Constitutional Court Rules Mining Permits for Mass Organisations Cannot Be Directly Appointed

The Constitutional Court (MK) has prohibited the granting of Mining Business Permits (IUP) to religious mass organisations (ormas) or MSMEs if conducted through direct appointment. This follows a legal challenge against the phrase ‘by way of priority offering’ for IUPs to religious mass organisations, universities, and cooperatives, as stipulated in Article 51 (1) and Article 60 (1) of Law Number 2 of 2025 concerning the Fourth Amendment to Law Number 4 of 2009 on Mineral and Coal Mining against the 1945 Constitution of the Republic of Indonesia.

Article 51 (1) of Law No. 2/2025 states: ‘WIUP for metallic minerals shall be granted to Business Entities, cooperatives, individual companies, small and medium enterprises, or business entities owned by religious mass organisations by way of auction or by way of priority offering.’ Article 60 (1) contains a similar provision for coal mining WIUP.

The MK’s decision is contained in Constitutional Court Ruling Number 160/PUU-XXIII/2025. The petitioners, including private business actors, an MSME operator, a lecturer, a student, and a student forum chairman, argued that the ‘priority offering’ mechanism created legal uncertainty and injustice, preventing the maximum utilisation of mineral and coal resources for public prosperity. They claimed this violated the constitutional mandate requiring natural resources to be managed for the broadest benefit of the people.

In its ruling, the MK declared that the phrase ‘by way of priority offering’ in the relevant articles is conditionally unconstitutional unless it is interpreted to mean that such priority can only be granted based on clear parameters through an objective, transparent, and accountable assessment process. The court stressed that the mechanism must not be misunderstood as an act of direct appointment that disregards applicable selection standards.