Ombudsman – lifting integrity in the Mining Industry.

Ombudsman – lifting integrity in the Mining Industry. (Vol 100)

Introduction.

There have been a number of news items wherein aspects of the mining industry have become the subject for review by the Ombudsman. A recent high-profile example is that of the Sulawesi regional governments claim to the Ombudsman that the ESDM improperly awarded two nickel concessions to PT. Aneka Tambang. The Indonesian Coal Mining Association (ICMA) together with the Indonesian Mining Association (IMA) and Mining Services Companies Association (ASPINDO) have jointly submitted a formal complaint to Ombudsman on the maladministration practices related to the imposition of the local vehicle tax which had been cancelled by the Constitutional Court.

Put simply, the Ombudsman’s function is to oversee the integrity of public service organizations, and the Ombudsman’s duty is to investigate and report on maladministration etc. The Ombudsman can seek the help of the police. The Ombudsman can mediate the case, or report to various authorities, including the police or KPK.

The mining industry often mounts a formal legal challenge by filing an expensive and lengthy judicial review to the Supreme Court to contest a specific decree to the State Administration Court (PTUN). Filing the complaints to Ombudsman is a cheaper and possibly quicker avenue for mining stakeholders that have experienced negative impacts from “irregularities” or “incompliance” of the government on the policy drafting process as well as “maladministration” practices.

 

Over coffee chats it seems almost every miner has some gripe about how difficult it can be to work with the bureaucracy of many different government agency. This article may act as an introduction to the roll of the Ombudsman, and for miners to seek further appropriate advice if approaches to the Ombudsman are to be considered. Note that quotes below are derived from a simple Google translate and should not be relied upon.

Ombudsman’s Law.

Law 37 of 2008 “Republic of Indonesia Ombudsman” is set out in 32 pages, with introduction and chapters on 1) general requirements, 2) nature, principals and objectives, 3) place to pose, 4) functions, assignments and authority, 5) appointment, 6) reporting, 7) procedures for examination and reporting, 8) personal and annual reports, 9) area representation, 10) criminal provisions, 11) transition provisions, and 12) closing. The law includes 12 pages of explanations.

The law defines “the Ombudsman is a state institution that has the authority to oversee organizing good public services held by state administrators and government including those held by State-Owned Enterprises, Regional Owned Enterprises, and State-Owned Legal Entities, and private agencies or individual given assignments holding certain public services wherein some or all of the funds are sourced from state and / or income and budget expenditure from regional income and expenditure.” The Ombudsman is independent and has no organic relationship with state institutions and other government agencies, and carries out their duties and authority freely from other power interference.

“The Ombudsman aims: A. creating a legal state that is democratic, just, and prosperous; B. encourage state administration to be effective and efficient, honest open government, clean and free from corruption, collusion and nepotism; C. improve the quality of state services in all field so that every citizen and resident may obtain justice, security, and better welfare; D. help create and increase efforts for eradication and prevention of Maladministration practices, discrimination, collusion, corruption, and nepotism; E. improve national legal culture, community law awareness, and the rule of law, truth and justice”.

The Law defines “Maladministration as the behaviour or action against the law, beyond authority, use authority for other purposes other than the purpose of such authority, including negligence, or neglect of legal obligations within the implementation of public services carried out by the State Administration, and that may cause the government material losses or for the community and individuals.”

Law No. 25 of 2009 “About Public Service” is 44 pages long with 10 chapters, and includes 20 pages of explanations. The law defines “Public service as an activity, or series of activities, in order to fulfil service needs in accordance with the legislation for every citizen and resident….” “Public service provider organizations,…, are public service organizing work units in the state institution, corporation, an independent institution formed by law for public service activities, and other legal entities formed solely for public service activities.” Article 40 (1) ; “The public has the right to complain about the implementation of public services to the Operator, Ombudsman, and / or House of Representatives, Provincial Regional Representative Council, Council Regency / City Regional Representatives.” This law includes the various procedures for complaints, investigations, reports and mediation / settlement by the Ombudsman.

Since the enactment of these Ombudsman laws, there have been many implementing regulations that largely deal with internal procedures, and some regulations apparently resulting from specific cases. The Ombudsman web page can be found at http://Ombudsman.go.id/

Recent Ombudsman cases.

The Ombudsman’s reports can be confidential, wherein the following Ombudsman mining related cases were sourced from Google web searches. It is understood that many of these cases are yet to be resolved and cases to be closed.

1. ESDM Maladministration in awarding two nickel blocks. (Oct 2018 – Jan 2019)

An auction conducted by the ESDM for two nickel blocks in Sulawesi (North Bahodopi &Maratappe) were won by PT. Anaka Tambang Tbk (Antam). This auction process was submitted to the Ombudsman as it was considered to be subject to maladministration, because the ESDM did not offer the blocks to the BUMD. It is indicated that the maladministration consisted of; –

1. The stipulation of WIUPK (PP Number 22 of 2010), the mining area must first change to a State Reserve Area (WPN) that requires the approval of the House of Representatives (DPR). Then it can be determined as WIUPK by considering the aspirations of the local government.
2. The WIUPK Production Operation should not be able to change its status to WIUPK exploration. (Law Number 4 of 2009).
3. The Central Sulawesi Regional Owned Enterprises (BUMD), PD Konosara, had fulfilled the financial requirements and were selected as auction winners. However, it was cancelled by the Directorate General of Mineral and Coal without any explanation.
4. PT BUMD Central Sulawesi BUMD was not given the opportunity to re-evaluate the documents given to the government. Supposedly, if the BUMD has not yet completed the document, the government has the right to provide an opportunity for BUMD to complete it.

Antam claimed to have fulfilled its obligation by completing the application document and paying the information data compensation (KDI) fee. In addition, Antam has also formed two joint ventures (JVCO) that will manage WIUPK for each of the mine blocks in accordance with the applicable procedures and provisions. Winners of WIUPK must pay Data Compensation Funds (KDI) funds if they have been declared winners. Antam has deposited the funds for North Bahodopi KDI (IDR 184.8 billion) and Matarape (IDR 185.05 billion). Aneka Tambang (Antam) will provide 10% of the ownership portion of each WIUPK to the regional government. Antam also intends to provide a 4% portion of the ownership of WIUPK to the provincial government and 6% to the district government.  Antam has not been able to carry out exploration activities because of this maladministration issue. The ESDM has not issued an exploration IUP for Antam, as is shall wait for the results of the regional objections that had been followed up by the Ombudsman.

The Ombudsman asked the ESDM Ministry to cancel the decision of the auction winner, and must also cancel the decision No. 1802 K / 30 / MEM / 2018 concerning WIUP and WIUPK for the 2018 period. After being cancelled, the status should change from WIUPK to WIUP, so that the regional government has the authority to manage the mining area. At the time of writing this article, the ESDM is evaluating the Ombudsman’s report.

2. illegal Mining (May 2017 – Jan 2019).

In May 2017 activists reported the Governor of East Kalimantan (Awanf Faroek) to the Ombudsman for not acting quickly enough to cancel some 826 IUP’s with a combined area of 2.48 million hectares. These IUP’s were non-compliant with CnC requirements. In response to this report, the Governor indicated he would revoke some troubled IUP’s.

In 2019, the Ministry of Environment and Forestry expressed concern that there are some 8,683 mining points (Non CnC) occupying a combined area of around 500,000 Ha throughout Indonesia. The Ombudsman hopes that his warnings will prevent illegal mining. There are 22 Provinces with illegal mining operations that are carried out by local residents or business groups. It is particularly hard to counter these illegal mines where they may have nominal local police support. The Ombudsman office will cooperate with the KPK to deter such illegal mining and approached the National Police Chief and the TNI Commander to warn their subordinates not to protect illegal mines.

3. Request class “c’ mining to be transferred to Regions. (Feb 2019).

West Java (Tasikmalaya) Ombudsman responded to local government requests for authority over class “C” mining (rocks & sand etc) to be transferred from the Province level back to the Districts for improved supervision, and so reduce illegal mining.

4. Rights of geothermal project. (Nov 2018)

One party has reported to the Ombudsman a dispute over rights between BGE and GDE (Pertamina connections) for a geothermal project.

5. Illegal coal mining in Muara Enim (May 2018).

In responding to community requests, the Ombudsman asked the representatives of South Sumatra to obtain clear evidence of illegal coal mining in the Muara Enim area before the Ombudsman can act. The Ombudsman does not want to be sued for false claims.

6. Lack of foreign work permits (May 2018)

The Ombudsman has indicated remote mine sites (PT. TAM) are accused of using foreign workers (including China) without the correct work permits. The appropriate agencies need to develop a TKA Task Force to visit remote mine sites and undertake work visa checks, and to more closely monitor foreigners entering Indonesia.

7. WALHI reports rock mine license (April 2018)

Local NGO’s, accompanied by WALHI reported improper licensing of a small local rock company (RPB) to the Ombudsman in the Padang area.  Some of the alleged incorrect procedures include; –

• Not based on the application of the Mining Business Permit Area and Minutes of Examination of the Mining Business Permit Area of ​​ Riski Putra Bersaudara (RPB) in requesting WIUP. PT.RPB submits a request for WIUP of 5 hectares. But in reality, it was approved by the Head of the ESDM Office of Bengkulu Province covering an area of ​​16.02 Ha.
• In the provisions of the article after WIUP is approved, the business entity / cooperative / individual must submit an Exploration IUP to the government no later than 5 working days if it is not delivered then the WIUP is deemed to be dead and the deposit becomes the State’s property. In this case it seems the application was submitted after 19 working days.
• The UKL-UPL (environment provisions) are alleged to be prepared by an expert who was not certified.

8. Slow business licenses process for miners. (Feb 2018)

More than 100 IUP owners complained of slow process at the central or regional level to obtain CnC. The investigation indicated no malintent, but that there was a lack of data and cooperation between the regencies and the provincial governments. The Ombudsman office is looking into how such business licenses coordination could be improved.

There are hundreds of complaints to the Ombudsman because the ESDM has frozen their non CnC compliant mining licenses (IUP). Some 2,595 IUP’s were revoked by regional governments between 2015-2017. The frozen non CnC companies have a right to file lawsuits to the court or Ombudsman. Many had adequate legal compliance, but delays in regional administration led to missing the deadline for submissions.

9. Miner to sue Province over security fee. (Feb 2018)
10. Sebuku Iron Laterite ores (SILO) intends to report its case to the Ombudsman and KPK. The South Kalimantan government is claiming Rp 51 billion for security of rehabilitation of watershed land. The Government is asking for security fee of Rp 30 million per hectare for the entire forestry loan permit area (IPPKH) of 1,731.6 ha, whereas SILO claims some 11.5 ha has been rehabilitated. SILO has invested heavily in the district, and claims this proposed fee is excessive and may cause serious harm for the company, its employees and the community that depends upon the mine.
11. Mercury in Aceh (July 2017)

The Ombudsman team checked the village run gold mine area of Manggamat in South Aceh to confirm the presence of mercury that is dangerous for people and the environment. The Ombudsman called upon the provincial government and relevant agencies to conduct further research in this area regarding the mercury pollution.

11. Suspect maladministration in preparing Ore export rules. (Jan 2017)

The Civil Coalition of Constitutional Guards for Natural Resources reported the Government to the Ombudsman regarding the preparation and issuance of PP 1/2017, ESDM 5/2017 & ESDM Ministerial Regulation 6/2017 concerning the relaxation of mineral mining export permits for both export of raw materials and concentrate. Maladministration is suspected as the two regulations were published on the same day, even though such Permen must go through several stages, including the involvement of the community.

12. Corruption cases as learning to improve integrity (Dec 2016)

The KPK determined Nur Alam as a suspect in a case of alleged corruption related to the Issuance of Mining Business Permits (IUP), and related permits to PT Anugrah Harisma Barakah (AHB). The Ombudsman spoke at a seminar to look upon this corruption case as a learning opportunity for local government to improve integrity.

13. Lunajang village sand mining (Oct 2015)

The Ombudsman team, along with the regional police (Polres) inspected the alleged illegal sand mining operation in Lumajang. Issues included the use of Polsek and Village Regulations (Perdes) related to alleged illegal trucking fees etc, if the funds were deposited in the regional treasury and possible corruption or extortion practices. The issue of the Community Mining Permits (IPR) and mining business license (IUP) is to be investigated, and if such permits are being misused.

Overview.

These few cases indicate that almost any size or nature of complaint from individuals, NGO’s, companies, or government organizations can seek the Provincial / Central Ombudsman’s investigation and report into the questionable workings of almost any form of government body, including State Owned Enterprises.

Report Outcomes.

Reports to the Ombudsman should lead to a fast and concise examination process, and may lead to publication of maladministration action by State Administrators and governments. The decision is only in the form of recommendations and there is no forced attempt at execution. In the event that the Reported Party, or their superiors, do not implement recommendations or only carry out some of the recommendations with reasons that cannot be accepted by the Ombudsman (ORI), then the ORI can publish on the Reported Party that does not implement recommendations and submit reports to the DPR and the President. (Article 38 ORI Law).

The Ombudsman does not accept cases that are only financial / business disputes.

The Ombudsman’s Workings.

The Ombudsman has seven sections, including one that incorporates the mining sector. Within each section there is a team of about 8 people, with backgrounds in government administration, legal etc, but lacks manpower with specific mining technical background. The Ombudsman’s annual overall budget (about Rp 140 Millyard) tends to increase modestly each year. In 2018 there was a significant upswing in mining cases, with more than 100 IUP’s cases related to the Central Governments policy to close down non CnC IUP’s, and put pressure on non-performing IUP’s etc. The IUP holders are often small players without resources, and so turn to the Ombudsman to hold onto their IUP’s. Some of these IUP cases extend into issues of defining the regency boundary on the ground. In some cases, a field survey may be required, but this draws heavily upon the Ombudsman’s resources.

The Provincial Ombudsmen operate in a largely independent manner, though the Central Ombudsman conducts reviews and endeavors to synchronize and harmonize with the Provincial Ombudsmen and to refine their investigation process etc. The Central Ombudsman undertakes a systematic review of major cases each year that is published. The 2018 annual mining sector report is looking at Community Empowerment and the Impact on Mining. There is consideration for the 2019 mining sector report to highlight illegal mining.

Closing.

The Ombudsman process is seen as a broad independent body that adds integrity to a responsible mining industry.