Indonesia Stands Firm in Churchill Mining Dispute

Indonesia Stands Firm in Churchill Mining Dispute
Tito Summa Siahaan | September 26, 2012

The Indonesian government will not pursue an out-of-court settlement over the ongoing $2 billion mining dispute with London-based Churchill Mining, claiming it has a strong case and that the resources company had acted illegally.

The statement was made by Isran Noor, the head of East Kalimantan’s East Kutai district, an ally of the national government in its international court case.

The legal case, which has been moving through Indonesian courts since 2010, revolves around East Kutai’s decision to revoke four coal mining business permits (IUPs) in Busang subdistrict that were previously obtained by the Ridlatama Group.

Britain’s Churchill Mining, through its local unit, Indonesia Coal Development, bought a 75 percent stake in Ridlatama in 2008. But according to the 1967 Mining Law — the legal foundation of Ridlatama’s permits — foreign parties can only control mining assets under “contracts of work,” not permits issued under the IUP scheme.

“Ridlatama is aware of the situation because it was clearly cited in one of the provisions within the contract,” Isran said on Tuesday.

Churchill Mining chairman David Quinlivan did not respond to requests for comment on Tuesday.

Isran revoked the permits in 2010 on the grounds that they had been falsely obtained and that the concessions allegedly overlapped with a forest conservation area.

He said that Ridlatama claimed to have a concession area that was supposedly under the control of Nusantara Energy, a company owned by presidential hopeful Prabowo Subianto.

Ridlatama lodged an appeal three times to three different courts: the Samarinda District Court, the Jakarta High Court and the Supreme Court. They lost the legal battle.

Churchill then entered the fray, accusing the Indonesian government and the East Kutai district of seizing its assets without proper compensation. Churchill has taken its case to the International Center for Settlement of Investment Disputes in Washington. It lodged the case in June this year.

The case has hurt Indonesia’s reputation as an investment destination, Isran said, while claiming that the revocation was made in accordance with existing regulations, including a 1976 bilateral investment agreement between Indonesia and the United Kingdom.

Isran said that Churchill never notified the local government about its interest in Ridlatama. “I have written twice to Churchill requesting a clarification over its interest in Ridlatama, but got no response. [It was] only after the dispute got noisy that they started to make claims,” he added.

Isran accused Ridlatama of forging the permit, citing a 2008 report by the Supreme Audit Agency (BPK) that the signature of the then-district head, Awang Farouk Ishak, had been forged on the permits. Awang is now East Kalimantan governor.

Isran accused Churchill of falsifying the size of the estimated reserves on the concession area in order to boost its share price.