Wednesday, August 1, 2012

Indonesian investment and mining laws prohibit nominee agreements

Senior Indonesian lawyer, Nono Anwar Makarim of Makarim &Taira S, writes in The Jakarta Post that “lawyers invented the beautiful structure of the nominee contracts in order to allow foreigners to conduct activities they are legally not supposed to do [and] the mining sector knows of such structures of convenience. They are called Cooperation Agreements.”

His article, The Risk of Convenient Alternatives: A Mining Story, argues that “Cooperation cum Investment Agreements” established between foreign companies and nominee Indonesian companies holding mining permits (KP) during 2001 and 2009 - when direct foreign investment in Indonesia mining projects was prohibited - are not enforceable and “a worst-case scenario could be the construction of a criminal act on the part of the foreign investor who carries out mining activities without itself owning a KP.”

An international lawyer based in Indonesian clarified the issue further: “Yes Article 33 of the Investment Law states that nominee agreements are void. But what makes the old form of cooperation agreements invalid is Article 124 of the Mining Law which does not allow a miner to subcontract actual mining. The old cooperation agreements were a separate issue from nominee arrangements,” he told AJM.

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