Indonesia Significant Points Domestic Interest In Minerals and COAL

NEW ERA OF Indonesian Mining, rulings which changes the COW era to become Permits to conduct the Mining Business Activities.

• LEGALIZATION & Effect. On 12th January 2009, the New Minerals and Coal Mining Law No 4 Year 2009 had been legalized and signed by the President and being enacted as Law by the Minister Of Justice and Human Rights (New Mineral and Coal Mining Law No.4/2009) This New Minerals and Coal Law No.4/2009 will take into effect as of the date it is enacted as Law as above mentioned.

• BEGINNING OF NEW ERA. This New Law becomes the NEW ERA of Indonesian Mining Law, which changes the COW Era and the Kuasa Pertambangan (KP) Mining Authority system that has been exercised for the last 40 years since 1967. The COW /KP system has been replaced by an area based permit / licensing system. Under this New Law there are several Permits to conduct the mining business activities which is attached and linked to several classifications of Mining Areas as regulated under such New Minerals and Coal Law No.4/2009

• AUTHORIZATION. Based on Article 4 of such New Mineral and Coal Mining Law No.4/2009 the Mineral and Coal as the natural resources which is non-renewal is the national wealth which is possessed by the State for the largest prosperity of the people. This authorization of minerals and the coal by the State is performed by the Government and /or the Regional Government.

• DOMESTIC INTEREST. Article 5 of New Mineral and Coal Mining Law No.4/2009 states that for the national interest, the Government after consultation with the DPR (Peoples’s House of Representative) can determine a policy for the prioritization of minerals and coal for the domestic interest. This national interest can be done by controlling the production and export. In implementing such control, the Government has the authority to determine the amount of production of each commodities per year per province. The Local Government is obliged to comply with the rulings of such amount as determined by the Central Government.

We have also published this at ALLVOICES GLOBAL MEDIA Jakarta, February 5, 2009

Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & CO

Blog Law Firm : http://www.sacolaw.blogspot.com

Email : agungsuleiman@gmail.com

agungsacolaw@telkom.net

Clasification of Mining Area in the New MINERALS AND COAL MINING LAW NO 4 Year 2009

• The New Minerals & Coal Mining Areas formed several Mining Areas based permits system, which was not found under the previous law :

Chapter I Article 1 There are several meaning /classification of Mining Area :

• Wilayah Pertambangan /Mining Area, referred to as WP, is an Area which owns potential mineral and/or coal and is not limited with government administration which form part of the national layout (tata ruang)

• Wilayah Usaha Pertambangan, Mining Business Area, referred as WUP, is part of the WP which had owned availability of data, potential, and /or geological information

• Wilayah Izin Usaha Pertambangan, Mining Business Area Permit, referred to as WIUP, is an area which granted to the holder of IUP

• Wilayah Pertambangan Rakyat, People's Mining Area, referred to as WPR, is part of the WP place where the people's mining business activities is conducted

• Wilayah Pencadangan Negara,State Reservation Area, referred to as WPN, is part of the WP which is reserved for the national strategic interest.

• Wilayah Usaha Pertambangan Khusus,The Special Mining Business Area, referred to as WUPK, is part of the WPN which can be usahakan (businessed / efforted) .

• Wilayah Izin Usaha Pertambangan Khusus / The Special Mining Business Area Permit within the WUPK, referred to as WIUPK, is an area which is granted to the holder of IUPK.

Published in ALLVOICES GLOBAL MEDIA

Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & CO

Blog Law Firm : http://www.sacolaw.blogspot.com

Email : agungsuleiman@gmail.com

agungsacolaw@telkom.net

NEW MINERALS AND COAL MINING LAW NO 4 Year 2009

• NEW ERA Indonesian Mining. LAW changes COW Era to become Permits /Licences to conduct the Mining Business Activities in Indonesia

• It is really interested in studying such New Minerals and Coal Mining Law, since it appears there is a significant change in the arrangement whereby the Government is providing permits /licences to Mining Minerals and Coal activities which according to the writings / articles from the media/ news, it indicates that the concept of Contract Of Work ( "COW") which was made by the Government and the Mining Companies as the basis of the contractual relations and the Kuasa Pertambangan (KP) mechanism, which was practiced for the last 40 years was changed and replaced by this Permits /Licenses of Mining Minerals and Coals.

• It is interesting to observe this new law, since as a Partner of the Law Firm of Suleiman Agung & Co, ( who operates for more than 10 1/2 Years since June 1998), I was formerly experiencing working as in-house Legal Counsel for 5 Years in PT Freeport Indonesia Company ( PT FI), a cooper USA mining company, who operates its mining operations in Indonesia, where COW was the main agreement between PT FI as the Mining Company and the Government.

• The other interesting part is because, I was also experiencing working for 5 Years as in-house Legal Counsel in Huffco Indonesia (Virginia Company) a USA Oil and Gas Company who operates in Indonesia, and produces Gas/LNG at Bontang, where Production Sharing Contract (PSC) was being the basis of their presence in conducting the oil and gas operations in Indonesia.

• all the oil /gas and the mining of minerals and coal are natural resources from Indonesia.

• The Scheme mechanism treatment in mining such natural resources from Indonesia is really very interesting to be observed, among others from the history of such mining rulings, which were introduced / developed by the various governments/ authorized institution and the people who were represented by their Representatives in the peoples house of Representatives/Parliament.

• For instance, relating to Oil and Gas, during the Dutch period, the concept which was introduced and recognized is sort of concession, where Private Companies may be granted a concession by the Authorized Institution.

• When Indonesia stated its independence, based on Article 33(3) of the Indonesian Basic Constitution Law Year 1945 , the oil and gas is the wealth of the people, where, the people will grant Power or Mining Authority to the State to mine such oil and gas, through forming PT Pertamina ( as representing the government /people) during that time , where as the holder of such Mining Authority they can /allowed to enter into a cooperation with private companies.

• Contract of Work ( COW) was being introduced as the basis of the relation or arrangement between the Government or PT Pertamina with such Oil/Gas Company.

• In the progress Production Sharing Contract (PSC) was introduced where in the transition period the COW was replaced / amended to become PCS, examples of this, is experienced by PT Stanvac Indonesia.

• In the COW concept, the Mining Contractor or the Oil/Gas Contrator shall perform the Mining activities, absorb all the expenses and costs and the risks, without any cost recovery mechanism by the Government.

• Whereas under a PSC arrangement, the Oil/Gas Contractor shall take the risks, and pay all costs and expenses by itself, but shall be cost recovered by the Government or Pertamina/ now BP Migas, after commercial production is declared.

• One of the most interesting part is that the rulings of oil and gas is differentiated from the rulings of minerals and coal.

• Having briefly giving some illustration of this matter, while studying this New Minerals and Coal Mining Law, I shall try to forward some significant items, and hope can digest in understanding this new law and shall try to communicate it with the readers of this blog.

This New Minerals and Coal Mining Law No. 4 Year 2009, contains XXVI Chapters and 175 Articles

• In the Recitals of this New Law its states that Minerals and Coal which is contained in the Indonesian Legal Mining Area of Indonesia is the natural wealth which cannot be renewable as gift from The One ALL Mighty God, has the important role to fulfill the life needs of many people, thus it has to be controlled /possessed by the State to give real value added for the national economy in the effort to reached the people's welfare and prosperous justifiably.

• the mineral and coal mining is mining business outside the geothermal, oil and gas and land water which has the important role in providing real value added to the national economic growth and sustainable regional development.

• it considers that the Law No 11 Year 1967 concerning the Regulation of the Basic Mining is no longer in accordance so that changes are required upon the rulings in the mineral and coal mining, which can manage and effort the potential mineral and coal in a manner which is independent, competent, transparent, competitive, efficient, environmental vision, to secure the sustainable national growth.

Based on the above considerations it is needed to form the Mineral and Coal Mining Law. The considerations also refers to Article 5 (1) , Article 20 and Article 33 (2) and (3) of the State Basic Constitution Law 1945.

PERMITS :

• There are several permits as shown in Chapter I Article 2 namely :

• Izin Usaha Pertambangan/Mining Business Permit ( IUP) which is the permit to conduct mining business.

• IUP Explorasi /Exploration Mining Business Permit which is a business permit provided to conduct stages of general survey, exploration and feasibility studies.

• IUP Operasi Produksi (Production Operation Business Permit) which is business permit provided after the completion of the performance of IUP Explorasi to conduct stages of production operations activities.

• IzinPertambanganRakyat (IPR) / Peoples Mining Permit which is permit to conduct mining business in the peoples mining territory with the area of limited territory and investment.

• Izin Usaha Pertambangan Khusus, Special Mining Business Permit (IUPK), which is a permit to conduct mining business in the special mining business permit territory.

• IUPK Explorasi (Exploration IUPK) which is the business permit provided to conduct general survey, exploration, and the feasibility studies in the special mining business territory

• IUPK Operasi Produksi (Production Operation IUPK) which is the business permit provided after the completion of the performance of IUPK Explorasi to conduct the stages of production operation in the special mining business territory

Jakarta, March 4, 2009

Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & CO

Also published in ALLVOICES GLOBAL MEDIA

Blog Law Firm : http://www.sacolaw.blogspot.com

Email : agungsuleiman@gmail.com

agungsacolaw@telkom.net

Business Legal Exposures

• As business Lawyer you have to be aware of the legal exposures that are involved in the business activities of your Clients.
• What kind of legal exposures that had been highlighted really depends upon the nature of the business issues transactions that you are being requested by your Client to be prepared and provided.
• if the issue is that your Client is trying to seek funds which are required to support its business, you then have to make sure that such funds are really available at the right time as been required by your Client to support their business.
• the time table of funds available and when and how does such funds will be disbursed and made available to your Client is very significant.
• The other issue that you have to make sure is what kind of arrangements are most beneficial to your Client and the party who is obligated to raise and provide such funds.
• Are the fund to be treated as loan which had to be repaid back by the fund provider?
• or are the funds going to be treated as investment injected by the fund provider to be treated as investment and capital paid up subscribed by such new investor.
• you have also to make sure whether the funds will be allocated in special account which shall be dedicated to the projects of your Clients
• or will there be a joint account established by both the new investor and your client where joint signature for disbursement of the funds are required.
• those are some of the elements of the legal exposures that you as a business corporate lawyer must be concerned of.
• well, the most important and significant part of the deal is how to ensure that the business deal transactions for such project between your Client and the new investor will be mutually beneficiary to both parties.
• the essence of a business is really how to make success to the" Project" which will benefit all parties concern.
• As a business lawyer you have to ensure that the transactions are clearly drafted to be communicative as a tool of "Meetings of Minds" by the Parties concerned, which can reflect and express their desires and wants to make the "Business Project" fruit full.

Jakarta, March 1, 2009

Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & CO

Blog Law Firm : http://www.sacolaw.blogspot.com

Email : agungsuleiman@gmail.com

agungsacolaw@telkom.net

OPTIMIST DURING GLOBAL ECONOMIC CRISIS

• Yes, we have to be optimist
• we must not be pessimist
• the world depends on our view of thinking
• we must not be unsure with our selves
• even though our cash flow is critical it does not mean that we have to give up
• don't through your towel in the ringside
• we must face the reality in life
• the global crisis is hitting many countries
• the ups and downs in this life cycle including the cash flow of your organization/vehicle device is normal
• even a big country like the USA is suffering Economic Crisis
• there was a stimulus package of around USD 78o billion that was being injected to stimulate its cash flows
• what is astonishing is that a country like Japan was also hit by the global crisis
• I saw on TV in CNN there were a long line of unemployed person who are in line to get ticket for food within this 2 months, since Japan depends heavily its revenue from its exports
• since the purchasing power of the people in many countries were badly hit, there are many employees and workers that have to be laid off
• even big news papers are facing financial problems
• the big issue is than how must we react on this kind of global crisis situation
• I believe that we have to optimist
• if we are optimist and positive with our selves than at least we can control our mind and body
• your business vehicle or organization regardless of the size, is operated by a human being
• thus this human being which happens to be you as the operator of such vehicle or device must have a good and positive attitude
• we must not be quitter
• we must not be losers
• we have to be rich with ideas and positive ideas
• as long as we are alive there are plenty of energies that lies within our self which were being built in by the Creator in our soul and body and mind
• we must not surrender
• yes, we must face the reality
• reality means among others that your real cash flow has to continue
• you need air to breath
• you need water to live
• you need motivation and purpose to continue your live
• as long as we are still given breath by the All Mighty, it means that there is still hope for us to survive and leave
• thus we have to consolidate our selves to keep on moving
• the significant point is that you have to manage your mind, body soul and spirit
• Keep you spirit high
• the continuity of this vehicle/organization driven by you depends on your high spirit and willingness to survive
• Don't look at others but look at your self
• the spirit and motivitaion lies within yourself
• you have to really focus and seek within your inner power
• which lies within your self
• Cheers

Saturday, February 21, 2009 revised Saturday Feb 28, 2009

18.30

Agung Supomo Suleiman

Senior Partner

Law Firm Suleiman Agung & CO

Blog Law Firm : http://www.sacolaw.blogspot.com

Email : agungsuleiman@gmail.com

Glance Snapshot - election in Indonesia

• Hi Long Time no see
• How is business
• Well we are all trying to survive in this new Era of 2009
• Its already the month of February so it is already the 2nd month of Year 2009
• Frankly speaking I am quite busy with my work
• That is one of the reason I had been off from this blog for quite a while
• It is election time in Indonesia
• The politic climate in Indonesia is getting hot know
• many comments and new political issues pop up in the media
• There are several new Parties popping up in the advertisement
• several of the candidates are former general in the military of Indonesia
• So there are several religion back grounds, military back grounds, nationalist backgrounds most are the break up of the former Sukarno ideologies Party, secular backgrounds, labor backgrounds, and professional intellectual background.
• It is really interesting if we observe the development of democracy in Indonesia which sometimes appears sort of a "demo crazy"
• There are also many political comedians shows in the TV media which we never can imagine could happen during the former Suharto Era.
• In this shows, we can see that we are free to critic the still existing President in power.
• This is really happening in Indonesia
• Even though most of us sometimes are really bored with the members of the People House Representatives who frequently are more self centered and thinking about their own life style, on the other side of the coin we can see that Indonesia is really on the democracy era.
• In the reality we understand that in order for a Party to campaign, they really need money
• This also applies to the person who are campaigning himself / herself needs monies in a certain level and degree.
• Well, in the real world money talks.
• How do we as layman in the streets in Indonesia must react or do in these development.
• I think this really depends on the individual to decide since nobody has the power to influence such individual expect if such person are in the position of desperate to have immediate in having monies to be able to continue his stomach.

Agung Supomo Suleiman February 14, 2009 14.10 hours Indonesia Western Time

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

Law Firm’s Blog http://www.sacolaw.blogspot.com

Email : agungsuleiman@gmail.com