Mining in Indonesia – Principal Laws and Regulatory Bodies

In addition to the Indonesian Constitution, the principal law that regulates the mining industry is Law 4/2009 on Coal and Mineral Mining (Law 4/2009), the amendment of which, under the draft Amendment to Law 4/2009 (the Mining Law Amendment), was recently ratified by the House of Representatives.

The Ministry of Energy and Mineral Resources (MEMR) is the principal regulatory body that administers the implementation of mining laws and regulations. However, since the mining industry is closely tied to other sectors (eg, forestry and the environment), other ministries govern matters that fall under their respective authorities. Mining companies in Indonesia must comply with regulations issued by ministries other than the MEMR, to the relevant extent.

Law 4/2009 is further implemented by various governmental regulations, including:

• Government Regulation (GR) 22/2010 on Mining Areas;
• GR 23/2010 on the Implementation of Coal and Mineral Mining Business Activities, as amended by:

• • GR 24/2012;
  • GR 1/2014;
  • GR 77/2014;
  • GR 1/2017; and
  • GR 8/2018;
• GR 55/2010 on the Development and Monitoring of the Implementation of Coal and Mineral Mining Business Activities;
• GR 78/2010 on Reclamation and Post-Mining Activities; and
• GR 81/2019 on the Types and Tariffs for Non-Tax State Revenues Applicable to the Ministry of Energy and Mineral Resources.

These regulations are further implemented by various ministerial regulations issued by the MEMR, including:

• MEMR Regulation 43/2015 on the Procedure for the Evaluation of the Issuance of Coal and Mineral Business Licenses;
• MEMR Regulation 7/2017 on the Procedure for Determining Coal and Mineral Benchmark Prices, as amended by MEMR Regulation 44/2017 and MEMR Regulation 19/2018;
• MEMR Regulation 9/2017 on the Divestment Procedure and Price Determination Mechanism for the Divestment of Shares in Coal and Mineral Mining Businesses, as amended by MEMR Regulation 43/2018;
• MEMR Regulation 48/2017 on the Supervision of Business Activities in the Energy and Mineral Resources Sector;
• MEMR Regulation 25/2018 on Coal and Mineral Mining Business, as amended by MEMR Regulation 50/2018;
• MEMR Regulation 26/2018 on the Implementation of Good Mining Principles and the Supervision of Coal and Mineral Mining; and
• MEMR Regulation 7/2020, which revoked MEMR Regulation 11/2018, as most recently amended by MEMR Regulation 51/2018.

Of these regulations, several that were issued in 2018 are particularly important. GR 8/2018, which is the fifth amendment of GR 23/2010, confirms that the MEMR is authorized to determine the sale price of coal for the fulfilment of domestic market obligations.

MEMR Regulation 25/2018 generally regulates the performance of activities under:

• a mining permit (IUP);
• a special mining permit (IUPK);
• an operation production IUP (IUPOP) specifically for processing and refining (IUPOPK-PR); and
• an IUPOP specifically for transportation and sales (IUPOPK-TS).

MEMR Regulation 25/2018 also contains provisions on:

• divestment;
• workforce;
• non-tax state revenue;
• the purchase of capital goods; and
• coal and mineral benchmark prices.

MEMR Regulation 7/2020 regulates matters relating to, among other things:

• determining and stipulating mining business permit areas (WIUPs) and special mining permit areas (WIUPKs);
• information systems on mining areas;
• the procedure for granting WIUPs and WIUPKs;
• the procedure for granting mining permits;
• the rights and obligations of mining permit holders;
• work plans and budgets; and
• periodical reporting requirements.

New features introduced by MEMR Regulation 7/2020 include: (1) a relaxed timeline on the escalation from an exploration IUP (IUPE) to an IUPOP; (2) additional obligations for holders of a mining services business license (IUJP) and an IUPOP specifically for transportation and sales; (3) the obligation for IUP holders to apply to the MEMR to adjust their IUP upon the change of status from a domestic investment company to a foreign investment company; (4) a reporting requirement on the change of management (board of directors or board of commissioners) of a mining company, as opposed to prior approval as required under MEMR Regulation 11/2018; and (5) additional provisions on the amendment of the mandatory Annual Work Plan and Budget.

The Mining Law Amendment will revise 83 provisions in Law 4/2009 and introduce 52 new provisions. Some of the changes provided under the Mining Law Amendment may need to be further implemented by government regulations or lower-level regulations. As a result, the existing implementing regulations may also be amended in the near future.

The Mining Law Amendment specifies 31 matters to be further regulated under government regulations, with the implementing legislation to be stipulated within a year of the enactment of the Mining Law Amendment. While waiting for the amendment to or new regulations to implement the Mining Law Amendment, the existing implementing regulations will remain effective and valid to the extent they are consistent with the Mining Law Amendment.

This first appeared in the Lexology GTDT Mining 2020 global guide. 

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