Legal View
    Category: Column By : Eddy Leks Read : 1006 Date : Friday, October 17, 2014 - 00:37:29

    During a holy month of Ramadan, Indonesia experienced unpleasant incident—the international arbitration claim brought by PT Newmont Nusa Tenggara (NNT) and Nusa Tenggara Partnership BV (NTP), a joint venture controlled by Newmont Mining Corp. (NMC) and Nusa Tenggara Mining Corp. of Japan (NTM).

    The claim threat was not new. On few occasions, after the promulgation of Minister Regulation on processing and purification activities in January 2014, as implementing regulation of mineral and coal mining law of 2009, NNT has revealed its intent. Yet, the talks to renegotiate the work contract (kontrak karya) of 1986 between the government and NNT is ongoing. It is inevitable due to the mining law of 2009.

    NMC and NTM control 56% of shares in NTT. NMC was founded in 1916, and thus has nearly a century of experience in the mining industry, including gold and copper. It is clear that NMC is not just an ordinary company.

    During the renegotiation, NNT and NTP unexpectedly filed an international arbitration claim against the Indonesian government. The government sees this move as bad faith and disrespect for Indonesian laws. The government immediately stopped the renegotiation until NNT/ NTP withdraws its claim.

    The international arbitration was brought to International Centre for Settlement of Investment Dispute (ICSID), which provides arbitration to settle international investment disputes. Indonesia has ratified its accession to the ICSID convention through Law Number 5 of 1968 on Settlement of Disputes between State and Foreigner on Capital Investment.

    The government moved quickly to respond to NNT’s action. The president appointed several ministers and other senior officials to represent the government in the international arbitration. The government also proposed its own international arbitration claim against NTT.

    Fortunately, before commencing the arbitration, NNT/NTP withdrew their claims. According to arbitration rules, the government has the right to approve (or not) the withdrawal by NNT/NTP.

    The government decided to approve the withdrawal provided that NNT adheres to prevailing Indonesian laws. Both parties then reached settlement on six points i.e. smelter construction by partnering with PT Freeport Indonesia, shares divestment at least 51%, increase of royalty of gold, silver, and copper, convert the work contract to mining business license, concession territory is reduced from 87,000Ha to 66,422Ha, increase the local content of goods and services.

    International arbitration is an increasingly popular means to resolve disputes. By being member of ICSID, Indonesia shows to international investors that it appreciates them by agreeing to refer disputes to ICSID, and it upholds the law, and it essentially provides similar standard to all international investors in Indonesia. In return, it is not unreasonable if Indonesia expects that all international investors comply with the prevailing Indonesian laws and regulations.

    Disputes are sometimes inevitable, but it is much better to reach win-win resolutions than waste time, money and energy on a dispute. Therefore, everyone would love to see a settlement with NNT. Just before the arbitration claim, Indonesia also experienced a dispute between two presidential candidates. That dispute is now over, and it is time to move on. For this dispute too, it is also time to move on.



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