Kalimantan mining row may go to int'l court

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)