Key Takeaways: 2023 Indonesia Coal Outlook: Exploring the Potential Dispute and Risk Mitigation in Coal Business – What Miners and Investors Need to Know in 2023?

Alexandra Gerungan

A. Main Presentation 

People are aware that coal is an energy source that is still very much needed. However, with the spirit of the energy transition to achieve net zero emissions by 2060, there will be several potential disputes that are predicted to occur in 2023. For this reason, the speaker, Alexandra Gerungan, Partner at ADCO Law, explained the risks and how to at least mitigate them.

1. Coal Project/Investment Risks in 2023
   Potential disputes:
   • Shareholders’/investors’ exit due to changes in market demand;
   • Unilateral termination of contracts/projects;
   • Failure to reach the agreed production target; and
   • Unclear dispute resolution/arbitration clauses. ADCO Law has found evidences where the arbitration clauses made by parties are very ambiguous, which could be a risk in the event of a dispute occurring later.

Risk Mitigations:

• • Conduct a comprehensive review of the upcoming trends in 2023;
  • Set reasonable production targets;
  • Pay close attention to every clause in the contract before the contract is signed; and
  • Specify dispute resolution forum/arbitration (eg SIAC model clauses and BANI model clauses). The parties usually do not put much emphasis on this step because the parties think that everything will be fine in the future. The parties forget that the shareholders, the Board of Directors, or the Board of Commissioners may change, but the contract will still exist.   

B. Sale and Purchase Coal Disputes in 2023

Potential disputes:

• • Failure to deliver and coal grades;
  • Regarding whether undelivered coal could be considered as debt since the Bankruptcy law provides a  broad definition of debt. On the other hand, to prove that undelivered coal is a debt, more than a simple proof is needed;
  • Force Majeure. An example of force majeure in mining activities is when a coal-hauling road section owned by a mining permit owner is blocked due to a land-use dispute with another mining permit owner, which causes the cessation of mining production activities; and
  • Regarding disputed plots of land/access roads whether exclusivity is allowed. 

Risk Mitigations:

• • Specify delivery details (schedule, specifications, price, etc.);
  • Notice of force majeure events;
  • Land acquisition plan/strategy (land-owners/communities, head of the village, local authorities/police, etc.); and 
  • Consider anti-competition regulations regarding exclusivity arrangements.

C. Employment Issues

Potential disputes:

• • Employment Downsizing;
  • Minimum wage;
  • Appointment/dismissal of directors/commissioners; and
  • How to handle expatriate employees.

Risk Mitigations:

• • Conduct and prepare HR plans/strategies;
  • Corporate decisions and right approach to layoffs;
  • Consider reputational damage;
  • Prepare do’s and don’ts for expatriates; and
  • Pay attention to the required appointment/dismissal procedures.

D. QnA Session 

Question 1 

How far will the existing regulations affect coal production in Indonesia? 

Answer 

It could be different for each company. For foreign investment companies, launching new products will be challenging. Investors could also have a new appetite for greener energy. Companies also have to follow the appetite in order to survive. 

 

Question 2  

In the event that the parties choose arbitration as a forum for dispute resolution, the losing parties usually do not intend to enforce the arbitral award. Furthermore, to enforce the arbitral award, the award must first be registered with the court. So, should the parties still choose arbitration? or just go straight to court if a dispute occurs? 

Answer 

It will really depend on what the parties need. If the parties agree that the dispute is confidential and do not want another party to know about the dispute, then the parties must choose arbitration as their dispute settlement forum. If the parties wish to be judged by an expert in certain fields, then they must choose arbitration. On the other hand, if there are no such concerns, then the parties may choose the court as their dispute settlement forum. For the enforcement of arbitral awards, the speaker is aware that it could be tricky because there is no time frame, and the registration of international arbitral awards can only be handled by one court in Indonesia. However, if it is handled properly, the international or national arbitral awards can be enforceable. 

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ADCO Law is a law firm that offers clients a wide range of integrated legal services, including commercial transactions and corporate disputes in a variety of industry sectors.

Over the course of more than a decade, we have grown to understand our client’s industry and business as well as the regulatory aspect. In dealing with the business dynamics, we provide comprehensive and solid legal advice and solutions to minimize legal and business risks.

Should you have more queries regarding this matter, please do not hesitate to contact us

ADCO Law

Setiabudi Building 2, 2nd Floor, Suite 205C

Jl. H.R. Rasuna Said Kav. 62, Setiabudi Karet

Jakarta Selatan, 12920, Indonesia.

Phone : +6221 520 3034

Fax : +6221 520 3035

Email : [email protected]

 

Disclaimer: This article has been prepared for scientific reading and marketing purposes only from ADCO Law. Accordingly, all the writings contained herein do not constitute the formal legal opinion of ADCO Law. Therefore, ADCO Law should be held harmless of and/or cannot be held responsible for anything performed by entities who use this writing outside the purposes of ADCO Law.