Priority Grant of Mining Permits to Private Entities: MK 202/PUU-XXIII/2025

The Constitutional Court of Indonesia decided case 202/PUU-XXIII/2025 on 16 July 2026, in a material review of Law 2/2025 on the Fourth Amendment to Law 4/2009 on Mineral and Coal Mining. The petitioners, Ilham Fariduz Zaman and Imam Rohmatulloh, questioned the constitutionality of provisions allowing mining business permits to be granted "by priority" to private business entities, measured against Article 33(3) and the equality provisions of the 1945 Constitution.

Legal Reasoning

The Court began with the phrase "secara prioritas" in Pasal 6(1)(j) of the Mining Law. It read the phrase as an affirmative instrument designed to serve national strategic objectives in mineral and coal management. Priority in that provision reflects not only a preference for state and regional enterprises, but also an allocation to qualifying private entities as part of an effort to mitigate problems such as illegal mining. On that basis the Court held that the phrase in Pasal 6(1)(j) does not conflict with Article 33(3), and the petitioners' argument on that point was without legal ground.

The Court then mapped the statutory architecture of priority grants. Law 2/2025 constructs three affirmation models for entities other than state or regional enterprises. The first grants priority to subjects that are affirmative by nature, such as micro, small and medium enterprises, cooperatives, and business entities owned by religious mass organisations, under Pasal 51(1) and Pasal 60(1). The second grants priority to private entities using the standing and independence of universities as the affirmative instrument, under Pasal 51A(1) and Pasal 60A(1). The third grants priority to private entities using downstream processing as the affirmative instrument, under Pasal 51B(1) and Pasal 60B(1).

Reading these systematically, the Court observed that only the first model rests on a condition inherently attached to the legal subject. The other two rest on conditions external to the entity. Pasal 51(1) and Pasal 60(1) name the qualifying subjects explicitly, whereas Pasal 51A(1), Pasal 60A(1), Pasal 51B(1) and Pasal 60B(1) identify recipients through the general phrase "dan badan usaha swasta", which carries a very wide reach.

That drafting choice drove the Court's concern. The phrase supplies no definition, limit, or qualification for the entities entitled to priority. It spans limited liability companies of modest size through to multinational conglomerates, entities owned by Indonesian or foreign nationals, newly established firms and corporations holding assets in the trillions of rupiah, and locally operating businesses alongside transnational companies. Where the recipient class is undefined, the Court reasoned, the priority mechanism becomes exposed to subjective interpretation by the licensing authority, with attendant risks of corruption, collusion and nepotism; to uneven application across regions, producing disparities in treatment; and to conflicts of interest between large private entities and the state and regional enterprises through which the state exercises control over important branches of production. The Court added that the provision contains no explicit requirement that the recipient be an Indonesian legal entity or be Indonesian-owned, leaving room to read the priority as available to foreign or foreign-controlled entities.

The Court set that concern against the purpose of affirmative policy. Affirmative action, it explained, is designed to give special treatment to groups that have historically and structurally experienced discrimination, marginalisation, or unequal opportunity, and its aim is substantive equality rather than formal equality of treatment. The Court cited John Rawls on the difference principle, under which social and economic inequalities are justified only where they benefit the least advantaged and attach to positions open to all under fair equality of opportunity, and Ronald Dworkin on equal concern and respect, which requires proportional rather than identical treatment. In the Indonesian constitutional setting the Court located affirmative policy in Article 28H(2), read systematically with Article 28D(1). Differentiation is permitted where it has rational and objective justification, is proportionate to the objective pursued, is not arbitrary, and serves a legitimate constitutional aim such as social justice or general welfare. From that framework the Court derived criteria for a legitimate subject of affirmative policy, beginning with structural vulnerability.

The Ruling

The Court granted the petition in part. It declared the phrase "dengan cara prioritas" in Pasal 51B(1) and Pasal 60B(1) of Law 2/2025 contrary to the Constitution and without conditional binding force unless read as "the grant of priority which may only be given on clear parameters through an objective, transparent and accountable assessment process, so that the grant of priority is not understood as an act of direct appointment". It applied the same conditional interpretation to the identical phrase in Pasal 51B(2) and Pasal 60B(2).

The Court also addressed the supply-chain criterion. It declared the phrase "dan/atau global" in Pasal 51B(2)(d) and Pasal 60B(2)(d) contrary to the Constitution and without conditional binding force unless read as requiring that added value and domestic supply-chain fulfilment be prioritised, and that global supply-chain fulfilment be pursued only once the domestic supply chain has been met. The Court ordered publication of the decision in the State Gazette and rejected the remainder of the petition.

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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