“MINING CONCESSIONS BETWEEN THE TWO MINING LAWS: A TRANSITIONAL OVERVIEW”

This is my latest writing. Quite long since my last logout in wordpress. I hope you find this useful. This summarizes a major transition from the previous to the new mining law. At the time this writing is made public here, yes, we have a new mining law. But we are still waiting for the implementing regulations pending to several months later. I hope to complete my writing soon after the regulations are issued.

(A. Prasusetya, writer)


“MINING CONCESSIONS BETWEEN THE TWO MINING LAWS:

A TRANSITIONAL OVERVIEW”


A. Introduction

‘A hard time’s product’, that is probably the most suitable nickname for the Law 4 of 2009 re. Mineral and Coal Mining (the New Mining Law). Even months before its stipulation, its bill gained numerous pros and cons from both mining business doers and amongst the Government officials itself. This issue was also quickly responded by Indonesian local governments; many of them seemed eager to execute this bill’s ideas, even at the sunset time where the Law 11 of 1967 (the Previous Mining Law) still reigned. For an instance, some local governments issued either double or quasi version of these regimes titled “KP/IUP” since confusions grew in the mining licences they issued. Before, for years, this bill had been remaining uncertain. In December 2008, Indonesian Senate eventually passed this bill, and soon, the President stipulated it into a law in 12 January 2009.

Indonesian mining business climate is well known as ironic, and to some degrees, paradoxical. The Fraser Institute made a breathtaking report in the year 2007 where Indonesia was found as one of the ten highly potential countries in connection with its mineral and coal resources. Yet on the same paper, Fraser Institute also stated that Indonesia was standing at the poorest appeal of foreign investment. Many things were calibrated in this issue with regulation uncertainty issues included.

What goes on particular concern here is how Indonesia would answer its challenge in this dilemma. Many people believe that mining industries in Indonesia must definitely be able to improve people’s welfare. That is exactly the solemn purpose of the Indonesian Constitution, containing a virtue by which Indonesian people must achieve these welfare goals.

As a country, Indonesia depends on international relationship with others. And Indonesia, however, must secure its interests by convincing other countries in order to establish mutual relationships and keep it alive. On the other hand, Indonesian mining business authorization lately, although seemed to be increasing before the New Mining Law stipulation, is now stopped at all. The Directorate General of Mineral, Coal, and Geothermal of Ministry of Energy and Mineral Resources (DGMCG) issued a circular early this year to maintain the business stabilization within a condition of regulation vacuum. Through a circular No. 03.E/31/DJB/2009 dated 30 January 2009 re. Authorizing Mining Licences Issued before the Law 4 of 2009 (Circular 03/2009), Government stopped authorizing mining licences at all, temporarily, until the implementing regulations of the New Mining Law are done. And what matters the most is, that the existing mining concessions including any contract with Government must be completely adjusted with this law.

As a matter of fact, since the New Mining Law definitely relies on its implementing regulations which, by the date this paper is made public, are not yet done. The real living mining law will, however, be completely subject to these regulations. Some of information obtained in this material are taken from the drafts of these implementing regulations. But the final provision takes some more times.

.

B. Mining concessions adjustment

One of the issues that significantly rises as the central spot, for which all main adjustment must be held, is a system transition from the Previous Mining Law to the New Mining Law. And for this, the New Mining Law only provides a 1 year period as of the date of 12 January 2009 when the law stipulated.

It is known that the New Mining Law applies only licence model for all mining authorizations issued thereunder (the licence regime). To the contrast of it, the Previous Mining Law applied both (but mainly addressed as the contract regime). Following is a table describing a comparison of transitional system change for Contract of Work (Ind., KK), Coal Contract of Work (Ind., PKP2B), Coal Mining Licence (Ind., KP), and Local Mining Licence (Ind., SIPD), into Mining Business Licence (Ind., IUP)/Special Mining Business Licence (Ind., IUPK) in their connection with contract and licence regimes.

link1

Under the Previous Mining Law, the contract regime was applied. The most significant matter adopted by the New Mining Law is that the contract regime is over and now replaced by licence regime. Such transition from contract to licence regime is ruled by the New Mining Law as follow:

Art. 169

  1. “Contracts of works and coal contracts of works that already exist prior to the effectiveness of this Law shall remain valid until the contracts/agreements expire.
  2. The terms that are stated by articles of Contracts of works and coal contracts of works as intended by point (a) shall be adjusted at the latest 1 (one) year of the promulgation of this Law, with the exception of state revenues.”

Slightly seen, there is an inconsistency between the two points, for which many controversies arise. Point a of this provision respects the Contract of Work (Ind., KK) and Coal Contract of Work (Ind., PKP2B), while point b strongly requires these contracts to be adjusted accordingly with the New Mining Law. Such inconsistency created a hole for which the Government itself must try to cover in order to maintain mining business climate stability in Indonesia. And once again, what Fraser Institute concerned does occur.

From the provision above, we may conclude this:

link2

In accordance with article 1338 of the Indonesian Civil Code as a basic law, upon which common practices occur, any agreement into which parties enter prevails and binds them as a law (pacta sunt servanda). This is also known as the principle of Sanctity of Contract where contract must be respected. Therefore, although the New Mining Law’s provisions must prevail by adjusting the contracts, it cannot overrule the pacta sunt servanda principle. All in all, the KK and PKP2B contracts remain valid as contracts until their respective expiries and will not be changed into IUP/IUPK licences until their respective expiry date.

Beside a requirement to adjust, the law also limit the extension of KK and PKP2B. Generally, a contract can be renewed or extended whensoever the expiry date comes to occur, subject to the contract’s provisions themselves. But the New Mining Law prevents this, ruling that after the expiry date each contract must be proceeded through an tender. In connection with the tender activities, this concept is newly introduced in our mining law. Tender, as provided under the New Mining Law, must be performed when:

(1)   applying new mining licences

The drafts of implementing regulations govern that the new mining licences (IUP/IUPK) applied must go through 2 mechanisms consecutively, i.e. (1) a tender process to obtain the mining area (later explained as WIUP and WIUPK) and (2) a mechanism to obtain the relevant mining licences (IUP/IUPK) in accordance with the obtained area. The drafts do not explain any procedure should an applicant manages to obtain a mining area but is failed in obtaining the mining licence.

The types of mining licence which require tender mechanisms are:

–          IUP for metal mineral,

–          IUP for coal, and

–          IUPK in case it is applied by private business entities.

(2)   adjusting the KK and PKP2B contracts after it is expired.

In the events of expiry, the KK and PKP2B contracts will be terminated. And through tender mechanisms, they will become IUP/IUPK. Through these mechanisms, a KK/PKP2B holder cannot extend the contracts validity. Instead, it may obtain the area after a tender process. A special right is introduced here as the right to match, by which a chance is given to the (former) KK/PKP2B holder to match the highest bidder at the tender process. Should it be able to match the price, then it will be the mining licence holder upon the ex KK/PKP2B area. And thereon, the mining concession will take form in IUP/IUPK instead of KK/PKP2B.

The elucidation to article 169(b) explains that such adjustment must apply over all articles of KK and PKP2B contracts. The only thing excluded from this provision is any effort to increase the State’s income. In other words, the Government may discretionally determine which provision under either the original contracts or the adjustment benefits it the most.

The New Mining Law does not regulate any event of incompliance with this provision. Most likely, should any incompliance event occurs, article 154 will prevail. Article 154 provides that any dispute (including incompliance in adjusting the KK and PKP2B contracts) will be filed to the relevant domestic courts and domestic arbitration. Related to this issue, the only possible way of disputing a licence is settled by the administrative courts, not arbitration. This is because IUP/IUPK, into which KK and PKP2B will be changed, is a licence discretionally issued by Government and no longer is a contract.

Further, article 172 of the New Mining Law details that KK/PKP2B which will be processed without tender are those which meet following requirements:

  1. had been submitted to the Minister at the latest of 1 year before the law’s stipulation; and
  2. already obtained principal approval or preliminary survey licence.

.

C. The two regulations guiding the transitional period

Indonesian mining business doers must be thankful for the initiatives made by the Ministry of Energy and Mineral Resources (MEMR). The ministry provides several regulations to cover the orders vested in the New Mining Law. Since the law itself is a political product and not the experts’, there are many weaknesses in countless number. But this stimulates the Ministry to be open in persuading mining business doers to participate in the making of implementing regulations. In Indonesia where the government is accustomed with one way direction of regulation, this is very rare and should be highly appreciated.

The DGMCG also issued a letter No. 1053/30/DJB/2009 dated 24 March 2009 re. Mining Business Licences (Letter 1053/2009) following the Circular 03/2009 where it is regulated therein that any in-process KK and PKP2B application which (1) had been applied 6 months before the New Mining Law stipulated (before the date of 12 January 2009) and (2) already obtained a Principal Approval, can proceed for an IUP/IUPK without having to go through tender. But the applicant must establish an Indonesian legal entity, for which the applicant must have an approval from the Minister of Law and Human Rights. Here lies a triangle of authorization where the Indonesian legal entity establishment requires followings:

  1. recommended by the DGMCG;
  2. coordinated with the Ministry of Law and Human Rights (MLHR); and
  3. coordinated with Indonesian Coordination Board for Investment (Ind., BKPM).

Lastly, the application which will end in IUP/IUPK authorization must be arranged accordingly with the format explained in the Letter 1053/2009.

The Circular 03/2009 which was issued in 30 January 2009 mainly governs the provisions as follow:

(1)   To cover the absence of KP regulation under the New Mining Law (although it engages a new difficulty, see point F of this paper).

(2)   To halt temporarily all mining concession authorizations until the implementing regulations are issued. All mining authorization issued by Minister, governors, regents/mayors dated after 12 January 2009 must be held null and void (note that this circular letter issued by DGMCG is directed to deal with Minister’s decrees using this treatment, while DGMCG is clearly subordinated under the Minister himself).

(3)   To invite all relevant KP holders to submit the KPs which had been applied and had already obtained area allocation approval before the New Mining Law was stipulated (12 January 2009) at the latest of 1 month after the circular’s issuance, to the Minister.

(4)   To invite all relevant KP holders which already at the stage of exploration or exploitation at the latest 6 months before 12 January 2009 to submit their mining activity plans containing all areas until the KP expiry date, to the Minister.

(5)   New applications to SIPD will be processed accordingly for IUP.

(6)   Each of the KK/PKP2B applicant intended by article 172 of the New Mining Law, must establish an Indonesian incorporated legal entity.

And lastly, the Letter 1053/2009 which was issued in the date of 24 March 2009, following the Circular 03/2009 governs followings:

(1)   Obligation to change KP into IUP using the attached formats.

(2)   All KP new application (which initially to obtain a new KP) submitted before 12 January 2009 can be proceeded without having to go through tender procedure.

(3)   All KP stage improvement and extension application must be proceeded accordingly with the New Mining Law using the attached IUP formats (using tender procedure).

(4)   All KP new application, stage improvement, and extension must provide sitemap and coordinates to the DGMCG.

(5)   Each of the KK/PKP2B applicant intended by article 172 of the New Mining Law, must establish an Indonesian incorporated legal entity. The applications will be proceeded without tender, but using attached IUP format.

(6)   Triangle coordination: MLHR, BKPM, and DGMCG.

.

D. Area Concept

The concept adopted in authorizing the new licence types are principally based on area concept. IUP and IUPK are granted after tendering the relevant area. Following is a diagram describing how mining area in Indonesia are assigned.

link3

Area allocation scheme for IUP
1 WUP is allocated from some parts of WP area, marked by availabilities of geological and potentials information
2 A WUP consists of several WIUP
3 WIUP is an area assigned to IUP holder
Area allocation scheme for IUPK
4 WPN is a part of WP which is exclusively allocated in connection with national strategic interest
5 WUPK is a part of WPN upon which particular mining activities are authorized
6 WIUPK is a part of WUPK
7 WIUPK is an area assigned to IUPK holder
Area allocation scheme for IPR
8 WPR is a part of WP allocated solely for people mining activities
9 WPR is an area assigned to IPR holder

.

E. New forms: IUP and IUPK

IUP and IUPK both are created from different concept and each has different nature. Following is a table of comparison to these mining licences. Beside the two types, the New Mining Law also provides the smallest scale of mining licence, by which the local people perform their mining activities, i.e. People Mining Licence (Ind., IPR). The IUP mining activities are conducted in WIUP (IUP Area) while IUPK and IPR are conducted consecutively in WIUPK (IUPK Area) and WPR (IPR Area).

Following is a table explaining a simple comparison between IUP and IUPK contained in the GR draft.

link4

WIUPK, in which area IUPK mining activities are performed, is authorized by Minister of Energy and Mineral Resources (Minister). Article 27 rules that WIUPK is an area derived from the State Allocation Area (Ind., WPN). The WPN is jointly determined by President and Senate concerning national strategic interests. For this reason, all IUPK authorizations must be granted by the Minister and subject to the Senate’s approval. Therefore, we may conclude that IUPK is obtained for more specific and strategic business objectives in connection with the State’s interests.

.

F. KP is at a null-regulation condition

As a political product, a law cannot be expected much. Instead, it is the government’s role (through MEMR) to cover such legal ideas in proper regulations. The fact is, the New Mining Law does not mention any provision, neither directly or indirectly, regulating the KP. It is quite unreasonable since the number of this type of mining licence under the Previous Mining Law positions at the highest rank over the number of KK and PKP2B. Pursuant to information from DGMCG this year 2009, there are 2513 active KPs (from general survey to transportation and selling); compare with the number of active KKs (42) and PKP2Bs (76). Here the mining business doers sense that there is something not right with regulation making process in Indonesia, by which the mining business climate darkens.

Viewing that Indonesian Government must be responsible for business climate in Indonesia, the DGCMG tries to cover this problematic condition by issuing the 2 regulations, i.e. the Circular 03/2009 and Letter 1053/2009. The latest regulates that KP will change into IUP and not IUPK. Despite of these responsive initiatives, there is a weakness in relying on the circulars. Theoretically, a law must be delegated into a regulation. But it needs a very clear certainty whether the circular types can be classified into regulation class. And in accordance with the Law 10 of 2004 re. Forming Laws and Regulations (Law 10/2004), it is not classified into the regulation class.

Pursuant to article 7.1 of the Law 10/2004, the hierarchy of laws and regulations in Indonesia is constituted by (a) Constitution 1945, (b) Laws/Government Regulations in lieu of Laws, (c) Government Regulations, (d) Presidential Regulations, and (e) Local Regulations.

Furthermore, the elucidation to article 7.4 provides several items which can be classified into the laws and regulations type, i.e. regulations issued by (a) People Assembly, (b) Senate, (c) House of Representatives, (d) Supreme Court, (e) Constitutional Court, (f) State Audit Board, (g) Bank Indonesia, (h) Ministers, (i) head of state organs, (j) head of state agencies, (k) head of commissions, (l) People Legislative Council in each province, (m) governors, (n) People Legislative Council in each regency/municipality, (o) regents/mayors, and (p) village heads.

Therefore, the KP position regarding the two circulars governing it is basically on an improper standing. The most effective solution for this is by changing these circulars into ministerial regulation by the Minister of Energy and Mineral Resources, by which the legal effect is acknowledged as conferred from regulation class.

Compared to the KK and PKP2B, KP consists practically of several steps of mining stages. Unlike KK and PKP2B, KP is rather complicated to be authorized. For example, a KK or PKP2B grants the licence holder rights to mine, starting from general survey to transportation and selling. But each stage of KP requires obtaining a specific and relevant mining licence respectively. Nevertheless, the New Mining Law guarantees that a licence holder will obtain the licence for next mining stages, whereby a certainty is created. Following is a table overviewing its stages, compared to the IUP/IUPK, into which the KP licence will be changed.

link5

.

G. Concept of mining product ownership

Concept of ownership to the mining product is perhaps the backbone concept of the entire mining business activities, by which a mining business doer sells its mineral/coal excavated from the mining licence area. Article 92 of the New Mining Law states a concept of mining product ownership as follow:

“IUP holders and IUPK holders shall be entitled to own minerals, including associated minerals, or coal they have produced if already paying exploration contribution or production contribution, except for radioactive associated minerals.”

From the provision above, we may conclude that a transfer of ownership occurs once the mining company pays: (a) exploration contribution, or production contribution (royalty). In the KK and PKP2B practices, and for KP, based on Government Regulation No. 45 year 2003 re. Tariffs on Non Tax State Income Prevails for the MEMR (GR 45/2003), such payment (the production contribution) is acknowledged as royalty, i.e. percentage given to the Government(s). Under the Previous Mining Law and GR 45/2003, royalty is a percentage set against sales price (practically FOB prices). The royalty tariffs are set differently for both open pit mining and under ground mining variously from low calorie-coal to high calorie-coal. Under the New Mining Law, royalty will most seemingly adopt the GR 45/2003, unless provided otherwise in the future by another GR.

Obligation to pay royalty prevails over KK, PKP2B, and KP holders. But in accordance with the Presidential Decree No. 75 of 1996 re. Main Regulation to PKP2B (PR 75/96), PKP2B holders are also charged with certain contribution in addition for royalty namely Fees for Coal Sales Proceed (Ind., DHPB) for an amount of 13.5% set against the coal production, paid based on FOB price. This percentage is nailed down and not subject to any change of taxation policies during the contract period. What differs DHPB from royalty is that DHPB is charged to a mining company regardless of the mining product quality mined. On the contrary, royalty is charged to a mining company based on the mining product quality. Further, the GR 45/2003 sets out the royalty fee for each mining product along with their qualities. In addition, DHPB in 13.5% already includes (1) exploration contribution, (2) exploitation contribution (or royalty), and (3) VAT.

Particularly to Operation-Production IUPK holder under the New Mining Law, an extra contribution fee (IUPK contribution fee) is charged. IUPK contribution fee is set against nett income, and the tariff is flat at the rate of 10%. This means that besides the royalty obligation, IUPK holders must also pay the contribution fee. The implementing regulation of this law must clearly define whether or not such payment includes royalty. This fee is unique since it is related with the concept of local governance. Under the Law 32 of 2004 re. Autonomous Governments (Law 32/204), Indonesia no longer applies centralization like it did completely before the 4 amendments to Constitution 1945 (year 1999 to 2002). This is an age where local governance concept pushes forward and influences almost over all issues. Accordingly, the governing approaches, especially in the mining business authorization case, are completely different as well. This description might give representing ideas for the authorities held by the Government and local governments in connection with 10% contribution fee payment charged to IUPK holders; through article 129 of the New Mining Law, local governments have more powerful authorization, including income arrangement governed by the New Mining Law as provided following in the table:

link6

In the mining area, it is possible to discover another type (or more than one) of mining material other than what authorized by the mining licence to holders. Mining any material other than what authorized must be licenced as well. But in this case, a right of first priority is given to the relevant holder in order to mine the newly discovered material, regardless the holder is to accept or decline such right. This right is also known as the right of first refusal. In case the holder accepts it, then it will be granted with an Exploration IUP.

An excavated mining material might be accompanied by a secondary mining material.

.

H. Transitional provisions to mining area

Principally, under article 169 of the New Mining Law, all aspects regulated by the existing mining concessions must completely be adjusted accordingly to the law’s provisions. Another important issue to the mining business is the area issue. In connection with such change this law brings about, any undesired effect is, however, inevitable.

The mining area must be adjusted in a complete accordance with the New Mining Law as follow:

link7

link8

Based on the area limitation explained above, an adjustment must follow. In case the real area is bigger than the maximum area allowed, it must be narrowed down due to the maximum area. But the New Mining Law does not rule any event in case the real area is smaller than the minimum area allowed. This issue is deeply concerned by local governments since in certain regencies, the areas are already blocked with other big mining licences, so there are only small-sized areas left and they definitely do not meet the minimum area requirement. Following is an adjustment mechanism which is contained in the GR draft.

link9

.

I. Who can hold mining licences?

Another significant basic principle brought by the New Mining Law, which basically is quite contrary with the previous law, is the legal entities permitted to hold the mining licences. Below is a comparison for the certain mining concessions under both Previous Mining Law and New Mining Law.

link10

The draft of implementing regulations state that unlike KP, IUP ownership is limited to one IUP can be held by a mining company, unless the company goes through an IPO to become a public listed company. The issue change, from exclusive concession holding to open concession holding as drawn in the table above, is predicted to influence the mining investment climate considerably. Under the New Mining Law both domestic investment and foreign investment companies are treated equally in connection with holding mining licences. Unlike the Previous Mining Law period in which many Indonesian and foreign companies conduct nominee arrangements to manoeuvre the Law in connection with KP holding, which eventually is banned by the Law 25 of 2007 re. Investment, such trick is now no longer necessary since the New Mining Law opens opportunities of holding mining licences fairly.

One thing must be noted that foreign investment has never been meant to be held as merely business activities. Indonesian laws and regulation from time to time, both directly or indirectly regulating foreign investment, require several mutual understandings focused in spirit of welfare achievement for Indonesian people. For an instance, related to manpower, a foreign investment company must limit the number of their foreign employees to work in Indonesia, or otherwise set a first priority to using Indonesian workers. This also becomes concern of the New Mining Law.

Based on this objective, the New Mining Law directs the mining business climate in Indonesia to be fair for any business doer and prioritize the people welfare at the same time. This stimulates more restrictive design charged to foreign investment such as divestment obligation to mining foreign investment companies. Now, although chances for obtaining mining licences are opened fairly, mining foreign investment companies must perform divestment after five years producing. The drafts of implementing regulations appoint that divestment obligation must be conducted to achieve a minimum limit of 20% shares divested. This divestment obligation must be performed gradually in 4 years consecutively after the fifth year of producing respectively 5%, starting from the sixth year to ninth year. It is expected that at the end of ninth year, the companies will already have divested at least 20% of its shares. Should any of the companies finishes its obligation before the ninth year, it will not be charged with the same obligation. A further and prominent opinion was contributed by some of mining business doers during the beginning of the drafting process that all of the mining companies must perform initial public offering (IPO) processes to achieve a status of Tbk. or publicly listed limited liability company. This is believed to optimize the transparency of the respective companies and to boost up the output performance. In addition, this idea was based on the fact of a post IPO condition to a BUMN mining company in which its performance increased remarkably. Nonetheless, in spite the idea’s fineness, more business doers are certainly objected with that and concern about the small scale mining companies which outnumber the big companies, so perhaps it could be applied in the future.

Another provision which is believed to tremble down business investment climate in Indonesia is the prohibition against using foreign investment mining services companies. Article 124 of the New Mining Law states as follow:

(1) “IUP holders or IUPK holders must engage local and/or national mining services companies.

(2) Where no mining services company as intended by section (1) is available, IUP holders or IUPK holders may engage other mining services companies of Indonesian legal entity.”

The provision above does not clearly direct that the foreign investment mining services companies are prohibited. But the section (1) is clear enough to be interpreted that the local and/or national mining services companies will always be engaged since the local and/or national mining services company do exist. Therefore, insofar as the local and/or national mining service company is available, the licence holder cannot use foreign investment mining services companies. Consequently, the foreign investment mining services companies simply can no longer operate their business in Indonesia. Such condition must also be covered by the implementing regulations.

.

J. Closing

As a political product, a law cannot cover the entire things. After a long deliberation, Indonesia cannot prolong its outdated mining law. A need of a new law replacing the Previous Mining Law is urgent, and perfection is something everyone must not expect. Instead, knowing that the New Mining Law is not as once expected, the MEMR takes remarkable initiatives to cover its shortcomings. The MEMR is perhaps the first governmental instrument in Indonesia which welcomes the business entities to contribute their ideas through regulation making. And this is highly appreciated by the business entities doing their mining activities in Indonesia.

Regarding the foreign investment in Indonesia, especially related to divestment obligation and prohibition against foreign mining service, this is perhaps the time where contributions are most welcomed due to the implementing regulation making. But certain legal consultation field might seemingly be able to legalize the transaction by using corporate structuring. Learning from the past where nominee agreements arose, this exercised corporate and transaction structuring mechanism as well by taking part in corporate identity changing. Such mechanism is believed could be applied by either changing the corporate identities or changing the nature of transaction itself. If all difficulties have their way out, then the next challenge is how to trust the system. This question is given exclusively to all the mining practitioners with no exception, towards better prospective and brighter dream of people’s welfare. (Andree Prasusetya)

“Usia Hakim Agung dan Penyelenggaraan Kekuasaan Kehakiman yang Merdeka dan Independen”

Baru-baru ini, integritas profesi hakim kembali disorot. Pembatasan term of office (masa jabatan) berdasarkan usia yang tadinya 67 tahun dikendurkan menjadi 70 tahun Usia hakim di Indonesia masih merupakan topik yang cukup menarik untuk dibahas. Betapa tidak, isu term of office ini berkelit kelindan dengan pemilihan model atau sistem hukum yang dianut oleh suatu negara. Anda tidak perlu terhenyak melihat betapa berbedanya masyarakat berbagai negara dalam memberikan penilaian terhadap para hakim. Cobalah Anda bandingkan bagaimana sekiranya pendapat orang-orang Inggris, Amerika Serikat, dan yang cukup ekstrem misalnya, Prancis. Setelah mengetahui ini, Anda tidak perlu, sekali lagi, melakukan hal yang sama dengan de Tocqueville ketika mengamati kekuasaan kehakiman di Amerika, saat ia begitu terkesima dengan sistem American judiciary. Betapa kekuasaan kehakiman di Amerika Serikat dan Inggris yang menerapkan sistem anglo saxon, menempatkan para hakim pada posisi yang sangat tinggi. Sementara, dalam sistem ketatanegaraan Prancis, barangkali hakim menempati posisi paling rendah.

Dapat dikatakan, hakim di Amerika Serikat dan Inggris merupakan pembuat undang-undang yang sebenarnya. Konsepsi yurisprudensi, yang dalam nature-nya disebut sebagai “precedent”[1]. Memang sistem kenegaraan di Amerika Serikat dan Inggris mengenal adanya pembagian kekuasaan yang salah satunya menelurkan cabang kekuasaan legislatif (terlepas dari istilah ‘legislatif’ dan ‘representatif’ yang kerap digebyah uyah secara equal). Legislatif, yang di Amerika dijalankan oleh Senate dan di Inggris oleh baik House of Common dan House of Lords, merupakan lembaga penerjemah konstitusi, dengan asumsi bahwa kita tengah berada pada wacana demokrasi konstitusional, bukan demokrasi primitif sebagaimana common people dengungkan. Konstitusi kemudian diterjemahkan menjadi seperangkat aturan yang selevel. Dalam hal ini, negara-negara penganut sistem Eropa Kontinental menerapkannya dengan istilah loi (Prancis), gesetz (Jerman), atau wet (Belanda).

Akan tetapi undang-undang tidaklah dapat prevail (berlaku) di masyarakat begitu saja. Harus ada pihak yang authorized untuk menyuarakan undang-undang. Persis mirip dengan legal opinion yang diajukan kaum Syiah terdahulu kepada Ali bin Abi Thalib, “Qur’an itu bisu. Dia tidak dapat berbicara. Oleh karenanya ia membutuhkan imam untuk menyuarakannya.” Meski mungkin tidak terdapat hubungan, perspektif yang sama dipergunakan oleh para juris (sarjana hukum) anglo saxon. Dengan mengambil analogi yang mungkin tidak sepenuhnya tepat tersebut, Penulis mencoba untuk memasuki dan memahami tidak hanya wilayah kedaulatan hukum, akan tetapi juga kedaulatan hakim.

Berkaitan dengan hal ini, adalah lumrah bahwa pada waktu suatu undang-undang diberlakukan, diasumsikan bahwa semua orang mengetahuinya (inilah tujuan dari penempatannya dalam Lembaran Negara RI, yang lazim diistilahkan dengan staatsblad[2]). Istilah ini kemudian diadopsi oleh setiap undang-undang yang ditelurkan oleh lembaga legislatif.

Dalam persepsi legal yang berlaku di Amerika Serikat dan Inggris, hakimlah yang menjadi penerjemah suatu undang-undang. Di negara-negara Eropa Kontinental, karena beberapa alasan yang cenderung historis, hakim tidak dapat menafsirkan lain dari undang-undang selain dari apa yang selayaknya diterjemahkan oleh pembuat undang-undang. Prancis adalah salah satunya. Indonesia, meski tidak sepenuhnya persis dengan Prancis ataupun Belanda (ingat, bahwa penolakan paling reaktif terhadap pendirian mahkamah konstitusi ada di Prancis dan Belanda), terlihat tidak memiliki cukup alasan untuk memberikan kewenangan menyuarakan undang-undang tersebut kepada hakim secara sepenuhnya, meski prinsip preseden masih juga dianut secara sebagian kecil di Indonesia. Hal ini dikarenakan bahwa dalam sejarahnya, demikian tulis Adnan Buyung Nasution, Indonesia pernah mencoba menerapkan sistem peradilan seperti Supreme Court di Amerika Serikat, yang dihalangi oleh kisah tragis mengenai pengebirian dan opresi yang diberikan oleh penguasa baik Orde Lama dan Orde Baru yang memiliki kecenderungan ke arah tiran.

Hanya saja dalam perkembangan demokrasi konstitusional modern, seorang tokoh mujadid (pembaharu) hukum Eropa Kontinental asal Austria, Hans Kelsen, melakukan modifikasi pemikiran hukum di negara-negara Eropa, bahwa hakim pun dapat pula diberikan kekuasaan menafsirkan undang-undang, dan bahkan lebih tinggi lagi, menafsirkan konstitusi. Kelsen agaknya menyadari kelemahan sistem hukum negara-negara Eropa Kontinental pada saat itu dimana kewenangan untuk merapikan norma hukum yang dikandung dalam peraturan perundang-undangan benar-benar absen dari ketatanegaraan pada saat itu. Kelsen pulalah yang pertama kali membuat model peradilan baru yang diakui sebagai sub cabang kekuasaan kehakiman, yaitu peradilan konstitusi. Sistem yang pertama kali berlaku di Austria ini sebenarnya hanya berjalan beberapa tahun, mengingat NAZI Jerman kemudian mengokupasi saudara kembarnya ini. Beberapa tindakan opresif juga kemudian dikenakan kepada Kelsen, mengingat Kelsen adalah seorang Yahudi. Dengan kata lain, sistem peradilan konstitusi pertama di dunia ini menjadi salah satu korban fasisme yang memberikan carut marut kepada tatanan peradilan Austria, mengikuti dentang lonceng kematian terhadap kemanusiaan.

“Tatkala denyut konstitusi terhenti, maka berhenti pulalah denyut kehidupan manusia berperadaban.”

Usai Jerman berbenah pada masa konstruksi hukum pasca PD II, sistem peradilan konstitusi versi Kelsen dianut di negara ini, dengan beberapa perubahan, sehingga menjadi varian baru peradilan Kelsenian.

Dengan adanya peradilan konstitusi melalui perubahan ketiga UUD 1945, maka Indonesia mulai mengadopsi sistem baru ini. Pasal 24 hingga 24C mengalami proses yang panjang dalam perjalanannya, dimana isu penguatan kekuasaan kehakiman mulai naik semenjak diskursus pada perubahan yang pertama, walau masih menjadi sebatas wacana tanpa ada kristalisasi isu lebih lanjut. Para juris terkemuka mulai menaikkan isu peradilan konstitusi. Pada saat itu, Jimly Asshiddiqie termasuk salah satu juris yang memperkenalkan mahkamah kelsenian ini. Sementara Bagir Manan banyak mengartikulasikan keberadaan Mahkamah Agung yang sudah ada pada saat itu. Dalam diskursus di Panitia Ad Hoc (“PAH”) MPR, sensitivitas isu ini menginduk pada kredibilitas hakim MA yang dipertanyakan baik secara politis maupun secara kapasitasnya dalam melakukan pengujian peraturan perundang-undangan. Jalan tengahnya pada saat itu, sempat peradilan konstitusi dijadikan sebagai salah satu cabang peradilan di bawah MA. Akan tetapi, pada perkembangannya peradilan konstitusi dikeluarkan menjadi peradilan sendiri yang independen, berada sejajar dengan MA. Maka Pasal 24 UUD yang diamandemen kini memperkenalkan dua buah pelaksana kekuasaan kehakiman, dimana segenap sistem peradilan yang sudah ada selama ini menginduk kepada MA, sementara MK adalah cabang peradilan baru yang mengadopsi kewenangan-kewenangan peradilan konstitusi pada umumnya, seperti menengahi sengketa kewenangan lembaga-lembaga negara, pembubaran partai politik, perselisihan hasil pemilihan umum, trial terhadap pemakzulan (impeachment) presiden, dan yang paling dominan disorot, pengujian undang-undang terhadap Undang-Undang Dasar.

Diskursus mengenai kekuasaan kehakiman ini walau bagaimanapun tidak dapat dipisahkan dengan kredibilitas hakim peradilan umum, (Kelsen membahasakannya dengan istilah ‘general court’). Kekhawatiran peserta sidang PAH ini dapat dilihat terletak pada kemungkinan terjadinya penyelewengan dalam pelaksanaan kekuasaan kehakiman. Meskipun tidak dilakukan oleh MA, kekhawatiran ini sedikit banyak menjadi kenyataan pada saat MK melakukan pengujian terhadap Pasal 50 Undang-Undang No. 24 Tahun 2003 (“UU MK”) yang tadinya membatasi kewenangan yurisdiksi MK hanya pada undang-undang yang diundangkan setelah perubahan Undang-Undang Dasar. Pemahaman sementara pihak terhadap posisi MK sebagai superbody mencuat dengan kemampuan MK membuka belenggu terhadap wilayah yurisdiksinya sendiri. Hal ini pulalah, saking klisenya, menjadi pertanyaan yang diajukan pada saat sidang skripsi Penulis beberapa waktu lalu. Penulis hanya memberikan jawaban pada waktu itu bahwa patut diakui oleh semua pihak bahwa sebagai guardian of constitution, demikian diungkapkan beberapa ahli, MK tidak terikat kepada produk undang-undang. Sebaliknya, MK hanya terikat pada Undang-Undang Dasar. Sebagai selingan, Penulis membayangkan adanya isu yang menarik apabila memperbandingkan istilah undang-undang dalam bahasa Inggris. Bahasa Inggris merujuk terminologi ‘hukum’ maupun ‘undang-undang’ pada satu istilah, yaitu ‘law’. Berbeda dengan istilah ‘act’ yang lebih mengacu kepada kinerja parlemen dalam membuat hukum. Pertanyaan lanjutannya, apakah sebenarnya MK tidak terikat pada undang-undang, ataukah MK tidak terikat pada ‘hukum’? Pertanyaan yang membutuhkan forum tersendiri dalam menjawabnya.

Pembicaraan kecil mengenai usia hakim agung ini sebenarnya diawali oleh tulisan yang Penulis baca di situs Hukumonline, dengan judul yang cukup eye catching, begini bunyinya, “Harimau Mati Meninggalkan Belang, Gajah Mati Meninggalkan Gading, Hakim Agung Tidak Ada Matinya.” Hal ini membuat Penulis tersenyum-senyum mengingat uniknya judul tersebut. Seketika penulis teringat kepada rekan penulis, seorang hakim perempuan asal Inggris seusia ayah Penulis, yang tahun lalu sempat bekerja sekantor dengan Penulis. Hal yang membuat Penulis terheran-heran kepadanya adalah tatkala dia bercerita bahwa latar belakang profesinya bukanlah majoring di bidang hukum. Sebuah fakta yang cukup contrary, mengingat jangankan hakim di Amerika Serikat, juris biasa saja sulit untuk bisa melanjutkan pendidikan S2 di Amerika hanya berlatar belakang hukum saja, dan sebaliknya harus menambah salah satu cross study-nya seperti perbankan atau politik, misalnya.

Penulis yang sempat bekerja bersamanya beberapa bulan dalam proyek Mahkamah Agung RI dengan Komisi Eropa di Indonesia tergelitik untuk bertanya, bagaimana bisa seorang botanis (profesi awal sang hakim) menjadi seorang hakim. Ngomong-ngomong tentang botanis, Penulis lebih banyak mengeksplorasi tentang bagaimana cara membuat wine atau bir dengannya ketimbang berbicara tentang reformasi peradilan. Dengan lancar, dia mengutarakan bagaimana proses fermentasi minuman. Kami tertawa pada suatu momen nge-teh siang hari di kantor (wah, orang Inggris tidak bisa dipisahkan dari teh), ketika Penulis berceletuk, bahwa dia lebih fasih berbicara mengenai fermentasi minuman daripada hukum. Walaupun hal ini tidak berarti pemahamannya kurang di bidang hukum, tentu saja. Lantaran usia, kini dia mulai mundur dari posisinya dari hakim menjadi magistrate; kalau dapat dikatakan menurut istilah Penulis, semacam minor judge, yaitu hakim yang hanya menyidangkan perkara-perkara pelanggaran hukum yang minor, atau kalaupun menyidangkan perkara serius, hakim ini hanya membatasi fungsinya pada preliminary hearings (di Indonesia, Pemeriksaan Pendahuluan yang menjadi sidang perdana).

Sekelumit diskusi Penulis dengan Mrs. Pillans, demikian namanya, membuat penulis akhirnya menyadari bahwa, sesuai dengan keterangannya, Inggris strictly menganut prinsip ‘equality before the law’ sebagai derivat dari sistem anglo saxon. Dengan demikian, setiap orang benar-benar setara di hadapan hukum. Terlepas dari bagaimana stigmatisasi hakim secara sosial, proses achievement, dan valuing profesi ini oleh masyarakatnya yang tentunya tidak pernah lekang dari posisi yang sangat terhormat. Sad but true, hal ini cukup bertolak belakang dengan kondisi yang ada di masyarakat kita, Indonesia.

Dengan demikian, pembicaraan mengenai kekuasaan kehakiman yang merdeka dan independen telah menempatkan kita pada kondisi dilematis dimana pada satu sisi konsep yang dianut Amerika Serikat, lebih daripada Inggris, benar-benar adalah konsep yang mendekati ideal dimana tiada seorang pun dapat mencopot hakim dari jabatannya sebagai hakim, ataupun memensiunkannya sesuka hati, diluar asumsi pelanggaran kode etik dan moral hakim. Hakim, berdasarkan sistem ini, tidak perlu takut dicopot dari jabatannya sebagaimana hal ini banyak menghantui para hakim di bawah rezim Orde Lama dan Orde Baru. Hakim adalah hakim selama dia pantas dan cakap untuk memegang jabatan tersebut.

Sementara pada sisi lainnya, kekhawatiran penyelewengan kekuasaan tetap menjadi momok, seperti seolah-olah suara Lord Acton masih berdengung di relung demokrasi saat mengatakan bahwa kekuasaan memang memiliki tendensi ke arah penyelewengan. Lantaran hanya seorang juris biasa, Penulis mungkin tidak terlalu fasih berbicara mengenai situasi historis, psikologis, kultural, sosial, maupun politis yang melatarbelakangi mengapa masyarakat Indonesia, jika memang perdebatan dalam PAH merupakan cerminan dari perdebatan para wakil rakyat. Fraksi-fraksi yang ada pada saat itu sebagian besar tidak dapat memberikan kepercayaan kepada hakim-hakim dari general court untuk menyelesaikan permasalahan-permasalahan konstitusional, termasuk di dalamnya konstitusionalitas undang-undang.

Untuk hal ini, Penulis tertarik pada tulisan Archibald Cox yang mengangkat mengenai pembatasan kekuasaan para hakim di Amerika Serikat sendiri. Penulis buku yang pernah menjabat General Solicitor masa Kennedy dan special prosecutor untuk kasus Watergate ini mengemukakan ide yang menarik ketika karakter Amerika Serikat sebagai negara federal dimanfaatkan untuk mengamankan posisi hakim dari tendensi terhadap penyimpangan kekuasaan. Adalah unik untuk bisa menemukan fakta bahwa dalam prakteknya kekuasaan antara para hakim agung federal (Supreme Court) saling mengoreksi dan membatasi dengan hakim-hakim agung negara bagian. Alasannya, dalam negara federal, kita mengetahui bahwa masing-masing negara bagian memiliki kedaulatan sendiri. Berbeda dengan teori residu yang kita kenal pada negara kesatuan dengan prinsip otonomi seperti Indonesia yang Mahkamah Agungnya adalah puncak dari ‘supremasi penegak hukum’ (bedakan dengan ‘supremasi hukum’).

Solusinya menurut Penulis bukan ke arah penilikan terhadap restriksi masa kerja hakim agung berdasarkan usia. Menurut hemat Penulis, antara usia hakim agung dengan alasan-alasan regenerasi sebagaimana diusung banyak pihak memang berhubungan, akan tetapi tidak cukup signifikan. Hubungan telak antara pembatasan masa kerja hakim, dalam hal ini hakim agung, justru berkaitan langsung dengan kekuasaan kehakiman yang merdeka dan mandiri, walaupun masih perlu dicatat dua buah tendensi yang berbeda dalam istilah ‘supremasi hukum’ dengan ‘supremasi penegak hukum’. Yang dicari dalam perbaikan untuk sistem hukum negara ini secara keseluruhan Penulis yakin telah disepakati semua pihak, yaitu ‘supremasi hukum’, bukan istilah rekanannya. Adapun mengenai alasan regenerasi hakim terkait dengan masalah administrasi pengadilan untuk MA, maka hal ini akan berakhir pada pembahasan mengenai sistem perbaikan administrasi MA, yang selayaknya pula diselesaikan oleh orang-orang yang lebih berkompeten, meski tiada salahnya untuk disupport banyak pihak. Terakhir, terkait dengan sekelumit isu yang dilepaskan di depan publik terkait dengan pendapat, “Masih banyak calon hakim agung yang lebih jujur, menunggu regenerasi hakim agung,” maka hal ini harus dibuktikan kesesuaiannya dengan pertama, hukum yang berlaku, apakah para hakim agung telah melakukan pidana terkait dengan so called ‘ketidakjujuran’, dan kedua, dengan pedoman code of conduct (kode etik) hakim, yang apabila terbukti tidak sesuai, maka harus diproses sesuai salah satu atau kedua perangkat di atas. Wallahu a’lam bishawwab.

—————————-

[1] Pernah dalam suatu waktu Penulis berjumpa dengan seorang hakim Inggris rekan Penulis itu, dia tidak merespons istilah ‘Jurisprudence’ yang Penulis kemukakan sesuai yang diharapkan. Barulah setelah Penulis pergunakan ‘Precedent’, dia ‘mudeng’ dengan percakapan kami. Ya, karena dalam bahasa hukum, ‘jurisprudence’ bisa berarti (1) sistem teori dan filsafat hukum, atau (2) sistem hukum secara keseluruhan. Sementara ‘precedent’ berarti keputusan hakim atas perkara yang precede (mendahului) lahirnya perkara-perkara lain yang serupa. Mudah-mudahan ini bisa memperbaiki pemahaman kita yang terkadang keliru.

[2] Staatsblad atau Gazette dalam bahasa Inggris pada awalnya merupakan istilah yang dipergunakan dan merujuk kepada pemberitaan di surat kabar yang ditujukan untuk umum, dikenal juga sebagai news-sheet. Intinya, tujuannya adalah untuk membuat publik mengetahui terhadap suatu hal.

“Comparing Mineral and Coal Bill (MINERBA) with Mining Law for Mining Businesses in Indonesia”

The Mineral and Coal Bill is about to be stipulated, as the Senate of Republic of Indonesia will most seemingly complete it by the end of this year or earlier. If so, this will bring about several changes in practicing mining in Indonesia. Following is a comparison for the Mineral Coal Bill (Ind. RUU Mineral dan Batubara or Minerba), diagonally compared with the Law 11 of 1967 on (Mining Law). For those whose interests are lying on mining businesses or legal practitioners, this might slightly be helpful to predict the business climate in the future, as the regulations in Indonesia are constituted like a jungle which are to change whensoever the Government wants it to change.

I. Conception of National Interests

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Emphasizes national interests as follow.

a. no longer contain religiosity;

b. controlled by State, but not provided as ‘utilized by State’; and

c. mineral and coal are considered as ‘national treasure”.

Emphasizes national interests as follow.

a. religiosity spirit using “God Almighty’;

b. controlled and utilized by State; and

c. does not regard mineral and coal as ‘national treasure”

d. National interest is represented by Minister.

II. Object of Regulation

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Objects of regulation are emphasized to:

1. mineral, and

2. coal.

Most probably, the Bill is designed to differ more sharply from Oil and Gas Law, by quoting the two objects above as Bill Title.

Object of regulation covers all kinds of followings.

1. mineral, and

2. coal.

III. Definitions

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

The Bill defines ‘mineral’ and ‘coal’.

‘mineral’ and ‘coal’ are not defined.

IV. Mining Materials Classification

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

a. radioactive materials class,

b. metal mineral and coal materials class, and

c. non metal mineral and rocks materials class.

Regulated further under a government regulation.

a. strategic mining materials class,

b. vital mining materials class, and

c. other mining materials class.

Regulated further under a Government Regulation 75 of 2001 regarding to Second Amendment of Government Regulation 32 of 1969 regarding to Implementation of Law 11 of 1967 (Mining Law)

V. Concept of Mining Area

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Generally, authorization of performing mining business is granted based on a concept of Mining Business Area (Ind. Wilayah Usaja Pertambangan or ‘WUP’).

WUP is given according to the type of mining business which is considered using types of business in relation with classifications for mining materials (point 4).

A WUP may be overlapped by more than one mining activities, for different mining materials, after the existing IUP holder is queried for consideration.

Beside the WUP, the Bill proposes to provide another type of mining area known as State Allocation Area which by the Elucidation determined as any part of national area which has potentials in mineral and coal, but exclusively managed to be carried out solely by Government. Therefore, a state owned-enterprise can be assigned to manage the mining business. But the enterprise is allowed to conduct it upon a base of cooperation with other contractor (private owned) under a guidance of particular requirements set forth by Government.

Such concept is not recognized.

VI. Strict Division of Authorities Held by Central Government and Local Governments in Mining Business

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

I. Central Government

a. Determining national policies;

b. Regulation mineral & coal business;

c. Determining national standards in mineral and coal mining;

d. Determining national authorization system for mineral and coal mining;

e. Determining national authorization for development and supervision across provinces and seas to mining business;

f. Determining national authorization for development and supervision across provinces and seas to Production Operation of mining business;

g. Determining national authorization for development and supervision to directly related mining activities to environmental issues across provinces and seas.

h. Determining WUP;

i. Determining production, marketing, utilizing, and conservation policies;

j. Determining cooperation and partnership policies;

k. Determining criteria of mining area;

l. Determining tariff of Fix Retribution and Production Retribution, alongside with Government’s share split;

m. Development and supervision of drafting regional Regulation regarding to mineral and coal mining.

n. Auditing, and research for mineral and coal deposit in arranging mining allocation area and WUP;

o. Managing geological information about potentials of coal and mineral resources, and national mining information;

p. Drafting national mineral and coal resources balance sheet;

q. Developing and increasing value added of mining industries; and

r. Developing Local Governments’ ability in conducting mining business arrangement.

II. Local Governments (Provincials)

a. Creating Regional Regulation;

b. Authorization, development, and supervision of mining activities across regencies/municipalities;

c. Authorization, development, and supervision of mining activities running in several areas of regencies or municipalities;

d. Authorization, development, and supervision of directly related mining activities to environmental issues across regencies or municipalities;

e. Geological information management for potentials of mineral and coal resources, and mining information of provincial areas;

f. Drafting provincial mineral and coal balance sheets;

g. Developing and increasing value added of mining industries;

h. Inventorying, investigating (audit), researching, and conduct exploration due to purposes of obtaining information related to mining industries; and

i. Submitting information resulted from inventorying, investigation (audit), research, and exploration to Minister and regent/mayor.

III. Regency/Municipality

a. Creating Regional Regulation;

b. Authorization, development, and supervision of mining activities limited at levels of regency/municipality;

c. Information management for geological, mining and coal potentials, and mining;

d. Drafting balance sheets of mineral and coal resources for limited level of regencies/municipalities;

e. Developing areas and empowering their local people;

f. Developing and increasing value added of mining business;

g. Inventorying, investigating (auditing), researching, and conduct explorations in purpose of obtaining mineral and coal information; and

h. Submitting report resulted from inventorying, investigating (auditing), researching, and explorations to Minister and governor.

Provides only followings.

Mining businesses of other mining materials class are subject to regulation under provincial government;

No further regulations

VII. Subjects of Mining Business

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Subjects allowed to perform mining business:

a. corporate body,

b. individual, and

c. state owned-enterprise (for radioactive materials class).

Subjects allowed to perform mining business:

a. Government institution (by Minister’s assignment),

b. State enterprise,

c. Regional enterprise,

d. Jointly capitalized enterprise (between state and regional government),

e. Cooperative,

f. Private company or individual which has been approved,

g. Hybrid company capitalized by state, regional government, and private company, and/or individual which has been approved, and

h. People mining business.

Point f and g above mark that the approval must consider followings.

a. Conduct mining business for vital mining materials class;

b. Companies are established under Indonesian regulations, with management board consisting of Indonesian citizens and domiciled in Indonesia;

c. In case of personals, he/she is Indonesian citizen and domiciled in Indonesia.

d. With consideration of Mining Council.

This Law provides that its regulation is set forth upon classified materials, as follows.

a. strategic mining materials class.

Basically, class A (strategic mining materials class) can only be given to followings.

1. Government Institution assigned by Minister, and

2. State Enterprise.

But the Law opens a possibility where private company can be invited to exploit the mining area considering followings:

1. in case Minister considers that government institution or state enterprise holding KP is not able to solely run the mining business, he/she appoints contractors.

2. in case it takes form in foreign investment, this must be consulted previously with Parliament.

3. in case it takes form in foreign investment, this must be approved by Government

b. vital mining materials class.

Given to followings.

1. Government institution (by Minister’s assignment),

2. State enterprise,

3. Regional enterprise,

4. Jointly capitalized enterprise between state and regional government),

5. Jointly capitalized enterprise between state owned-enterprise with private company,

6. Cooperative,

7. Private company or individuals which meet following criteria.

Companies are established under Indonesian regulations, with management board consisting of Indonesian citizens and domiciled in Indonesia;

In case of personals, he/she is Indonesian citizen and domiciled in Indonesia.

With consideration of Mining Council.

VIII. Types of Mining Authorization

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Recognizes three types of mining licence:

I. Mining Business Assignment

Given solely to National Atomic Energy Agency carry out radioactive mineral mining, by Minister of Energy and Mineral Resources. Further regulation will be set forth upon lower level of regulations.

II. Mining Business Licence (‘IUP’), in lieu of Mining Licence (‘KP’) of Mining Law

Given to metal mineral and coal mining materials class, and non metal mineral and rocks mining materials class. It is clear that an IUP cannot be run under different purposes other than provided therein.

An IUP holder may transfer its title of IUP to other party accordingly with regulations and is subject to IUP issuer.

Principally, an IUP can only be occupied by one type of mined material/coal. Should any other type of mining material be discovered along the mining activities, the IUP holder cannot be automatically permitted to perform any mining activity on it. But the holder may be conferred a right to be prioritized over any other party to carry out mining activities upon the newly discovered material, or decline it. In case of the declination, the holder must secure the discovered materials, so others may legally make use of it in their turns, after the end of the holder’s IUP.

Nonetheless, an IUPPO holder is permitted to cooperate with other IUPPO holders, insofar as for the same type of mining product.

While the Bill appoints that the further regulation will be positioned under Government Regulation (for technical, financial, professional, and administrative matters), this Bill proposes still to provide in general that IUP authorization consists of two stages:

1. IUP for Exploration (‘IUPE’).

Consists of:

a. general survey, and

b. exploration (in which feasibility study is included).

In feasibility study, an IUPE holder is permitted to perform followings.

geotechnical test,

mining test,

processing test, and

sampling.

2. IUP for Production Operation (‘IUPPO’).
Consists of:

a. construction,

b. mining,

c. processing,

d. refining,

e. transporting, and

f. selling.

Art. 26 provides that both IUPE and IUPPO holders are permitted to perform either the entire operations (from exploration to selling) or some parts of them.

III. Mining Licence for People.

Given by Regent/Mayor only to local people, limited on People Mining Area. Regulated further at the level of Regional Regulations.

Recognizes only two types of mining licence:

I. KP (Mining Licence)

KP is issued by Minister in Minister Decree, and consists of 6 type of KP as follow:

a. KP of General Survey,

b. KP of Exploration,

c. KP of Exploitation,

d. KP of Processing and Refining,

e. KP of transporting, and

f. KP of Selling.

A KP holder may transfer its title of KP to other party accordingly with regulations and is subject to Minister’s approval.

II. Mining Licence for People

Purpose: to allow local people participate in developing the country. Further regulations provided in Government Regulation.

Mining Licence for People will be issued in case deposit of strategic mining materials class (Class A) is considered as too small, and therefore, will be much benefited to run also in small scale by private company (people).

IX. Validity Period of IUP Mining Authorization

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

1. IUP Exploration : 8 years maximum

2. IUP Production Operation : 23 years, and can be extended by 10 years. The regulation does not determine how many times the 10 years can be extended.

Requirement :

a. continuing previously obtained IUPE, or

b. by auction of a WUP.

Auction can only be executed upon WUP with complete feasibility study results and environmental quality threshold (AMDAL). In accordance with Article 47, an auction may prevail upon a WUP under which an IUP already ends.

Further procedure of IUP will be put under government regulation.

Not provided

X. End of Validity

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

IUP ends by following circumstances.

1. returned,

2. revoke,

3. end of validity period

ad.1. Return of IUP must be submitted by written statement and accompanied with plain reasons. It is completely subject to Minister/governor/regent/mayor.

ad.2. Revocation is conducted upon following grounds.

a. Incompliance of obligation provided in the IUP;

b. IUP holder is committed to crimes; and

c. IUP holder is pronounced as fallen to bankruptcy.

ad.3. Normally ends, because there is no request of period extension, or if any, does not meet the requirements.

By the end of validity, IUP holder is obliged to conduct any proper action in related to fulfilling any outstanding obligation. Accordingly, any outstanding obligation is subject to Minister/governor/regent/mayor approval.

The WUP under which an IUP ends, may be offered to a corporate body or individual through auctions.

KP ends by following circumstances.

1. returned,

2. revoke,

3. end of validity period

ad.1. Return of the KP must be submitted by written request, accompanied with sufficient reasons. It is completely subject to Minister/governor/regent/mayor.

ad.2. Revocation is issued using Minister Decree for following grounds.

a. KP holder does not meet requirements under regulations,

b. Default and incompliance on order and suggestions given by the authorities related to national interests.

c. For any other consideration based on national interests. This releases several legal consequences upon KP holder as described below.

ad.3. Normally ends, because there is no period extension granted.

Legal consequences raising up by the end of validity:

a. end of validity releases KP holder from any obligation;

b. return of mining area to the State;

c. all means to secure mining building comes to State’s possession, alongside with rights to excavate mining materials, without indemnification.

d. all kinds of mining data must be returned to Government, including all photograph data, map, landscape map, etc.

Legal consequences raising up from validity termination based on national interests: indemnification is provided for KP holder.

Some periods will be provided by Minister for KP holder to evacuate its belongings. Unevacuated properties by the end of the period will automatically come to State to possess.

XI. Obligations rising up from each Mining Authorization

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

1. The Bill proposes to provide several particular activities in both IUPE and IUPPO. But it is also opened for the IUP holders to either perform the a to z activities or pick up only needed activities.

2. IUP holder must apply good mining technique principles, financial, environmental management, mining safety, value added increase, and render assistance for Government in developing and empowering local people and the area where they live.

3. IUP holder must guarantee implementation of environment standard quality accordingly with characteristics of the area.

4. IUP holder must comply with mining labour health and safety standards, management and supervision of mining environment. Above includes followings.

a. Reclamation

IUP holder must provide reclamation guarantee which must be performed accordingly to area allocation based on agreement with holder of rights on land. Incompliance for this results in assignment by Minister/governor/regent/mayor to third party(ies) to perform reclamation with obligation to store reclamation guarantee. Procedure of storing reclamation guarantee is put under government regulation.

b. Environment Conservation and Labour-Related Issues

This must be performed during the mining period, alongside with labour health and safety standards implementation as well. IUP holder must prioritize employing local people over those coming from other locations. IUP holder must also prioritize using domestic product and service transparently.

c. Management for waste

This also includes any process result in solid, liquid, and gas which are emitted by mining activities.

5. IUP holder is responsible for maintaining the quality of water resource related to its mining area, in accordance with prevailing regulations.

6. IUP holder must provide assistance to government in developing the areas and empowering its people, based on business scale of IUP holder and on tripartite consensus between local people, local government, and the IUP holder. Further will be provided under government regulation.

7. IUP holder must support and develop partnership with people or local small and medium scale business doers, based on mutual benefit purposes.

8. IUP holder must apply good mining technique principles, financial, environmental management, mining safety, and value added increase during mineral and coal mining activities for following stages.

mining,

processing/refining, and

utilizing

9. IUP holder must submit regular reports on work plan and mining business implementation to Minister/governor/regent/mayor, accordingly to guidance in government regulation.

10. IUP holder must pay Production Contribution (levied only from the IUPPO holders as they reach the quarried materials as provided in IUPPO).

11. IUPPO holders are obliged to perform processing and or refining of mineral and coal mining product in Indonesia.

Retribution conducted by Government

a. fix retribution,

b. exploration retribution, and/or

c. exploitation retribution, and/or

d. other payment related to mining activities.

The Law assigns government regulation to regulate the retribution.

Governors/regents/mayor may be entitled to certain part of retributions, provided under government regulation.

XII. Rights Granted by Mining Authorization

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

1. Rights to perform mining activities.

2. Exclusive rights to proceed will be given to the IUP holder which manages to discover mentioned mineral and coal in its IUP during exploration.

3. IUP holder may make use of any common facility, and utilize water for mining purpose.

4. After paying production contribution, the holder is permitted to possess:

mineral / coal, alongside with

its accompanying materials

Except for radioactive minerals.

5. An IUP holder may transfer its title of IUP to other party accordingly with regulations and is subject to IUP issuer.

Not provided

XIII. Procedures in authorizing a Mining Licence

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

IUP, of both exploration and production operation are issued by either:

a. Minister,

b. governor, or

c. regent/mayor.

ad.a. Minister will be in position in case the national environmental interest will predictably be influenced by the mining activities, according to the result of environmental quality threshold (Ind. AMDAL). This will require considerations given by regent/mayor, and governor in charge for mining area.

ad.b. Governor will be in position in case the regional environmental interest will predictably be influenced by the mining activities, according to the result of environmental quality threshold (Ind. AMDAL). This will require considerations given by regent/mayor in charge for mining area.

For another matter, in case a mining site, refining, and processing industry are not located in the same place, Minister or governors are in their position to issue IUPPO.

For imported mining product, Minister is in his/her position to issue such authorization, for IUPPO holder to perform refining and processing it.

Request for KP must be submitted to Minister.

Regulated further under Minister Decree.

Minister asks the request submitter to demonstrate its eligibility in performing related mining business, before he/she decides.

Requesting a KP automatically domiciles the KP submitter into the District Court jurisdiction, under where the proposed mining area is submitted.

XIV. Temporal Halt

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Temporal halt may be provided to IUP holder in because of:

a. a force majeure circumstance, and/or

b. any other circumstance impeding mining activities (other than force majeure).

ad.a. Temporal halt under force majeure releases the IUP holder from any obligations towards government therein.

ad.b. In case the temporal halt is caused by any circumstance impeding the mining activities (other than force majeure), IUP holder’s obligations towards Government keep prevailing.

Temporal halt is not accumulated to any part of IUP period.

Request for temporal halt can be submitted to Minister /governor/regent/mayor, based on clear grounds stated therein (which marks reasons which impede the mining activities).

Bill seeks to oblige Minister/governor/regent/mayor to issue requested decree in 30 days at latest.

The period lasts limitedly to 1 year, but is able to be extended for only 1 year.

Such concept is not recognized.

XV. Mining Business Placement

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Ban on performing mining activities on followings

a. graveyard, holy considered-places, public places, an public utilities, unless permitted by Government;

b. field and state defence building, unless permitted by Government;

c. housing area or factories including all surrounding fields, and customary land, unless permitted by the owners.

d. monumental building and state’s symbols,

e. other prohibited places by law.

Therefore, transfer of title from above places is possible (except for point d and e), insofar as conducted accordingly to prevailing regulations and authorized.

IUP holder are obliged to settle any overlapping land rights between IUP rights and others before starting mining activity.

Any land rights owner must waive their title to IUP preceded with followings.

a. IUP holder shows its IUP or its authorized copy, and communicate the purposes of occupying the land;

b. All overlapping rights upon the land are already settled.

An area cannot be authorized as ‘Mining Area’, unless stipulated as such by Minister/governor/regent/mayor. This requires IUP improvement from IUPE to IUPOP before.

Ban on performing mining activities on followings

a. existing people mining is not to be harmed by any KP, unless permitted by Minister, for national interest;

b. mining activities must not be placed upon closed places for public, and upon defence field and building;

c. graveyard, holy considered-places, public work, streets, rails, electricity and gas line, etc;

d. location of other mining activities;

e. buildings, housings, factories and their fields, unless by approval from the owners;

Transfer of title for above places is possible, insofar as conducted accordingly to prevailing regulations and authorized.

KP holder is responsible; and therefore, must indemnify any loss inflicted by its mining activities.

By a consensus, holder(s) of land rights must give permission to KP holder after followings.

a. The KP holder shows the KP, or its authorized copy.

b. The KP holder provides explanations about mining purposes and locations.

c. Indemnification.

Should the parties not find any consensus related to indemnification, the dispute will be submitted to Minister. And if the Minister cannot resolve the dispute, it goes to District Court of that area. Indemnification is charged to KP holder.

XVI. Development and Supervision

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

The Bill proposes to position following responsibilities of conducting development and supervision on to Minister/governor/regent/ mayor.

a. mining techniques (directly developed and supervised by Mining Inspector*);

b. marketing;

c. financial;

d. data processing for produced mining materials;

e. mineral and coal conservations;

f. health and safety of mining labours (directly developed and supervised by Mining Inspector*);

g. environmental management and reclamation;

h. utilizing domestic products, service, technology, and engineering abilities, design and constructions;

i. improvement for technical labours at the mining fields(directly developed and supervised by Mining Inspector*);

j. area development, and people empowerment;

k. abilities in handling, developing, and implementing mining technology;

l. other mining activities which are related to public interests;

m. authorization management; and

n. quantity, types, and quality of mining product.

*) Mining Inspector’s development and supervision objects include followings:

a. Mining Business Assignment holder,

b. IUP holder,

c. Mining Licence for People holder**, and

d. Mining Service Business holder.

People Mining Business is also developed and supervised by regent/mayor.

Governors and regents/mayors are obliged to submit report to Ministry of Energy and Mineral Resources on mining activities in their areas regularly every 6 months.

Regulated further under government regulation.

Administration, supervision of mining business and mining product are managed under Minister.

Such supervision includes followings.

a. work safety,

b. production, and

c. other mining activity related to public interests.

KP holder is obliged to conduct reclamation, in order to avoid illness or any other potential danger to people.

XVII. Investigation

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Those who are authorized to perform investigations are:

a. Investigator from Police Force;

b. Authorized investigator from Civil State Employee, of Energy and Mineral Resources Department;

The two investigators above may coordinate each other.

Authorities of Authorized investigator from Civil State Employee, of Energy and Mineral Resources Department in conducting investigation to mining activities are as follow.

a. investigate personal/institution for crimes;

b. summon people to be heard for testimony and investigated;

c. search places and or facilities related to crime;

d. investigate facilities of mining business and halt its machine;

e. seal and or confiscate any equipment related to crime as proofs;

f. summon needed experts to assist investigation; and

g. halt a crime investigation.

Not provided

XVIII. Sanctions

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

a. Administrative sanctions

Administrative sanctions are charged to followings.

1. Warning letter,

2. Suspending a part or entire exploration or production operation,

3. Licence revocation.

b. Criminal Sanctions

Criminal sanctions include following crimes.

1. Performing mining activities without IUP/IPR;

2. Performing mining activities not accordingly with licence;

3. Counterfeiting report data/documents;

4. Storing, utilizing, processing, refining, transporting, and selling mineral and coal which are mined without IUP/IUPR;

5. Deterring or harming exploration activities performed by an IUP holder;

6. Deterring or harming exploration activities performed by an IUP holder;

7. Deterring or harming production operation activities performed by an IUP holder

Criminal Sanctions

Criminal sanctions are charged to following crimes.

1. Performing mining activities without KP;

2. Performing mining activities before accomplish all duties regarding to dispute or unclear ownership of mining land;

3. Deterring or harming authorized mining activities performed by a KP holder;

4. Incompliance on duties provided by the Law;

5. Incompliance on orders issued by government officials in relation to the Law;

XIX. Transitional Provisions

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Existing KP (Mining Licence), KK (Contract of Work), and PKP2B (Coal Contract of Work) keep prevailing until the end of validity period, and is positioned solely under Minister’s authority.

[Any Post-Mining Plan, KK and PKP2B, SIPD (Regional Mining Licence Letter), and SIPR (People Mining Licence Letter) which has been issued before this Bill comes to Law must be adjusted with these provisions.]

Any request for KP, KK and PKP2B, SIPD, and SIPR at authority level of Minister/governor/regent/mayor must be adjusted and proceeded accordingly with these provisions.

Level of authority in issuing authorizations must be adjusted accordingly with this provisions.

All existing mining licences and mining rights prevail to the end of validity, unless provide otherwise by Government Regulation regarding to the Law.

All mining procedures prevail insofar as its provisions are not yet covered by the Law.

All regulations under Law No. 37 Prp. Year 1960, insofar as not revoked, or amended with regard to the Law.

XX. Others

MINERAL & COAL BILL

LAW 11 OF 1967

(MINING LAW)

Having IUPPO without neither possessing rights to mining nor occupy a WUP is possible, since the Bill seeks to provide that any corporate body which is to sell mineral or coal as its side product is required to obtain IUPPO, although it occupies no WUP. The Bill’s Elucidation describes the ‘side product’ terms as for example:

1. sand mined from rivers or harbours, or

2. peat prepared for agricultural purposes.

On the other hand, IUPPO holders are strictly prohibited from processing or refining any mining material produced by miners without IUPPO.

None

“Concerning Issues of Law Regulating Corporate Social Responsibilities in Indonesia”


I. Introduction

In its own connectivity to mining business activities, Corporate Social Responsibilities (CSR) recognizes at least two issues with which it is constituted. First, environmental issues. This sets forth a concern on environment in which social life occurs. For an instance, in customary community (masyarakat adat), such aspect means a lot, since in several customary communities, belief is held that nature appears as god itself. Therefore, they also believe that a balance is needed for stabilizing the entire life, so nobody should do harm to the stability. Thus, it means that social life of the customary communities depends very much on environmental issues. Second, through another angle, we see that nature gives in its turn economic, cultural, and social values to the people living nearby. This is one reason for embedding the two concepts: social and environmental, into one regulation provided by Law 40 of 2007 on Limited Liability Companies (“Company Law”), especially that which is stated in Article 74.

The provision of Article 74 above itself is a one-step closer approach towards betterment of social legislation where in a welfare state, such concern on social welfare is perhaps more than a necessity. Main subjects of the CSR are companies, people, and government. The three creates altogether a main purpose of CSR where sustainable development is aimed to.

It is also necessary to put the CSR rate on the table since we know that its existence does not aim to satisfying public with a normative view. In Indonesia, not only has this concept nor even rate been under debate for many years, even with a clearer Companies Law year 2007 which regulates CSR as none was even sliced by law before (it had only been provided by other law-levelled regulation, such as Contract of Work, Coal Contract of Work, and Production Sharing Contract), but also it has been remaining several provisions and leaves our business mining doers now sinking in confusion. This article aims to providing a short review bringing CSR and its position under several prevailing regulations, involving laws and other law-levelled regulation along with RPP (draft of Government Regulation) concerning it. The mentioned types of law-levelled regulations are considered as such, on a reason that the Indonesian Civil Code positions contracts coming between parties at one level with laws, thus they prevail as laws between the parties.

II. CSR Activities in mining industries according to Laws

Mining industries belong to their own nature which very much distinguishes them from other sector. What shapes them and thus puts them in different classification of business activity rather than other sectors is simply the activity they practice which requires mining certain mineral, gas, or oil from deep under ground. Therefore, it is said that mining industries is a natural resources-based industry, a concept with which law also threat them different than any other sector of industry.

CSR according to the Law is simple. Its parts, or some parts if not all, are applicable since they grow from deep understanding and care for people and environmental issues. Not only avoiding environmental destruction for people to continue living on appropriately, but also empower and benefit them for something they deserve to have, on humanity basis.

But for mining industries, there are potential damages tagging along with the business run. Mining cannot be unattached away from exploiting environment and managing it to extract minerals, oil, and gas out from its source far underground. And for that purpose, mining industries must carry out certain activities which may harm the environment or threaten people’s safety. Once accepted and licensed by Government, a mining industry can even legally drive people away from a mining location it tends to. Therefore, a mining company may hold or be provided with certain level of authority which turns it into a very powerful institution.

CSR can be viewed from one side as means to prevent great damage or loss from occurring, or from another, to rehabilitate any misconduct or damages related to environment or social life which directly or indirectly violates people’s rights. At the term of rehabilitating, Mining Law (Law No. 11 Year 1967) already constitutes one of main issues for mining activities in conducting their responsibilities towards environment and people’s health. Article 30 provides that a mining company must conduct at least two things, reclamation and any effort avoiding people from illness or any other danger. These are two main issues related to applicable CSR for mining companies.

Below lies a table of CSR regulation mapping according to several Laws and Contract of Work (please see that Law on Mineral and Coal of 2008 is not done from the legislation yet)

LAW

11 YEAR 1967

(MINING)

23 YEAR 1997

(ENVIRONMENT)

41 YEAR 1999

(FORESTRY)

39 YEAR 1999

(HUMAN RIGHTS)

40 YEAR 2007

(COMPANY)

Mining is included under Chapter of Mining Supervision

Art. 30:

Holder of Mining Concession is obliged to conduct reclamation in hindrance to potential of illness and other hazard to people.

Art. 14 prohibits violating standard criteria and quality by any business activity.

Art. 40 provides that rehabilitation aims for rehabilitating, preserving, and improving land and forest’s function in supporting life system.

Most of its provisions regulate indirectly to CSR. But those which are prominent are as follow.

Art. 74:

1. Obligation of conducting CSR for natural resources-based industries.

2. Being conducted in appropriateness, CSR (and environmental) obligation shall be posted in corporate cost as its responsibilities.

3. Incompliance results on sanctions.

4. CSR implementation is subject to Government Regulation pointed by this Law.

Art. 15 regulates that any industry plan whose activities will be potentially harmful to environment must provide Environmental Quality Threshold. Therefore, mining industries are obliged to conduct as such.

Art 41 provides 5 kinds of rehabilitating the land; they are:

1. Reforestation,

2. Planting new vegetations,

3. Preservation,

4. Diversification, and

5. Reempowering unproductive lands.

Art. 6.2. is prominent in providing social and cultural aspects. Obligation to preserve cultural identity of customary community, including rights of ulayat (possession concept in customary land law).

Art. 16 provides obligation for waste management.

Art. 42.2 provides that locals must be involved in order to empower them.

Art. 9 point 3 is prominent for providing people’s rights to live on healthy and fine environment.

Art. 67 recognizes rights belonging to customary community where they are entitled to perform certain exploitation according to their daily need according to customary law insofar it does not violate any regulation, and to be empowered in improving their well beings.

Art. 44 emphasizes reclamation (esp. for those in mining industries) as to rehabilitating damaged environment.

Art. 45 shares similar point of view with Art. 74 of Company Law in which mining industries are considered as natural resources-based industries and potentially conduct deforesting, thus are required to conduct reclamation and/or rehabilitation. The obligation is charged on to holders of Mining Concessions. In addition, such activities are also charged with duty to pay security fund for reclamation and rehabilitation

From the Laws comparison above, it may be concluded that, of course, mining industries are concerned with its status as natural resource-based industry which, according to Company Law, must be responsible for its activities utilizing natural resources by all means allowed by laws themselves. But the next idea lies on how it will be necessary to burden our mining doers, since many people think that CSR is a responsibility, not duties upon which law must prevail. This different points of view start from different points too.

Therefore, from above we may conclude that there are at least two suppositions for charging CSR to business doers. First, CSR is purely responsibility and not compulsory like it must be regulated by law. Since it grows from business doers, it is absolutely subject to, let’s suppose, a company to whether it is most willingly to apply CSR or it is not. Or second, it is true that CSR is a responsibility, but still a government’s action is necessary for stimulating mining doers to and prevent them from ‘disobeying’ this very responsibility. Therefore, according to this second supposition, all natural resource-based industries will be charged by CSR and taxation at the same time.

Most of mining company tend to have objection towards the second supposition, and desire the first one to prevail. Taxation is however something to count. If a company is burdened by obligation in conducting CSR alongside with tax, it will be extortion. This is a reason for not regulating CSR by laws. Nevertheless, we cannot deny that company must, although the commonly used term is voluntarily, concern both people wellbeing and the environment itself, in which people live.

On one side, first option leads us to the spirit of capitalism where state need not to concern business activities, by charging CSR as a compulsory object, moreover. But state, however, holds its right to regulate its people’s life. On the other hand, second option leads us to centralized system with which state is freely and absolutely allowed to set regulations for people’s well being like those in communists countries. Only, the CSR after taxation perhaps would be quite difficult to swallow.

Many suppose that the idea, once related to Art. 74 of the Company Law, may be construed as discriminating mining activities. Word is, the term of ‘natural resources’ in its turn raises discourses about responsibility versus voluntary of mining industries. That is probably true, but both mining doers and government should not be trapped under that term. Instead, we must wisely deem that the CSR comes naturally from the consciousness of being amongst people and environment. Therefore, it is not necessary to distinguish between being coerced and invited by law. But the most notable thing is inserting and progressively educate mining business doer while creating conducive business atmosphere. In addition, concerning those two seemingly-contradictive issues, we may set a comparison with CSR conducted in India. In India, CSR concept was formally introduced year 1988. Since that time, India has been applying CSR practice which then accumulated with taxation. In accordance with Indian Tax Law Year 1961, companies carrying out CSR will get tax compensation or even incentives.

So perhaps it’d be best if we apply such system where CSR is accumulated into taxation system, in order to amalgamate positive values from both option and thus leave behind the minus ones. By offering CSR combined with tax, government does not have to lose most part of its income for it will be benefited from equity split as provided in agreement between government and companies. Of course there will be tax reducing. But such thing is needed in order to stimulate companies to get used to CSR. Therefore, taxation philosophy doesn’t have to lose its meaning in welfare state concept where raising people from poverty is mainly state’s obligation. Only, in modern state, government doesn’t have to do it all alone because it can involve mentioned companies to help people hand in hand. Through this concept, chances are also presented for companies to actualize its existence amongst people. Both government and companies are benefited while people’s welfare is lifted up as well.

Through some implementations in developed countries where people are well involved in state’s concern, we find that it is people’s legal awareness which helps CSR being implemented to meaningful actions. Internationally, there are many standards for CSR. One of well known standards is ISO 9001:2000 which is applied throughout the world although only effectively in developed countries. One of its requirements is CSR application. People living in Europe and US initiated what known as ethical consumerism which set up CSR as their concerns. These people are so well developed towards CSR, that they even conduct boycott to any product or manufacturer they find violating CSR. For example, there was a boycott charged upon a chocolate manufacturer in Europe for reason that the company employed children as their labours in Ivory Coast, Africa. Compared with same concern in Indonesia, this awareness has developed into certain level that empowers even the consumers to watch their industries in running CSR. Another illustration, Japan applies a labelling policy which marks the company related to their compliance towards CSR. This policy is applied through auditing process.

What differs Indonesia and the countries named above is basically people’s legal or social awareness towards CSR. This involves legal, social, and cultural campaigns for CSR, while it is not limited only for company or business men who prolong their discourse mainly on whether this CSR awards them certain profit or not. It does not include severe corruption and other misappropriation in managing CSR fund, which is often used to mark up a company’s cost as a way of hindrance from taxation. This, we may conclude that CSR will in turn not only drag people out from poverty, but also educate people’s awareness and concern for humanity issues.

III. Auditing CSR: Financial and Environmental.

There are two ways in assessing audit process and approach towards CSR. They are financial (taxation) audit and environmental audit. Financial and taxation audit is a way to measure the most of its quantity and closely scrutinize its validity according to what reported. Now as it is possible for taxation to include CSR inside it, further it will undoubtedly require regulating by law assigned by parliament since the Constitution provides that taxation authority is vested in parliament, thus bring such taxation issues into validity, a sole authority that cannot be passed by anyone otherwise. Therefore the embodiment process for CSR into taxation matters will need to be applied in a new law of, let’s say, taxation. But this needs to be followed by state’s willingness in keeping it stick on the rule. The most important thing is first, classifying what and how CSR will be implemented. And second is auditing the process as tax auditing, since it has been parted with taxation procedures.

Before continuing to auditing process, we need to explain to which post the CSR may belong. For mining, both mineral mining industries and oil-gas are obliged to conduct CSR. But an illustration for oil and gas will perhaps be interesting because it sharpens CSR position before Law, that it, in accordance to Art. 74 of New Company Law, belongs to company’s cost.

In oil and gas mining activities, cost recovery is widely known as an important and significant factor to deal with. There, the cost recovery is burdened upon the Government, so the certain approved cost will be recovered by Government for the oil industry. This needs critical attention, related to upon whose position this CSR burden is loaded; Government or oil and gas company (contractor)?

This is because generally, CSR will possibly be put into several applicable posts, such as the cost post, or may be subject to profit before taxing. There are at least two alternatives in which CSR can be settled down, if not at all. They are as follow.

1. Putting CSR into Cost Recovery

This model burden the CSR cost onto Government’s responsibility while the company takes best advantages from it, such as promoting a well mannered company, social advertising, etc. This way allows company to be funded by Government for what they generously give to people living nearby.

2. Putting CSR into Cost, but not Cost Recovery

This is perhaps the most suitable model to apply in Indonesia, and goes accordingly to regulations providing CSR as Corporate Social Responsibility. For an instance, one remarkable feature of CSR, what known as Community Development (often called comdev), affords best chances to people to be empowered. Companies practicing this model know exactly and comprehend that their business are running amongst their surrounding people, and their rights are mixed up in every single part of what companies earn every year, month, even day. There have been numerous movements nowadays bringing this consciousness into more aware action containing companies’ concern to people living around their business area (the locals).

Together, the two bring about several differences in both normative and practice field. Lesser description above perhaps previews little part of the normative one. In practice field, related to mining industries, firstly, it has been being in a stage of concern or even discourse to whether it is accumulated to outstanding tax or it is not. Secondly, concerning Government’s income, it is most appealing to see how the both sides’ split could eventually differ significantly after cost recovery. For this instance, in oil and gas business, we know that Production Sharing Contract (PSC) commonly regulates that the profit sharing between company and Government is about 15 – 85. The profit sharing may vary, but doesn’t range too far from described. See comparison for the two conditions in a simple illustration below.[1]


Component

PSC for Oil

Without Comdev

in

Cost Recovery Post

With Comdev

in

Cost Recovery Post

A.

Revenue

100

100

B.

Depreciation + Unrecovered + Non Capital + Operational Cost

50

50

C.

Community Development Cost

0

10

D.

Recovery

50

60

Contractor’s Profit

A.

1. Gained from Cost Recovery

50

60

2. From Equity to be Split

B.

2.1. Profit Sharing before Taxing

14.4

11.5

C.

2.2. Profit Sharing after Taxing

7.5

6

D.

TOTAL

(point 1 + point 2.2)

57.5

66

State’s Profit

A.

From Equity before Split

35.6

28.5

B.

From Tax

6.9

5.5

C.

TOTAL

42.5

34

Taken with proper adjustment from: http://www.id-petroleumwatch.org

In the illustration above for not posting the comdev Cost in Cost Recovery, it is assumed that the entire revenue is 100. And then, after being subtracted by depreciation, unrecovered, non capital, and operational cost, the equity is split for Government and contractor. Contractor’s profit is obtained as 14.4, and subtracted once again by 48% tax to 7.5. This is the nett number. The split percentage is obtained as 42.5% to 57.5% for Government and company.

On the other hand, at the table of posting comdev in Cost Recovery post, it is most apparently that Government’s expense has been down drastically from explanation just above, from 42.5 to 34 (or 8.5 points), while the contractor’s share ascends for 8.5 points. At the rate of percentage, it is obtained as 34% to 66% for Government and company. Here by adding comdev into Cost Recovery, Government loses its 8.5% of its split, if compared with the previous. Basically, there is nothing to concern about the differences. But it is clearly unfair if the comdev rate is burdened upon Government for what is obliged to contractor by Law. In accordance with Art. 74 Par. 2 of New Companies Law, CSR (which means, including Community Development) can be construed firstly as it is burdened to company/contractor’s obligation. Secondly, it is provided by the Paragraph that the CSR is posted into Cost, and not Cost Recovery instead. Therefore any contract within PSC which burdens comdev on to Government violates the Law.

One reasonable issue to consider is perhaps that the Government must specify and provide all criteria and specification; what matters which belong to this Cost Recovery, with comdev being excluded. It is also necessary to affirm that the comdev, with respect to the Law, cannot be stationed in Cost Recovery, and therefore Government will not recover comdev cost for it belongs to contractor’s obligation. When a cost recovery is proposed, Government must select and audit to which part of claimed cost it can be included as cost recovery.

Illustration above does not show us not detailed posts as described and agreed in accounting principles. Therefore, of course there are some expenditures which cannot be shown. For example, meeting with clients, golfing, dinner, etc. Therefore, as the regulations prevail, government will need to identify which expenditure is classified as CSR, thus issue government regulation covering it, so it will get rid of all existing uncertainties about CSR.

But still, the main difficulty in auditing CSR is the character of CSR itself. Being operationally immeasurable, there has been being discourses lately on how to evaluate CSR, since as a social activity, CSR takes form of too many appearances. CSR auditing process will take much more effort than other types of auditing. There are several difficulties related to this issue. First, as CSR takes more effort than other auditing such as financial or tax auditing, it requires involving numerous human resources, crisscrossing certain multidisciplinary levels and sectors, such as tax auditor, the company itself, social auditors, locals, sociologists, anthropologists, and more. Therefore auditing CSR is more complex than auditing other measurable activities. Second, Indonesia is lack of regulation covering this wide area. We cannot rely solely on existing regulations, because above we find that the Laws themselves cannot undertake carrying out to certain technical levels. Instead, government regulations (PP) can. Third, Indonesian legal enforcement system has not yet well adjusted to handle social cases, and moreover environmental ones. In Germany, for an instance, social issues go to Sozialgericht (a branch of court whose jurisdiction covers specifically only on social matters). In other countries, like United States, all kinds of typical issue are driven to Supreme Court. Only, its system has been well standardized and steady. And last, business doers must be stimulated to undertake this issue into their grasps and further, into awareness. It is true that there is assumption that we cannot generalize CSR implementation amongst all companies. In this matter, we too cannot generalize and insist one CSR standard policy to prevail on all companies in Indonesia. For an illustration, a newly established company should not be obliged with CSR as a chance must be given to let it struggle with its financial obstacles such as tax, employees, and many other issues it deals with for its beginning. On the other hand, a big company can be stimulated to undertake CSR activities. Its concept is similar with taxation programmes which recognize a concept of ‘non taxable income’ where tax is charged only to certain level of income and not to those whose income is under the line. Such idea matches and is applicable for CSR in regard to its combination with tax.

Beside tax and financial audit as described above, we also recognize environmental audit as provided in Environment Law No. 23 Year 1997. This audit is different from tax and financial audit. From the previous illustration for equity split, we know that financial auditing process is a process to undertake before calculating reported cost to be included in cost recovery. But environmental audit takes form in quite different perspective.

Art. 1 of Environment Law provides a definition of environmental audit as evaluation process towards legal and environmental compliance in carrying out companies’ business activities. Its standards include prevailing laws and regulations, alongside with the companies’ policy and other standards, and commonly applied standards in some areas as well. Amongst many opinions leading to company obligation, Indonesia is actually a country which considers CSR as voluntary and obligation at the same time. In other words, unclear approach between this two sides; thus results on ambiguity and eventually uncertainty of business climate. For a better description, we need to compare following provisions which are contradicting each other.

“In order to reach business and/or activity improvement, Government encourages business and/or activity executive officers to conduct environmental audit.”

(Art. 28 of Environment Law)

and this article

“Companies which run its activities in sector of and/or related to natural resources shall conduct Corporate Social Responsibility

(Art. 74 of Company Law)

This environmental audit is relatively new to introduce. Canada is noted as one of developed countries which put environmental audit into action in 1988. Hitherto, most of developing countries, including Indonesia, are barely unable to initiate this idea more than promulgating it within laws while the concept remains on the books. The environmental audit strictly involves two main parts of Environmental Quality Threshold (Ind.: AMDAL), Environment Management Plan (Ind. RKL) and Environment Monitoring Plan (Ind. RPL). [2] Moving awkwardly towards this idea of environmental audit, Indonesian Government will still find it difficult to apply; moreover, to encourage, if not insist companies to comply.

What needed in implementing the environmental audit for mining industries is simply to determine its scope. The scope may include followings.[3]

a. Mining activities.

Such activities may include underground mining and ore extraction which uses certain technique and chemicals which are potentially harmful to environment. In addition, mining activities require transporting and processing its ore in industries which affect the environment by emitting gaseous, liquid, and solid wastes.

b. Mining support.

This mainly includes maintenance for heavy equipment and other needs such as housing, fuel depots, hazardous and toxic chemical handling, storage, and disposal.

c. Environmental management practices

This part points out companies’ concern on developing its ability and awareness in environmental issues. This may take form of training and education.

IV. Draft of Government Regulation (Ind. “RPP”)

Laws alone cannot wholly regulate CSR for it consists only and limited to abstract and normative content. Therefore, their norms need to be implemented and translated into details which according to our hierarchy of laws and regulations, shall be vested in government regulation. In spite of its absence currently, we may look to its draft (RPP) which soon will most apparently enter into its validity because of urgent need of such regulation recently.

The RPP concerns on following matters. First, a way of providing CSR as obligation chiefly addressed to natural resources-based industries, such as mining, forestry, and maritime. This category is divided into two sub-categories, i.e. businesses which are directly related to natural resources (such as mining and forestry), and those which are indirectly (such as textile industries).

Second, this RPP recognizes two type of CSR: internal and external CSR. Internal CSR is addressed to a company’s employees, such as for their safety, health, and wellbeing. External CSR is addressed to outer aspects of a company which target community development activities, waste management, reclamation, etc.

Third, RPP provides an obligation for planning CSR annually in a company’s work plan, in which its budget contained. Such budget, in accordance with Art. 74 of Company Law, is posted in company’s cost. This means that this RPP goes accordingly to the article. The budget is arranged based on equity and appropriateness principles. The principles jointly point out to a company’s financial condition, alongside with risk ands responsibilities to which it’s obliged to conduct. But this RPP does not provide any rate or percentage of CSR that must be paid. This annual obligation must also be reported annually before General Meeting of Shareholders. In addition, chances are provided for public to submit evaluations of performed CSR.

Fourth, awards shall be rewarded to the companies which conduct CSR beyond their basic obligations. Such awards will be determined by either Ministry of Energy and Mineral Resources, Ministry of Environmental Affairs, Ministry of Maritime Affairs and Fisheries, or any other related sector. On the other hand, incompliance will be sanctioned, although the RPP does not provide its sanctions. Most apparently, the sanction will be charged accordingly to several related laws, such as Mining Law, Environment Law, Company Law, Human Rights Law, Forestry Law, Antimonopoly Law, Manpower Law, Water Resources Law, and State-owned Enterprise Law.

V. Closing

Nothing is intangible nor beyond measure for watching business activities, in purpose to lift up people’s welfare and to build better business climate from time to time. Moreover, mining industries in Indonesia are however believed as one of the most reputable sectors in building the practice, responsibilities, moral obligations, and legal compliance towards CSR. Too many to mention, mining industries which are reputable in performing certain activities such as community development, more than other sectors. Government, business doers, and public should be cooperating hand in hand for creating better future of modern welfare state through industries, since modern life itself cannot be separated from industries activities while the need of maintaining environment and social order keeps growing. Such virtuous dream should be embodied in laws and regulations of a legal state. Therefore, as developing country, Indonesia alongside with global awareness, learns something to apply CSR concepts. And we know that there is always cost for learning. Therefore, cooperation between the three parties; government, business doers, and public, is a must since none of them can solely bring the ideas into reality.

[1] Taken with proper adjustment from: http://www.id-petroleumwatch.org

[2] http://www.pacific.net.id/~dede_s/Audit%20lingkungan.htm

[3] Adrianto Machribie, Paul Murpy, and Bruce E. Marsh in Indonesian Mining into the New Millennium, p. 336.

“This material is made under ADISURYO, SUDJANA & ASSOCIATES LAW FIRM, and is modified for public use. Quoting any part or the entire material is permitted with proper compliance with ethics and standard guidance in writing.”

“Tulisan ini dibuat untuk LAW FIRM ADISURYO, SUDJANA & ASSOCIATES, serta diubah untuk konsumsi publik. Pengutipan sebagian atau seluruhnya dari tulisan ini diperkenankan dengan mengindahkan etika dan pedoman penulisan.”

Follow

Get every new post delivered to your Inbox.