In another blow to the government, the Constitutional Court announced on Tuesday a ruling that favoured the interests of the House of Representatives.
The court ruling barred the central government from buying a 7 percent stake in Newmont Nusa Tenggara, the local unit of the US mining giant Newmont, which runs the country’s second-biggest copper and gold mine in Sumbawa Island in West Nusa Tenggara.
Tuesday’s ruling may halt a planned stake purchase, valued at $246.8 million, as the government has to seek approval from the House of Representatives, which last year opposed the plan.
“The court rejected [the government's] request,” Chief Justice Mahfud M.D. said in Jakarta.
The prolonged dispute stems from the House’s rejection of the government’s plan to purchase the divested stake in NNT. Legislators on House Commission XI, which oversees finance, insisted last year that the purchase of the 7 percent stake of Newmont by the State Investment Agency (PIP) was against the law.
However, the government insisted that purchasing the stage was within its authority after Newmont complied with regulations requiring it to reduce its NNT stake from 80 percent to 48.5 percent.
“The president has the authority to formulate and execute the state budget, and the House has authority over its approval,” Judge Mohammad Alim said in the ruling.
The government initially planned to buy the stake in the miner through the PIP using its reserved budget for investment and accrued income worth Rp 1 trillion ($106 million).
But the panel of judges stated in its ruling that regardless of the urgency, the purchase should still abide by the necessary regulations, which means that the government was required to propose the plan to the House first.
“The PIP was formed to accelerate development by way of investing in infrastructure. The purchase is not driven by any economical urgency, nor is it used for investment in infrastructure,” Alim said.
Furthermore, he continued, the 7 percent stake was not a majority and did not affect any decision-making process.
“The government does not have to have a stake in the company to regulate it because it has the authority to control in other ways, such as making sure that the company abides by the law, is accountable and performs its corporate social responsibility duties,” Alim said.
The decision split the panel 5-4, with each of the four judges in the minority writing dissenting opinions in favour of the purchase.
“The constitution regulates that natural resources are owned by the state, therefore the more ownership it can actually possess, the more it can be used for the public’s welfare, even though it is only 7 percent,” Judge Achmad Sodiki said.
Judge Maria Farida Indarti added that the purchase should be seen as a constitutional duty of the government to promote national interests.
Indonesia Corruption Watch had previously claimed that the purchase of another 24 percent stake by Daerah Maju Bersaing, a consortium of local governments in West Nusa Tenggara, from the divestment was unlawful since the company had been set up without the required approval from the district and provincial legislatures.
Andy Hadiyanto, the chief director of Daerah Maju Bersaing, has denied those claims.
Finance minister Agus Martowardojo and PIP chief Soritaon Siregar, both representing the central government during the trial, said that they would study the court’s decision regarding the purchase before moving forward. The ruling by the court is final and binding, meaning the government cannot appeal and must carry out the verdict.
Agus, who said last year that he would resign as finance minister if the NNT stake purchase failed, could hardly conceal his disappointment after hearing the verdict.
“We can go to the House again,” the minister said.
The stake is the last piece of Newmont’s Indonesian unit that is up for sale. The ruling is likely to further delay a planned listing for NNT on the Indonesia Stock Exchange.