ESDM DRAFT NEW MINING LAW – A VERY MIXED BAG

27 May 2016

by Bill Sullivan

INTRODUCTION

A draft of Indonesia’s proposed new minerals and coal mining law (“New Mining Law”), as prepared by the Ministry of Energy & Mineral Resources (“ESDM”), was published by Hukum Online in early April (“April Draft Mining Law”).

The April Draft Mining Law represents only the first step in the process of enacting a New Mining Law. Nevertheless, the April Draft Mining Law provides a good opportunity to see ESDM’s most recent thinking as to what the New Mining Law should contain as well as how that thinking has evolved since a position paper on the New Mining Law was published by the Directorate General of Minerals & Coal (“DGoMC”) in October 2015 (“DGoMC Paper”).

The April Draft Mining Law is very much a “mixed bag” for the private sector and foreign investors, with some positive aspects as well as, unfortunately, some seriously negative aspects.

In this article the writer will (i) summarize the main proposed changes contemplated by the April Draft Mining Law and (ii) make an assessment of the likely significance of these changes if and when they eventually become part of the New Mining Law.

BACKGROUND

Indonesia’s existing regulatory regime for mining is found in the 2009 Minerals & Coal Mining Law (“2009 Mining Law”) and the numerous implementing regulations made pursuant to the 2009 Mining Law as well as in sundry government regulations, presidential and ministerial decrees and other instruments (together, “Existing Mining Regulatory Regime”).

It is a clear indication of the general dissatisfaction with the Existing Mining Regulatory Regime that, only 8 years after the introduction of the 2009 Mining Law, the consensus is that Indonesia needs a New Mining Law. Indeed, a New Mining Law was first proposed in 2015 if not earlier.

The deficiencies in the Existing Mining Regulatory Regime are numerous and have been the subject of much commentary by the writer and others.

The April Draft Mining Law is only a draft. ESDM may rethink and rewrite the April Draft Mining Law on one or more occasions before the New Mining Law moves to the next stage. A separate draft of the New Mining Law will also be prepared by Commission VII of the Indonesian Parliament (“DPR”) (“Commission VII Draft”). An attempt will then be made to reconcile the Commission VII Draft and the April Draft Mining Law (or whatever is the then current ESDM draft). It will be this reconciliation that is ultimately considered by and, likely, materially changed by the DPR.

It should be readily apparent from the foregoing there is no certainty that, if and when a New Mining Law is actually passed by the DPR and signed by the President, it will be even substantially the same, far less identical to, the April Draft Mining Law. Nevertheless, the April Draft Mining Law is an important, albeit early, milestone in the process of bringing about the New Mining Law.

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