Government to Issue Regulation to Re-order or Revoke IUPs

Finance & Projects Jakarta | Singapore Client Alert December 2015 Government to Issue Regulation to Re-order or Revoke IUPs For the past 5 years, the Ministry of Energy and Mineral Resources ("MEMR") has sought to tidy up historic anomalies in the issuance of mining business permits (IUPs). As part of this process, the MEMR maintains a "Clean and Clear" list which provides information on IUPs that have been found by the MEMR to fulfil certain requirements, including (amongst others): (a) having no overlapping areas with other mining areas; and (b) where the holder has satisfied certain financial obligations (such as royalty and deadrent payment obligations). As a result, the "Clean and Clear" certificate has increasingly became essential to secure other approvals and licenses - e.g. for approval of a change of shareholding, or the issuance of forestry borrow-to-use permits (pinjam pakai), etc. Against this background, it has been recently floated in the media that the MEMR may soon issue a regulation to sort out problematic IUPs, by setting out a legal basis to revoke non-compliant IUPs. What can we expect from the regulation? Given that the authority to supervise the mining industry vests only with the MEMR and governors, we expect that the person authorized to supervise this regulation will also be the MEMR and governors, with no involvement from the regents (bupati). It is also seems likely that governors will act as the front guard of the MEMR in identifying problematic IUPs, particularly in respect of: a. overlapping areas with other IUPs. b. overlapping areas with forest areas. c. overlapping administrative areas (overlapping with other regency, city or province). d. conformity of coordinates of the IUPs with the reserve areas. e. conformity of coordinates of the Production Operation IUPs with the Exploration IUPs. Finance & Projects 2 Government to Issue Regulation to Re-order or Revoke IUPs December 2015 Possible Remedies The assessment by the governor may affect the respective IUPs, by way of, amongst others: a. adjustment of the IUP (for example, by revising the coordinates as necessary); b. relinquishment of area, if only part of an IUP is affected; and c. revocation of IUP. As this assessment should sort the compliant IUPs from the non-compliant ones, we expect that the results of this assessment will be used by the MEMR to determine the status of these IUPs. Takeaways While it may be too late for some IUP companies to ensure that their IUPs have been properly issued, they should ensure that their reporting, financial and environmental obligations have been satisfied, and that they have been issued with a Clear and Clean certificate. *** We will continue to monitor this matter and will provide a further, more detailed analysis once the regulation has been passed. ©2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. www.bakermckenzie.com For further information please contact Luke Devine Foreign Legal Consultant +62 21 2960 8600 luke.devine@bakernet.com Norman Bissett Foreign Legal Consultant +62 21 2960 8678 norman.bissett@bakernet.com Muhammad Karnova Partner +62 21 2960 8699 muhammad.karnova@bakernet.com Jeremia Purba Associate +62 21 2960 8592 jeremia.purba@bakernet.com Hadiputranto, Hadinoto & Partners* The Indonesia Stock Exchange Building, Tower II, 21st Floor Sudirman Central Business District Jl. Jendral Sudirman Kav. 52-53 Jakarta 12190 Indonesia www.hhp.co.id Milan Radman Principal +65 6434 2641 milan.radman@bakermckenzie.com Baker & McKenzie.Wong & Leow* 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 www.bakermckenzie.com/Singapore *Hadiputranto, Hadinoto & Partners and Baker & McKenzie.Wong & Leow are member firms of Baker & McKenzie International.