Practical Guide to Resolving Disputes in the Mining Industry

The mining industry, as one of the primary pillars of the economy, holds significant profit potential as well as challenges that cannot be taken lightly. In this industry, disputes often emerge as significant hurdles.

But what disputes often arise? Disputes in the mining industry encompass a wide spectrum of conflicts of interest among various stakeholders, both directly and indirectly. The disputes span from licensing issues to intricate environmental and social concerns. Handling these disputes with finesse is essential for the sustained success of mining operations.

This article aims to provide an overview of disputes in the mining industry, methods of dispute resolutions, and effective strategies for resolving them.

Disputes in the Mining Industry

Criminal Disputes: This category includes actions that violate criminal laws, such as obstructing or impeding mining activities, engaging in illegal mining, operating without proper permits, not complying with reclamation and post-mining funds, or providing false reports to the Ministry of Energy and Mineral Resources.
Civil Disputes: This category includes disputes related to mining transactions, such as the sale and purchase of mining company shares, trading of mining commodities, or disputes with third parties e.g., mining contractors. This also includes contractual disputes related to mining activities.
State Administrative Disputes or Sengketa Tata Usaha Negara This category includes disputes related to obligations towards the state i.e., failure to pay fees, failure to prepare Annual Work Plans and Budgets or Rencana Kerja dan Anggaran Biaya (“RKAB“), and non-compliance with periodic reporting obligation, as well as violations by holders of Mining Business License or Izin Usaha Pertambangan (“IUP”) e.g., not carrying out mining business activities or share divestment. Disputes in this category can also arise due to administrative actions taken by individuals or legal entities claiming losses resulting from government decisions.
State Affairs or Tata Negara Disputes: This category involves legal challenges to government regulations, which encompasses constitutional review of laws based on the 1945 Constitution at the Constitutional Court, or legal review of regulations at the Supreme Court.

Mining disputes

Resolving Disputes in the Mining Industry

A fundamental understanding of the legal framework governing mining business activities is a crucial first step in handling disputes in order to ensure the stability of company operations and prevent adverse impacts on all parties involved. Article 154 of Law Number 4 of 2009 concerning Minerals and Coal Mining, which has been partially amended by Law Number 3 of 2020 jo. Government Regulation of the Republic of Indonesia Number 2 of 2022, stipulates provisions for resolving disputes arising in the implementation of IUP, People’s Mining Permits or Izin Pertambangan Rakyat (IPR), or Special Mining Business Permits or Izin Usaha Pertambangan Khusus (IUPK). Resolution can be pursued through two ways:

Court Litigation: The process of resolving disputes through the court, also known as litigation, involves the disputing parties in a judicial proceeding presided over by a judge. The advantages of this approach include well-defined procedural standards based on procedural law, the opportunity to present statements, and the award of a fair and unbiased final decision.
Arbitration: Apart from court litigation, dispute resolution can be pursued through arbitration in accordance with relevant legislation. Arbitration is an alternative dispute resolution mechanism conducted outside the regular court system, involving a written agreement between the parties in dispute. The advantages of arbitration include swifter decision making, selection of arbitrators with expertise in the mining industry, and a more confidential process.

Mining disputes

How To Mitigate Mining Dispute Risks

In managing the complexity of mining business activities, implementing best practices for dispute resolution is crucial. By following straightforward yet effective steps, mining companies can minimize the risks associated with disputes and ensure continuous operations. The following are some best practices to consider:

Understanding and Identifying Stakeholders: Get to know your potential partners well before collaborating to avoid future disputes. This includes evaluating their track record, business integrity, and financial capability, etc.
Drafting Robust Contract Agreements: Ensure the agreement is well-drafted, clear, and comprehensive. A strong agreement should cover crucial details such as the rights and obligations of each party, profit sharing, and dispute resolution steps.
Collaborating with Professionals: In handling mining disputes, it is crucial to collaborate with professionals who possess in-depth knowledge of the legal, technical, and financial aspects of mining. They can assist in evaluating, designing, and executing dispute resolution strategies.
Compliance with Regulations: Ensure you understand and adhere to all obligations stipulated by the laws and regulations in place within the mining industry.
Coordination with Government Bodies: It is crucial to maintain good relations with government institutions, particularly the Ministry of Energy and Mineral Resources. This can help in understanding the latest regulations and policy changes, and in finding easier solutions for dispute resolution.
Thorough Due Diligence: It is critical to conduct thorough due diligence on all transactions as it helps identify potential risks before they escalate into disputes.

By understanding disputes in the mining industry and their resolution methods, mining companies can optimize their operations and minimize disruptions. These measures not only support business growth but also create positive impacts on all parties involved.

In closing, At ADCO Law, we provide each client with the most suitable consultation and services. Don’t let challenges hinder your progress; let our expertise be the key to your uninterrupted mining success. Contact us now and pave your path to seamless operations and prosperity.

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About ADCO Law:

ADCO Law is a firm that offers clients a wide range of integrated legal services, including in 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 business dynamics, we provide comprehensive solid legal advice and solutions to minimize legal and business risks.

ADCO Law is a Proud Member of the Alliott Global Alliance (AGA) in Indonesia. Founded in 1979, AGA is one of the largest and fastest-growing global multidisciplinary alliances, with 215 member firms in 95 countries.

As a law firm, we also believe in regeneration. To stay abreast of business changes and stay relevant, our formation of lawyers is comprised of the top graduates from Indonesian and international law schools.

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

ADCO Law

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Jakarta Selatan, 12920, Indonesia.

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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.