Mining Law and Regulatory Practice in IndonesiaA Primary Reference Source
The first and only English-language reference to the laws and regulations of the booming Indonesian mining sector As the growing Indonesian mining industry attracts new investment from foreign mining companies, those companies are faced with the daunting challenge of unraveling the hugely confusing and complex plethora of local laws and regulations that govern the industry. Until now, there has been no comprehensive English-language guide to Indonesia's mining laws that western companies could turn to for reliable guidance and advice. This detailed reference fills that gap for the mining companies, advisors, and consultants who must navigate this confusing and growing web of regulation on a daily basis. The only English-language reference on the subject of Indonesian mining law A valuable guide for anyone in the mining industry currently doing business or intending to do business in Indonesia Written by a highly regarded legal expert with deep experience in the Indonesian mining industry Combines all the relevant regulations in one comprehensive guide Ideal for professionals in the mining industry, as well as academics, government institutions, policy makers, and industry associations, Mining Law & Regulatory Practice in Indonesia is the perfect guide for an underserved market.
Foreword xi Preface xiii Acknowledgments xvii CHAPTER 1 Overview of Mining Regime 1 I Prevailing Laws and Regulations 1 II Former Mining Regime 3 III CoWs/CCoWs 3 IV Regional Autonomy 5 V Mining Activities 6 VI Mining Areas 6 VII Mining Licenses 7 VIII Procedures for Obtaining WIUPs and IUPs 11 IX Rights and Obligations of IUP Holders 12 X Domestic Market Obligation 15 XI Divestiture of Shares Requirement 16 XII Procedures for Minerals and Coal Benchmark Price Determination 17 XIII Domestic Processing and Refining 19 XIV Direction and Supervision of the Management and Implementation of Mining Business 22 XV Transitional Provisions for Existing KPs, CoWs, and CCoWs 23 XVI Mining Services 24 CHAPTER 2 2009 Mining Law 25 I Executive Summary 25 II Details of Main Provisions 26 CHAPTER 3 Mining Area Determination 43 I Executive Summary 43 II Details of Main Provisions 44 CHAPTER 4 Mining Services Regulation 53 I Executive Summary 53 II Details of Main Provisions 55 CHAPTER 5 Affiliated Mining Services Provider Regulation 65 I Executive Summary 65 II Details of Main Provisions 67 CHAPTER 6 Prioritization of Domestic Interest Regulation 71 I Executive Summary 71 II Details of Main Provisions 72 CHAPTER 7 Domestic Coal Supply Decree 2013 79 I Executive Summary 79 II Details of Main Provisions 79 CHAPTER 8 Coal and Mineral Mining Enterprise Activities Regulation 83 I Executive Summary 83 II Details of Main Provisions 85 CHAPTER 9 Mining Direction and Supervision Regulation 107 I Executive Summary 107 II Details of Main Provisions 108 CHAPTER 10 Benchmark Price Determination Regulation 117 I Executive Summary 117 II Details of Main Provisions 119 Appendix 1: Coal Adjustment Cost for HPB RE Sales of Coal by Way of FOB Barge 131 Appendix 2: Cost Adjustment for HPB RE Sales of Coal in One Island to the End User 132 CHAPTER 11 Benchmark Price Formulae Regulation 135 I Executive Summary 135 II Details of Main Provisions 136 Appendix 1: Formula for Steaming Coal Benchmark Price 139 Appendix 2: Coal Benchmark Price Reference Formula for Steaming Coal Based on Brand Name 142 Appendix 3: Formula for Coking Coal Benchmark Price 145 CHAPTER 12 Reclamation and Post-Mining Activities Regulation 147 I Executive Summary 147 II Details of Main Provisions 149 CHAPTER 13 CoW and CCoW Change of Investment Regulation 159 I Executive Summary 159 II Details of Main Provisions 160 CHAPTER 14 Extractive Industry Income Transparency Regulation 167 I Executive Summary 167 II Details of Main Provisions 168 CHAPTER 15 Increase of Added Value of Minerals through Processing and Refining of Minerals Regulation 173 I Executive Summary 173 II Details of Main Provisions 177 Appendix 1: Minimum Processing and Refining Specifications for Metal Mineral Products 188 Appendix 2: Minimum Processing and Refining Specifications for Nonmetal Mineral Products 191 Appendix 3: Minimum Processing and Refining Specifications for Rock Mineral Products 192 CHAPTER 16 Regulation Amending Mineral and Coal Mining Enterprise Activities Regulation 193 I Executive Summary 193 II Details of Main Provisions 195 CHAPTER 17 Mineral Products Export Requirements Regulation 201 I Executive Summary 201 II Details of Main Provisions 202 Appendix 1: Certain Mineral Products Subject to MOTR 29/2012 210 CHAPTER 18 Export Tax Regulation 213 I Executive Summary 213 II Details of Main Provisions 214 III Attachment IV of MoFR 75/2012: Certain Mineral Products Subject to Export Tax 216 CHAPTER 19 Regulation Amending Mining Services Regulation 219 I Executive Summary 219 II Details of Main Provisions 221 Appendix 1A: Types, Sectors, and Subsectors of Mining Services Business Activities 229 Appendix 1B: Types of Non-Core Mining Services Business Activities 232 CHAPTER 20 Acceleration of Domestic Processing and Refining Instruction 233 I Executive Summary 233 II Details of Main Provisions 235 CHAPTER 21 Draft Procedures for Issuing Special Production IUPs for Processing and Refining and Transportation and Sales Regulation 239 I Executive Summary 239 II Details of Main Provisions 241 CHAPTER 22 Draft Guidelines for Licensing of Metal Mineral and Coal Business Activities Regulation 267 I Executive Summary 267 II Details of Main Provisions 269 CHAPTER 23 Draft Guidelines for Licensing of Nonmetal Mineral and Rock Mining Business Activities Regulation 323 I Executive Summary 323 II Details of Main Provisions 325 CHAPTER 24 Draft Mining Business Employees, Goods, and Services Procurement Regulation 347 I Executive Summary 347 II Details of Main Provisions 349 CHAPTER 25 Draft Community Development and Empowerment Regulation 363 I Executive Summary 363 II Details of Main Provisions 365 CHAPTER 26 Draft Coal Value Added Regulation 373 I Executive Summary 373 II Details of Main Provisions 375 Appendix 1: Minimum Calorific Requirement 381 CHAPTER 27 Overview of the Forestry Regime 383 I Relevant Laws and Regulations 383 II Categorization of Forest Areas in Indonesia 384 III The Key Definitions for Forest Areas 385 IV Key Licenses for Forest Activities 386 V Carrying on Mining Activities in a Forest Area 386 VI General Description of Rent Use Permits 387 VII Steps Involved in Obtaining a Rent Use Permit and Related Licenses 388 CHAPTER 28 Forest Area Function and Purpose Regulation 405 I Executive Summary 405 II Details of Main Provisions 407 CHAPTER 29 Forest Area Utilization Regulation 419 I Executive Summary 419 II Details of Main Provisions 421 CHAPTER 30 Rent Use Permit Regulation 429 I Executive Summary 429 II Details of Main Provisions 431 CHAPTER 31 Forest License Moratorium Instruction 451 I Executive Summary 451 II Details of Main Provisions 452 CHAPTER 32 Forest Area Utilization for Underground Mining Activities Regulation 455 I Executive Summary 455 II Details of Main Provisions 456 CHAPTER 33 Procedures for Alteration of the Usage and Function of Forest Areas Amendment Regulation 463 I Executive Summary 463 II Details of Main Provisions 464 CHAPTER 34 Usage of Forest Areas Amendment Regulation 467 I Executive Summary 467 II Detail of Main Provisions 468 CHAPTER 35 Second Amendment Regulation re Guidelines for Rent Use of Forest Areas 471 I Executive Summary 471 II Details of Main Provisions 473 Glossary of Defined Terms 481 Index 491
William A. Sullivan is a Licensed Foreign Advocate in Indonesia as well as a Solicitor of the Supreme Court of New South Wales; a Solicitor of the High Court of Australia; an attorney and counselor-at-law in all courts of the State of New York; an attorney and counselor-at-law in the United States District Court for the Southern and Eastern Districts; a Solicitor of the Supreme Court of England and Wales; and a Solicitor of the Supreme Court of Hong Kong, admitted to practice in each of these jurisdictions. Bill's first involvement with Indonesia came in the early 1990s when he was seconded by an Australian law firm to a leading Indonesian law firm to provide international legal expertise in corporate and securities with a particular emphasis on corporate restructuring, the development of new financial products, debt and equity raisings, and other capital markets projects. He also acted for multinational corporations with substantial investments in Indonesia and for Indonesian companies pursuing major domestic and foreign investments, particularly in the oil and gas and hotel industries. From 1999 to 2000, Bill acted as the Australian government-funded technical adviser on debt restructuring matters to Bank Indonesia (the Indonesian central bank). Since 2006, Bill has concentrated increasingly on the Indonesian mining, energy, and resources sector. He has been involved in the negotiation, structuring, and documentation of numerous coal, gold, iron ore, and mineral sands project acquisitions, financings, and investments. This work has also included both advising upstream oil and gas companies in connection with their existing operations as well as advising foreign independent oil and gas companies on potential new investments in Indonesia, particularly in the coal bed methane gas sector.
Indonesia is blessed with an abundance of mineral resources. In addition to being one of the world's largest producers of tin, coal, and copper, Indonesia produces significant quantities of gold and nickel. It also produces bauxite, phosphates, and alluvial diamond where there is great resource potential for production, as well. Rivaling the nation's mineral resources in abundance is the mass of legal red tape with which mining companies, both domestic and foreign, must contend when operating there. Already notoriously confusing, the Indonesian legal and regulatory regime is currently experiencing a time of sweeping change as the government reevaluates its attitude toward the industry. To get an idea of just how confusing the situation has become, one need only consider the September 2012 decision of the Indonesian Supreme Court striking down the ban on the export of certain unprocessed metal and non-metal mineral products, which the Government introduced as a way of forcing producers of metal minerals and non-metal minerals to start carrying out domestic processing and refining of their production by January 2014. Although seen as a victory for the local mining industry, the Government has simply refused to accept the Supreme Court decision, insisting that the export ban is still in place. This is despite the fact that the commencement of widespread domestic processing and refining in January 2014 is a practical impossibility. Adding to the confusion is the lack of any coherent system for the widespread public dissemination, discussion, or notification of proposed new regulations or contemplated major policy changes for the local mining industry before their enforcement. This, inevitably, results in new regulations and policy changes that are completely at odds with the reality of local mining industry conditions. Finally, new laws, regulations and policies impacting the local mining industry generally appear in official Bahasa Indonesia versions only, with foreign mining companies and foreign professional advisers being left to rely on occasional, poorly written, and inconsistent unofficial English translations often prepared by non-lawyers and people with no understanding of mining industry practice. Considering the enormous stakes involved, it is more than a little surprising that no attempt has been made to provide a comprehensive, English-language guide to Indonesian mining laws and regulations—until now, that is. Written by a lawyer with unparalleled knowledge of and experience in the field, Mining Law & Regulatory Practice in Indonesia fills that gap in the global legal literature. The first and only comprehensive English-language summary of all the more important laws and regulations in the booming Indonesian mining sector, this book provides thorough coverage of everything from price setting to the processed minerals VAT, land use regulations to investment regulations, rent use permits to forest area utilization. In addition to providing detailed reviews of the laws and their various interpretations, expert William Sullivan supplies in-depth analyses of potential legal pitfalls for domestic and foreign operators and investors. An indispensable working resource for mining companies and their legal advisers and consultants, Mining Law & Regulatory Practice in Indonesia will also be of value to academics in the fields of international business, law, and finance, as well as industry associations and government policymakers both in Indonesia and abroad.
Praise for Mining Law & Regulatory Practice in Indonesia "I have known Bill Sullivan for many years and admire his profound grasp of the simultaneously complex and dynamic legal system surrounding the mining sector in Indonesia, which is intertwined with forestry, land ownership, regional government, and other equally intricate matters. His incisive mind cuts through the maze and gets straight to the core of the issue. I am glad that he has now written a book for which he is immensely qualified and that is required reading for anyone interested in the Indonesian mining industry." —Noke Kiroyan, former CEO, Rio Tinto Indonesia, Kaltim Prima Coal, and Newmont Pacific Nusantara "Bill Sullivan has long been one of the most highly respected lawyers advising on mining activities in Indonesia. Now Bill has summarized his years of deep experience and high-quality analysis to produce Mining Law & Regulatory Practice in Indonesia. Anyone seeking to understand mining in Indonesia must read this book. It will be the standard reference for many years." —James Castle, Chairman, CastleAsia, and founding President, International Chamber of Commerce in Indonesia "Bill Sullivan disproves the theory that Indonesian law is 'unknowable', but he does demonstrate its complexity. In a very clear, methodical way, Bill sets out the layers or 'lapis-lapis' of laws, presidential decrees, ministerial decrees, and government regulations that make up the Indonesian legal regime around mining, which is administered by the central government, province governors, and regencies. "Knowing for yourself with certainty what the law says is a great place to start in order to comply with it and progress your mining project. This is best attempted with a guide, and Bill's law firm serves as a good guide." —Andrew Wilson, Director, Robust Resources Ltd; Commissioner, PT Resource Alam Indonesia Tbk; former president director, PT BHP Billiton Indonesia "Bill Sullivan's comprehensive compilation of the laws and regulations governing activities in the exploration and mining sector in Indonesia is a long-awaited reference book for anyone involved or considering involvement in the sector. The inclusion of regulations, together with his comments, is invaluable, as is the inclusion of the relevant regulations on forestry. Project managers, directors of parent companies, and anyone interested in investing in the sector will find it to be an essential addition to their reference library." —Malcolm Baillie, Chairman, Indonesian Forum for Mining Exploration and Development "Bill Sullivan's book shows miners a clear path through the government's 'minefield' of regulation. Bill Sullivan has produced a comprehensive, systematic work. He deserves a prize for clarifying a very turbid regulatory regime. Bill's book will be kept on the desktops of all mining executives." —Dennis Heffernan, Principal, Van Zorge Heffernan, a prominent government relations and consulting company
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