TAMBANG, July 25, 2012 | 23.01
Who’s Afraid Of Churchill

By: Alfonsus Atu Kota

Only months after appointed as Vice Energy Minister, Rudi Rubiandini must already face a legal case against his office. Churchill Mining Plc. (hereinafter referred to as Churchill), a British mining company, has filed a lawsuit against among others the central government of Indonesia and the local government of East Kutai.

The Bandung Institute of Technology graduate was nevertheless calm as he claimed that the case submitted by Churchill and its Indonesian partner, PT Ridlatama, is purely a business problem. “Should there be misinformation or falsification of data, the parties concerned must settle it between themselves in the civil court,” he said in Jakarta, July. If the documents referred to by Churchill are legally proven to be accurate, and if the unfairness as charged could also be proven, then Churchill via its Indonesian partner could take the Regent of East Kutai to court.

“I think the Regent (of East Kutai) would not deliberately revoke a license without firm reason and accurate data. In principle, there is no legal basis for Churchill to charge a lawsuit against the Regent, let alone against the central Government or the President,” stated the former BP Migas official.

An unclear relationship between Churchill and PT Ridlatama is suspected to be the main reason behind the case. On the word of Churchill, as shown in a bi-lingual letter attached to an e-mail from the company’s solicitor Hogan Lovells LLP, Atlantic House, Holborn Viaduct, London, which was sent to TAMBANG Magazine last June, the relationship should be incontestable. The letter did not make any references to the legal conditions of the relationship.

The letter was actually addressed to the President of the Republic of Indonesia Susilo Bambang Yudhoyono, the Regent of East Kutai Irsan Noor, Minister of ESDM Jero Wacik, Minister of Forestry Zulkifli Hasan, Head of Investment Coordinating Board (BKPM) and Minister of Foreign Affairs Marty Natalegawa. The letter which bears intimidating tone towards the Indonesian government and the local government of East Kutai mainly elucidates on a mining contract between Churchill and PT Ridlatama.

In the letter, Hogan Lovells LLP stated that his client has received unlawful and unjust treatment from the East Kutai government and several ministries here. The treatment is seen as abusing the rights and interests of Churchill under the existing law in Indonesia, which shall also be deemed as a breach of the principles of the international laws, specifically of the Bilateral Investment Treaty (BIT) between Indonesia and the UK.

The letter further called for the relevant authorities to take necessary steps towards an amicable resolution. Otherwise, the British company would commence an arbitrary process against the Indonesian government, which could taint the country’s reputation as a trustful destination for investment.

The charge was proven to be serious. Churchill has since begun the process to take the government of the Republic of Indonesia to the International Centre for Settlement of Investment Disputes (ICSID) in Washington D.C. In its claim, Churchill asked the Indonesian government to pay a compensation of US$ 2 billion for the illegal revoking of its mining licenses by the East Kutai regency government.

The Regent of East Kutai Irsan Noor expressed his opinion on the issue. According to him, Churchill has never invested in his region. He stated that he does not afraid of the lawsuit.

“The arbitrary process by Churchill does not have a strong legal basis. Churchill has never invested in the mining sector at East Kutai or in Indonesia,” he affirmed during a press conference to respond to the lawsuit in Jakarta, June. He informed that he had just heard of Churchill’s name in 2009, when the company laid a claim that it has invested in the mining sector with the potential second-biggest coal reserve in the East Kutai. He also claimed that the company is not registered at the East Kutai Regional Mining Service. “Give me evidence that Chuchill had really invested in the mining sector,” claimed the Regent.

The head of legal advisors for the East Kutai government Didi Darmawan questioned the evidence of ownership of Churchill’s share at PT Ridlatama Group, said to possess four mining permits (IUP) in East Kutai. The local government has thus far no knowledge of the ownership of Churchill at Ridlatama, which is alleged to be as big as 75 percent. “Even in its arbitrary claim, they failed to provide any detailed references to the ownership and on the shares at the four IUPs,” said Mr. Darmawan. He maintained that according to his sources, PT Ridlatama Group itself has admitted to a 100 percent ownership of local investors. Its relationship with Churchill is limited at a Master Service Agreement. “We have known this since year 2009, when the East Kutai Regent sent a written letter to PT Ridlatama Group on the subject of Churchill,” continued the lawyer.

On the revocation of the mining permits of PT Ridlatama Group, he stated that the matter was already accorded to the existing law in Indonesia. He claimed that he was informed of the finding by the State Audit Agency (BPK) which alleged that the permits which belong to PT Ridlatama Group are indicated as forged. “According to BPK’s findings, the numbering on the letter of permit was reversed, hence the allegation of falsification,” stated Mr. Darmawan. Moreover, the East Kutai Regent had also considered a report from the Ministry of Forestry on the mining activities of PT Ridlatama Group, which are said to be done on the so-called production forest without a proper permit from the Ministry. “The East Kutai Regent had therefore revoked the four permits which belong to PT Ridlatama Group,” affirmed Mr. Darmawan.

Even President Susilo Bambang Yudhoyono had his say on the subject. He utttered his hope that the Indonesian Government could win the case claimed by the British company.

“I hope we will win because I don’t want multinational corporations to do whatever they want with their international force, pressuring developing countries such as Indonesia,” said President Yudhoyono on the occasion of a plenary cabinet meeting at his office in Jakarta, 28 June 2012.

President Yudhoyono stated that such a case must serve as a lesson for regional administrations in resource rich areas. At the same time, he also lauded the East Kutai Regent’s decision to revoke the mining permits of Churchill. “Just imagine if we have hundreds of areas which are problematical (like this), and then if we are on the wrong, the implications would be extraordinary. We are thus obliged to defend our honor, truth and justice,” added the President.

The East Kutai Regent Isran Noor implied that what the British company had done here was just a manifestation of its own resentment for being tricked by its own local partner, PT Ridlatama Group. He pointed to the fact that Churchill earlier had also taken PT Ridlatama Group to court in relation to breach of an investment agreement. The Master Service Agreement between the two was actually consigned for mining transportation service purposes only.

When purchasing the shares of PT Indonesia Coal Development, a subsidiary of PT Ridlatama Group, Churchill should have thought that it was a mining company, when in fact the company is dealing in the mining transportation services sector. “Now Churchill and PT Ridlatama Group are suing each other. It is basically their own internal problem, what’s the use of us being also dragged along?” said Mr. Noor.

If Churchill insists to perform mining activities on behalf of its Indonesian partner, then the British company could break the existing regulation on the permit to mine which is given only to companies in possession of mining permit. “Even Churchill’s current permit, which it had obtained from the Investment Coordinating Board (BKPM), is clearly consigned for mining transportation services only, not for mining sector,” stated the Regent. He also pointed to the facts that Churchill has not been registered at the ESDM Ministry for any kinds of contract, be it for Work Contract (KK) or for Coal Mining Exploitation Work Agreement (PKP2B). Therefore, his side would not open any doors for negotiation with Churchill, as he is sure that his government would easily win the case in the court.

Indeed, should Churchill be permitted to mine, the company would hit it really big there. Production at the area is estimated to reach 30 million tons per year. The coal reserve is predicted at 150 million tons, with resources of 2.73 billion tons, easily places it as second biggest in the country, and seventh in the world. In 2008, upon the announcement of its partnership with PT Ridlatama, the shares of Churchill became the primadonna at the London bourse.

The lawyer Didi Darmawan laid the claim that the British company could be seen as trying to illegally mine the coal here through its local partner.

PT Ridlatama, the British company’s partner in Indonesia, is a Mojokerto-based group of companies with headquarters in Bintaro, Tangerang, near Jakarta. One of its commissioners is Mr. Soewadji Prawadina. He is an alumni of the Magelang Military Academy, class of 1970. That makes him a senior to President Yudhoyono, and the same generation with other known names such as Luhut B. Pandjaitan, Tyasno Sudarto, Fachrul Rozi, Subagyo HS, Slamet Kirbiantoro or Mardiyanto.

At present, there is a huge rock standing on the way of the partnership between Churchill and Ridlatama. The dreams of reaping a great profit there could thus become fading memories only.