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Friday, 10 July 09
INDONESIAN MINING LAW IN TRANSITION


Further to the enactment of Law No. 4 of 2009 on Mineral and Coal Mining (“Law 4/2009”), the enactment of various implementing regulations is awaited, including regulations providing further details on the status of the existing mining structures, i.e. Contract of Work (known as Kontrak Karya or KK) (“CoW”), Coal Contract of Work (known as Perjanjian Karya Pengusahaan Pertambangan Batubara or PKP2B) (“CCoW”), and Mining  Concessions (known as Kuasa Pertambangan) (“KP”). While the general framework for the adjustment of CoW and CCoW is provided, Law 4/2009 remains silent on the status of KP.

As the Indonesian mining community   is still waiting for legal certainty in this sector, the Government of Indonesia through the Department of Energy and Mineral Resources initiated several policies to bridge the gap during this transition period by issuing Circular Letter of the Director General of Minerals, Coal and Geothermal Energy No. 03.E/31/DJB/2009 on Permits for Mineral and Coal Mining Before The Issuance of Government Regulations As The Implementation of Law No. 4 of 2009 (“SE 3/2009”).

SE 3/2009 is dated 30 January 2009 and was issued by the Director General of Minerals, Coal and Geothermal Energy (“DGMCG”) and signed for and on behalf of the Minister of Energy and Natural Resources (“Minister”). SE 3/2009 provides several guidelines for mineral and coal mining activities as follows:

i. KPs issued prior to enactment of Law No. 4 of 2009 (“Law 4/2009”) including any escalations thereof will  remain valid for the remainder of their term and are to be converted to Mining Business Permits (Izin Usaha Pertambangan or “IUP”) within one year of issuance of Law 4/2009 (i.e., by 12 January 2010);

ii. The issuance of new IUPs is suspended pending the issuance of implementing regulations;

iii. Governors and Regents are to liaise with the DGMCG in respect of the processing of all applications for escalations and
extensions of KPs in accordance with Law 4/2009;

iv. Governors and Regents must submit to the Minister all applications  for KPs, whose  reserved mining areas were  approved
before the enactment of Law 4/2009, for evaluation and verification in order to prepare the WIUP (Mining Business Permit Territories)  in accordance with national spatial planning;

v. Governors and Regents must notify KPs holders who have done exploration and exploitation stages to submit their activity plan for approval by the KP grantor with a  copy to the DGMCG at the latest 6 (six) months after the enactment of Law 4/2009;

vi. All KPs issued after 12 January 2009 are null and void;

vii. The DGMCG will issue a format for Exploration (IUP Eksplorasi) and Production Business Licences (IUP Operasi Produksi);

viii. New applications and extensions for Group C Mineral Mining Permits submitted before Law 4/2009 will be processed in accordance with Law 4/2009 after coordination with Governors;

ix. Applicants for CoW and CCoW must establish an Indonesian legal entity at the latest 6 months after the enactment of Law 4/2009 in order for their IUPs to be processed.

Following the enactment of SE 3/2009, and considering that there are still uncertainties among the mining stakeholders regarding the actions to be taken prior to the enactment of the implementing regulations of Law 4/2009, the DGMCG again issued Letter No. 1053/30/DJB/2009 dated 24 March 2009 addressed to all Governors and Regents/Mayors in Indonesia (“Letter 1053/2009”).

Letter 1053/2009 sets out the format for IUP (“IUP Format”) and stipulates as follows:

i. All KPs which are still valid must be adapted  to become  IUP, the format of which will be based on the IUP Format;

ii. The extension of KPs will be coordinated by the DGMCG based on the IUP Format;

iii. KP applications which were  submitted prior to 12 January 2009 and obtained  a territory reservation (pencadangan wilayah) will be processed to IUP, but without being required to participate in  a tender process;

iv. CoW and CCoW which were  submitted 6 (six) months prior to the enactment of Law 4/2009 and  obtained principal approval
will be adjusted to IUP and must form  an Indonesian legal entity, and may undergo the next steps to commence the designated mining activities without being required to participate in  a tender process;

v. In order to obtain a corporate and investment approval related to the establishment of an Indonesian legal entity (foreign investment company) from the Department of Law and Human Rights and the Investment Coordinating Board (“BKPM”), a company must also obtain a recommendation from the DGCMG;

vi. The Governor and Regent/Mayor must submit all of the mining information (KP, CoW, CCoW) within each of their respective areas for the Government to formulate the Mining Business Permit Territory (“WIUP”).

Source: HPRP



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