Indonesia vs Churchill Mining: Churchill has never secured a Mining Business License in Indonesia

Japan Corporate News  09/23/2012 10:00 PM ET

Indonesia vs Churchill Mining: Churchill has never secured a Mining Business License in Indonesia

Jakarta, Indonesia, Sept 24, 2012 – (ACN Newswire) – Churchil Mining Plc does not have any legal relationship whatsoever with the East Kutai Regency government, because the Mining Business Licenses (“IUPs”) issued to four companies which have since been revoked by the Kutai Timur Regency Head Isran Noor were companies incorporated in the Ridlatama Group. The East Kutai Regency Head issued the IUPs to Ridlatama, not to Churchill, and Churchill was not a shareholder of Ridlatama at that time. It is clear that Churchill has no right to sue the East Kutai Regency Head, let alone the government of Indonesia.

Prof. Dr. Abrar Saleng, a legal expert on mining and Professor at Hasanuddin University, said, “The Churchill Mining lawsuit against the government of Indonesia was directed at the wrong party, as the party with a relationship to Churchill was not the local governor nor the State, but a local company, namely Ridlatama.


“The party that was engaged with the government, the proper authority to issue the license, was the concession holder, Ridlatama. It was this local company that was registered by the local government. When the local company failed to meet its obligations or breached stipulations as stated in the business license, the local government which issued the license has the right to revoke the license,” said Prof. Abrar.

Therefore, said Prof Abrar, “If Churchill wanted to sue the local government and the State, the legal standing has to be clear, and the substance must be strong as well. It may go forard and file a lawsuit (against local government and the State), however, I don’t see any legal connection.”

If Churchill wanted to sue, he added, the lawsuit should be filed against its local partner, i.e. Ridlatama, and challenge that company on failing to meet its obligations which led to the revocation of the permit.

The concession holder right remained in the hands of Ridlatama as the holder of the License, while the relationship between Churchill and Ridlatama was on share composition, based on their agreement, not about land or IUPs that were granted. “Those are two different matters,” he said.

Churchill entered Indonesia through PT Indonesia Coal Development (‘ICD’) in which Churchill holds 95% shares and the remaining 5% shares are owned by Planet Mining Plc., an Australian company. ICD was established as an FDI company in 2005. Churchill later claimed to own 75% shares in four Ridlatama companies.

East Kutai Regency Head Isran Noor was surprised with the lawsuit filed by Churchill against the East Kutai Regency Government, because Churchill has never been registered as a company investing in East Kutai. He heard about Churchill in 2009, after the company announced that it had invested in the mining sector, and the second biggest coal reserve (potential) in East Kutai. In fact, the company has never been recorded by the Mining Office of the East Kutai Regency government.

“If Churchill invested in the mining sector, where was the evidence?” Isran questions.

Isran Noor believes that the legal steps undertaken by Churchill Mining PLC are from frustration with its local partner, Ridlatama Group. This is evident in the action of Churchill taking the Ridlatama Group to court over alleged violations of their investment agreement, given that Churchill’s partnership with Ridlatama Group was based on Master Service Agreement in mining transportation services.

Churchill purchased shares of PT Indonesia Coal Development thinking that the company was engaged in the mining sector, while PT Indonesia Coal Development is a subsidiary of Ridlatama Group, which engages in mining transport services.

“If Churchill claimed to have obtained licenses from the Investment Coordinating Board (BKPM), the licenses were just for mining transportation services, not for mining activities,” he elaborated.

BKPM recorded investments in January-June 2012 reaching Rp 148.1 trillion, up 28.1 percent compared with the same period in 2011. Total investment in 2012 is targeted to reach Rp 283.5 trillion, up from actual investment in 2011 amounting to Rp 251.3 trillion.

Head of the BKPM Muhammad Chatib Basri is determined to make Indonesia an investment hub in South East Asia (ASEAN) by initiating change in order to improve the investment climate.

“Our focus is attracting investment and boosting economic growth. The ASEAN Investment Forum, which was initiated by Indonesia, is trying to convince investors that ASEAN, especially Indonesia, is a great place to invest,” he said.

According Chatib, one way to improve the investment climate and to break is to adopt a tracking system in the licensing process. With a tracking system, each investor can directly monitor the the status in any licensing process – at what stage in the process, when the process will be completed and when the permit is issued.

“This is an effort by BKPM to cut red tape and simultaneously apply transparency so that investors will have clarity and certainty. The permit tracking system will be implemented this year,” he said.

Says Prof. Abrar Saleng, firmness of government in enforcing the rule of law provides security to investors in entering Indonesia. Certainty is also reinforced through the government’s firm stance in revoking licenses that do not fit or violates the rules.

“If the government is firm, legal certainty is enforced, and investors will come to Indonesia. Firmness and certainty of law would be a good precedent for the sustainability of investment in Indonesia,” he said.