Upholding the law in the mining sector

Upholding the law in the mining sector

The Constitutional Court's unanimous ruling last Thursday that
Law No. 19/2004 on forestry is constitutional certainly
disappointed and angered environmentalists as the ruling boils
down to a license for a number of firms to conduct open-pit
mining in protected forests.

The court's president, Jimly Asshidiqie, was quoted by the
media as saying that the unanimous decision had been based on the
overriding need to improve the investment climate in the mining
sector.

The ruling has cleared up once and for all the seven-year
imbroglio that had virtually halted new investment in the
extractive industries sector (apart from oil and gas) since 2002
and threatened to immerse the government once again in messy and
costly international litigation.

However, citing only the need for an improved investment
climate as the grounds for the decision could lead some to
believe that the court, which is the guardian of our Constitution
and national conscience, had succumbed to the political wishes of
the government.

We beg to differ with the environmentalists on this particular
issue. Given the history of Law No.19/2004, we should even
commend the Court for its consistency in upholding the
Constitutional provision that prohibits the retroactive
application of a statute.

This legislation originated as a government regulation in lieu
of law, which was hurriedly issued in early 2004 and was
eventually enacted by the House of Representatives as Law
No.19/2004 in July, 2004, in an effort to correct the glaring
error made by the framers of Law No.41/1999 on forestry, which
was made retroactively applicable to mining contracts awarded
before 1999.

Hence, the amendment essentially boiled down to the insertion
of transitional provisions into Law No.41/1999, which stipulated
that companies that had obtained mining contracts prior to 1999
could continue to engage in open-pit mining in protected forests
until the expiry of their concessions.

After all, the insertion of transitory provisions is normal
practice in legislation that introduces new rules of the game, or
which repeals provisions contained in earlier legislation.

Law No.41 only stipulated that open-pit mining operations were
entirely prohibited in areas designated as protected forests, but
had nothing to say about the legal status of the 150 mining
contracts the government had awarded prior to 1999 for open-pit
mining operations in protected forests.

The problem was that many of the 150 mining contractors had
invested hundreds of millions in their concessions, and
unilaterally annulling their contracts would have plunged the
government into highly expensive and protracted litigation, and
resulted in a lack of legal certainty in the mining industry.

It was this very same principle of non-retroactivity that was
applied by the Constitutional Court in its majority ruling in
July 2004, which stated that the Antiterrorism Law (No. 16/2003)
could not be applied retroactively to cases arising out of the
terrorist attacks in Bali on Oct. 12, 2002.

Consistency in the upholding of all the articles of the
Constitution is key to building up the public's confidence and
trust in the court, and its own ability to perform its role as
the guardian of the Constitution.

This isn't an easy task as the court has to tread a fine line
between fulfilling popular aspirations for justice and the
demands of political exigency, while all the time striving to
avoid any whiff of arbitrariness in its rulings. A credible
constitutional court, both as regards legal competence and
integrity, is vital to rebuilding public trust in the judicial
system as its ruling cannot be appealed.

We share the great concern of environmentalists about the
damage that could be inflicted on our forests by greedy miners.
The dilemma, though, is that the sanctity of a legal contract
must be honored, otherwise our economy will collapse into total
chaos.

Law No.19/2004 seems to be the best compromise that could be
struck between the objective of protecting our forests and that
of maintaining legal certainty for investors and the public in
general.

First of all, this legislation does not open wide the gates of
our protected forests to open-pit miners as it permits only 13
concessions in such forests. Moreover, the concessionaires
involved were selected by a special team made up of
representatives of the government and the House on the basis of
the level of investment already made, the commercial volumes of
the mineral deposits already found and the potential benefits of
their operations to the national economy.

We should respect the Constitutional Court's ruling. Our task
now is to help oversee the enforcement of the legislation to
ensure that no more companies, besides the 13 existing ones, are
awarded open-pit mining concessions in protected forests and that
the 13 mining companies strictly abide by the prevailing mining
and forestry regulations.