22 Mar 2022
New Decree Should Help Resolve Long-standing Licensing Problems in Mining Sector

On 21 January 2022, the Minister of Energy and Mineral Resources (“MEMR”) issued Decree No. 15.HK/HK.02/MEM.B/2022 on Application and Issuance Procedures for Mining Business Licenses (“Decree 15/2022”).[1] This occurred only a few months after the Ministry of Investment had revoked a number of mining business licenses (“IUPs”). As reported by the media, the license revocations were primarily due, among other things, to failure to commence or conduct mining operations within the stipulated timeframes or failure to submit annual operations and budget plans to the Government, as required by law

The decree aims to:

1. establish clear requirements and procedures for the issuance and registration of IUPs based on decisions of the State Administrative Court (“PTUN”), and reports of state institutions responsible for monitoring the provision of public services (“State Institutions”)[2],
2. clarify the procedures for the revocation and suspension of registered IUPs; and
3. clarify the legal status of IUPs whose holders have been declared bankrupt.

A. Requirements and Procedures for Issuance and Registration of IUPs

1. Issuance and registration of IUP pursuant to PTUN decision

Based on a final and conclusive PTUN decision, a mining company whose (i) IUP has been revoked, (ii) request for an upgrade has been declined, or (iii) request for an IUP extension has been declined, may apply for an IUP under the following conditions:

1. the PTUN decision must contain:
   1. A determination on the legitimacy of the administrative decision in question; and/or
   2. An order to either revoke or issue a license.
2. confirmation of compliance with the administrative and spatial requirements stipulated in Decree 15/2022
3. in order to proceed to IUP registration, the business undertaking must also comply with technical, environmental and financial requirements stipulated in Decree 15/2022.

Separately, and also based on a final and conclusive PTUN decision, a business whose IUP overlaps with another’s may apply for registration of its IUP, subject to the same conditions.

2. Issuance and registration of IUP based on a State Institution report

Pursuant to a report by a relevant State Institution (most likely the National Ombudsman Commission), a mining company that (i) did not obtain a license when their IUP expired; or (ii) did not register their IUP, may apply for or register an IUP under the following conditions:

1. the report must cite that maladministration occurred during the IUP issuance process and that corrective measures to address the issue have been requested by the State Institution.
2. the report may no longer be availed of after two years have elapsed since the making of the first application at a time when the IUP was still legally valid and effective,
3. compliance with administrative, spatial, technical, environmental and financial requirements, as stipulated in Decree 15/2022
4. IUP registration will only be possible after the fulfilment of the requirements referred to in point 3 above.

3. Measures to address overlapping of IUP Areas

In cases where an IUP is issued pursuant to a PTUN decision or State Institution report, and the outcome results in an overlap with the IUP area of another company, the MEMR’s Director General of Minerals and Coal (“Director General”) may adopt the following measures:

1. Rearrange the IUP area/Special IUP area in the following ways:
   1. For a partial overlap, reducing the extent of the IUP area
   2. For a full overlap: (i) a new IUP can be issued and the registered one revoked; or (ii) the rejection of IUP applications on a “first come, first served” basis.
2. Other solutions that take into account the interests of expediency, transparency, justice, and national or regional interests.

B. Revocation and Suspension of Registered IUP

Decree 15/2022 provides that the Director General may revoke or suspend a registered IUP in accordance with the following requirements:

C. Legal Status of IUP Whose Holder is Declared Bankrupt

An IUP whose holder has been declared bankrupt may be revoked. An IUP holder that has filed an appeal or entered into a debt restructuring process may notify the Director General of this within 14 days of the declaration of bankruptcy for the purpose of having the IUP revocation annulled.

D. ABNR Commentary

The issuance of Decree 15/2022 is to be welcomed as it should help to strengthen the MEMR’s hand in tackling, among other things,administrative issues and problems related to the overlapping of IUPsin the mining sector.It isto behoped that, armed with this new decree,theMEMR will be able tomore effectivelyaddress these issues inatimelyandaccountablemanner.

By partnerMr. Ayik Candrawulan Gunadi(agunadi@abnrlaw.com) and senior associateMr. Mahatma Hadhi (mhadhi@abnrlaw.com).

This ABNRNewsand its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.