Constitutional Court bows to pro-mining pressure

Down to Earth No 66  August 2005

Campaigners against mining in protected forests were disappointed in July, when Indonesia's Constitutional Court ruled in favour of mining companies. Nevertheless, foreign multinationals have not got it all their own way.

Indonesia's Constitutional Court, established less than two years ago, was welcomed by many who hoped it could put an end to the arbitrary exercise of executive power. Indonesian community activists also dared to hope the Court might succeed in protecting human rights and the environment through a progressive reading of certain passages in the 1945 Constitution.

These goals were foremost when the issue of mining in protected areas was brought to the Court by 92 Indonesian mining-affected individuals and non-government organisations from Sumatera, Java, Kalimantan, Sulawesi, Nusa Tenggara, Maluku and Papua, earlier this year.

Open-pit mining in protected forest areas was made illegal in 1999, a move which affected 150 (mostly inactive) mining concessions. But the threat of retaliatory legal action from powerful mining companies and a deteriorating investment climate prompted the government of then president Megawati to cave into pro-mining demands. Thirteen companies were permitted to continue mining activities despite the clear threats to the environment and opposition from communities (see DTE 61 and DTE 65).

The 92 appellants requested that the Constitutional Court conduct a judicial review of a series of three legal instruments enacted in 2004 to enable these 13 companies to proceed with open-pit mining in protected forests. This legislation includes a Government Regulation in Lieu of a Law (Perpu), issued by Megawati's cabinet in March 2004 and confirmed by parliament in August 2004, plus a Presidential Decree naming the thirteen companies.

It is the right of every person to live prosperously in body and soul, to have a home, to enjoy a good and healthy natural environment, and to have access to health services.

Similarly, Emil Salim, the former Indonesian environment minister who headed the World Bank's Extractive Industry Review, provided an affidavit as an expert witness to support the mining-affected community members' challenge. He presented an argument based on another two crucial Constitutional clauses pertaining to natural resources and environment, Clauses 33 (3) and (4). Clause 33 (3) reads:

The earth, water and natural wealth contained within is under the jurisdiction of the State and shall be used for the greatest welfare of the people.

The appellants made a case that the 2004 legislation enabling 13 companies to dig open-pit mines in protected forests was at odds with Clause 33 (3), because it prioritised the interests of a few (mostly foreign) companies ahead of the long-term prosperity of local communities and the Indonesian public in general. Salim argued that in Indonesia's experience of mining, local communities have become impoverished rather than more prosperous. He also drew attention to the fact that Indonesia's mined resources are mostly exported by multinationals as raw commodities, rather than as processed or value-added goods, so that Indonesia is not benefiting from technological advances or state revenues.

Clause 33 (4) continues:

The national economic system is founded on economic democracy with the principles of togetherness, efficient justice, sustainability, environmental perspectives, independence and through guarding the balance and unity of the national economy. [emphasis added]

The appellants provided compelling evidence that the 2004 legislation was unconstitutional because it breached the principles of sustainability (using the UNCED 1992 definition) by permitting open-pit mining in protected areas.

Although this Court shares the opinion of all the experts brought by the appellants regarding the danger and negative impacts of open-pit mining in protected forests, nevertheless this Court also understands the reasoning for the need for a transitional regulation which continues the rights or legal status gained by mining companies before the advent of the Forestry Law (1999).

(Quoted from the conclusions at pp 413-414 of the Judgement of the Constitutional Court).

To the great concern of civil society, the Court found that whether there is a pressing crisis is not measured objectively by reference to whether a national emergency exists which cannot be dealt with by parliament. Instead it is a subjective measurement at the discretion of the President. The Court cited as precedents previous Perpu, most of which date from the time of Soeharto's New Order regime. Finally, the Court opined that the subjective decision of the President ‘becomes objective’ once it is ratified by parliament. Observers believe that this odd statement constitutes a legal fiction created to justify a policy of non-interference by the Constitutional Court. Even the judges themselves seemed uncomfortable with this fiction, ambiguously recommending that, in future, the President must consider more objective conditions before issuing further Perpu.

The government's lawyers argued that a key reason for the Perpu was the threat that Indonesia would be sued by foreign mining companies at international arbitration, for more than US$ 22 billion. The activists presented expert evidence to the contrary, arguing that this threat from multinational corporations was an immoral attempt to sabotage public interest policy-making for private profit. In any case it was not sufficient basis for the Decree since the companies' legal position was so weak that they would surely fail at international arbitration. To the frustration of the appellants, the judges did not refer to this issue in their final decision, passing up an opportunity to create precedents in constitutional law relating to national interest and rule of law. The judges did, however, discuss evidence (including testimony from a member of parliament) that parliamentarians received bribes of US$ 5,000 to $15,000 in order to ratify the Perpu but concluded that the Constitutional Court was unable to consider the bribery issue until it was proven in a criminal court.

This Court concurs with the opinion of expert witness Prof. Dr. Emil Salim ... that the six companies still at the stage of exploration or feasibility studies, at such time as they enter the exploitation stage must comply with the requirements in Clause 38 (4) of the Forestry Law (41/1999) [which prohibits open pit mining in protected forests] as long as their licences for exploration and exploitation are not a combined licence.

Under Indonesian law, a Contract of Work (CoW) is granted to a mining company to exclude others from mining in a certain area and does not comprise a permit for exploitation. A company holding a CoW may carry out exploration, but only gains a licence for exploitation once its mining plan and Environment Impact Assessment for a particular site receive government approval. Companies are commonly required to complete a separate Environment Impact Assessment (EIA) for each major mining site even within the same CoW licence area. For example Newcrest’s Nusa Halmahera Minerals was required to complete an EIA in 2003 for the Toguraci gold mine just a few kilometres from their previously licensed Gosowong mine, despite the two mines sharing the one CoW and even the same processing plant. Clearly, licences for exploration and exploitation are not combined under this system (see DTE 60 for more on Newcrest).

The outcome is that, at the very least, six companies of the 13 listed in the Presidential Decree are prohibited from open-pit mining in protected forests. These are Emil Salim's list of six companies which was explicitly accepted by the Constitutional Court as not having reached the exploitation stage: Weda Bay Nickel (Canada), Gag Nickel (BHP Billiton - UK/Australia), Pelsart Tambang Kencana (Australia), Aneka Tambang (Indonesia), Sorikmas Mining (Australia), and Interex Sacra Raya (Indonesia). It seems that the true list of companies permitted to proceed with mines in protected areas should be shorter still, since most companies of the 13 listed in the Presidential Decree did not hold exploitation permits for protected forest areas before 1999. (For example, Newcrest's Toguraci Protected Forest EIA is dated 2003).

Nevertheless, activists still hope the Constitutional Court will strike down another controversial law: the recent Presidential Regulation No 36 (2005), which facilitates land evictions to make way for "public interest" projects, many of which are in fact privately owned (such as toll roads) or of dubious public benefit (such as military facilities). WALHI has gathered 8,000 supporters, mostly from impoverished communities who bear the brunt of evictions, who have put their names to the constitutional appeal. The appeal will probably be lodged around September, once at least 10,000 appellants are listed and the case arguments and evidence are compiled (see also land article).