Earlier this year, the Indonesian Government implemented laws prohibiting the export of raw minerals by foreign investors in conjunction with subjecting their export to progressive export taxes and requiring the divestment of foreign held mining licenses (a link to our alert can be found here). Now the first investor claim brought against Indonesia by a Netherlands party has been settled demonstrating the effectiveness of treaty protections in negotiating with host states.
On 15 July 2014, PT Newmont Nusa Tenggara (PT Newmont) and Nusa Tenggara Partnership, PT’s Dutch majority shareholder, filed a claim against Indonesia with the Centre for Settlement of Investment Disputes (ICSID) arguing that the export ban of unprocessed ore and export duty forced the closure of its Batu Hijau copper and gold mine in breach of the investment protections offered under the Netherlands-Indonesia bilateral investment treaty.
In a press release on 26 August 2014, PT Newmont announced that it had discontinued its ICSID claim after commitments from senior Government officials to open formal negotiations to conclude a memorial of understanding (MoU). PT Newmont anticipates that signing of the MoU would be followed by the safe ramp-up of copper concentrate production and exports from Batu Hijau. PT Newmont’s case demonstrates not only how foreign investors can take action to protect their investments but that ICSID arbitration provides a good background within which negotiations with the Indonesian Government can be conducted.