Opinion: Supreme Court revokes onshore mineral processing regulation

On 3 April 2013 the Supreme Court issued a decision revoking Minister of Energy and Mineral Resources Regulation No. 7 of 2012 regarding the Value Added Enhancement of Minerals through Mineral Processing and Purification Activities (MEMR Regulation 7/2012) in its entirety. The decision has only recently become publicly available.

The basis for the Supreme Court revoking MEMR Regulation 7/2012 was that the detailed implementation of the ban on export of ore (and in particular, commencing that ban from 6 May 2012) started prior to the January 2014 deadline set out in the higher ranking Mining Law and Government Regulation. As a result of this inconsistency, the Supreme Court issued its decision, and under the laws relating to Indonesian judiciary, upon the Supreme Court issuing its decision, MEMR Regulation 7/2012 ceased to have any legal effect.

With this revocation of MEMR Regulation 7/2012, the amendments to MEMR Regulation 7/2012 (i.e. MEMR Regulation No. 11/2012 issued on 16 May 2012 and MEMR Regulation No. 20/2013 issued on 6 August 2013) also cease to have any legal effect, and the MEMR no longer has any legal basis on which it can insist on minimum thresholds for mineral processing.

Although MEMR Regulation 7/2012 has been revoked:
a) mining companies still have a legal obligation imposed by virtue of the Mining Law and Government Regulation 23/2010 (as amended) to "value add" minerals domestically, although with the revocation of MEMR Regulation 7/2012, there is no longer any prescription as to what level of "value add" is required;
b) all contract of work companies in production phase as at 12 January 2009 and all IUP holders must process minerals domestically by 12 January 2014 (but again, the prescribed level of processing has not been prescribed); and
c) the Minister of Energy and Mineral Resources still has the authority vested by the Mining Law to issue a ministerial regulation on mineral processing.

Accordingly, the joy arising from the Supreme Court having revoked MEMR Regulation 7/2012 may be short lived, and mining companies should expect the Minister of Energy and Mineral Resources to shortly issue a new regulation on mineral processing, this time ensuring that the detailed implementation set out in the Ministerial regulation is in line with the Mining Law and Government Regulation 23/2010 (as amended).

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