Examining the decision to revoke mining permits

by: Eko Prasetyo

On Friday, 12 August 2022, the Minister of Investment/Head of the Investment Coordinating Board (BKPM) Bahlil Lahadalia stated, in the context of land management, the government had revoked 2,065 mining business permits (IUP) covering an area of ​​3.1 million hectares.

The permit revocation was made because mining businesses committed violations, according to the government. The violation in question is that IUPs are mortgaged. Lahadalia said, these permits cannot be mortgaged at the bank.

Many of the IUPs are resold and used to “play” in the securities sector, but capital gains from these securities are not invested back to build already licensed businesses. Lastly, Lahadalia argued that there are also many IUPs that are stalled, and even abandoned.

However, the problem is, is it appropriate that the institution that evaluates and revokes the permit the Ministry of Investment/Investment Coordinating Board (BKPM)? And whether the reasons used to revoke IUPs are in line with those stipulated in the legislation? Then, what steps should be taken, both by entrepreneurs and the government, so that similar incidents do not happen again in the future?

Authorised agency

Given the revocation of permits with IUP clauses, at first glance the public—especially businesses—would believe that the authorised and responsible institution is the Ministry of Energy and Mineral Resources. However, the government represented by the Director General of Minerals and Coal of the Ministry of Energy and Mineral Resources, Ridwan Djamaluddin, said that all licensing processes are currently centralised at the Ministry of Investment/BKPM through the Online Single Submission (OSS).

This transfer of authority is contained in Presidential Instruction (Inpres) Number 1 of 2022 concerning Optimising the Implementation of the National Health Insurance Program (hereinafter referred to as Presidential Instruction No. 1/2022). The second dictum number 23 Inpres a quo instructs the Minister of Investment/BKPM to support the implementation of the National Health Insurance program in the business licensing process through the OSS system.

In addition, there is Presidential Decree Number 11 of 2021 concerning the Task Force for Acceleration of Investment which attributes the authority of this institution to the Minister of Investment/BKPM. The main task of this institution is to encourage business acceleration for sectors that have the characteristics of rapidly generating foreign exchange, generating employment, and developing regional and local economies.

Meanwhile, the Ministry of Energy and Mineral Resources is currently only focusing on formulating and establishing policies in the fields of fostering, controlling, and supervising oil and gas, electricity, minerals and coal, new energy, renewable energy, energy conservation, and geology.

From this change in the regulation of authority, the government clearly wants to accelerate the ease of doing business. This transfer of authority also indicates that the government wants to make permits as a forum for independence for the Indonesian people with an investment mechanism.

Reason for revocation

Permit revocation is one of three types of administrative sanctions that must be given gradually to IUP holders who violate the provisions. The types of sanctions referred to are contained in Government Regulation Number 96 Number 2021 concerning the Implementation of Mining Business Activities (hereinafter referred to as PP No. 96/2021) in the form of: (i) written warnings; (ii) temporary suspension of part or all of Exploration activities or Production Operations; and/or (iii) revocation of mining permit (IUP), special mining permit (IUPK), community mining permit (IPR), stone mining permit (SIPB), or IUP for Sales.

Meanwhile, the types of violations that can be subject to sanctions are at least regulated in 31 provisions in PP No. 96/2021. Some of them are Article 10 paragraph (1) regarding the prohibition of transferring IUP to other parties without the approval of the Minister, Article 13 paragraph (1) concerning the prohibition for IUP holders to transfer share ownership without the approval of the Minister.

Article 48 paragraph (1) which explains the obligation to carry out further exploration every year. Article 49 paragraph (1) the obligation to install WIUP boundary signs at the stage of Production Operation activities. Article 65 paragraph (1) stipulates the obligation for the holder of a People’s Mining Permit (IPR) to carry out mining activities within three months after the IPR is issued.

Article 137 paragraph (1) stipulates the obligation of IUP or IUPK holders to use local and/or national mining service companies. Article 145 paragraph (3) and Article 146 paragraph (3) concerning the obligation to carry out reclamation.

From some of these obligations, there are no obligations that explain that within a certain period of time, it is mandatory for IUP and/or IUPK holders to start mining activities. In contrast to IPR holders who are required to start mining activities no later than three months after the IPR is issued.

The void of this provision is suspected to be the cause of delays or even many IUPs that have been stalled for years and have not been cultivated, and there is not even a clause that instructs IUP and/or IUPK holders to carry out general investigations or prospecting.

In addition, the imposition of sanctions in the form of revocation of permits immediately without going through the stages of giving administrative sanctions in the form of written warnings and temporary suspension of part or all of the activities can only be imposed if the holder of an IUP, IUPK, IPR or SIPB who: (i) commits a criminal offence based on a court decision which has permanent legal force; (ii) the results of the minister’s evaluation of IUP, IUPK, IPR, or SIPB holders who have caused environmental damage and do not apply good Mining technical principles; or (iii) the holder of an IUP, IUPK, IPR, or SIPB is declared bankrupt (Article 188 of PP No. 96/2021).

Based on the regulation, the reason for the revocation of mining permits by the government on the pretext that the IUP holder (and other permits other than the IPR) do not carry out mining activities is irrelevant.

Measures for handling and prevention

Mining provides a variety of benefits when managed properly. This activity that requires human labour will certainly create job opportunities, which is expected to reduce the unemployment rate at the local level. The large results obtained from this activity will also increase income, both for the region and the country through its foreign exchange. However, these two things will be achieved if mining activities can be carried out immediately once a permit has been obtained.

The problem is, one of the reasons why many mining areas have not been developed is the legal vacuum that forces IUP/IUPK holders to immediately carry out mining activities.

Then, the government inconsistently took steps to revoke permits without going through two administrative sanctions (written warning and temporary suspension) on the pretext that many entrepreneurs already held permits, but did not immediately use them. It is feared that the immediate revocation of permits will damage the investment and business climate in the mineral and coal sector.

Steps that can be taken to mediate this problem are, the government must evaluate the IUP granting system, especially from the regulation arrangement by ensuring that there are no clauses that are used as legal loopholes and tightening the qualifications of those who apply for permits.

Furthermore, a permit that has been revoked and the previous permit holder did not try to take legal steps, can be auctioned. This mechanism is recognized in Article 51 paragraph (1) of Law Number 3 of 2020 concerning Amendments to Law Number 4 of 2009 concerning Mineral and Coal Mining and Article 17 paragraph (3) of Government Regulation No. 96/2021.

This auction mechanism is expected to be a way out in the search for entrepreneurs who are qualified, meet the requirements, and are serious about seeking their permits.

Entrepreneurs who have been harmed by this government step can file a lawsuit to the State Administrative Court on the grounds that the government does not exercise discretion as regulated by laws and regulations, which is in line with the General Principles of Good Governance and contrary to regulations.

Banner photo: Parilov/shutterstock.com

Like this article? share it

More Post

Receive the latest news

Subscribe To Our Weekly Newsletter

Get notified about new articles