Revocation of Mining License: The Grounds, Process, and Remedy
Since the conclusion of the Fourth Debate of Vice Presidential Candidates for the 2024 Election, the discussion on illegal mining has piqued the interest of the general Indonesian public. One of the several presented ideas was to simply revoke the mining business permit such being, among other licenses, the revocation of the Mining Business License (Izin Usaha Pertambangan/”IUP”) of illegal and corrupt mines.
This perspective has been met with hesitation as the question remains: such illegal mines do not possess IUPs, therefore, how is it possible to revoke non-existent IUPs? In contrast, for business actors that do possess IUPs, the prevailing laws and regulations do provide the grounds and procedure for IUP revocation. Nonetheless, since President Joko Widodo enforced the mass revocation of IUPs in 2022, the regulatory certainty of the grounds and procedure for IUP revocation has been challenged by business actors within the mining sector.
A. IUP License Under Indonesian Administrative Law
To address the qualification of IUP and its revocation as a ‘state administrative decision’ (Keputusan Tata Usaha Negara), it is essential to understand the framework established by Indonesian law. The qualification stems from the legislative definitions and context provided by Indonesian administrative law, specifically under the Law No. 5 of 1986 on the Administrative Court, as lastly amended by Law No. 51 of 2009 (“State Administration Court Law”), and Law No. 30 of 2014 on Government Administration as lastly amended by Government Regulation in Lieu of Law No. 2 of 2022 (“Government Administration Law”).
The concept of state administrative decision is defined in the State Administration Court Law as a written determination issued by a state administrative body or official, containing state administrative legal actions based on applicable legislation, which is concrete, individual, and final, and has legal consequences for individuals or legal entities.[1] Similarly, the Government Administration Law broadens this definition by including any written determination issued by governmental bodies or officials in the conduct of government administration.[2]
An IUP, being a license for mining business activities, falls under this category as it is a specific, individualized administrative decision issued by the relevant government authority to a business entity or individual. The issuance and, by extension, the revocation of an IUP, therefore, constitutes a state administrative decision because it is made as a concrete, individual, and final administrative decision that directly affects the legal rights and obligations of the entity to whom it is issued.
B. Grounds and Process of IUP Revocation
Grounds for Administrative Sanctions
The Minister of Energy and Mineral Resources (“Minister of MEMR”) is the authority empowered to implement administrative sanctions on IUP holders. The administrative sanctions constitute: (i) written warnings; (ii) fines; (iii) temporary suspension of part or all business activities; and/or (iv) revocation of IUP (collectively referred to as “Sanctions”).[3] These Sanctions may be triggered upon the occurrence of particular acts and/or omissions of the IUP holder, which are sporadically identified within the law and Minister of MEMR regulations as elaborated below.
Under the Mining Law, grounds for Sanctions include inter alia:[4]
- IUP’s usage for a purpose that is not stated in the granted IUP;[5]
- Guaranteeing IUP and/or mining commodities to other parties;[6]
- Failure to apply good mining principles, to manage finances in accordance with the Indonesian accounting system, and to implement development and empowerment of the local community;[7]
- Failure to guarantee the application of environmental standards and quality assurance in accordance with the characteristics of the region;[8]
- Failure to prioritize the use of local labour, goods, and services;[9] or
- Failure to submit all data that was obtained from the exploration and production operation to the Minister of MEMR, governors, or regents/mayors in accordance with their authorities.[10]
Under MEMR 7/2020, grounds for Sanctions include inter alia:[11]
- Failure to acquire approval from the Minister of MEMR or governors in accordance with their authority before any changes to its shares and its registration of such changes to the Ministry of Law and Human Rights (“MOLHR”) and failure to report such shareholding change to the Minister of MEMR or governors in accordance within their authority within 14 (fourteen) business days after obtaining approval from MOLHR;[12]
- Failure to pay proper compensation to communities affected by direct negative impacts if mistakes occur in the implementation of mining business activities that generate such impacts;[13] or
- Conducting any of the actions prohibited under Article 66 of MEMR 7/2020.[14]
Under MEMR 10/2023, grounds for Sanctions include inter alia:[15]
- Failure to acquire approval from the Minister of MEMR or governors in accordance with their authority on the preparation of Work Plan and Budget (Rencana Kerja dan Anggaran Biaya/”RKAB”) for 1 (one) year (in the case of RKAB for Exploration activities phase) or for 3 (three) years (in the case of RKAB for Production Operation activities phase);[16] or
- Failure to implement the mineral and coal mining business activities in accordance with the approved RKAB.[17]
Procedure toward Revocation of IUP
Under the Mining Law and Regulation of the Government No. 96 of 2021 on The Implementation of Mineral and Coal-Mining Business Activities (“GR 96/2021”), the Minister of MEMR will usually implement the following Sanctions before the revocation of the IUP:[18]
However, it should be noted that particular non-compliance or violations of specific provisions may be subject to the revocation of license immediately without the requirement to impose Step 1 to Step 4 above. The immediate imposition of revocation of license by the Minister of MEMR is subject to the following conditions:
- Committing criminal offenses based upon a court decision that has permanent legal force;[19]
- Results of the evaluation by the Minister of MEMR toward the holder of IUP that caused environmental damages and failure to implement good mining principles;[20]
- Declaration of bankruptcy;[21]
- Failure to fulfill the obligations stipulated in the IUP;[22]
- Results of evaluation on the issuance of IUPs undertaken by the Minister of MEMR or governors in accordance with their authorities;[23]
- Conducting mining and/or coal sale activities without the possession of the approved RKAB;[24] or
- Failure to apply for the approval of RKAB for 2 (two) consecutive years.[25]
Further, the revocation of IUP process must include the issuance of a new state administrative decision that outlines the legal basis for the revocation and observes the principles of good governance. It is also mandated that such a revocation can only be carried out by the issuing government official. The above requirements are rooted in the principles of legal certainty and administrative governance outlined in Indonesian administrative law.
The Implementation of Immediate IUP Revocation
The above method of immediate revocation of IUPs without the requisite written warning and temporary suspension of business activities has previously been enforced and enhanced through Presidential Decree No. 1 of 2022 on Task Form for Land Management and Investment Management (“PD 1/2022”). As a result, 2,078 (two thousand seventy-eight) companies will have their IUPs revoked on the grounds of non-operation and failure to prepare the RKAB despite possession of IUP.
However, such mass revocation was met with disapproval by mining companies as the Minister of MEMR’s authority of overseeing IUPs was overtaken by the Minister of Investment/Head of the Investment Coordinating Board (“Minister of BKPM”). This is evidenced by the composition of the Task Form established under PD 1/2022 whereby it consists of the (i) Minister of BKPM (as the Chairman); (ii) Minister of MEMR (as the Vice Chairman); (iii) Minister of Environment and Forestry (as the Vice Chairman); and (iv) Minister of Agrarian Affairs and Spatial Planning (as the Vice Chairman).
Thus, the Task Form acquired the authority to provide recommendations to the Minister of BKPM for the revocation of IUPs.[26] However, it should be noted that the Minister of MEMR delegated the authority to issue and/or revoke licenses in the mineral and coal mining sector within the Online Single System (OSS) to the Minister of BKPM.[27] Therefore, this power originates from the Minister of MEMR, and in turn, PD 1/2022 is undermining the Mining Law as the issuance as well as the revocation of IUP rests with the Minister of MEMR, not the Minister of BKPM.
C. Remedy to Revocation
IUP Revocation and Administrative Remedies
At first glance, the Mining Law has no provisions regarding remedies should an IUP be wrongfully revoked by the Government. The Mining Law’s lack of explicit internal administrative remedies for the revocation of an IUP necessitates turning to the broader framework of state administrative law, particularly due to the fact that the issuance and revocation of an IUP are classified as ‘state administrative decision’, as previously discussed. This classification is crucial for understanding why the state administrative law framework becomes the appropriate recourse for addressing the lack of remedies in the Mining Law.
Given this classification, when the Mining Law itself does not outline the procedures or remedies for challenging the revocation of an IUP, the broader state administrative law framework provides the necessary legal mechanisms for review and redress. This framework is designed to govern all administrative decisions, ensuring that they adhere to the principles of good governance. Ex-IUP holders who are aggrieved by their IUP revocation may file an administrative remedy to the government official or the superior of the official who made and/or carried out the decision.[28]
Options for Administrative Remedies
Options for administrative remedies within the Indonesian legal framework, specifically under Government Administration Law, include a structured process that involves initial objections and subsequent appeals if necessary. Below is an overview of each of these remedies:
- Objection (Keberatan). This represents the initial stage of the administrative remedy process, where an aggrieved party presents a written objection against a state administrative decision directly to the responsible authority.[29] In cases of IUP revocation, the objection should be directed to the issuing authority of the IUP revocation decision. It is important that the objection be submitted within 21 (twenty-one) working days from the date the decision was communicated to the aggrieved party[30], affording them adequate time to prepare and lodge a thorough objection.
The issuing authority is obligated to examine the objection and provide a response. The resulting decision may confirm, modify, or annul the IUP revocation decision. The issuing authority must issue a response to the objection within 10 (ten) working days of its receipt, ensuring the prompt evaluation and resolution of the complaint at this preliminary stage of the administrative remedy process.[31] In the event that the issuing authority does not address the objection within the designated period, the objection is consequently considered to have been accepted.[32] An objection deemed accepted necessitates further action, culminating in the issuance of a state administrative decision reinstating the IUP in alignment with the objection request by the issuing authority.[33]
The issuing authority is mandated to issue a decision in accordance with the objection request no later than 5 (five) working days following the conclusion of the aforementioned 10-day period.[34]
- Administrative Appeal (Banding Administratif). If the objection is denied or not satisfactorily resolved, the aggrieved party has the option to escalate the matter through an administrative appeal. This appeal is directed to a higher or supervisory issuing authority, which was not involved in the original decision. The appeal must be submitted within 10 (ten) working days following the receipt of the decision on the initial objection. [35] This short timeframe underscores the importance of promptly addressing administrative grievances.
The higher or supervisory authority conducts a review of the appeal, taking into consideration the entirety of the case, including the initial decision and the basis for the objection. The higher authority must make a decision regarding the appeal within 10 (ten) working days of receipt.[36] This decision marks the conclusion of the administrative remedy process and is considered final for the aggrieved party. In the event that the issuing authority does not address the administrative appeal within the designated period, the administrative appeal is consequently considered to have been accepted[37] An administrative appeal deemed accepted necessitates further action, culminating in the issuance of a state administrative decision reinstating the IUP in alignment with the administrative appeal request by the issuing authority.[38]
The issuing authority is mandated to issue a decision in accordance with the objection request no later than 5 (five) working days following the conclusion of the aforementioned 10-working day period.[39]
Post Administrative Remedies
In situations where state administrative disputes cannot be resolved through administrative remedies, the established procedure involves initiating legal proceedings by filing a claim with the State Administrative Court (the “Administrative Court“).[40] A pertinent inquiry emerges regarding the timing for submitting a claim to the Administrative Court and whether it is permissible to bypass administrative remedies entirely, especially in cases where an IUP is revoked, and proceed directly to Administrative Court.
Prior to the enactment of Government Administration Law, only certain administrative disputes required administrative remedies before a claim could be filed in the Administrative Court, based on the specific regulations that issued those state administrative decisions. Should these regulations not mandate administrative remedies, claims could be taken directly to the Administrative Court without first attempting administrative remedies. [41] Given the Mining Law’s lack of specified administrative remedies for IUP revocation, it could be argued that an individual or legal entity may directly file a claim with the Administrative Court following such a revocation. Nevertheless, with the Government Administration Law, disputes arising from state administrative decisions must first be addressed through administrative remedies before proceeding to Administrative Court. Under this law, any administrative dispute that adversely affects an individual or legal entity necessitates that affected parties first seek administrative remedies against the issuing administrative body or official.[42]
A notable issue arises with the role and necessity of pursuing administrative remedies before approaching the Administrative Court. Article 76 of the Government Administration Law states that government bodies or officials have the authority to resolve claims arising from state administrative decisions. However, this article’s use of the word “may” implies that resolving claims through objections and administrative appeals is optional for the administrative body or official, introducing ambiguity. [43] Legal experts argue that this wording suggests a discretionary norm, allowing individuals to forgo filing a claim if they accept the decision made from the administrative remedy process. Conversely, aggrieved individuals or entities have the option to seek resolution through objections and administrative appeals before resorting to Administrative Court.
The Supreme Court addressed this ambiguity in 2018 with Supreme Court Regulation No. 6 of 2018 concerning the Principles of Resolving Government Administrative Disputes after Exhausting Administrative Efforts (“Supreme Court Reg 6/2018”). This regulation mandates that all Administrative Court disputes intended for court review must first undergo the process of objections and administrative appeals. Consequently, the fulfillment of administrative remedies constitutes an essential prerequisite for filing a claim with the Administrative Court should an IUP be revoked, ensuring a comprehensive exploration of all available out-of-court administrative solutions before judicial involvement. [44]
D. Conclusion
In conclusion, the discourse surrounding the revocation of IUPs in Indonesia, underscores the complex interplay between legal frameworks, administrative governance, and political will in addressing illegal and corrupt mining practices. The legal mechanisms for IUP revocation, grounded in Indonesian administrative law, are designed to ensure that revocations are carried out with due regard for legal certainty and good governance principles. Despite these safeguards, the mass revocation of IUPs in 2022 raised concerns about the balance of authority between different government ministries and the impact on the mining industry. Moreover, the availability of administrative remedies provides a pathway for aggrieved parties to challenge revocations, emphasizing the importance of due process and the right to a fair hearing.
As Indonesia continues to navigate the complexities of mining regulation and enforcement, the case of IUP revocation serves as a pivotal example of the ongoing efforts to balance economic development with environmental protection and legal integrity. The discussions and policies emerging from this debate will undoubtedly shape the future of the mining sector in Indonesia, with implications for governance, industry practices, and the broader socio-economic landscape.
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[1] Article 1 Paragraph (9) of State Administration Court Law.
[2] Article 1 paragraph (7) of Government Administration Law.
[3] Article 151 Paragraph (2) of the Mining Law.
[4] Article 151 of Law No. 4 of 2009 on Mineral and Coal Mining, as lastly amended by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation (the “Mining Law”).
[5] Article 41 of the Mining Law.
[6] Article 93C of the Mining Law.
[7] Article 95 of the Mining Law.
[8] Article 97 of the Mining Law.
[9] Article 106 of the Mining Law.
[10] Article 110 of the Mining Law.
[11] Article 95 to Article 100 of Regulation of the Minister of Energy and Mineral Resources No. 7 of 2020 on Procedures for Granting Areas, Licensing, and Reporting to Mineral and Coal Mining Business Activities, as lastly amended by Regulation of the Minister of Energy and Mineral Resources No. 10 of 2023 on Procedures For The Drafting, Submission And Approval Of Work Plans And Funding Budgets, And Procedures For The Reporting Of The Implementation Of Mineral And Coal-Mining Business Activities (“MEMR 7/2020”).
[12] Article 64 of MEMR 7/2020.
[13] Article 65 of MEMR 7/2020.
[14] I.e., Conduct sales of products resulting from mining abroad prior to carrying out processing and/or refineries domestically; conduct sales of products resulting from mining that are not from their own results; conduct processing and/or refineries from results of mining that does not have an IUP; transfer IUP to other parties without approval from the Minister of MEMR or governors in accordance with their authority.
[15] Article 23 of Regulation of the Minister of Energy and Mineral Resources No. 10 of 2023 on Procedures for the Drafting, Submission, and Approval of Work Plans and Funding Budgets, and Procedures for the Reporting of the Implementation of Mineral and Coal-Mining Business Activities (“MEMR 10/2023”)
[16] Article 3 Paragraph (3) of MEMR 10/2023.
[17] Article 3 Paragraph (4) of MEMR 10/2023.
[18] Article 185 to Article 187 of GR 96/2021.
[19] Article 119 Paragraph (b) of the Mining Law, Article 100 Paragraph (a) of MEMR 7/2020. and Article 188 Paragraph (a) of GR 96/2021.
[20] Article 100 Paragraph (b) of MEMR 7/2020 and Article 188 Paragraph (b) of GR 96/2021.
[21] Article 119 Paragraph (c) of the Mining Law and Article 188 Paragraph (c) of GR 96/2021.
[22] Article 119 Paragraph (a) of the Mining Law.
[23] Article 100 Paragraph (d) of MEMR 7/2020.
[24] Article 27 Paragraph (1) of MEMR 10/2023.
[25] Article 27 Paragraph (2) of MEMR 10/2023.
[26] Article 3 Paragraph (b) of PD 1/2022.
[27] Regulation of the Minister of Energy and Mineral Resources No. 25 of 2015 on Delegation Of Authority To Give Licenses In The Mineral And Coal Mining Field In The Framework Of Implementing One-Door Integrated Services To The Head Of The Investment Coordination Board, as lastly amended by Regulation of the Minister of Energy and Mineral Resources No. 19 of 2020 on the Amendment of Regulation of the Minister of Energy and Mineral Resources No. 25 of 2015 (“MEMR 25/2015”).
[28] Article 75 paragraph (1) of Government Administration Law.
[29] Article 76 of Government Administration Law.
[30] Article 77 paragraph (1) of Government Administration Law.
[31] Article 77 paragraph (4) of Government Administration Law.
[32] Article 77 paragraph (5) of Government Administration Law.
[33] Article 77 paragraph (6) of Government Administration Law.
[34] Article 77 paragraph (7) of Government Administration Law.
[35] Article 78 paragraph (1) of Government Administration Law.
[36] Article 78 paragraph (4) of Government Administration Law.
[37] Article 78 paragraph (5) of Government Administration Law.
[38] Article 78 paragraph (6) of Government Administration Law.
[39] Article 78 paragraph (7) of Government Administration Law.
[40] Article 47 of State Adminisration Court Law.
[41] Article 48 of State Adminisration Court Law.
[42] Article 47 of State Adminisration Court Law, cf. Article 76 paragraph (3) of Government Administration Law.
[43] See below for clarity on the use of “may” in Article 76 paragraph (2) – (3) of Government Administration Law (unofficial translation):
(2) In the event that the Community Members do not accept the resolution of the objection by the Agency and/or Government Official as referred to in paragraph (1), the Community Members may appeal to the Superior Official.
(3) In the event that the Community Members do not accept the resolution of the appeal by the Superior Official, the Community Members may file a claim to the Court.
[44] Article 2 of Supreme Court Reg 6/2018, cf. Article 47 of State Adminisration Court Law.