Law firm calls for quick issuance of mining implementing regulations
Wednesday, January 14 2009 - 01:59 PM WIB
The firm?s partner Daniel Ginting and foreign legal consultant Luke Devine said in a presentation during a recent seminar on mining law that the law had a lot of issues or details that need to be explained by the government in implementing regulations.
The governmental regulations should clarify what remain unclear in the law so that investors well understand what all the provisions of the law mean and thus can decide whether or not to invest in the country.
?Move fast. The implementing regulations must be issued within one year? they said, citing the bad experience in the oil and gas and geothermal sectors as a result of the government?s slow move in issuing implementing regulations. There were no projects for four years in both sectors until the government issued implementing regulations for the new laws governing both sectors, they said.
The seminar, organized by Petromindo.Com on Monday, attracted hundreds of participants from Indonesia, Singapore, Hong Kong and India.
Hadiputranto, Hadinoto and Partners has a lot of clients among the country?s mining companies.
The law firm outlined provisions of the law that remain unclear and still need explanations. They include:
? The law states that mining concessions will be awarded through a tender process. What will be the basis for the government to award a concession? Technical ability, the amount of bonus offered by the companies or their work programs?
? The law obliges foreign mining license holders to divest their shares within five years of production. However, under the current ?negative investment list? issued by the Investment Coordinating Board (BKPM), mining opens 100 percent for foreign investors. Furthermore, does the divestment obligation also apply to the existing KP/CCoW companies? How much are the shares that a company has to divest? Can they divest the shares by selling them on the stock exchange?
? The law prohibits the IUP/IUPK license holders to transfer their licenses. The old law allows this to happen.
? The law forbids a IUP/IUPK holders to list their shares on the stock market unless they have carried out explorations and found at least two prospects. Does this mean two IUP/IUPKs or two mineralization areas within one concession?
? The law obliges IUP/IUPK holders to hand over 10 percent of their net profit to the central and regional governments. Does it mean that the government will audit their expenses?
? The law says IUP/IUPK must use the service of local and/or national mining services companies. If no local or national services companies are available, the IUP/IUPK holders may use the service of other companies which are Indonesian legal entities. The impact is that foreign-owned mining contractors established in Indonesia can only be hired if no national company is available. The question is, What does ?national? mean? Are Indonesian listed companies with foreign shareholders considered ?national? firms?
? The laws says IUP/IUPK holders can only use the service of affiliates on an approval from the government only if there are no other mining service companies in the area and no other mining services contractor is capable or willing to provide the service. What is the definition of affiliate? The stock market and the CCoW have different definitions of affiliate.
? The law stipulates that disputes regarding IUP/IUPK will be settled through court procedures and domestic arbitration. Usually, disputes in license-based system is settled through Administrative Courts or civil courts.
? The law says the existing CoW and CCoW shall be respected but they must be amended within one year after the enactment of the law, except for provisions regarding revenue. The implementing regulations should specify what aspects should be amended. (bodega)