Regent´s Clumsiness Leads to US$581 M Inernational Arbitrage Lawsuit

Tuesday, 29 August 2017 , 15:00:00 WIB - Law

An areal view of a coal mining activity in Jambi, Friday (4/8). (ANTARA)

JAKARTA, GRES.NEWS – The government’s clumsiness in issuing mining business permits (IUP) has led to a lawsuit worth several trillion rupiah.

The plaintiffs are PT India Metals and Ferro Alloys Limited (IMFA) rom India. In their lawsuit, filed to an international arbitrage, the companies claim they are unable to mine on the location motioned in the IUPK as the area overlaps with other IUPK owned by other companies.

PT India Metals and Ferro Alloys Limited (IMFA) are demanding US$581 million, or Rp7.7 trillion, from the Indonesia government. The figure was set based on potential loss.

The lawsuit was actually failed in 2015, by PT IMFA, and the ruling will be handed down this year.
Meanwhile, the case began when IMFA acquired PT Sri Sumber Rahayu Indah in 2010 for US$8.7 million. The IUP that PT Sri Sumber Rahayu Indah owned was for a mining location Barito Timur, Kalimantan Tengah.

However, it turns out that the IUP for the 3,600 hectare land is not Clean and Clear (CnC) and over lap with the mining area of seven other companies.

The overlapping areas occurred because the local regent was careless in issuing the permits, which were issued since 2006.

The lawsuit has caused the central government to panic. Vice President Jusuf Kalla in March 2017 summoned a number of ministers to discuss the case, namely the Minister of Finance, Sri Mulyani Indrawati; Investment Coordinating Board (BKPM) Head, Thomas Lembong, Attorney General Agung M Prasetyo, the Minister of Law and Human Righs, Yasona Laoly; Minister of Internal Affairs, Tjahjo Kumolo.

Legal Affairs Bureau, Directorate General of Mineral and Coal, Ministry of Energy and Mineral Resources, Heriyanto, said the lawsuit contains many flaws, for instance, IMFA failed to conduct legal audit before acquiring PT Sri Sumber Rahayu Indah to find out whether the IPU was CnC.

"The company (IMFA) did not conduct legal audit (on PT Sri Sumber Rahayu Indah). They should have done that before they completed the acquisition. They should have asked the government whether the IPU was CnC," he said.

Legal expert Ahmad Redi said IMFA filed a lawsuit against the wrong party. He explained that IUP are not Contract of Work (KK). Hence, the company should have filed the lawsuit the local administrative court instead of an international arbitrage.

"The authority to issue IUP is in the hands of regency/municipal governments, so the dispute should have been brought to an administrative court. IUP is not KK that PT Freeport Indonesia holds," Redi said, Monday (21/8).

Redi suspects that IMFA brought the case to an international arbitrage as India and Indonesia have signe the Bilateral Investment Treaty (BIT) that obliges Indonesia to protect investors from India and otherwise.

However, Redi stays firm that the lawsuit was filed against the wrong party (dtc)