Freeport ready for arbitration

JAKARTA. The dispute between the Ministry of Energy and Mineral Resources (ESDM) with Freeport continues. The President and CEO of Freeport McMoran Inc Richard C. Adkerson McMoran said, to date Freeport has yet to agree with the government’s policy about the status conversion from contract of work (CoW) to special mining license (IUPK).

“There are 120 days for the government and Freeport to settle this dispute,” he said at a press conference, Monday (20/2). At that occasion, Richard C. Adkerson was accompanied with the former President Director of Freeport Indonesia Chappy Hakim, who now becomes the advisor at Freeport.

Article 21 paragraph 2 of the Contract of Work (CoW) sets a period of 120 days to settle a dispute related to the contract, before filing the case to the arbitration. If both parties fail to settle the dispute, “Freeport might settle this (case) through arbitration,” he said.

Adkerson stated, Freeport is complying with the CoW, which was made in 1991. Despite the Government of Indonesia has issued recommendation to export concentrates at amount of 1.7 million tons, Freeport would have not executed the decision.

In this case, the status of CoW would be automatically converted to the IUPK once Freeport implements the recommendation. The status conversion from CoW to IUPK is a requirement for Freeport to export concentrates. Adkerson said that Freeport cannot accept that condition, due to several important things.

According to Adkerson, Freeport would lay off 12,000 contract employees, while waiting the settlement of the dispute. To date, Freeport is employing 30,000 employees. The layoff would be driven by export termination, while the warehouse has been full of the stockpiles. “The foreigners consist 10% of the PTFI employees, while the national employees consist 97%-98% of the employees,” he said.

Adkerson said, the layoff is not aiming at giving pressures to the government. Instead, Freeport wants to continue the dialogues to find the best solution of this dispute. “Indonesia will receive more than US$ 40 billion during the remaining period of contract. This is a large amount of asset. Therefore, we have commitment to remain in Indonesia,” he said.

Minister of ESDM Ignatius Jonan said, there are three alternative solutions to settle the contract dispute with PTFI.
First, the company has to comply with the Indonesia’s legislations. Freeport has to accept the status of IUPK while continuing the negotiations om the investment stability maximum in six months period.

Second, Freeport may want to wait for the revision of Law No. 4/2009 on Mineral and Coal Mining. However, the revision is projected to take a longer time period to be completed.

Should both parties fail to reach agreement, “Each party is entitled to file this (case) to the arbitration,” Jonan said, Monday (20/2).

Vice Chairman of DPR (the House of Representatives) Agus Hermanto said, the government cannot deny the existing law. Furthermore, the government has to find the reliable arbitraries to face the arbitration. “The Ministry of ESDM has many reliable arbitraries,” he said. (Muhammad Farid/Translator)