Change of Mining Business Working Agreements into Special Mining Business Licenses Under the Indonesian Mining Law

摘要

The creation of Law Number 4 of Year 2009 on the Mining of Minerals and Coal (Indonesia Mining Law) has caused changes to occur in Mining Business Working agreement, turning them into Special Mining Business Licenses, which is quite significant and has brought up several issues. Several of these changes include, among others, forbidding companies who have Working agreement to conduct exports of concentrates, instead of requiring them to perform enrichment first; changes in the schema of tax obligations and royalties that must be paid by the company, wherein the company must follow general tax regulations that apply in Indonesia; changes in the areas of mining operations, becoming more restricted than before; and changes in the position of relationships of the company and the government. These changes have raised quite serious reactions from several investors, in which PT Freeport Indonesia can be taken as an example. PT Freeport Indonesia has harshly reacted by rejecting the change from Working Agreements into Business Licenses and accusing Indonesia of having defaulted because of violating the principle of Pacta Sunt Servanda and will file a law suit through international arbitration. Meanwhile, Indonesia stands firm that it has the authority to regulate policies and politics within the country Indonesia has provided several options regarding the changes in policy and adequate time to comply as a result of the enforcement of the Indonesia Mining Law.