Licensing Versus Contract in Mineral Ownership: MK 184/PUU-XXIII/2025

The Constitutional Court of Indonesia decided case 184/PUU-XXIII/2025 on 16 July 2026, in a material review of Law 4/2009 on Mineral and Coal Mining as last amended by Law 2/2025. The petitioners, Wahyu Ilham Pranoto, Muhammad Faza Aulya'urrahman, Fauzan Akbar Mulyasyah, Yudi Amsoni, Nasidi and Sharon, challenged the ownership rule in Pasal 92 of the Mining Law and asked the Court to treat a production-sharing contract, rather than a business licence, as the proper legal form for state relations with mining operators.

Legal Reasoning

The Court framed the case around the meaning of state control under Article 33 of the 1945 Constitution. It recalled its reasoning in decisions 058-059-060-063/PUU-II/2004 and 008/PUU-III/2005 on the Water Resources Law, where it held that "controlled by the state" carries a higher and broader meaning than ownership in the civil law sense. State control is a public law conception connected to the principle of popular sovereignty in both its political and economic dimensions, and it encompasses public ownership held collectively by the people.

The Court then restated the operational content of that conception, drawing on decision 001-021-022/PUU-I/2003 on the Electricity Law and on decisions 002/PUU-I/2003 and 36/PUU-X/2012. The people, constructed collectively, mandate the state to exercise policy (beleid), administration (bestuursdaad), regulation (regelendaad), management (beheersdaad) and supervision (toezichthoudensdaad) over the earth, water and the natural riches contained within them, for the greatest prosperity of the people. Because minerals and coal are non-renewable resources bearing on the livelihood of many, the Court treated mining as a strategic sector in which the state must ensure that control and management are exercised carefully and accountably. Among the forms state control may take, the Court singled out the administrative function exercised by the Government through the issuance and revocation of permits, licences and concessions.

That characterisation shaped the Court's answer to the petitioners' preferred scheme. Business licensing in mining, the Court reasoned, is a public law instrument of an administrative character, which places the state in a superior position as regulator rather than as an equal party to an agreement. The Court quoted paragraph [3.14] of decision 36/PUU-X/2012, where it examined cooperation contracts in the oil and gas sector. Under such contracts the state agency acted as a party alongside the business entity, producing a civil law relationship in which the two sides stand on equal footing. Once the contract is signed the state becomes bound by its terms, loses the discretion to make regulations for the benefit of the people where those would conflict with the contract, and to that extent loses its sovereignty over the resource. The Court in that case held that the relationship between the state and private parties in natural resource management cannot be civil in character, but must be public, in the form of concessions or licences fully under state control and authority, because a civil contract degrades state sovereignty over natural resources.

Applying that line, the Court held that business licensing is the appropriate system for giving effect to the state's right of control in mineral and coal mining. If state control were exercised through a civil scheme such as a production-sharing contract, as the petitioners sought, legal problems would follow. The scheme would reduce the authority inherent in the state's right of control, because a contractual relationship creates parity between the parties. It would also expose state assets, which could be pledged in performance of the contract and claimed by operators seeking compensation for losses. The state would risk losing command over a strategic resource in the event of default, dispute or other legal problems, to the detriment of the public interest, in tension with Article 33(3).

Turning to the ownership rule itself, the Court noted that business licensing in mining consists of the IUP and the IUPK. Pasal 92 of the Mining Law provides that holders of an IUP or IUPK are entitled to own the minerals, including associated minerals, or coal that they have produced after meeting production levies, with the exception of associated radioactive minerals. The Court read that entitlement as arising only after the mineral or coal has been produced, that is ex situ, and after the permit holder has discharged its obligations to the state in the form of production levies.

The Ruling

The Court did not reach the merits of the ownership challenge. It declared the petition inadmissible in so far as it concerned the review of Pasal 92 of Law 3/2020 on the Second Amendment to Law 4/2009 on Mineral and Coal Mining. The Court rejected the petition for the remainder, leaving the licensing framework and the ownership rule in place as enacted.

Read the full decision in the official record.

Methodology: This memo summarises the official decision text and is not legal advice; report corrections to contact@crpg.info.

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