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Indonesia appoints senior lawyers for arbitration with UK Churchill Mining

Publication Date : 09-08-2012


Indonesia has appointed a number of senior lawyers to represent it at the Washington-based International Centre for Settlement of Investment Disputes (Icsid) over the US$2 billion lawsuit filed by British mining company, Churchill Mining.

The lawyers include Law and Human Rights Minister Amir Syamsuddin, Home Minister Gamawan Fauzi, Attorney General Basrief Arief and Investment Coordinating Board (BKPM) chairman M. Chatib Basri.

"With the President's consent, I will send a notification to the Icsid that we are the appropriate lawyers to represent the government in the arbitration," Syamsuddin told The Jakarta Post yesterday.

The Icsid, an affiliate of the World Bank, is well known for having rigid rules as well as maintaining its integrity. It is, therefore, customary for the institution to examine thoroughly anyone who intends to come before it, Syamsuddin said.

Arbitration proceedings often take up to three years before a decision is made.

Indonesia was dragged into the Icsid tribunal following a request from Churchill Mining when the latter claimed its coal mining assets were seized by the regional administration in the East Kalimantan district of East Kutai without paying proper compensation.

The London-listed company established its coal mining operations in Indonesia in 2008 by acquiring a 75 per cent stake in the Ridlatama Group, which at that time was its local partner.

In 2010, the East Kutai administration revoked Ridlatama's mining permit for allegedly engaging in illegal logging and operating with forged permits. Churchill undertook a series of litigation in Indonesia, getting as far the Supreme Court, which, however, rejected its request to have the revocation of its local partner's mining permits overturned.

Churchill's local partner had secured mining permits for about 35,000 hectares of land, formerly controlled by six local firms affiliated with the PT Nusantara Group.

Despite the Nusantara Group reportedly losing their mining rights in 2006 and 2007 due to a lack of activity, former East Kutai regent Isran Noor assured the company that it still held a legitimate permit while Ridlatama was the one working under falsified permits.

Churchill estimated in mid 2008 that its mining concessions held 2.70 billion tons of coal with potential annual revenues of between $700 million and $1 billion for more than 20 years of operations.

In the upcoming arbitration, Syamsuddin said he planned to defend the actions of Indonesia's regional administration in revoking Ridlatama’s permit.

"We believe the East Kutai administration did the right thing by revoking the company's permit," he said.

Syamsuddin added that Indonesian law stipulated that foreign companies were not allowed to acquire a local company's stake and operate in the country without prior approval from the local administration in the intended operational region.

Noor has claimed its administration had no record of Churchill Mining seeking approval from the administration to operate in the region.

Indonesian Deputy Energy and Mineral Resources Minister Rudi Rubiandini said the government would wait and see Churchill's reaction after they appoint its lawyers.


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