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Indonesia gets ready for British mining company's US$1.8b suit

Publication Date : 05-07-2012

 

Several Indonesian ministries and the Attorney General's Office held a meeting at the Finance Ministry’s office in Jakarta yesterday to prepare the government’s response to the US$1.8 billion lawsuit filed by British mining company Churchill Mining.

"Today the team talked about preparations for the legal suit. We are learning about our strengths and weaknesses, and we are cross checking all available data that we have," Deputy Energy and Mineral Resources Minister Rudi Rubiandini told reporters late yesterday.

He said that the government had established a team comprising senior officials representing the Energy and Mineral Resources Ministry, the Forestry Ministry, the Attorney General's Office, the Finance Ministry, and the East Kutai administration as well as the Investment Coordinating Board (BKPM) to prepare the government’s response to Churchill's litigation.

The team will report its work to President Susilo Bambang Yudhoyono on Friday.

Aside from Rubiandini, yesterday's meeting was also attended by Forestry Minister Zulkifli Hasan, Attorney General Basrief Arief, Finance Minister Agus Martowardojo and East Kutai Regent Isran Noor.

The London-listed company requested international arbitration after the Indonesian Supreme Court rejected its request to overturn the revocation of its local partner's mining permits in East Kutai regency, East Kalimantan.

Churchill entered the country’s coal mining business after it acquired a 75 per cent stake in the Ridlatama Group in 2008. The East Kutai administration revoked its partner's mining permits in 2010 for allegedly engaging in illegal logging and operating under forged permits.

The permits covered coal mining in about 35,000 hectares that was formerly controlled by six local firms affiliated with the PT Nusantara Group, which was reported to have lost their mining rights in 2006 and 2007 due to a lack of activity.

Churchill estimates that the mining concessions hold 2.70 billion tonnes of coal with potential annual revenues of between $700 million and $1 billion for more than 20 years of operations.

The British company is reported to have sought $1.8 billion in compensation for the revocation of its mining permits. In its arbitration request, the company said the Indonesian government had breached its obligations under the UK-Indonesia Bilateral Investment Treaty.

Speaking to reporters after the meeting, Noor said that the permits were revoked because the company breached mining and forestry regulations.

He claimed Ridlatama had forged mining permits to operate on mining areas owned by Nusantara Group — a company linked to Prabowo Subianto, the founder of the Great Indonesia Movement (Gerindra) party and a chief of the Kopassus special forces unit under president Soeharto.

Noor denied rumors that the East Kutai administration had returned the mining areas to Nusantara after Churchill and its partner discovered huge coal deposits in the area.

"The mining areas belong to Nusantara and are now still owned by the company," he said, adding that Ridlatama operated in the mining areas using forged permits.

"There is a strong indication that the licensing documents that Ridlatama used are fake," he said. With such strong legal arguments, he felt Churchill had little chance to win the case.

Meanwhile, Hasan also confirmed that the Forestry Ministry had strong evidence indicating that Ridlatama had operated in a forestry reserve in East Kutai without proper permits. He said that any mining company should obtain approval from his ministry to be able to operate in productive forest areas. "Ridlatama conducted mining activities and found huge coal deposits, but it operated without a permit," he added.

 

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