Luhut Asks Freeport to Respect Indonesian Constitution

Jakarta (Antara Bali) - Coordinating Minister of Maritime Affairs Luhut Binsar Panjaitan asked PT Freeport Indonesia to respect the Indonesian regulations, regarding the change in the companys permit status from Contract of Work to Special Mining Operational Permit.

Luhut said in Jakarta on Monday that the government has taken a clear stance in the situation and will not step back from the regulations that apply in the country.

"Freeport needs to realize that this is B to B (Business to Business), so there are no issues regarding the state. Freeport has been operating here for almost 50 years, so they also need to respect our constitutions," he remarked.

The former Coordinating Minister for Political, Legal and Security Affairs further stated that the American mining company had not been fulfilling its duties in building a mineral processing and purifying facility since 2009, and it has also not been doing the required 51 percent divestment.

"It is an old dispute. The government now refuses to step back because it has been 50 years," he noted.

The government, through the Government Regulation number 1 of 2017 about the Fourth Change of the Government Regulation number 23 of 2010 on the Execution of Mineral and Coal Mining Operations, prolongs the export activities of concentrates with a number of requirements, which include the clause that obliges Contract of Work holders to transform it into Special Mining Operational Permit and Mining Operational Permit, as well as releasing an agreement to build a smelter within a five-year period.

Another requirement is that holders are obliged to carry out divestment of up to 51 percent.

With the Special Mining Operational Permit status, the governments position will then be higher than Freeport, as it acts as the party that releases the mining permit.

When the permits status changes, companies will then have to abide by the applied taxation scheme rather than a nail down form in the CoW, which means the taxation scheme will not change until the contract is expired.

For that reason, Freeport insisted that they cannot let go of the legal rights that was written in the contract signed in 1991.

Furthermore, Luhut believed that if PT Freeport Indonesias parent company, Freeport McMoRan Inc, disagrees with the new mining status, then they risk losing the investment opportunities in Indonesia, as the contract itself will end in 2021.

He also admitted that the government was prepared, should Freeport decide to take the dispute to the International Court of Arbitration.

"We are prepared to face that," he affirmed.

It was previously reported that the President and CEO of Freeport McMoRan Inc. Richard C Adkerson would bring the dispute to the International Court of Arbitration if it fails to reach an agreement with the Indonesian government.

Richard said in a press conference in Jakarta on Monday that PT Freeport Indonesia had sent a notice letter to the Minister of Energy and Mineral Resources, Ignasius Jonan, regarding this issue on Friday (Feb 17).

He thinks that Freeport will not be able to do export activities without ending the Contract of Work that was signed in 1991.

He also expected the letter to be a solution to the contract dispute.(WDY)