MEMR moves quickly to limit application of coal price caps to new contracts

Ministry of Energy and Mineral Resources (MEMR) Decree 1395 K/30/MEM/2018, issued on March 9 2018, imposed price caps on coal supplied for power generation in the public interest (for further details please see "Government caps prices of coal for power generation"). As the coal industry is dominated by locally owned companies and companies listed on the Indonesia Stock Exchange, the coal industry was expected to undertake significant lobbying in order to reduce or limit the decree's impact.

This anticipated lobbying appears to have commenced already, as the decree was amended on March 12 2018 by MEMR Decree 1410 K/30/MEM/2018, after having been on the statute books for just four days. This must place MEMR Decree 1395 K/30/MEM/2018 among the most rapidly revised statutory provisions in Indonesian legal history.

MEMR Decree 1410 K/30/MEM/2018 amended Paragraphs 7 and 9 of the original decree. Previously, Paragraphs 7 and 9, taken together, stipulated that the coal price caps were to be effective from January 1 2018, even though the original decree was not issued until March 9 2018. Unsurprisingly, eyebrows were raised, not just because the decree had a retroactive effect, but also because it contained no exemptions or guidance for the treatment of contracts signed before March 9 2018. For example, it was unknown whether the coal prices in such contracts would need to be adjusted downwards so as to comply with the decree. If this was the case, it would have opened a Pandora's box of legal challenges from understandably aggrieved parties.

This issue has been resolved by MEMR Decree 1410 K/30/MEM/2018, which amended Paragraphs 7 and 9 to the effect that the price cap provisions now apply as of March 9 2018, the date of issuance of the original decree. The miners that would have been adversely affected by the retroactive application of MEMR Decree 1395 K/30/MEM/2018 will no doubt be breathing a sigh of relief.

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