

• Thirdly,  Bottlkenecking mindsetblock. This bottlenecking block according  to Rhenaldi are fears or  exesive nationalism, which resulted more of Restriction rather than Boosting -Pushing such as that ideas of limiting foreigners not to allow purchasing property above Rp1.5 milliard, and may only purchase new houses.  

• The latest mindset is that the worrisome that the need of people to own houses is still high which is 800,000 Unit.  However from the data form Panagian Simanungkalit and Associates shows that new houses which are being built had  reached  only 257.365 Unit in the Year 2010.

• Rhenaldi syas that we have to understand that the property market in not only determined by " the Need" or the desire to purchase, but also the preparation to buy and the power to purchase.

• Rhenaldi says that rather than raising about matters which has already  a market mechanisme, why are we not limiting on startegic matters such as prohibition to purchase property in the strtaegic area, border or area which can damage the natural resources. 

The above are my reading on Rhenaldi Economic Analysis relating to Probability Foreigners Allowed to own Property in Indonesia, as found in the Kompas Newspaper of 8 February 2010.


             

Running A Business Law Firm

Well, I have been running this shop of mine which is a Business Law Office for more than 11 1/ 2 Years since 1st June, 1998. The Law Firm specialty depends on the Partner who is running such Firm. Since I was formerly working as In - House Legal Counsel 5 Years in the Oil and Gas Company (formerly owned by Roy M.Huffington) called Vico Indonesia (Huffco Indonesia) who produces LNG as the end product after being refined in Bontang,  and 5 Years as In House Legal Counsel in a Cooper Mining Company (one of the biggest copper mining company in the world) called PT Freeport Indonesia who is operating in Irian or now called Papua, my links and network of friends are within the oil and gas as well as Mining Companies in Indonesia. 

I was also working for 5 Years as Legal Consultant and Advocate at the Law Office of Adnan Buyung Nasution and 2 Years as Partner at the Law Office of Delma Juzar  & Wiriadinata (Wiriadinata & Widyawan), where  I   experienced providing legal services relating to  corporate business, financing transactions, restructuring loan, insurances,  construction contracts, capital market, shipping, labour matters.

The significant experiences which I felt was  that I had experienced for more than 11 1/2 Years running my own Law Firm which is now called Suleiman Agung & Co.   since 1 st June 1998,  when Indonesia was hit by the Asian Economic Crisis. 

I managed to survive in running this Law Firm for more than 11 1/2 Years. Like selling other services, in the Legal Services field, the Services that you are offering to sell to your Customers or Clients are among others your legal expertise in  giving legal advices on the legal aspects of your Clients business. These includes giving legal advises on the rules and regulations that have to be taken into considerations by your Clients in conducting their business activities in Indonesia.

For instance if your Client happens to be a foreign investors who is interested in conducting Coal Trade Activities from Indonesia to be exported to outside the country for instance China, since their Industries are growing fast where for running their industry they  might need Coal for fueling their Power Plant to engine their Industry or manufacture to produce their products, than for sure they are in the high need of Coal. Our Customers or Clients are also questioning whether a foreign company is allowed to establish a Mining Company in Indonesia who desires to conduct the Coal Mining activities in Indonesia.  

Some of the Customers were asking whether a foreign Investor or  foreign Company maybe involved in the Trading of this Coal in Indonesia or  establishing a Coal Mining Company in Indonesia, several questions  may pop up such as : What are the rulings and what are the requirements that must be fulfilled. In order to answer their questions, we as Business Lawyer, have to check on the Rulings of Trading of Coal in the Department of Trade and The Directorate of Coal. We also need to seek on the New  Mineral  & Coal Law No. 4 Year 2009 concerning Coal Trading and Coal Mining activities. 

We have to check the Size of the Coal Mining Area, the  Location of the Coal  where they want to trade or mine and the Relevant Competent  Authority either Central Level and The Local Regional  level who is authorized to Issue/Grant the Izin Usaha Pertambangan ) Coal Mining Authority/ Business Mining License.  

As implementation of the Autonomy Law - there is a segregation - Delegation of Authority between the Central Government and the Local Regional Government, where the Ruling may be incorporated in the New Mineral and Coal law No. 4 Year 2009 as well as in the implementation ruling either made by the Central or Local Government.

We may  need to check whether the Location of the Coal is within 1  Regency, Province or  crossing more than 1 Regency or Province.  We may also need to check the size of  such Coal Mining or Coal Stock Pile. Since foreign investors are involved we also have to check the rulings on Foreign Investors who wants to invest in Indonesia in the Coal Mining Sector.  

For checking such purpose we have to Check -  the Rules and Law No.4 Year 2009 including checking with The Directorate of Coal and Department of Mine and Energy.  We also need to check with the Local Government Ruling ( Perda) as well as the Rulings from Local Government ( Bupati/Governor) where the Location of the Coal Mining is located. In order to avoid any overlapping  with other activities such as Forestry Conservation or any other activities we have to check with the Bupati and Local Government /Local Forestry Department. 

If our Client wants to take over or acquire any existing KP we have to check the existing documents possessed or held by the KP holder to know the legality, the size, the Duration period and who had issued such KP. We also need to check the rulings relating to converting KP into IUP either it is already expired  or still on. We  may also need to conduct research upon  the time period for processing the new IUP for  the size of the  coal concesion and whether it is more proper in acquiring  an existing KP or  applying for a new IUP

We may also notice from several information that there are many uncertain brokers of Coal Trader and Coal Mining Concession, where we really have to check whether the sources of the Coal Product or Coal Mining Stock or Coal Mining Permit are genuine and backed-up by real legal documentation. for which we as Business Lawyer can conduct the necessary checking on the Legal Documents and licenses, as well as the rulings and policies. 

Since Foreign Investors are involved, if the requirements under the New Mining law requires that a Limited Liability is required to be the legal entity to conduct the Mining Coal Business than a Joint Venture agreement might be drafted where we as Business Lawyer have to draft such Joint Venture Agreements. Initially before a Joint Venture is negotiated, in the initial stage  we may be requested to draft a Memorandum of Understanding  (MOU) or Letter of Intent to jot down the desires and intention of our Client and the Local Partner.

One interesting experience tasks which I was involved in assisting legal services related to Coal Business activities, is that our law firm was involved representing a Coal Trader who are also injections some funds to a certain  Mining Company for constructing its Coal Plant Facilities  where the repayment of the loans/funds is through the delivery of the Coal products by the Seller /Debtor to the Buyer or Financier.       

Well those are among others the functions of the Business Lawyer in assisting Clients to conduct business in Indonesia

   

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  

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.           

     

     

               

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
b.Cooperative
c.Individual

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.

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.

Coal Mining Activities in Kalimantan

As we all are aware The Minerals and Coal Mining Law No. 4 Year 2009 was passed by the DPR ( House of Representatives)  on 16 December 2008 and was signed by the President on 12 January 2009.  After 30 Years enjoying COW (Contract Of Work), and Work Agreement For Coal Mining Enterprises  (CCOWs) Indonesia enters into a new era where new licensing regime is introduced replacing the rulings of  COW  to conduct Mining Business Operations in Indonesia.  There are significant changes and several new provisions being introduced. Up to this moment we are still waiting for the Implementation Rulings of this New Law which usually  are done by rulings made by the Government  through the issuances of PP (Government Regulations) as frequently  being mentioned in such  Minerla and Coal Laws. Besides the Government Regulation that may also be several  Decrees issued by the Respective Governmental  Officers such as Presidential Decrees, Ministerial of Mines and Energy Decree, Decree from the Directorate of General Mining as well as  Decree from the Directorate of Coal.  In the Regional Local Level, The Governor or the Bupati  and the DPRD ( Regional House Of People  Representative) in coordination with the Governor shall issue Regional Government Rules.  As we watch the news relating  to Coal Mining Activities in Kalimantan  made by Kompas  during these last days,  we  understand that several rulings relating to Coal Mining Permits had been made  by the Department of Forestry, as well as the Bupati,  where The Department of Forestry  had issued the permit to lend and use the part of land of located within the the Forestry Protection or Forestry Conversation Area. It is indicated that the Bupati and the Walikota had issued several Kuasa Pertambangan Batubara ( CoaL Mining Authrotity Permit), which according to the Governor of East Kalimantan there are around 1.180 Coal Mining Permits issued by the Local Regional Government (Pemerintahan Kabupaten/Kota) and 32 Coal Mining Authority Permits issued by the Central Government.  On the other hand,  Kompas Newspaper dated 27th January, 2010,  said that the Bupati  of Kutai Timur (East Kutai) had revoked 12 KP from 38 KP which was issued by the previous Bupati. The reason in revoking this 12 KP is because 7 KP was issued within the Kutai National Park Conservation which is in violation of the rules. The other  5 KP is revoked since no progress of following up the permit from General Survey to Exploration is performed. Several other KP are being evaluated with the reasoning that no reclamation was made, no seriousness in continuing the Coal mining is conducted and overlaping with other activities.  Since Otonom Region was introduced in 2001 up to the New Law No. 4 Year 2009, Kompas, says  that  there are thousands of Mining Aurthority being issued by the Regional Government, many of which are not in accordance with the allotment of the land. One of the Sources said that the Reclamation of the ex Coal Mining Area Holes should actually not be treated as Burden, but rather as Investment by the Coal Mining Investors. Brief Awareness of the NEW Mineral  and COAL LAW No. 4 Year 2009.  Before we continue in observing the Kompas newspaper Highlights of this indicated  Un - Controlled Coal Mining Activities in Kalimantan,  it is wise,  to educate our selves with  Brief Key Issues on the New Mineral and Coal Law No 4 Year 2009 to enlighten ourselves upon the New Minerals and Coal Law  in Indonesia. This New Mining Law  does not differentiate between mining licenses for domestic and foreign investors. All investors must have either :  a Mining Business Permit (Izin Usaha Pertambangan-“IUP”), a People’s Mining Permit (Izin Pertambangan Rakyat-“IPR”) or   a Special Mining Business Permit (Izin Usaha Pertambangan Khusus-“IUPK”)  to engage in mining activities.  INDONESIA: Take-over leads to $1,200,000,000 coal mining contracts, PT THIESS CONTRACTORS INDONESIA [Indonesia/Australia] - Order #: 119103.: An article ... & Plant Operations in the Developing World An IPR will only be given to : an individual (for a maximum of 1 Ha),  a group of people (for a maximum of 5 Ha) and  a cooperative (for a maximum of 10 Ha).  An IUP and IUPK is granted to Private Companies with certain size limitation.   The IUP/IUPK is divided into an Exploration and a Production Operations IUP or IUPK.  The Exploration IUP/IUPK covers General Surveys, Exploration and Feasibility Studies, and the Production Operations  IUP/IUPK covers construction, mining, processing and refining activities as well as transportation and sales.  Each type of IUP/IUPK has its own term and area limitation.    Significant Key Features of the Law No 4 Year 2009 :  Duration :  Exploration IUP:    Metal: up to 8 years for a concession area between 5,000 Ha and 100,000 Ha;  Non-metal: up to 3 years for a concession area between 500 Ha and 25,000 Ha;  Specific non-metal: up to 7 years;  Rocks: up to 3 years for a concession area between 5 Ha and 5,000 Ha; and  Coal: up to 7 years for a concession area of between 5,000 Ha and 50,000 Ha.  Production Operations IUP:  Metal: up to 20 years for a concession area of up to 25,000 Ha, extendable for 10 years a maximum of twice; Non-metal: up to 10 years for a concession area of up to 5,000 Ha, extendible for 5 years a maximum of twice; Specific non-metal: up to 20 years extendible for 10 years a maximum of twice;  Rocks: up to 5 years for a concession area of up to 1,000 Ha, extendible for 5 years a maximum of twice; and Coal: up to 20 years for a concession area of up to 15,000 Ha, extendable for 10 years a maximum of twice.  An IUPK is granted for a National Mining Reserve Area.  Durations and concession areas of IUPK:  Exploration IUPK:  Metal: up to 8 years for a concession area of up to 100,000 Ha; and  Coal: up to 7 years for a concession area of up to 50,000 Ha. Production Operations IUPK:  Metal: up to 20 years for a concession area of up to 25,000 Ha, extendible for 10 years a maximum of twice; and Coal: up to 20 years for a concession area of up to 15,000 Ha, extendable for 10 years a maximum of twice.  The relevant Regional Government issues a WIUP (Wilayah Izin Usaha Pertambangan/Mining License Business Area) to a business entity, a cooperative or an individual.   A Metal minerals or Coal WIUP can be issued through public tender, while a Non-metal minerals and Rocks WIUP can be issued through an application for a reserve area.  State Reserve Areas (Wilayah Pencadangan Negara-“WPN”) are to be determined by Central Government with prior approval from the DPR ( House of Representatives). These areas may be exploited under an IUPK which may be issued to an Indonesian Legal Entity including a State Owned Enterprise, Regional Owned Enterprise or private sector entity.  State/Regional Owned Enterprises are given priority in obtaining IUPK and if not taken,  the Private Sector can obtain it through public tender.  TRANSFER OF IUP/IUPK - Ownership -shares of Company Holding IUP / IUPK An IUP/IUPK cannot be transferred. However ownership or shares in a Company holding an IUP/IUPK can be made.  Transfer of ownership or shares in the Indonesian Stock Exchange may only be permited if : the company has found 2(two) prospective areas during the Exploration Period, and   there must be a  prior notification to the Minister, Governor, or Regent/mayor in accordance with their authorities and such transfer is not contrary with the applicable laws and regulations.  The Central Government, after consultation with the House of Representatives, can determine policy on giving priority to minerals and coal for domestic interests, including the authority to determine production levels for each commodity in each year on a Province-by-Province basis. This provision may have an impact on the annual production limit of a company holding a license to export to the international market.   As we are  aware inthe Oil and Gas Sectors in Indonesia, Domestic Market Obligation Private (DMO) is also regulated where 25% of its annual production has to be sold for  Domestic Needs. In the Coal Sectors, it appears that Coal commodities are also needed by the Local Power Plant,  by which  DMO on Coal shall also be implemented.     Government  Regulations will be made for implementing this DMO ruling. Holders of IUP and IUPK must increase the value of their minerals and/or Coal resources through Mining, processing and refining, and the use of the minerals and coal. Accordingly, they must process and refine the minerals and coal domestically. This provision are also found in the existing COW for General Mining of Cooper, thus  this  is a continuation of the policy of the Government which are also found and implemented by other Countries.  A license holder can cooperate with other holders of Production Operations IUPs for the same minerals and coal processing and refining.  The companies can either build their own processing/smelting facilities or use existing processing/smelting facilities in Indonesia owned by other parties. Relating to the Cooper Product of PT Freeport Indonesia, PT Smelter in Surabaya was the realization and implementation of this smelting facilities requirement.  Existing Contracts of Work (CoWs) which are already in the production phase, have a 5 year grace period to comply with this obligation.  Sharing Net  Profits ot of Coal production :  Holders of Production Operations IUPKs for metal minerals and coal must pay a production fee of 10 % of their net profits as of production, with 4 % going to the Central Government and 6 % being shared between the relevant province and regencies. A temporary suspension can be granted to a holder of an IUP/IUPK, in case of force majeure, or conditions which hamper mining activities, cause some or all mining activities to cease or the environment can no longer support the mineral and/or coal production activities. This temporary suspension will not reduce the duration/ term of the IUP.  The duration of a Temporary Suspension may be up to 1(one)  year and is extendable once for 1 (one) year.  Divestment  :  After 5 years of production, all companies must divest any shares owned by foreign parties to the Central/Regional Government, a State/Region owned enterprises or local companies. This provision will be regulated more  further through a Government Regulation. Usage of Local / National Mining Services. Holders of IUPs or IUPKs must use local and/or national mining services companies. If no local companies are found available, foreign companies whom are deemed as Indonesian legal entities may be used. Holders of IUPs and IUPKs may not use subsidiaries or affiliates to provide mining services, unless Minister of Energy and Mineral Resources approval is being obtained.  Corporate Crime . The New Mining Law No. 4 Year 2009 adopts  the concept of corporate crime. Sanctions can  be imposed on Contractors as legal entities. If crime is committed by a legal entity, the legal entity and/or its management will be charged with the crime. If found guilty, they are ordered to pay the regulated fine plus an additional 1/3. Besides the criminal sanctions, the business license and legal entity status  of such Company can be revoked. Any dispute arising from the implementation of an IUP, IPR or IUPK is to be settled through the courts and arbitration domestically under the prevailing laws Transition Period. Existing CoWs and CCoWs remain valid until the expiration of their terms. However, the contract terms and conditions must be adjusted to the provisions of the New Mining Law within 1 (one) year of the enactment of the New Mining Law 12 January 2010 except concerning state revenue. It appears that this New Mining Law does not rule any transitional provision for KPs (Mining Authorizations) issued to Indonesian companies regarding whether KPs already issued will remain valid and whether they must be adjusted to the New Mining Law, as is the case of the existing CoWs and CCoWs as described above. It appears that this may be  further regulated in the implementing regulations. The implementing regulations (Government Regulations, Ministerial Decrees and directives) for the implementation of the provisions of the New Mining Law, are to be made  within 1 year after the enactment of this New Law No. 4 Year 2010.