Kalimantan mining row may go to int'l court

By Johannes Simbolon

JAKARTA (JP): A dispute between Taiwanese coal mining company PT Chung Hua Overseas Mining Development and the Indonesian government over the company's contract termination is likely to be settled in the international arbitration court.

Chung Hua lawyer Facrie Doemas has indicated that the company would sue the Ministry of Mines and Energy in New York's arbitration court for unilaterally terminating its contract for the development of coal resources in South Kalimantan if the Jakarta Administrative Court, which is currently handling the dispute, makes an unfair ruling.

"The Directorate General of Mining (at the Ministry of Mines and Energy) was notified last January over the possibility that the dispute would be settled at an international arbitration court," Doemas said.

Minister of Mines and Energy Kuntoro Mangkusubroto said Friday the ministry was ready to face such legal proceedings if the company filed a suit.

"If it wants to seek a settlement through arbitration, go ahead," Kuntoro said.

Kuntoro said the government still believed former minister of mines and energy I.B. Sudjana's decision to terminate Chung Hua's coal contract last February was not against the contract.

"The company has not carried out any mining activities for 13 years," Kuntoro said.

Chung Hua was among the first generation foreign contractors who signed a coal contract with the government in November 1985.

Under the contract, the company should have started production eight or 10 years after its signing.

Chung Hua won the right to explore an area of 150,000 hectares in the Banjar and Tapin regencies through the contract.

After five years of exploration, in compliance with the contract, the company relinquished a part of the area to the government and held the remaining 60,000 hectares for development.

The company, however, reportedly could not meet the production deadline under the contract, unlike other first generation coal contractors.

Anglo-Australian company Kaltim Prima Coal in East Kalimantan is among the first generation of coal contractors. It started production in 1992.

Chung Hua did not start its mining activities in the area until 1994.

The ministry believes Chung Hua, a joint venture between a Taiwanese state company and a private company, is unable to undertake mining activities due to an internal dispute among its shareholders.

Internal dispute

Chung Hua admitted that it was suffering from an internal dispute, but said development delays were mainly caused by illegal mining activities of local cooperatives in its contract area.

"Production can only be done on schedule under normal conditions, that is on the absence of illegal miners... Chung Hua could not meet its contractual production deadline due to the troubles made by the illegal miners," Doemas said.

He added that the government should have cleared Chung Hua's contract area of illegal miners to allow the company to operate on schedule.

It was reported that the Taiwanese government later stepped in to help settle the company's dispute, assuring the Indonesian government that the dispute would be smoothed out and would not affect the company's financial and technical ability to fulfill its contract.

Kuntoro, who served as the director general of mining when the dispute culminated in 1996, contended that the widespread illegal mining activities in Chung Hua's contract area were caused by the company's delay in developing the area.

"The widespread illegal mining activities, which created a lot of losses for the government was the culmination of Chung Hua's lethargy in developing the area," Kuntoro said.

Kuntoro added that the illegal mining activities had environmentally degraded the area and made the government lose the chance to receive earnings from the production of coal in the area.

Illegal mining activities have produced no revenue for the government, whereas under the contract, Chung Hua would share 13 percent of its earnings in coal royalties to the government.

Restoring order

Concerned over the state of affairs, State coal mining company PT Tambang Batubara Bukit Asam, which then supervised all foreign coal mining activities, appointed two local companies -- PT Baradatra Satrya, controlled by former president Soeharto's son Bambang Trihatmodjo, and PT Kartika Karya Wisesa, controlled by Bambang's sister Siti Hutami Endang Adiningsih -- to restore order in the contract area.

But, it was reported that the two companies were later allowed by the government to extract coal from the area.

The area reportedly contains 60 million tons of coal reserves.

Sudjana amended Chung Hua's contract in 1996, leaving only 8,030 hectares of the 60,000 contract area for the company to develop. The rest of the area was reportedly delivered to the two companies controlled by Soeharto's family.

Chung Hua was reportedly given one year to develop its production ability, but when ministry officials came to survey the area in 1997, they found no signs of production activity.

Sudjana then terminated Chung Hua's contract last February with Soeharto's approval.

Chung Hua filed a lawsuit against the ministry at the Jakarta Administrative Court, claiming that it had started production last year but that Sudjana was in fact intending to transfer the contract area to Soeharto's family, observers said.

Kuntoro dishonored Bukit Asam's decision to transfer Chung Hua's contract area to Baradatra and Kartika several months ago and put the area into bidding last Tuesday.

The bidding was open to local investors provided they were willing to cooperate with the local cooperatives which had been illegally mining the area.

The bidding reportedly drew 106 participants who competed for four blocks of the coal mining field. Two blocks of the field were reserved for the cooperatives.

The government reportedly obtained Rp 85.3 billion (US$7.7 million) in bidding fees from the winners of the tender.

PT Baramulti Sukses Sarana, PT Gandatama Niaga, PT Wahana Baratama Mining and Sumber Kurnia Buana won the tenders for the four blocks.

According to local reports, Baramulti Sukses Sarana is the subsidiary of Baradatra Satrya.

Baradatra Satrya and Kartika Karya, which were assigned to restore order in the disputed mining area, had reportedly asked for compensation amounting to Rp 35 billion from the ministry for the infrastructure they had built on the mining field and geological data they had obtained from surveying the area.

It is not known if the ministry will pay the compensation.

Doemas protested the bidding, saying: "The Jakarta Administrative Court is still trying Chung Hua's lawsuit against the ministry. As such, the minister should not make any bidding until the court makes a decision." (jsk)