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Legal Updates

Recent Legal Developments related to Mining Activities in Indonesia

The Government has enacted Law No. 32 of 2009 on Conservation and Management of Environment dated 3 October 2009 (the “Environment Law”). The Environmental Law introduces the so-called Environment License (Izin Lingkungan) which shall be required for all business activities who already obtained AMDAL. The Environment License shall be a pre-requisite document before the relevant authority grants its approval or license to conduct business activities.

A circular letter issued by the Department of Energy and Mineral Resources in March 2009, contained a draft format of the new form of mining concession under the Indonesian Coal and Mineral Mining Law (Minerba Law), known as an IUP (Izin Usaha Pertambangan).The draft form of the IUP contains a term explicitly stating that prior approval from the Minister of Energy and Mineral Resources is required by a mining company for sales contracts with a duration of 3 (three) years or more.

On 5 March 2009 the Minister of Trade issued a decree No.10/M-DAG/PER/3/2009 on Export of Goods requiring a Letter of Credit ("Letter of Credit Regulation"). The Letter of Credit Regulation stipulates that payment for the export of coal with a value exceeding US$1,000,000 (for each export notification) must be settled by a letter of credit. The letter of credit must be issued by a 'local foreign exchange bank' (bank devisa domestik) operating in the Republic of Indonesia which is authorized by the Bank of Indonesia to perform banking activities using foreign currency including in the context of export and import activities. The Letter of Credit Regulation does not provide a definition of 'local foreign exchange bank'. Subsequent to the issuance of the Letter of Credit Regulation, the Director General of Foreign Trade introduced technical guidelines for the Letter of Credit Regulation, No.02/DAGLU/PER/3/2009 (“Technical Guidelines”). Non-compliance with the requirements under the Technical Guidelines may result in a suspension of exports. Further exports may only resume after the submission of a report on export realization to the Directorate General of Offshore Trade. Therefore, any non-compliance with this obligation by a coal producer could lead to significant delays in export/delivery of coal.

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