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Contracts Versus Acts

Michael Hunt, International Mining and Oil & Gas Law, Development, and Investment (2011)

The published topic for this session is:

“Contracts versus Acts: Brazil and Ecuador are among countries that are considering a change from a licensing or permit-based system to a contract-based system for mineral development. This session will highlight the legal and regulatory issues in the transition from one system to the other. This will include lessons learned from other countries such as Indonesia and Pakistan that have made a similar transition.”

This is a topic which requires careful analysis.

INTRODUCTION

So far as I am aware, Indonesia is the only country which operates a contract-based system covering all stages of mineral activities, exploration through mining. In Indonesia the Contract of Work has been the initial exploration title and Indonesia did not have a statutory exploration licence regime under its mineral legislation - unlike the situation in Australia and in all countries where I have worked (except Indonesia). Until recently, the Contract of Work has allowed progress from the exploration stage, through feasibility to development and mining.

But Indonesia has recently adopted new mineral legislation which departs from the contract-based system and reverts to a permit-based system.

The processes of development and mining are occasionally facilitated in Australia by contractual development agreements. De