IUPK with CoW provisions for Freeport

JAKARTA. Indonesia has granted a ‘red carpet’ for Freeport. By releasing Minister of Energy and Mineral Resources (ESDM) Regulation No 15/2017 on the Procedure of Special Mining License as the Continuation of Contract of Work or Work Agreement on Coal Mining, the Government of Indonesia grants flexibility to Freeport to sustain the provisions of its contract of work (CoW).

In other words, despite PT Freeport Indonesia, which is the subsidiary of Freeport McMoran, will be holding the status of special mining license (IUPK), all agreements under the IUPK should be in accordance with the provisions stipulated under the CoW. Article 8 of the regulation stipulates that the provisions under the CoW would be the inseparable parts of the IUPK. In this case, the IUPK holder may obtain the extensions in two times, each for 10 years.

As the consequences, Freeport can resume concentrate exports and is not subject to comply with any change in taxation regulation.

Chief of Legal Bureau of Ministry of ESDM Hufron Asrofi said, the newly signed regulation is a kind of transitional regulation. In this case, the status conversion should be made in a gradual manner so that Freeport and the government has a six-month period to discuss some conversions to IUPK status.

The source of KONTAN in the Ministry of ESDM said, the regulation is a kind of middle way on the legal certainty of Freeport’s investment in Indonesia. The status conversion to IUPK merely aims at giving a leeway for Freeport to export concentrates, since the Government Regulation No 1/2017 on the Procedures of Mineral and Coal Mining Business stipulates that the status conversion to IUPK is a requirement for exporting concentrates.

The Spokesperson of Freeport Indonesia Riza Pratama said, Freeport does not have objection on the status conversion to IUPK on condition that all provisions should refer to the CoW. “We will continue working together to reach mutually beneficial agreements,” Riza said.

However, he refused to explain about the issues related to the divestment of Freeport shares. In accordance with the CoW, Freeport will divest up to 30% of its shares to Indonesian shareholders, while the Government Regulation No 1/2017, which was signed by President Joko Widodo, stipulates that Freeport has to divest 51% of its shares to Indonesian shareholders.

The observer of natural resources law at Tarumanegara University Ahmad Redi said that the regulation has violated the Law on Mineral Resources and Coal. “The status conversion should comply with IUPK’s provisions, not to CoW’s,” Redi said. (Muhammad Farid/Translator)