Wednesday, December 17, 2008

New Mining Mineral Coal Law

  • We can read in the newspaper in Jakarta that after having processed through tough discussion for 3 Years and 7 months the House of Representatives (DPR) has approved the Laws Mineral Mining and Coal Tuesday ( 16 Dec,08).
  • According to the news In Kompas today December 2008 in the front page said that such Law had ended the Era of Contract of Work which had been going for 41 Years.
  • This Law replaced the Law No. 11 Year 1967.
  • Through this new Law the performance of Mining is conducted through permits granted by the Government.
  • The change in the mining sectors through permits are crucial in the changes of the ruling of this mining regulations.
  • Most of the fractions in the House of Representatives (DPR) according to the newspaper say their appreciation because the form of permit makes the position of the State above the mining companies.
  • This position is not found under the Contract of Work scheme.
  • Even the decision in approving this new Law is not unanimous such Draft Law was approved.
  • The existing COW are still being honored to maintain the investment environment.
  • The question which may arise is : are there going to be adjustment made to the terms under the existing COW and the Coal Cooperation Agreement to be in accordance with this new Law ?
  • It is really interesting to hear this news, since "Permit" from the legal aspects will have different understanding and legal consequences with " Contracts" .
  • Our experience relating to Mining minerals activities are more based on a "Contract arrangement" between the Government as the "proxy" from the People of Indonesia through "Mining Authority" as the owner of the mining wealth, who enters into a "Contract of Work" with Mining contractors.
  • In a contract situation, both parties who signed the contract are having the same position, even though the Government at the same time has a "Public" function .
  • The terminology of a "permit" may be interpreted as a one side act from a government institution granting a "permit", where such permit is valid for a certain period of time.
  • The Legal Question which may arise is : "Can this permit be revoked by the Government Institution " as the granter of such permit, during the duration of the permit ? We hope this is not the case.
  • For us who are used to experienced contracts and has to switch their minds to "permit' in the mining sector, has to really read the Contents of this New Law.
  • This is significant to ensure that such "Permit" IUP gives assurance to the Mining Investors who spend monies and takes full risks, that they are given certainty of time to make profits from their mining ventures in Indonesia.
  • We noticed, that Mining Minerals Ventures in Indonesia adopted the concept that Minerals Products can only be owned by the Investors or Buyers of such Mineral Products, after such Product passed the point of Export.
  • Before passing the point of Export, such Minerals Products are still owned by the People of Indonesia who has granted the Mining Authority to the Government to mine and develop such Minerals Wealth for the welfare and prosperous of the People pursuant to Article 33 (3) of the Indonesian Basic Constitution.
  • Accordingly, there will always exist a combined and mixed situation where on One Side, The Government has the Public Mission, however at the other side of the Coin, The Mining Investors who are dealing with Government in handling such Mining Minerals and Coal Ventures, has to focus on making profits out of the monies that they spend and incurred in conducting such Mining Ventures;
  • Certainty for Climate Investment Environment for the Mining Investors are significant at one side, however, on the other side, the Government has a Public Mission, to also make sure that there are sufficient monies, from such Mineral Wealth Resources, to make the People of Indonesia as a whole, who has put their trust to the Government, increase their life welfare and prosperous.
Wednesday December 17, 2008
Agung Supomo SuleimanPartner Law Firm Suleiman Agung & Co
Freedom Business Lawyer
Partner Law Firm Suleiman Agung & Co



1. The Mining consist of radioactive mineral, metal and coal mineral, non metal and stone mineral.

2. There is only one mining business permit (IUP) which is issued by the Government for a certain area ( there is no more contract between company and the Government)

3. The permit is issued through tender process with the same treatment and transparency principal.

4. The Permit system is simplified to become two parts. First Part : Exploration Permit ( which includes GS, exploration and FS.Secondly L Operational which includes construction, mining, development, transportation and sale)

5. Environmental protection aspect (reclamation and post mining)

6. Observing Community Development mainly to increase the public society surrounding the mining

7. KP, KK, PK3B, SIPD, SIPR which are already issued shall still be valid until the expiration of the contract

Friday, December 12, 2008

Global Recessions At the Ending of 2008

  • Well it is near the end of Year 2008
  • It is already the 12Th of December 2008
  • I have just deliver my legal service tasks to my Client.
  • Wauw, interesting isn't, in closing this Year of 2008, I really have to thank GOD for His kindness in giving us the opportunities to still be strong and healthy which enable us to provide our legal works to our Clients, which hopefully will benefit the surroundings and stockholders of our Client.
  • It is really interesting because your Clients appears to be always experimenting new ventures which really inspired us as Business Lawyers how to behave and react in facing the global recession which are occurring in this world.
  • One of the issue which pop up is whether this global recession is caused by "Reasons beyond our control or Acts of God or whether it is caused by human error.
  • We have to draw the line between these two causes.
  • What is also interesting is that this Global Recessions started from the Country where "Free market" control the business.
  • However, Governments Involvements and Bail Outs or Financing Interventions by the Government are being called to assist this 3 Major Auto Companies which according to CNN are facing "real financial problems".
  • So the Big Questions, which arise, is " whether Free Market" still applies ?
  • It also appears that the pride of a Nation is at stake, since the 3 Major Car Companies are requesting to be assisted by the Government to avoid bankruptcy.
  • The whole world are watching closely to the outcome and results of such dilemma situation
  • 3 Generations working in such Car Companies are at stack and are interviewed in CNN.
  • It appears, from the news in CNN today that The Senate has turned down such bail out request.
  • According to CNN, this will effect the shares price on this Friday morning in USA.
  • In Indonesia we have experienced Economy Crisis since Year 1998, 10 Years ago, where Indonesia managed to survive.
  • And now at the end of 2008 Indonesia may be affected by the Global Recessions emerging from USA.
  • This Global Recessions had affected many Regions in this World including our neighbour countries.
  • Unemployment will increase.
  • For me myself, I have started being independent by opening my own Law Firm starting from June 1st in the Year of 1998, when Recessions hits Indonesia which started from Thailand.
  • Thus, I am among many of the Indonesians who experienced in trying really hard to cope and manage ourselves to keep on surviving during this Economic Recessions.
  • We hope that we can all survive and take lessons from our 10 Years of experience since the First Economic Recessions hits Indonesia in 1998 in this coming 2nd Economic Recessions.

Wednesday, December 10, 2008

Practitioner Business Lawyer

  • Yes, I really realize that from the progress of my writing in this Blog it helps me to identify who I am as a profession.
  • I am a practitioner Business Lawyer
  • Why is that so?
  • Because most of my time for this 10 1/2 years I am really practicing myself as a Business Lawyer.
  • By experiencing in assisting the business and entrepreneur in their work, I became more aware that honesty and truth worthiness is the key words of conducting continuous sustainable business ventures.
  • Each party in a contractual transactions has to make their best efforts in getting the best deal they could reached in a certain given time by reaching and closing a deal which will create jobs opportunity for many professions and persons.
  • Each party are given their chances to view from several angles and perspectives before they reached a mutually agreed transactions.
  • Nothing in this world is perfect.
  • Having the same given time by nature, each party are bound to accept the best terms and conditions which they can reach to sign the deal.
  • There are always risks in entering into a contractual arrangements between the parties.
  • But by making the right decisions after viewing all the given possibilities at a certain given time, the management has to succeed in taking and making the right decisions after getting all the necessary inputs from several aspects and angles.
  • It is better to make a decision compared to an attitude of being afraid of making the necessary corporate actions.
  • We as professional business lawyers are really expected to make our best firm legal decisions and legal advices as well as legal steps which are necessary to be taken, in a certain given time, since "time is in the essence" for businessmen in making their business management decisions.
  • To enable such Business Lawyers to make such moves, such Lawyer has to be backed up with knowledge, experience, skills and positive attitudes as well as "mental bravery" to make the necessary legal actions to support the management in pursuing their goals and achievements for the benefits of all the stakeholders.
  • Well, having said the above, let us from this very moment "start" acting and performing ourselves to be a smart business lawyer, which will benefit, the business venture to start its business operations, by giving them the proper and timely legal advices, to maximize their benefits, to their surrounding community as a whole.
Agung Supomo Suleiman Partner Law Firm Suleiman Agung & Co Sunday, December 7, 2008 Business Lawyer Partner Law Firm Suleiman Agung & Co

Wednesday, December 03, 2008

Confident as a Business lawyer

  • Why do you want to be a Business Lawyer ?
  • You have to have a reason why you wanted to be a business lawyer.
  • If you are not confident with yourself, you may forget your dream to be a business lawyer.
  • Why is it so?
  • Well the reason is very simple and straight forward : How can you advise your Business Client if you are not sure about yourself.
  • Your Client is taking risk in choosing you to be their business lawyer.
  • Their business interests from the legal aspects are really very significant part of their overall corporate actions in making their business judgement and business deal.
  • In order for your Client to sleep tight at night, they want to be sure that their business interests particularly when they are having a deal with their business counter part, are well protected to ensure that their business decisions are well accommodated and incorporated in their business transactions with their counter business partner.
  • To ensure that such goal and achievement are fullfilled, such Client needs the assistant from a professional business lawyer who can lead their way and visions from the legal perspective.
  • Accordingly, you as the Business lawyer have to equipped your self with the knowledge and skill including the "self confidence" within your self to give the level comfort to your Client.
Cheers Agung Supomo Suleiman Partner Business Lawyer Partner Law Firm Suleiman Agung & Co

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Saturday, November 29, 2008

Enjoy Drafting Commercial Contracts

  • Drafting Business Commercial agreements
  • Well as a Business Lawyer it is really interesting in drafting and preparing agreements for your Clients.
  • The interesting part of drafting for me as a Business Corporate Lawyer, is because I really love and enjoy experimenting making clauses and provisions which is actually, the art of accommodating our Clients wants to protect their business interests since every pennies of their monies are really worth to be protected in order to maintain the continuity of their business operations.
  • From my experience in assisting our Clients, I understand that they are really rich with new ideas to develop their business.
  • It appears that they never are asleep and are always waiting for new ventures and ideas in setting up and growing their business.
  • It makes us always being inspired by our Business Clients, since they are always seeking for new ventures and opportunities.
  • We as business lawyers have to be smart and must always maintain and enriched ourselves with alternatives ideas and ways to accommodate our Client wants and needs.
  • Why am I really interested in helping our business clients ideas, is because if we can develop in making an agreement which could accommodate their wants in entering into an arrangement with their co investors or counterpart , this will result a ground for our Clients to visualize their business wants and visions, through a proposal written agreement with their co partners or business counter part, which will than be responded by their co partner or co business counter part to incorporate their counter business ideas.
  • These will be followed by several meetings and negotiations between the relevant parties, which will involved the management, technical, commercial, tax, lawyer and other related professions.
  • Accordingly, under a certain cooperation agreement relating to certain business ventures, we usually have to be aware of the commercial aspects, the respective technical aspects, business legal aspects and other relevant aspects.
  • The most important thing that you as a Commercial Lawyer has to do is to really to understand what your Clients wants, wishes and visions.
  • Thus you have to capture and really capture their business visions and goals.
  • Once you have digest their wants and visions, we as Corporate Lawyers will than have to make our best efforts to translate their vision, wishes and wants through the legal agreements that you drafting, in order to assist your Clients wants.
  • if at the end of the day, such negotiated Commercial Agreements are signed on the closing and signing date, this will be the embryo of the new venture which will results new jobs and opportunities and will absorb many workers and professions engaged in such new established ventures and thus with the help of the ALL Mighty, this new venture, may feed many families, kids of such involved people, and makes the lives cycles continue in moving its part;
  • As a Corporate lawyer the above tasks are really very challenging jobs for us.
  • It makes us as Corporate Lawyers really feel alive, maybe it is comparable or the same as painters, who likes to paint, what they captured from their perspective and translate into paintings on their canvas with their paint brush, or photographers or film makers, who can professionally capture this life cycles with their photograph instruments.
Cheers Sunday November 29, 2008 18.20 Agung Supomo Suleiman Partner Business Lawyer Partner Law Firm Suleiman Agung & Co

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Wednesday, November 12, 2008

DMO ON COAL Producers IN Indonesia

  • I read in the News Paper Kompas dated 11 November, that there is going to be a Domestic Market Obligation (DMO), 20-60 million ton per year, shall be stipulated at the latest of December 2008.
  • This amount can be changed in accordance with the real needs movement domestically.
  • It is said that such was the statement from the Director Mineral Program Development Coal, and Geothermal Department of Energy and Mineral Power Resources (Direktur Pembinaan Program Mineral, (ESDM), Sukma Saleh Hasibuan, Monday 10/11) in Cirebon.
  • The production of Coal is 200 million ton per year.
  • The draft of the Ministerial of ESDM relating to this DMO appears to be nearly final.
  • The rulings of this DMO among others includes ruling the minimum DMO coal sales ( PMPBDN) for the entire coal producer in Indonesia.
  • Whereas, the coal mining companies with qualification of coal types which are not matching for the DMO is subject to certain compensation value in the form of fulfilling transfer quota PMPBDN.
  • With Coal DMO, there will be a guarantee of standard price of DMO.
  • Such sources says that according to the Coordinator Committee Securing the State Assets Marwan Batubara the rulings of DMO has to be immediately determined because the coal stock for the State Electricity (PT PLN) is decreasing.
  • According to him the rulings on the DMO must be adjusted with the State financial strenght and the public interest as the user of the PLN services.
  • Meanwhile, the conversion program of coal becoming gas or coal gasification as the mixed fuel source for the Diesel Electricity Power Plant (PLTD) is merely effective to be developed for the territory of Kalimantan and Sumatera.
  • Such Kompas newspaper says that the PLN Expertise Functional Service and Production, Sadar Tobing emphasize that the usage of coal gas for the PLTD territory is geared to the PLTD territory which is near to the mining location, namely West Sumatera (Sumatera Barat), South Sumatera, and Kalimantan. This is to save the transportation cost and storage effectiveness.
  • The Example Project coal gasification in Paliman, Cirebon, is being developed by PLN to gether with the Mineral and Coal Research and Development Centre together with PT Coal Gas Indonesia.
  • Coal Gasification is using the low calorie coal 4.500-5.000 calorie, 6-50 millimeter diameter
  • The usage of the coal gas shall substitute 70% of solar usage.
  • From the PLN test, the usage of coal gasification as solar mixed for PLTD with 130 Kilowatt Power can safe the solar consumption 63%.
Quoted from the Kompas Newspaper of 11 November 2008 by Agung Supomo Suleiman Partner Business Lawyer

Partner Law Firm Suleiman Agung & Co

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Saturday, November 08, 2008

Snapshots on Oil and Gas Rules

  • Based on the considerations of the Law No. 22 Year 2001, the National Development has to be directed to achieve the peoples prosperity by conducting the reformation of all fields of the nation and state based on the Pancasila and the Indonesian Constitution 1945.
  • For Foreigners readers, I would like to inform that Pancasila is the five principles of the Indonesian people and State which is being used as the motto to unite the various ethnics and background culture found in Indonesia.
  • Whereas the Indonesian Constitution 1945, was the Constitution which was established and agreed by the founding fathers of this Nation, during the period when Indonesia was formed after its Independent day.
  • The oil and gas is the strategic nature resources which are non-renewable which is controlled by the State and is the vital commodity which controls the mainstream live of the majority people and has an important role in the national economy so that the management has to maximize in contributing the welfare and prosperity of the people.
  • the oil and gas activities has an important role in giving the real value added to the growth and continuity of of the national economic.
  • The Law No.44 Prp.Year 1960 concerning Oil and Gas, the Laws No. 15 Year 1962 concerning the stipulation of the Government Regulation of Replacing Law No.2 Year 1962 concerning the Obligation of the Oil Companies to fulfil the domestic needs and Law No. 8 Year 1971 concerning the State Oil and Gas Enterprise is no longer in accordance with the development of the oil and gas enterprise
  • Whereas, by still considering the national as well as international development the changes of the laws regulations concerning the oil and gas mining which can establish oil and gas enterprise which is self standing, strong, transparent, having the competitive power, efficient, and having the environmental vision, and boost the potential development and national role.
  • Based on the above considerations and in order to give the legal base for the renewal steps and redress the oil and gas performances the Law No. 22 Year 2001 had been formed.
  • After having implemented since the Year 2001, we understand from our sources there is an amendment being proposed and discussed between the House Representative of the People ( DPR ) and the oil and gas Community.

Agung Supomo Suleiman

Partner Law Firm Suleiman Agung & Co

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Exiting and Thrilling Experiences

  • Well I feel like writing in this Blog of mine.
  • I know its already late at night time shows 1.00 night.
  • Finally I realize that I am a business lawyer and specializing in Oil and Gas, General Mining, Coal Mining, Hotel activities, Construction and financing arrangements.
  • Well in this Oil and Gas, it started when I was working 5 Years as In house Lawyer in Huffco Indonesia (Virginia Company) who has its oil and gas operations under a Production Sharing Contract with Pertamina.
  • These Oil and Gas operations produced oil and gas, where the gas is being delivered to the processing and refinery plant in Bontang being purified and processed as LNG ( Liquefied Natural Gas) which shall be delivered to its customers in Japan. Wauw really exiting isn't ?
  • I was assigned as the in house Lawyer who was reporting directly to the Senior Vice President Exploration & Production, who are mostly engineers.
  • It was really an exiting experience because I was responsible for handling and reviewing the Exploration and Production Contracts, and is also responsible to answer any question from the Management relating to the interpretation of the Production Sharing Contract ( PSC).
  • Some of the questions relating to this PSC are among others what is meant by commercial production, when is the Oil and Gas Company obligated to surrender part of its Contract Area and other significant PSC issues.
  • On the Exploration and Production side, I was responsible to draft and review the E & P Contracts from the legal aspects. Such Agreements covers operational contracts among others the Drilling Contracts, Well Testing, Cementing Agreements, Helicopter Charter Agreements,Vessel Charter Agreements, EPIC (Engineering,Procurements, Installation, Commissioning Agreements) and other Exploration and Production Agreements.
  • It was really exiting and interesting tasks working as In House Legal Counsel in an Oil and Gas Company.
  • The most interesting part of the tasks, which I really enjoyed, is when you are assigned to go to the Site Location, in Badak or Bontang in East Kalimantan of Indonesia.
  • Why is so exiting ?
  • The existing part is because you will directly go to the terrain and remote places, where the access roads are not asphalts but are brown land and dusty, where you can see the pipelines which transported the oil and gas from the production wells in the commercial producing wells, and the oil and gas station gathering, the rigs, the wells, the plants and other oil and gas facilities;
  • You will also see the green forests trees, all around you which makes you feel , you are trapped in a beautifully wild nature.
  • The fun part is also when you fly with the Helicopter Bell 412, and sea the view of the Site Location from the chopper.
  • It is really exciting and thrilling experience.
  • On the Site Location you usually travel with jeeps which is really exiting.
  • Well, such view and adventure in the Fields are really important for you so that you can capture the whole and comprehensive picture, as a contribution when you are drafting the oil and gas contracts.
  • Remember as a Lawyer, part of your job are incorporating the rights and obligation of the parties which is the Oil and Gas Companies and the Supporting Contractors in a contractual agreements which is actually the reflection of the meeting of minds and understandings between the parties.
  • The readers and the stack holders of such Contracts which you are drafting and preparing consists of various disciplines and background which are managements, shareholders, engineers, technical and finance people.
  • So the art of being a Lawyer is to having writing skills to establish communications and understandings between the various stockholders to achieve their common goals and interests.

Agung Supomo Suleiman

Partner Law Firm Suleiman Agung & Co

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Thursday, November 06, 2008

Breaking NEWS - Congratulations OBAMA

  • I wanted to congratulate him for winning the USA Presidential election in USA on November 2008.
  • I really like Obama's style. He is still young in age 47 Years old, but he is really mature when he delivers his speech.
  • All the people around the world no matter where they are, appears to be putting high hopes on Obama, because he really gives hopes of changing this world into a more peaceful place to live.
  • It happens to be that when his mother divorced his father, she married an Indonesian men, namely Soetoro and thus there is certain attachment between his family and Indonesia.
  • In a certain way we are all really proud having Obama elected as the new President of USA.
  • He happens to be at the right time and the right place to make the changes in a positive way.
  • When he made his speech after winning the election, everybody sings : Yes We Can.
  • This is really a dynamic motto which inspired us all Yes We Can.
  • Well again congratulations to Obama.
  • We wish you all the the best, good luck and success in your new position as the Leader of USA.

Wednesday, November 05, 2008

Understanding Indonesian Goals in Mining

  • The Legal Sources of the General Mining Law in Indonesia is Article 33(2) and (3) of the Indonesian Constitutional Law.

What is Article 33 (2) and (3) of the Indonesian Constitution LAW ? Why you as a Foreign or Local General Mining Company who operates in Indonesia, must really understand this Famous Article which was "Planted" in the Indonesian Constitutional Law by the "Founding Fathers" of this Great Nation of Indonesia. Well, let me try to explain to you why this Article 33(2) and (3) of the Basic Constitution Law 1945 is really significant to be understood by the Mining Companies operating in Indonesia.

  • Pursuant to this Article it states that the branch of productions which are important for the State and which exploits the mainstream live of the majority people shall be under the sovereign of the State.
  • The earth and the water and the natural richness which is contained therein shall be under the control of the State and be used at the most for the welfare of the people.
  • Furthermore the basic principal of the control and the beneficial of the natural richness upon the various mining minerals for the social welfare of the people in the mining activities shall be implemented under the Indonesian Mining Law.
  • The Indonesian Nation as the holder of the Ownership Title upon the natural richness in the form of various mining minerals which is contained in the earth and water within the Indonesian Territory which is the "Indonesian Mining Legal Area", shall thereafter "grants the power" to the State to regulate and makes benefit of such national richness with the utmost to achieve the justice and prosperity of the society as a whole.
  • Thus based on the above principals, The State has the Authorization Right ( Hak Penguasaan) upon such National Richness, whereas the execution/the performance of the State Sovereign is called " The General Mining Authorization".
  • Since the State posses the right to control or the Authorization Right ( Hak Penguasaan) upon the various mining minerals, than the State cannot not grant other rights which is more larger then such Authorization Right.
  • Accordingly, what can be given by the State is the General Mining Authorization Enterprise ( Kuasa Usaha Pertambangan Umum ) or abbreviated (Kuasa Pertambangan Umum) General Mining Authorization, which covers the general mining efforts ( usaha-usaha pertambangan umum : general survey, exploration, exploitation, pengolahan ( treatment ) and pemurnian (purification), transportation and selling.
  • Furthermore, the State shall give the performance of the General Mining ( Pengusahaan Pertambangan Umum) to the holder of the Mining Authorization.
  • Since there are many various mining minerals, the State needs to determine the categorization or grouping of such mining minerals and the performance of such mining minerals.

Agung Supomo Suleiman

Partner Law Firm Suleiman Agung & Co

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Monday, November 03, 2008

Slight View on the Mining Law in Practice

The Mining Law in Indonesia regulates :
  1. Ownership
  2. Grouping of minerals according to their importance
  3. The way mining will be conducted by different parties
  4. The role of the Local Government
  5. The way in which mineral development can be licenced or authorized.
  • As regulated under the Mining Law, minerals are divided into 3 Groups based on the historic role, present and the future potential and possible economics significances each of such minerals to the state and the people. These grouping are being determined by a Government Decree from time to time.
  • The Groupings in general are divided into Group A : namely the Strategic Minerals.
  • Under this Strategic Minerals are among others : oil, asphalt, wax, natural gas, coal, brown coal uranium, radium, and other radioactive minerals, nickel, cobalt, tin .
  • Following thereafter is the Grouping B which is the Vital Minerals. This Vital Minerals among others are : iron, manganese, copper, lead, gold, silver, platinum, diamond, silver, mercury, sulphur.
  • These groupings of mineral shall have impacts on the issuance of the mining licenses and /or royalties.
  • While C Minerals are handled by the Provincial Governments. These C Minerals are usually relating to among others limestone, sand, gravel which are developed under a Regional Mining Permit ( Surat Izin Pertambangan Daerah or SIPD) which is issued by the Governor and can cover an area of 25 ha.
Based on the Mining Law, the Mining of Strategic Minerals can only be undertaken by a government agency appointed by the Minister or a state enterprise. Mining can be licensed or authorized in 5 ( five) ways :
  • 1. Ministerial Assignmentt to carry out mining by government bodies or agencies ( Penugasan Penambangan) as in the case of BATAN which is the atomic energy agency being assign to carry out the development of radioactive minerals.
  • 2. Issuance of Mining Authorization ( Kuasa Pertambangan or KP). This KP are granted to Mining Companies (sate or private) or to Indonesian Individuals.
    • As we are aware there are different stages of Mining Authorization which can be applied for.
    • In applying the Mining Authorization, we have to submit the required maps and other administrative requirements.
    • In practice the Mining Authorization will be given for a limited time. Reasoning of this is usually related to guarantee the seriousness of the applicant / the right holder in performing its obligations. If such right holder is not performing any exploration activities for a certain period of time, in a certain Area, the potential minerals in such location will be idle, which on the other hand, can actually can be explored, exploited by the other more serious mining companies to produce the mineral products.
  • 3. Contracts for Foreign or Domestic Companies ( Contract of Work or Coal Cooperation Contract). This is based on regulations under the Mining Act combined with the Foreign Investment Act.
  • 4. License or Permit for People's Mining. This License is granted to small traditional or manual mining operations which are using simple equipment and technology. Usually it is conducted in a small scale or through mutual cooperation using simple tools and equipments.
  • 5. Authorization by District Government ( Surat Ijin Pertambangan Dearah - SIPD) This usually in practice applies to Group C Minerals.
  • From my experience, as In house Legal Counsel in a Mining Company who conducts Mining Operations in Copper, such Company, who operates in Indonesia under a Contract Of Works ( Licence/Authorization) needs a certain volume of limestone for processing its product in the Mill Plant. The Company who conducts the limestone operation holds the Group C Minerals license issued by the Local Government.
  • This Limestone Company was granted work by the Copper Mining Company to manage the usage and supply of the limestone in the Mill Plant. Exiting isn't it.
  • Thus, in practice, you may found situation in the field operation at Site, where a cooperation mechanism, may arise between the Big Cooper Mining Company who is exploring, exploitation and producing the Cooper Mineral which falls under the Group B Vital Minerals, and the Limestone Mining Company who is granted the Authorization by the District Government for its C Mineral of Limestone.
Well, the above is a slight view of the Mining Law and its real implementation in the real practice operations which you may find in the Mining Field Operations in Indonesia, which hopely will be usefull for you readers who are interested in reading Legal aspects related to Mining Operations in Indonesia. Date : November 1 , 2008

Agung Supomo Suleiman

Senior Partner Law Firm Suleiman Agung & Co

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Saturday, October 25, 2008

Understanding Mineral Policy In Indonesia

  • Based on the Indonesian Mining Law it is determined that all minerals found within the Indonesian mining jurisdiction in the form of natural deposits as blessings of God All Mighty are national wealth of the Indonesian people and shall, therefore, be controlled and utilized by the State for the maximum welfare of the people.
  • This policy is based on Article 33 of the Indonesian Constitution Law which specifies that the state maintains total sovereignty over land and mineral resources of the country and that they shall be used and developed for the full benefit and welfare of the people.
  • The government thus administers mineral resources development on behalf of the people.Accordingly, within the spirit surroundings this policy framework, are the laws and regulations established by the Government together with the House of Peoples Representative (DPR).
  • This is different with the system in other countries where individuals owning a certain peace of land will be recognized by State of having title ownership on the minerals found below the land owned by such private individual. Besides the written laws, in practices we frequently found unwritten policies which needs us to get the correct guidance since the interpretation between the individual government officers sometimes may differ on to the other.
  • Accordingly, if we happen to be the in-house lawyer in a foreign mining companies, we usually must be equipped with skills, to bridge the understanding and perceptions and wants of the Mining Investors and the officers either local or central.This is significant, to enable in reaching meeting of minds between the foreign investors who are used with their way of dealing with mining operations in their home country and the local mindsets.In common language, if we want to make our sandwich and hamburgers be eaten and taste by the local people, than we have to try to put some local traditional contents in serving such sandwich and hamburgers.
  • With the same spirit, if the local people want their traditional foods to be viewed by foreigners, than the local people must take into considerations in putting some foreign vegetables or contents, which are known by such respective foreigners wherever they come from.
  • By making the above samples, I just wanted to say as a practice business lawyer, that regulations and laws does not stand by itself in a vacuum empty space, but is developed and shaped by the surroundings where such mineral deposits is located.
  • If such same minerals deposits for instances ore, gold, coal or nickel is located in Australia, then the laws and rules of the people in Australia will influence them in making and developing such mineral deposits.
  • These principles will also apply to other countries, where such mineral deposits of ore, gold or nickel are located for instance in America Latin Countries like Chile, Venezuela and in other parts of the world.
  • We also understand that in Indonesia, when Indonesia was under the sovereignty of the VOC, as well as the Dutch, the VOC, and Dutch economical, political system and their peoples view, had shaped the laws and regulations related to the Mineral Deposits, where individual Dutch / Foreign person or Dutch /Foreign Companies may owned the mineral deposits which is known as concession right.
  • While as we understand the local have their traditional perspective relating to the minerals deposits, like in Irian Jaya or Papua, the local people has the believe system that the mountain, including what it contains which are mineral deposits, are considered to be their mother
  • Having said the above, we may understand the laws and regulation more clear, since the rules and laws which are being laid down by the Legislator are influence and at a certain level a political product of such Nation and State.
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    • Agung Supomo Suleiman
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Tuesday, October 21, 2008

Domestic Market Obligation (DMO) issue in OiI/Gas in Indonesia

In the Oil and Gas activities in Indonesia, one of the interesting parts to be observed is the Domestic Market Obligation ( DMO) issue.

Why is it interesting ? This is really interesting because, this DMO is imposed towards the Producing Oil/Gas Companies in Indonesia by the Government of Indonesia (GOI) together with the Peoples House of Representative in Indonesia (DPR) to make sure that the Indonesian Domestic Consumption on Oil and Gas per the running Calendar Year, are being fulfilled.

Accordingly this is within the framework of implementing National Interest of a Nation for the continuity of the development and progress of such Country.

With respect to this issue, it appears that every Nation and Country in this world shall have its task in imposing its National Interests.

As far as the Industries, State Owned Companies, cars and public transportation, Airplanes, Vessels, Army Vehicles, which are the base fundamental needs of such Nation, are still by enlarge are being energized by the oil fuel/ gas, then the institution of such country which is the Government and the House of the Peoples Representatives (DPR) , shall do its up most to ensure that such source of energy to supply their Industry as the back bone of their country are flowing.

The above circumstances, may probably be the reason why DMO is imposed under the Production Sharing Contracts (PSC)/Technical Assistance Agreement(TAC) / Enhance Oil Recovery (EOR) by the Government of Indonesia ( GOI) now being represented by BP Migas.

Relating to this issue, the significant elements among others shall then be as to what kind of formula and to what extent of volume of DMO, shall be shared by each Producing Oil/Gas Contractor in Indonesia.

There has to be a certain Total Number of Domestic Consumption of Fuel/Gas per Calendar Year that has to be established by the GOI together with the DPR based on their studies.

Furthermore what are and from where are the sources for such Domestic Consumption of Oil /Gas, meaning as to how much is it driven from Outside of Indonesia and how much is taken from Inside of Indonesia.

Relating to the "Sources from Inside Of Indonesia", it appears that such DMO shall be shared or based on a certain Quota among "All of the Oil/Gas Companies who are already in the production Stages In Indonesia".

This Quota, is then equally shared prorate among "All of the Oil/Gas Companies who are already in the production Stages In Indonesia".

Based on the above perception, a certain formula was then applied in each and every PSC, TAC, EOR, which based on the Existing Law No. 22 Year 2001, including the Decision of the Constitution Court In Indonesia, such DMO is 25 % of the Oil /Gas Equity entitlement or oil /gas portion of each respective Oil/Gas Contractor in the Calendar Year.

However, as I understand, Law No.22 Year 2001 is now being reviewed, for which, relating to this DMO issue, I understand from a source, that DPR at this present moment is suggesting the DMO figure to be 75%, which appears to be a rather high figure. The representative from the Oil/Gas Community or the Indonesian Petroleum Association shall have their saying in the hearing with the DPR relating to this revision of the Law No. 22 Year 2001 including to the DMO issue .

Agung Supomo Suleiman Senior Partner of the Law Firm of Suleiman Agung & Co


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Thursday, October 16, 2008

Knock To Knock Arrangements in Oil/Gas Operastional Contracts

When you are negotiating and drafting legal contracts between parties in the oil and gas operations, you frequently are faced with a situation where the other party is asking for a knock to knock arrangements.

Interesting isn't it. Well what does it mean.

Let me share my experience on some interesting experience relating to this knock to knock arrangement.

These may occur when the other party is having the same strong position when they negotiate the terms related to shifting the risks relating to the liability and indemnifications issues.

For instance, you happen to be a lawyer representing one of the Oil and Gas Companies in establishing and incorporating such liability clauses, you are asking the Contractor to indemnify, release and hold harmless the Oil/Gas Company from and against any claims in whatsoever form and kind being filed by any person or party, who are employed or engaged by such Contractor, regardless of the cause.

In these case the Contractor which is represented by their lawyer, may ask for a knock to knock to knock arrangements relating to this liability issue.

In response to their request you as the lawyer of the Oil and Gas Company, shall then request such Contractor’s Lawyer to provide you with their revisions and versions.

After receiving such revisions, you then as the lawyer of the Oil and Gas Company will come again with your comments and inputs, for instance that you may agree, to also indemnify, hold harmless the Contractor from and against claims coming from any person under the Oil/Gas Company employment relation, however, to the extent such losses or damages are solely caused by the deliberate and major fault of the Company.

As you may see, the risks of liability, and the burden of proof elements, may be moved from one party to the other party, depending on the strength position of such respective parties who are negotiating such terms.

In practice, this may happen since under the Indonesian Law, we adopt the freedom of contract, Article 1338 of the Indonesia Civil Code, whereby the parties are free to enter and negotiate any kind of agreements in our case commercial agreement, which they want, provided however that such agreement does not violate the applicable compulsory law, public law or the public order.

Thus, in my experience and practices as a commercial lawyer, I have the perception that, whether an agreement is in more favor to a party compared to the other party, really depends on the situation and position of the parties during the negotiation, drafting and completion or signing the agreement.

Agung Supomo Suleiman

Senior Partner Law Firm Suleiman Agung & Co

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