Indonesia proclaimed its independence from the Dutch colonial power on 17 August 1945. This was then followed by a four-year war of independence, culminating in the end of Dutch administration in the country. During this process, the constitution was developed to regain control over the Dutch colonial administration. In particular, Articles 33(2) and 33(3) of the 1945 Constitution confirmed that all land, water, and natural resources therein are controlled by the state for the maximum benefit of the people, without precise definition or explanation. In 1949, international law was silent about the post-independence transfer of natural resources from a colonial power to a newly created state. It was excluded that year from the Roundtable Conference in The Hague. Confrontation with the Dutch moved from the military and the political to the economic, particularly in respect of the economic control of natural resources.
The aim of this paper is to chart the rise of resource nationalism in Indonesia and show how this might be regarded as a manifestation of sovereignty. It examines, in particular, the use of the Constitution by the Indonesian judiciary in protecting natural resources, such as oil, gas, and fisheries from external control. In this sense, it stands as a clear expression of sovereignty and not, necessarily, an argument that the state should be the exclusive provider of services based on natural resources. Thus, outside investment is permissible, and perhaps desirable, to achieve the successful exploitation of natural resources. Instead, what it does prevent is the central government ceding control of natural resources to external actors to the detriment of national and regional governments, along with the local inhabitants. In looking at the issue of resource nationalism in the context of Indonesia, the paper takes a broadly linear approach. It begins, in Section I, with the immediate declaration of independence and Indonesia's constitution. Next, Section II concerns the period from 1966 to 1998, the Suharto era, and charts the strengthening of the central government and the liberalization of Indonesia to foreign investors. Suharto's period of government was followed by a period of reform, described in Section III, a period in which resource nationalism rose to greater prominence and concern. It was during this period that the role of the Indonesian courts increased and a more muscular approach, based on the Constitution, to sovereignty over natural resources developed. Section IV then examines the Indonesian approach to resource nationalism, raising some of the issues experienced in this context and offering suggestions for the future.
I. THE ORIGINS OF RESOURCE NATIONALISM IN INDONESIA
Key to understanding the Indonesian approach to resource nationalism is the Constitution itself. This outlines the foundational nature of anti-colonialism and sovereignty over natural resources. The Preamble to the 1945 Constitution stated: “[w]hereas independence is the inalienable right of all nations; therefore, all colonialism must be abolished in this world as it is not in conformity with humanity and justice.” The term “all colonialism” applied to the economy of the country, in particular its natural resources, as the main concern in the immediate post-colonial era. Articles 33(2) and 33(3) of the 1945 Constitution stated that:
(2) Sectors of production, which are essential for the country and affect the life of the people shall be controlled by the State. (3) The land, the waters and the natural resources contained therein shall be controlled by the State and exploited to the greatest benefit of the people.1
Article 33 has been a benchmark of resource nationalism in Indonesia. Despite the varying interpretations of the Constitution by different regimes, Article 33 has survived without any amendments to its interpretation since independence. In the first generation, it was construed as the right of the state to regain control over colonial-based investment in natural resources and its affiliated system, as reflected in the Bandung Conference held on 18–23 April 1955,2 the 1957 Juanda Declaration,3 and the nationalization of Dutch companies in 1958.
The Bandung Conference was associated with the Asia-Africa Conference held in the city of Bandung in the West Java province of Indonesia and attended by representatives of twenty-nine countries from Asia and Africa. It was considered an important movement of the Third World [TW] states’ coalition, as it entailed creating a new political power in the international sphere, the so-called Non-Aligned Movement or the group of 77 in the United Nations [UN] system.4 The conference produced a “Bandung Final Communiqué”,5 which can be formulated into five principles:
1) a peaceful coexistence between nations, 2) the liberation of the world from the hegemony of any superpower, from colonialism, from imperialism, from any kinds of domination of one country by another, 3) the equality of races and nations, 4) building solidarity toward the poor, the colonised, the exploited, the weak and those being weakened by the world order of the day, 5) their development.6
Following these principles, at least three main messages conveyed during this conference remain relevant today. First, it succeeded in gathering political support and raising awareness in colonial countries and newly independent states of the remaining colonial peoples seeking independence, such as in Africa and the Middle East.7 This voice was then heard in the UN system, which contributed to the UN Declaration of Decolonization in 1960 and the acceleration of the independence of several colonies such as Tunisia, Morocco, Algeria, and Kenya.8
Second, this promotes the notion that being politically independent does not automatically mean economic independence. This is particularly the case with respect to natural resources. Such awareness was further manifested in the formation of post-colonial states as a new political power in the UN system. Colonialism was highlighted as “a common abhorrence of imperialism”, set against the idea of “a common hope and desire for economic development and social progress” following decolonization.9 The idea was the continuation of the anti-colonial spirit over the “modern dress” of economic colonization,10 as highlighted by Sukarno, the first president of Indonesia, when opening the Bandung Conference. He noted that colonialism had not yet ended, it had instead donned a “modern dress, the forms of economic control, intellectual control, actual physical control by a small but alien community within a nation”.11 Colonialism changed “its dress” from colonialism through physical territories into diplomacy, economics, and international treaties,12 but the substance remained the same.
Sukarno stated: “[W]e are often told colonialism is dead, let us not be deceived or even soothed by that. I say to you, colonialism is not yet dead”. He went on to elaborate:
I beg of you, do not think of colonialism only in the classic form which we of Indonesia, and our brothers in different parts of Asia and Africa knew. Colonialism has also its modern dress, in the form of economic control, intellectual control, and actual physical control by a small but alien community within a nation. It is a skilful and determined enemy, and it appears in many guises. It does not give up its slot easily. Wherever, whenever and however it appears, colonialism is an evil thing, and one which must be eradicated from the earth.13
Hence, the Bandung Conference defined independence (self-determination) as an anti-colonial movement, and extended the meaning of colonialism “in all its forms and manifestations”.14 It also confirmed the strong relationship between self-determination and human rights,15 following the UN Charter of 1945 and the Universal Declaration of Human Rights [UDHR 1948].16 The final recommendation of the Bandung Conference in Part C on “Human Rights and Self-determination” stated:
[t]he Asian-African Conference declared its full support for the fundamental principles of Human Rights, as set forth in the Charter of the United Nations and took note of the Universal Declaration of Human Rights as a common standard of achievement for all peoples and all nations … which is a pre-requisite of the full enjoyment of all fundamental Human Rights.17
Equally, some concerns on exporting the raw materials of post-colonial states also emerged, such as in Point 6 of the Final Resolution in economic co-operation, which explicitly highlighted that “Asian-African countries should diversify their export trade by processing their raw material, wherever economically feasible, before export”.18 This idea then developed into the formulation of the Declaration of Permanent Sovereignty over Natural Resources in 1962, the Charter of Economic Rights and Duties of States [ERDS] in 1972, and the New International Economic Order [NIEO], and was eventually embedded within the formulation of the Anti-colonial Clause of Self-determination under Common Article 1 of the International Human Rights [IHR] Covenants.19
It is the first political consolidation of newly independent states from their former colonial powers, to reflect the missing part of sovereignty achieved under the existing international legal system. The core problems of economic deficit and the resistance of colonial powers to taking any responsibility from colonialism for their economic and natural resources would require a solid power to change the existing colonial-based international system. For example, the Bandung Conference proposed “the establishment of the Special United Nations Fund for Economic Development” of post-colonial states even though it had not been welcomed by developed states.20
Hence, in this generation, Indonesia led the TW states to utilize the right of self-determination differently from the one promoted by the UN under its decolonization programme in terms of scope and content. This constraint on self-determination then moves to the right of development now, despite there being no agreed definition.21 Such a contribution might be a part of the Third World Approach to International Law [TWAIL] movement, which seeks to create a universal International Law to rectify the colonial interpretation and application of International Law since the sixteenth century.22
On 13 December 1957, this spirit was manifested in a more concrete way in relation to the International Law of the Sea on Archipelagic States, as announced in the Juanda Declaration. This was followed by the enactment of Law Number 4/1960, which proclaimed that all water surrounding, between, and connecting the islands constituted “the exclusive sovereignty of the Indonesian State”.23 Conversely, the US and other Western maritime powers considered themselves as having free use of the high seas until the development of the United Nations Conference on the Law of the Sea [UNCLOS] in 1982.24
The declaration also triggered Arvid Pardo, a Maltese representative at the UN, to propose a collective approach for the TW states on the common heritage of humankind. This was to the effect that resources beyond territorial boundaries should be controlled by, and for the benefit of, post-colonial states. This approach encapsulated and represented the worries of the TW states about the continued exploitation, beyond a state's territorial jurisdiction, because of the TW states’ admitted lack of scientific and technological capacity for successful extraction. The proposal was designed to share the benefits of natural resources amongst the people in the world, not only for those who have the ability to exploit them. In particular, it was to declare that sharing the control and benefits of the sea bed and ocean floor “underlying the seas are beyond the limits of present national jurisdiction”.25 Unsurprisingly, perhaps, the proposal was supported by the majority of the TW states, as then formulated in the UNCLOS 1982.26 However, the rejection by Western states, on the basis that it was “contrary to the interests and principles of industrialized nations”,27 as expressed by President Reagan, has rendered this principle devoid of proper legal content.
Anand stated that the US insisted in not accepting the twelve-mile territorial sea boundary, as adopted in the 1982 UNCLOS, unless its freedom of transit passage was recognized and accepted in the Convention. This resistance was then accepted in UNCLOS III through hard bargaining and a concession to the US and other maritime powers for their agreement to accept a wider coastal state jurisdiction in the Exclusive Economic Zone [EEZ] and the continental shelf, and international machinery for the exploration and exploitation of deep sea bed resources.28 The TW states, recognized as the group of Coastal States at UNCLOS III, declared:
[t]he group of Coastal States noted with surprise and concern recent media reports that the government of the United States had ordered its navy and air force to undertake a policy of deliberately sending ships and planes into, or over, the disputed waters of nations that claim a territorial limit of more than three miles.29
The Common Heritage of Humankind proposal can be seen as not merely for sharing the benefits of, but also the impact of, the exploitation of natural resources. This concept confirmed the idea of the internationalization of resource nationalism in terms of placing obligations on developed states to share the benefits of natural resources beyond a state's territory.
In 1958, Indonesia claimed its control over Dutch companies through Statute Law Number 86/1958,30 followed by the implementation of various government regulations31 to regain control over colonial Dutch companies in Indonesian territory.32 Article 1 of the Law held that: “the Dutch companies in Indonesia's territory which were decided by the government regulations, shall be nationalized and become full and free possessions of the State of Indonesia.” Compensation would be decided by a committee, which was to be appointed by the government (Article 2). If any disputes were to arise on the amount of compensation, the committee will decide it, with appeals to the National High Court constituting the final decision (Article 3).33 However, no case was filed in the National High Court, as the Dutch companies preferred to use International Courts, although they mostly found in favour of Indonesia.34 Overall, the process of nationalization went without violence, but with a virtual collapse of the Dutch-Indonesian relationship for decades.35
Following nationalization, Indonesia also introduced the first Law on Oil and Gas (Law Number 44/1960), as a review to the colonial mining Dutch law—the Indische Mijnwet 1899—that was amended in 1904 and 1918. This confirms that “[a]ll oil and gas found within the territory of Indonesia is national property and controlled by the State of Indonesia”. This law was introduced to rectify the colonial characteristic of the law, which gave control to the colonial government without concern to benefit the people in its colony.36 The colonial mining law favoured the Dutch in concession rights, i.e. mining concessions for seventy-five years, and were limited to Dutch companies.37 All taxes went to the colonial government,38 and gave the Dutch all mining rights39 under the establishment of the Special Committee for Mining in 1852.40 In 1960, the Indonesian government took all powers from the Dutch government and transferred them to Indonesian state enterprises.41
In 1967, Sukarno also issued the first law concerning foreign investment (Law Number 1/1967), which involved concluding the idea of the restrictive access of foreign investments in the strategic self-defence sector, limiting tax and royalty concessions for five years, and fulfilling the obligation to recruit national resources in the first instance and to transfer knowledge through providing training for national staff and the like. Under this law, foreign investment was limited to thirty years, and a strong emphasis was placed on transferring skills and technology to the host state,42 and inviting foreign investments on a temporary basis, with a social mission to facilitate the transition of economic development in Indonesia.43
In this early period, there was a mainstream consensus about the central government and the Masyarakat Hukum Adat [MHA] as a newly independent state, but there was no discussion on how to benefit indigenous peoples, or how to compensate for personal or collective ownership of land and resources in the affected areas. Thus, this early period of Indonesian independence established many of the ideas pertaining to resource nationalism prevalent today, but failed to achieve their realization. In the subsequent period, when Indonesia was ruled by the Suharto regime, as seen in the next section, the gap between the central government and MHA widened as the central government assumed the role of the absolute representative of colonial peoples.
II. THE SUHARTO ERA: NEW ORDER (1966–98)
Soon after Suharto came to power, he established a new cabinet of Ampera44 and issued two Presidential Decrees to change the previous Decrees during the Sukarno era, i.e. the Presidium Cabinet Instruction No.28/U/IN/12/1966, returning foreign enterprises to former owners on 12 December 1966, and another instruction on 30 December 1966. These decrees aimed (1) to abrogate the Decree of Sukarno's Dwikora Cabinet Presidium on the establishment of the Body of Enhancement of National Endurance in the Field of Petroleum;45 (2) to abrogate the Decree on the placing of the oil companies Caltex, Shell, and Stanvac under the temporary control/supervision of the government;46 and (3) to abrogate the decree placing the Pan Am Oil Company under the temporary supervision of the government.47
Thus, during Suharto's administration, the power of colonial and foreign enterprises was strengthened, along with a centralization of government power in Jakarta. On 7 January 1967, Suharto also signed an Indonesian-US Investment Guarantee Agreement in Jakarta, the first Bilateral Investment Treaty [BIT] of Indonesia with a foreign state.48 The US set out a strict protection of its investment in Indonesia, evident in paragraph 4 stating that “[t]he Guaranteeing Government (US) does, however, reserve its rights to assert a claim in its sovereign capacity in the eventuality of a denial of justice or other question of state responsibility as defined in International Law”,49 referring to International Law on the Protection of Foreign Investments.
Foreign Investment Law Number 1/1967 was applied for the first time to formally liberalize natural resources for foreign investors, attracting various BITs and several big investors in mining, oil, and gas. The first foreign investor in gold mining (Freeport) signed its first contract for a thirty-year period (1967–97), and extended it for another twenty-five years.50 Its operations covered 10,000 hectares of land, without clear compensation to the people.51 Subsequently, on 24 August 1971, natural gas was discovered in the village of Arun in the Aceh province,52 with onshore and offshore reserves estimated at 17.1 trillion cubic feet of reserves within a 271-hectare area.53 Other natural resources were exploited in various parts of Indonesia, such as oil and gas in Riau and Kalimantan and mining in Nusa Tenggara Timur [NTT], exploited with the support of military power and all benefits controlled and referred to the central government of Java,54 while the MHA in associated areas were increasingly marginalized.
Additionally, the transmigration policy under the centralistic Suharto regime moved the marginalized poor people on Java Island to other territories, i.e. Sumatra, Kalimantan, Sulawesi, and Irian, along with the entitlements to the lands. This migration changed land ownership in certain areas, increasing the difficulty of defining indigenous people.55
The government interpreted resource nationalism in a manner which secured more benefits for the elites and foreign investors to the dissatisfaction of many marginalized substates and peoples around the country. In particular, it fuelled the self-determination conflict in the Aceh province, where resources benefited the indigenous people little.56 Eventually, popular pressure from all over the country forced Suharto to step down and a reformation era started. Centralization caused the inequity in the allocation of natural resources, so decentralization to district-level autonomy aimed to rectify the historical wrongs of the previous administration. However, as will be seen, it is questionable whether the governments of the autonomous regions were capable of protecting indigenous peoples vis-à-vis foreign investors. The Suharto era gave birth to a centralized and consolidated state at the expense of regional governments and the people themselves. However, this began to change once the Suharto regime ended.
III. REFORM ORDER GENERATION (1998–2015)
After the fall of Suharto, the Reformation Order was a turning point for resource nationalism in Indonesia. Article 33 of the Constitution remained untouched throughout four constitutional amendments.57 The Constitutional Court [MK] was established to provide a space for individuals and the people to review laws considered to be not in conformity with the constitution.58 In this era, arguments about resource nationalism emerged through judicial review in the MK and subsequently the imposition of a new legal regime in mining, negotiating BITs, and challenging international arbitration awards. There is, however, a mixed picture, with the MK more readily finding breaches in some areas than others. The vague concept has contributed to different interpretations. Thus, this section is broken into three subsections. The first assesses the developing doctrine of constitutional review pertaining to natural resources and Indonesian law, the second addresses the export ban on raw materials, while the third considers the status and effect of BITs.
A. Assessing the Constitutionality of Natural Resource-related Laws
A constitutional review of resource nationalism law illustrates the inconsistency of Indonesian legislation over the Constitution over decades. This judicial review was primarily initiated by the second-largest Islamic nationalist organization “Muhammadiyah” under the banner of “constitutional jihad”.59
The first petition concerned Law Number 22/2001 on Petroleum and Natural Gas. It was made as an intervention of the International Monetary Fund's [IMF] conditionality during the Asian Financial Crisis in Indonesia from 1997 to 1998,60 and brought three times to the MK concerning the right of the state to control and to benefit the people.61 In the first and second review in 2003, the MK decided to slightly alter the law to bring it in line with Article 33.62 The third review in 2012 was the most fundamental.63 The MK ruling on the contradiction of Law Number 22/2001 with Article 33 of the Constitution and the dissolution of the essential implementing institution for upstream oil and gas activities (BP Migas) on 13 November 2012.64 The MK argued that:
[f]irst, the Government could not directly exercise management over or appoint directly a BUMN (state owned company) to manage directly an entire oil and natural gas working area in the upstream sector; second, once BP Migas signed a Production Sharing Contract (PSC), the state becomes bound by the entire contents of the PSC, meaning that the state lost its freedom to make regulations or policies contrary to the contents of the PSC; and third, the non-maximizing of state benefits for the maximum welfare of the people, because of the potential of the control over oil and gas by permanent establishment or private entities, based on the principle of business competition.65
The MK believed that oil and gas were essential for the state and people, as referred to in Articles 33(2) and 33(3) of the Constitution. Therefore, “as long as the state has a capacity, i.e. capital, technology and management, the state has to take a direct control over oil and gas resources”.66 The MK confirmed that the meaning of “state control” is direct control of the state for the maximum benefit of the people. However, it had not yet clarified the capacity of the state and the background to the emergence of BP Migas as a rectification to the previous full control of Pertamina.67 So the MK assumes that when BP Migas signed a contract, it means that the state as a public entity has signed a contract as a civil arrangement, by which the state has bound itself to the rights and obligations of contract law.68
Under the previous regime (Suharto), the control and power of the state was represented by the national private entity Pertamina, but under the reform era, Law Number 22/2001 was issued to split the upstream and downstream activities of oil and gas, with the upstream controlled by a new government institution (BP Migas), while the downstream remained under Pertamina.69 Pertamina was considered corrupt and inefficient during the Suharto era.70 Thus, “BP Migas replaced the position of Pertamina as the regulator, controller, and supervisor of the oil and gas upstream sector and thereafter Production Sharing Contracts (PSC) were entered into with BP Migas”.71 The MK decision annulled this law, mentioning that BP Migas was not part of the government, and it prevented the government from using its full authority to control oil and gas resources.72
In other words, the MK “requires the State to exercise direct control over the upstream oil and gas activities”,73 not to delegate this responsibility to other bodies such as BP Migas. Consequently, BP Migas was dissolved for contradicting Article 33 of the Constitution. The MK made it clear that state power is limited to the right to regulate, not subject to contract, and a state company should be subject to contracts with foreign investors.74 However, the MK decision fails to capture the inability of the state to directly control these activities, which becomes a concern for its application,75 and its link to maximizing benefits for the people.76 Hence, the decision has failed to appropriately use the term “direct control of the state” in relation to Article 33 of the Constitution. The essential idea was not to enforce the direct control of the government over the oil and gas sector, but rather to free the government from any contractual obligations with foreign investors, as arranged by BP Migas.
The MK decision referred to the meaning of “permanent control” of the state, which may historically be affiliated to the UN Declaration of Permanent Sovereignty over Natural Resources [PSNR] in 1962. Hence, the dissolution of BP Migas was considered a misinterpretation by the MK of Article 33 and its relationship to BP Migas and Pertamina.77 This can be seen on the same day (13 November 2012) of the MK decision, when the President, Susilo Bambang Yudhoyono [SBY], issued Presidential Decree Number 95/2012 on the Transfer of the Duties and Functions of BP Migas to the Ministry of Energy and Mineral Resources [MEMR], under the new banner of the special working unit (SKK Migas), until new regulatory laws could be passed by parliament.78
The Judicial Review of Electricity Law Number 20/2002 ruled that this law undermined the right of the state to full control of electricity against privatization, as mandated by the loan agreement of the IMF during Indonesia's monetary crisis in 1998.79 The MK rejected the government's argument that regulating the electricity sector was the same as “controlling” the supply of electricity. It held that the state's obligation to ensure public prosperity would not necessarily be fulfilled by allowing competition, because the private sector would give priority to its own profits and would concentrate on the established markets, primarily in Java, Madura, and Bali, whereas other less well-established areas would be discriminated against.
Again, the MK believed that cross-subsidies from these established markets would be required to support “less competitive” parts of Indonesia, and that subsidies could not be obtained from the private sector. In this context, competition would “tend to undermine state enterprises and might not guarantee the supply of electricity to all parts of the community”.80 Therefore, the MK ruled that electricity, as a strategic sector under Article 33, can be controlled by the state in terms of operating through its enterprises, while private enterprises can only participate with state enterprises.81 The MK considered the different gaps between Jamali (Java, Madura, and Bali), the areas of central government with a settled electricity market, and other areas which have insufficient electricity as a result of the centralistic policy of the last era.82 Additionally, it considered the insufficiencies of state enterprises such as mismanagement, corruption, collusion, and nepotism, but concluded that these could not override the meaning of state control under Article 33(2) of the Constitution.83 Hence, the MK invalidated the entirety of Electricity Law Number 20/2002 and reinstated the previous Electricity Law Number 15/1985, confirming that the MK intended to define the state's control as full control over all aspects of electricity, including the supply chain, but failing to assess the ability of the state to exercise this service in respect of a private entity.84
The Judicial Review of Law Number 7/2004 on Water Resources85 related to several Articles, which provided the right to commercialize water. Articles 33(2) and 33(3) of the Constitution explicitly stated that the state shall control water as a natural resource. In the first review, the MK rejected the claimants’ argument that the state's control over the essential aspects of people's lives should allow for a monopoly over water resources, but demanded instead the regulation and monitoring of the water resources.86 State control was not direct and full, but conditional, as long as it followed the spirit of Article 33 of the Constitution.87
This was amended by the recent MK Decision Number 85/PUU-XI/2013,88 that the conditionality conditional decision norm apply, allowing the privatization of water through the right to commercialize water.89 This has contributed to the lack of surface water for use by the majority of people90 and has led to many conflicts between indigenous peoples and the investors.91 This followed on from the intervention of foreign international institutions, such as the IMF and the Asian Development Bank [ADB], which imposed conditions for loans during the monetary crisis in Indonesia under the “restructuration” programme in 1998.92
The MK argued that access to water is a human right, which a state has the duty to respect, control, and fulfil, as it is a public, not private, right under Articles 28H and 33(3) of the Constitution.93 In this case, the MK had also annulled the clause under Article 6(3) which mandated the formal process through the regional government's decision to prove the existence of the MHA to thereafter be entitled to have a right over water resources.94 Thus, the MK legitimized the MHA as unconditional users of water resources in their areas, without being subject to interventions by authorities. Eventually, the MK returned to the previous Law Number 11/1974 on Water, excluding foreign investors or private entities from water resources in Indonesia.95
The Judicial Review of Law Number 27/2007 on the Management of Coastal Areas and Small Islands [MCASI]96 declared coastal water area concessions as unconstitutional on the grounds that they were not in conformity to Article 33(3), which demands benefit to the people. This decision protects traditional fishing communities which had been marginalized.97 The law had favoured private entities, funded by foreign agencies such as the United States Agency for International Development [USAID], ADB, and the World Bank [WB], and provided a concession right for the private sector to exploit coastal waters and small islands for aquaculture, tourism, and mining to the detriment of the traditional users of the waters.98 Thus, the MK has amended the right to manage coastal resources by investors, which had adversely impacted the traditional rights of the MHA over coastal areas.
The Judicial Review of Law Number 18/2004 on Plantations in relation to Article 21 of the Law prohibited using and damaging plantations without a permit, or disturbing the plantation business, and was punishable with a maximum of five years in jail and a maximum fine of five billion rupiah.99 This law prevented the MHA and local people from accessing and taking benefits from plantations that were permitted for investors’ use, and investors could prosecute the MHA around the plantation area. The term “prohibition to use plantation land without any permit” dated from the colonial era and often covered MHA land.100 Hence, the MK found this law violated the right of the MHA and was not legally binding, opening a space for the MHA to benefit from plantation areas.
The Judicial Review of Mining Law Number 4/2009 concerned the role of the government in issuing mining licences under Article 6(1)(e), which required the licence to be issued after co-ordination with local government and the legislator.101 The MK ruled that the government had to co-ordinate with certain people in the mining areas, not just with the local governments and legislators, ensuring direct popular participation. The ruling uses the phrase “… to take into account people's opinions” in Article 10(b) of Law Number 4/2009 on Mining Mineral and Coal, which is considered to run contrary to the Constitution if not understood as the “obligation to protect, respect, and fulfil the people's concerns in which their area is under a mining area and its affected area”.102 As such, the MK has clarified what the rights of people in and around mining operations prior to the concession are, but the MK does not use the term “MHA” which was understood in limited spaces in relation to the forestry area, which may implicitly cover the broader meaning of the MHA. However, this ruling has no enforcement mechanism and is confined to other subordinate legislation.
The Judicial Review of Forestry Law Number 41/1999 relates to the status of the MHA in the state's forests. Article 1(6) stated the “Adat forest is state forest within MHA's area”, and allowed the state to claim indigenous forest to be under its control and to issue a licence to investors. Article 4(3) stated that the government would respect the rights of the MHA, subject to the qualification of the constitution.103 Thus, if the qualification is not met, the full control of government will prevail. The MK in the first ruling in 2011 stated that the law is conditionality unconstitutional, i.e. the law would be considered unconstitutional subject to certain circumstances,104 but it changed this in the second review in 2012 to totally amend the law as it runs against the constitution.105 The objective of this law is stated in Article 3, “forestry resources are intended to the maximum benefit of the people on the basis of justice and sustainability”, but in practice it allowed the grant of licences to investors for the exploitation of resources without the consent of the MHA. The conflict between the MHA and investors continues without clear resolution.106 The MK ruled that the term “state” under Article 1(6) of Law Number 41/1999 was against the constitution,107 and should be replaced with “Adat forest is a forest within the area of the MHA”.108 The decision then recognized the indigenous people's forest as separate from state-owned forest as part of the indigenous people's entitlement to land in the forested area.109 The MK Decision 35/PUU-X/2012 [MK Decision 35] has progressively opened a new space for indigenous people to claim their rights.
The core of this decision relates to two constitutional issues, i.e. the recognition of indigenous forest and the conditional recognition over the existence of the MHA. The MK accepted the existence of indigenous forest, but rejected the request to amend the conditionality of recognition over the MHA, as attributed in the Law on Forestry.110 Following the MK Decision, the Ministry of Forestry stated that they were waiting for provincial technical guidance to implement this ruling,111 while various local authorities sought ministerial regulation to clarify the ruling.112 Thus, as of now, the application of this ruling remains uncertain.
The MK of Indonesia can be seen as a reforming body for safeguarding the rights of the indigenous people. However, the MK decisions aimed at ensuring direct adjustment of the existing provisions in legislation covering statutory Acts and subordinate legislations at provincial and district levels have often been ineffective. The complexity of legal claims for the indigenous people, under both national and international law, has left the problem unresolved.
From the cases examined, the MK's interpretation of Article 33 of the Constitution and its relationship to the laws of natural resources has contributed to the development of the meaning of resource nationalism, with increasing recognition of the role played by the MHA under the term “state control” in the law relating to forestry, coastal areas, water resources, plantations, and mining. This normative recognition and entitlement remains difficult to apply, as it is subject to qualifications in the constitution and constraints in subordinate legislation. On the other hand, the MK decisions on electricity, water resources, and coastal area law has mainly opposed the mainstream of privatization, under the loan agreements with the IMF and the WB during the monetary crisis in 1997.113 In contrast, with respect to forestry, mining, and plantation law, the MK has implicitly supported privatization. Further complexity has been introduced by the position of the MK in the area of oil and gas law, where it has ruled in favour of direct state control.114 These differing interpretations of the MK contribute to different approaches to the state control of resource nationalism in Indonesia.
B. Imposing an Export Ban on Raw Minerals
Law Number 4/2009 on Mineral and Coal Mining has been considered the key piece of legislation concerning resource nationalism in the mining sector,115 replacing Mining Law Number 11/1967, which tended to favour foreign investors. The new law brings about changes in three key areas.
First, it has revised the Contracts of Work [CoW] to become a licence system for investors, in the light of the fact that the contract system indicates that the state and investors are of equal position, while the licence system indicates that the state is in a superior position to the investors.116 The CoW was developed from the BIT and the imposition of additional obligations beyond those in the CoW could constitute a breach of the BIT, liable to international arbitration.117 Therefore, Indonesia also negotiated the BIT and CoW to adjust to the provisions of the law, as described in the following items.118
Second, foreign mining companies need to divest at least fifty-one percent of their shares in stages to their domestic partners119 from the fifth to tenth year of production.120 Government Regulation 22/2010 requires twenty percent local ownership by the fifth year of production. Another regulation in 2012 required fifty-one percent local ownership in the tenth year of production.121 This new obligation is now under negotiation with foreign investors.
Third, the law added value to minerals through in-country raw mineral processing and refining, restricted the export of raw materials, and required companies to increase domestic value-added processes within Indonesia by January 2014.122 This imposed an obligation on investors to process raw materials in the country through establishing a smelter refinery. After the negotiations, only some minerals were banned, while the ban on others only took effect in 2017 when the smelter would be ready.123 This provision also increased the progressive export tax on all exported commodities: twenty-five percent in the first year for copper, twenty percent for all other commodities, then escalating to sixty percent for all materials by 2016.124 Indonesia's largest mines, which are in Papua (Freeport),125 eventually agreed to build smelters during the renegotiation of the CoW, while Newmont in NTT filed a case with the International Centre for the Settlement of Investment Disputes [ICSID] against the Indonesian government in June 2014, then withdrew it several months later.126 Indonesia also negotiates BITs as they are essential for ensuring state control and maximizing benefit for the people.
C. Negotiating Bilateral Investment Treaties
Following the series of judicial reviews and the implementation of the new mining regime, Indonesia has negotiated its BITs with other states, in terms of the absence of the expected benefits and the risk of compensation claims in international arbitration. These facts were considered contrary to the preamble, such as the 1994 BIT between Indonesia and the Netherlands, which involved “intending to create favourable conditions for investments by nationals of one Contracting Party on the basis of sovereign equality and mutual benefit”.127 The preamble of the UK-Indonesia BIT included “[r]ecognizing that the encouragement and reciprocal protection under the international agreement of such investment will be conducive to the stimulation of individual business initiative and will increase prosperity in both states”.128
Under the sovereign equality principle (Article 2(1) of the UN Charter 1945 that all nations are equal in sovereignty), the “mutual benefit” principle is questionable in a situation where the investor is weighed against the host state. Indonesia argues that, in practice, the existing BIT only benefits developed countries, which possess the capital and technology to invest in newly independent countries like Indonesia. This demonstrates that the BIT is an unequal treaty with unequal benefits between Indonesia and the foreign investors.129 This is akin to an unequal colonial investment treaty with unequal benefits between the parties. The current model of the BIT ensures sovereign equality, but it is not clear whether the benefits are measured with reference to the state or the people.130 Article 33 of the Constitution refers to the full and direct control of the state over natural resources for the benefit of the people, but with “no actual process to ensure the conformity between an international treaty and the Constitution”.131 Indonesia's BITs were drafted in common form by the exporting capital countries.132
Following this, Indonesia decided to terminate its BIT with the Netherlands from July 2015 as part of a plan to end all sixty-seven BITs with other countries, e.g. China, France, and the UK, when they came up for renewal.133 Renegotiating BITs will face several threats from the existing international investment system, i.e. stabilization, sunset, and arbitration clauses. For example, under the UK-Indonesia BIT, the stabilization or umbrella clause provided in Article 3(2) states that:
[i]nvestments of nationals of companies of either Contracting Parties shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party. Each Contracting Party shall ensure that the management, maintenance, use, enjoyment or disposal of investments in its territory of nationals, or companies of the other Contracting Parties, is not in any way impaired by unreasonable or discriminatory measures. Each Contracting Party shall observe any obligation it may have entered into with regard to investments of nationals or companies of the other Contracting Party.
The clause “shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party” would be regarded as a stabilization clause for foreign investors to oppose any changes of law and policy of the host government and to thereby claim compensation. Such a clause exists in most of Indonesia's BITs, making foreign investors largely immune to any regulatory changes.134
An example of a “sunset clause” can be seen in Article 15(2) of the 1994 Indonesia-Netherlands BIT. It applies to existing investors for an extended period of fifteen years from the termination date.135 Thus, the protection right for foreign investors remains applicable until 2030. Equally, the term “expropriation” in Article 5 has protected foreign investors with a broad interpretation, as stated:
[n]ationals of either Contracting Party shall not be deprived, directly or indirectly, of their investments, be nationalized, expropriated or subjected to measures having effects equivalent to nationalization or expropriation in the territory of the other Contracting Party, except by measures taken for a public policy.
This provision might imply the concern of the Netherlands over the nationalization of all Dutch investments in the Indonesian territories in 1958 by Sukarno's administration. The provision opens with a vague concept of the term “indirect expropriation” and public policy exception, potentially disputed by both Contracting Parties. If so, the compensation would follow a traditional formula of the “Hull standard” stated in Article 5: “[t]he measures shall be taken in full, prompt and effective compensation.” The BIT includes referral of disputes to the ICSID, which has potentially disfavoured host states.136
Terminating or reviewing a BIT may not prevent foreign investors from filing an international arbitration claim during the timeframe of a treaty,137 but a long-term resource nationalism policy can have a binding effect on newly agreed treaties.138 Indonesia had to follow the rules of international arbitration law for dispute settlement and enforcement of international arbitration awards. Indonesia issued Presidential Decree (Keppres) Number 34/1981 upon the ratification of the 1958 UN New York Convention on the Recognition and Enforcement of International Arbitration Awards. Article V(2)(b) of the New York Convention confers power upon the court of Member States to refuse the enforcement of an international arbitration award if enforcement would violate the public policy of the place of enforcement.139 Furthermore, enforcement may also be refused by a court, at the request of the party against whom it is sought to be enforced, if the contesting party can show, among other things, that:
(b) the party against whom the award in invoked was not given proper notice of the appointment of the arbitrator, or of the arbitration proceedings, or was otherwise unable to present his case; or (d) the composition of the arbitral authority, or the arbitral procedure, was not in accordance with the agreement of the parties, or failing such agreement, was not in accordance with the law of the country where the arbitration took place.140
This exception was then strengthened by the enactment of Law Number 30/1999 on Arbitration and Alternative Dispute Resolution, which regulates the enforcement of an arbitration award as long as it is not against “public order”. The award has to be legislated by the Head of the National Central Court in Jakarta, if the losing party so requires.141
There are several cases where Indonesian state companies challenged international arbitration awards in the Central Court in Jakarta. For instance, in the Karaha Bodas v. Pertamina case on the geothermal project, the Jakarta Central Court nullified the international arbitration award seated in Geneva on 19 August 2002,142 although the Supreme Court then corrected this annulment.143 In the Yani Hariyanto v. ED&F Man Sugar case,144 the Central Court of Jakarta rejected the ruling made by the London Court of Arbitration on Presidential Decree No. 34 in 1981 that sugar only can be imported by Badan Urusan Logistik [Indonesian Bureau of Logistics: BULOG], making sugar import contracts by a private party invalid. In the case of Banker Trust International plc v. PT. Mayora, the Central Court of Jakarta refused the enforcement of a London Court of Arbitration award on grounds of public policy on 3 February 2000, a decision confirmed by the High Court on 5 September 2000.145 Other cases include Banker Trust v. PT. Jakarta International Hotel Development 146 and Bakrie Brothers v. Trading Corporation of Pakistan Ltd, 1986.147
These commercial arbitration cases under the United Nations Commission on International Trade Law [UNCITRAL] rules have created confusion as to how an international arbitration award can be challenged on the grounds of “public interest” in the Central Jakarta Court under the Act of Arbitration of Indonesia, while meanwhile invoking the spirit of the Calvo Doctrine, which demonstrates the precedence of national law over international arbitration law.148
Indonesia ratified the Washington Convention 1965 [ICSID],149 a year after it enacted Law 1/1967 on Foreign Investment, and signed the first contract of work with Freeport, a company exploring mining in the West Papua province. ICSID decisions are equated with the final judgment of a contracting state's court, subject to annulment under the ICSID Convention, with no chance for appeal or review within a national court system (as applies in commercial arbitration cases). Indonesia is concerned with amending this clause in negotiating future BITs, as described above.150
Thus far, Indonesia has faced five claims in the ICSID. First, the Amco Asia Corps takeover of the old Kartika Plaza Hotel, owned by a foundation affiliated with the armed forces. The claimant alleged that the Indonesian government, through military action in January 1981, had seized their investment. The ICSID ruled that Indonesia had breached the contract and should pay compensation.151 This is regarded as the first ICSID case that Indonesia had lost.152
Second, the Cemex Asia Holding Ltd claim, concerning its purchase of twenty-five percent of shares in its state-controlled company, PT Semen Gresik, was withdrawn in 2007.153
Third, in 2010, a claim was brought by the disgraced former owner of Bank Century, Rafat Ali Rizvi, under the UK-Indonesia BIT, which favoured Indonesia.154
Fourth, the ongoing claim of Churchill Mining PLC (a Company from the UK and its subsidiary) concerned mining licences revoked by the Regent of East Kutai District, East Kalimantan155 on 4 May 2010. In the meantime, the claimant filed with the ICSID on 22 May 2012 after various unsuccessful attempts to settle the disputes domestically.156 Interestingly, Indonesia attempted to issue Presidential Decree Number 31/2012 in order to exempt the UK-Indonesia BIT from the ICSID's jurisdiction. The decree was understood as an implementation of Article 25(4) of the ICSID Convention that allowed a state to notify the ICSID whether it would submit to the jurisdiction of the ICSID. Article 1 of the decree clearly stated that “any disputes arising from the administrative ruling of the district court within jurisdiction of Indonesia is excluded from the settlement in the ICSID jurisdiction”, but the ICSID rejected this argument, and the case continues.157
Fifth, Nusa Tenggara Partnership B.V. and PT Newmont Nusa Tenggara Limited [PTNNT] filed against Indonesia in the ICSID on 15 July 2014 based on the alleged breach of both the BIT between Indonesia and the Netherlands 1994 and of the CoW after the failure of national negotiations over a period of six months.158 The issue began when the Statute Act on Mineral and Coal Mining 4/2009 required an adjustment of the existing CoW to be in line with that legislation, including imposing a new export condition, a new export duty, and a new January 2017 ban on the export of copper concentrate. Under the new law, PTNNT was required to build a smelter in Indonesian territory, but PTNNT withdrew the case after reaching an agreement with the Indonesian government.159
This policy of challenging international arbitration awards was considered as a continuation of the Calvo spirit, but Indonesia seems ambivalent towards rejecting international arbitration and reviewing international arbitration awards in the national justice system,160 and under both situations the benefit to the people remains questionable.
IV. REFORMULATING RESOURCE NATIONALISM IN THE INDONESIAN CONTEXT
Following the inconsistency of resource nationalism described above, Indonesia has sought to apply a people-based resource nationalism principle within a human rights-based approach. This approach, as Miranda observed, can “… offer a normative framework potentially capable of lending legitimacy to indigenous peoples’ local, anti-subordination struggles and of translating indigenous peoples’ claims into recognizable rights. To that end, indigenous peoples must be engaged in both informal mechanisms of knowledge production and norm-generation, as well as formal, top-down decision-making structures.”161 Consequently, an account of indigenous peoples’ participation that reflects on these challenges perhaps holds some promise for the use of IHR law as a meaningful tool for social transformation. This framework will be based on normative, institutional, and public awareness developments and may be broken into several subcategories: the normative development of the idea, the redefinition of the role played by the MHA, the definition of the term “people”, an integrated approach via the Constitution to the law pertaining to resource nationalism, and increasing the development of institutions.
A. Normative Development
To develop a legal basis for people-based resource nationalism, Indonesia should change from full and direct state control over natural resources to fully and directly benefiting the people. Under Articles 33(2) and 33(3) of Indonesia's Constitution, the people should be a beneficiary under this state control.162 Such an understanding can also be seen from various MK decisions on natural resource-related laws, that the status of people remains unclear under the increasing power of the state.
Article 33(2) states that all essential production for the people shall be controlled by the state. Essential production, such as electricity and water resources, as reviewed by the MK, has been opposing privatization, yet in reality state control through the Electricity States Company [PLN] and water-related companies, has not operated to the maximum benefit of the people, with inadequate electricity power and clean water, especially outside Java island and with some remote areas having no access to electricity and clean water.163 In this case, the MK has been unable to assess the ability of the state to be in control and to maximize the benefits for the people in general, let alone the MHA in isolated forestry areas. Therefore, it proposes that Article 33(2) should read: “all essential production in relation to the majority of people, has to be controlled by the state, based on the people's necessity in any means.”
Hence, the term “state control”, or “privatization”, may not be significant, as long as people's necessity is taken into account. This is in line with the views of the first Vice President of Indonesia, Mohammad Hatta, who stated:
… it does not necessarily mean that the state itself should be an operator or provider of goods and services. More precisely state control means state regulation of economic activities, particularly to prevent the exploitation of those who are economically weak by those who are economically strong.164
Article 33(3) of the Constitution states: “[t]he land, the waters and the natural riches contained therein shall be controlled by the State and exploited to the greatest benefit of the people.” The origin of this Article was greatly influenced by the anti-colonial spirit to regain control over Dutch power at the time of independence.165 Such a construction makes people the beneficiary of natural resources, but also explicitly provides for the state's provision of resource-based services, meaning that a role exists for centralized and decentralized governments. However, absent from Article 33(3) is a definition of the meaning and status of the “people”. If the ultimate beneficiary is to be the “people”, this has to come with an associated right to participate in the procedural process of natural resource development so as to include the Free, Prior, and Informed Consent [FPIC] principle for MHA communities. Thus, Article 33(3), should read: “All people have the right to land, the water and the natural riches contained therein, under the control of the state. The people will be identified on the given impact, historical possession and autonomous region, which is further regulated in a specific law.” This alteration would clarify the government's current misperception which leads it to interpret the “right to control” as the right of ownership by the state.
Equally, Article 18B(2) reconfirms the existence of the MHA as a priority group of people to benefit from the exploitation of natural resources, considering their isolated and marginalized circumstances over the past decades. Hence, Article 18B(2) provides an interpretation of the term “people” in Article 33 in the present-day context. The limitation of recognition of the MHA should be relaxed to provide a flexible space for the MHA to claim rights over natural resources in their ancestral areas. Reading Articles 33 and 18B(2) of the Constitution jointly would develop a new paradigm for the MHA in Indonesia's system.
Having revised Article 33(3) of the Constitution, the approach towards how a people's right of participation over natural resources can be fulfilled under state control might change. Previous decisions of the MK may have taken a different direction to demonstrate people's concerns, rather than the state's power to control natural resources. However, the amendment of the Constitution would have to go through the House of Commons [MPR], pursuant to Article 3(1) which gives the MPR the authority to amend the constitution.166
B. Redefining MHA in a Post-colonial Context
The general meaning of the term “people” in Common Article 1 of the IHR Covenants can be applied both in a colonial and post-colonial context. The term “people” was commonly understood in a colonial context as meaning “indigenous”, but in a post-colonial context the term “indigenous people” might be more restricted in meaning. Thus, the determination of people as colonial people in Common Article 1 (paragraph 1) sheds light on the substantive meaning of the term “people” in the following paragraphs (2 and 3). Colonial people are, by nature, disadvantaged and marginalized in political, economic, social, and cultural terms. Building upon this, the meaning of “indigenous people” in Indonesia can be potentially construed as being those marginalized from central development. It also can be construed in terms of the isolated and non-isolated MHA, with reference to the marginalization of the allocation of the benefits of natural resources.
The rhetoric of Indonesia in considering the meaning of indigenous as similar to colonial people could be developed167 to clarify the term “people”, linking the colonial and indigenous meanings. It can then be considered in the application of Common Article 1 of the IHR Covenants in the context of Indonesia, which means that the marginalization and “unequal distribution of power and wealth”168 over colonial people can be linked to indigenous peoples in the Indonesian context. Therefore, the MHA has a right to internal self-determination in terms of the FPIC principle, which should be taken into account.169 Such understanding would help in the implementation of the United Nations Declaration on the Rights of Indigenous Peoples [UNDRIP] 2007, in particular Articles 3 and 4 on internal self-determination, Articles 10 and 19 on the FPIC principle, and Article 8(2), which reads as follows: “States shall provide effective mechanisms for prevention of, and redress for: (b) any action which has the aim or effect of dispossessing them of their lands, territories and resources.” In this regard, the UNDRIP can function as a tool to interpret the meaning of “peoples” under Common Article 1 and to support the analogical approach from the colonial to post-colonial context, as well as to enhance the benefits to indigenous peoples in Indonesia.
In the report to the Human Rights Committee, Indonesia considered the whole population of Indonesia to be indigenous people. However, in practice, the government has recognized indigenous people in a much more limited way, i.e. as geographically isolated people in relation to forestry known as the MHA. This differs from the wider meaning under the UNDRIP, which distinguished historical peoples affiliated with certain territories, covering land, territory, and resources. According to the UNDRIP, Indonesia did not recognize the meaning of indigenous people in actuality. Instead, Indonesia has recognized some distinctive historical cultural peoples pre-dating Indonesia's independence, as having been given special autonomy, such as the people in Aceh and Papua.170 The meaning of indigenous peoples under the UNDRIP 2007 is designed to implicitly declare that the colonial meaning and spirit continues to remain in the post-colonial time, in which the terms “colonial people”, “non-self-governing”, and “trust territories” are no longer relevant within a post-colonial state. In that way, Common Article 1 of the IHR Covenants is relevant and applicable in the post-colonial era.171
The right of indigenous peoples has been developing, as evidenced by the creation of the UNDRIP. The declaration was “[g]uided by the purposes and principles of the Charter of the United Nations, and good faith in the fulfilment of the obligations assumed by States in accordance with the Charter”. Accordingly, the MHA would be entitled to the right of internal self-determination in the forms of minority or autonomy in international law.172 Duruigbo argues that international law has accorded the entitlement to natural resources to the people rather than the state. It is the people who have ownership, while the government acts as the people's trustee or custodian.173 However, it has not been enforceable because the state is the only legal subject recognized in general public international law.174 As a result, the term “people” and its association with natural resources is neither clearly defined in public international law nor in Indonesian domestic law. This is despite the term “people” being recognized as the holder of the right in various instances. In the general international context, the definition in international law remains uncertain because, in many provisions, the word “state” is dominant. Hence, “colonial people” in Common Article 1 as interpreted in the colonial context is similar to that in the post-colonial context. Additionally, the meaning of indigenous people in the Indonesian context, with respect to the MHA, should be extended from the isolated MHA to the non-isolated MHA. This would cover the marginalized ethnic and pre-sovereign kingdoms for the benefits of and for sharing control of resources. Mr Anshor, a delegate from Indonesia in the Human Rights Committee stated:
Masyarakat Hukum Adat were special communities governed by oral legal systems and were not indigenous peoples within the meaning of the Declaration on the Rights of Indigenous Peoples. Since the composition of the Indonesian population had not changed since the colonial era, Indonesia considered the entire population as indigenous. That did not mean, however, that certain provisions of the Declaration were not relevant, in particular those relating to free, prior and informed consent or customary law.175
Contemporary discussion is dominated by the first model of indigenous people, isolated peoples in forest areas, rather than the second model. However, without distinguishing between the differing meanings of “indigenous”, the government would face difficulties in advancing discussion on their entitlement over natural resources, or over a ceremonial culture. The UNDRIP 2007 tends to define indigenous peoples to include both categories, to cater to the historical nature of several distinguished tribes, kingdoms, and the like without being restricted to the number of groups, and the nature of remote and non-remote areas.176
Equally, there were different historical relations between the various groups of non-isolated MHA and the emergence of Indonesia, which gave rise to the differing status of the different groups. The pre-sovereign region of Aceh has the strongest bargaining position, with a strong history of anti-colonialism and opposing foreign interference. West Papua, which has a distinctive identity and came through the process of the “Act of Free Choice” in joining Indonesia, also enjoys a strong bargaining position.177 The sovereign region of Aceh people share some of the power and revenue of natural resources today with the pre-sovereign region after the 2005 Memorandum of Understanding [MOU] signed in Helsinki.178
C. Defining “People”
Including a definition of the term “people” in Common Article 1 of the IHR Covenants shows that the meaning of “people” under international law in the post-colonial context is uncertain, as can be seen from the response of the Human Rights Committee179 to Indonesia's dubious understanding of the meaning of “people” and its association to natural resources. However, the committee is deeply concerned about Indonesia's lack of adherence to other provisions of the covenants.180 Hence, Common Article 1 has been marginalized from the flow of arguments, both in the Human Rights Committee and the national report of Indonesia.
Following the report concerning Common Article 1(2) on the management of natural resources, Indonesia has interpreted the right of the whole people of Indonesia, who initially struggled for the right to external self-determination and later struggled for internal self-determination, as the right of the state to manage natural resources for the greatest benefit of the people, as explicitly stated in Articles 33(2) and (3) of the Constitution.181 The term “greatest benefit of the people” has been questioned, as its precise meaning may have varied depending on the ruling regime. For example, during the Sukarno regime, the meaning of “people” was strongly associated with the “state”—most of the natural resources development was controlled by central government elites.
The use of “indigenous people” to refer to all the people in Indonesia in the official report to the IHR Committee has been misleading and inapplicable in the post-reformation era, in which the decentralization principle applied. That understanding was only workable in the centralistic system (pre-reformation, 1945–98), in which all resources and power were under the control of the authoritarian central government in Jakarta.182 The unequal distribution of the profits and the benefits of resources and developments between central Jakarta and its surroundings and those outside the island of Java remains. Despite the term “Indonesia” being used to establish multi-ethnic uniformity and the equality of all people, in practice the centralistic power has marginalized other entities and ethnic groups outside the Javanese, illuminated by the glory of the ancient Hindu kingdom of Majapahit on Java island, a central power over its subsidiary.183
People-based resource nationalism under Common Article 1 should not be understood as a separatist movement, or legitimizing such a movement, but rather as the right of people to internal self-determination. It would fill a gap in the national legal system and provide a solution to rectify the adverse effects brought about by the centralized government of the Suharto era.184 However, there has been no serious effort to link this meaning to demonstrate that indigenous people are entitled to the benefits of natural resources. The meanings of “people” and “indigenous people” in the constitution have yet to be integrated to define Common Article 1 on people-based resource nationalism. Furthermore, the overlapping and inconsistent regulations on natural resources have tended to alienate the people (indigenous people) from their entitlement to such resources.
As mentioned above, Article 33 of the 1945 Constitution gave a central state government the mandate to utilize and manage natural resources in “the best interests of the public”, without giving a definition of this concept. The government had a right to decide what the best interests of the public were at that time, but also the members of the public had an equal right to use these resources, directly or indirectly, as long as they complied with the rules provided by the government.
D. An Integrated Law on Resource Nationalism
The implementing law of Article 33 on resource nationalism is referred to in several aspects of legislation, such as the laws on oil and gas, mining, forestry, water resources, and investment. Such divergent legislation has contributed to potentially conflicting interpretations of the rights of the state in Article 33, and its relationship with various lower legislations from ministerial to special autonomy provinces and districts. Therefore, the main law regulating resource nationalism would interpret Article 33 on the degree of the rights of the state, in comparison to special and district autonomies, and to define the people who are entitled to the substantial and procedural rights of resource nationalism.
It would form an umbrella law for natural resources, including the usage, exploitation, and conservation of resources in land, sea, and space, and it would require the establishment of an independent body to manage natural resources, rather than different agencies, as is the case currently. It would satisfy an emerging need for a new law on oil and gas, water resources, and electricity after the annulment by the MK, which would define the extent to which resource nationalism can be exercised, under the conditions of people's needs and interests and in relation to foreign investors.185 This integrated law could be the main basis for resource nationalism and its legal arguments, as a manifestation of Common Article 1 of the IHR Covenants, and Articles 33 and 18B(2) of the Constitution as well as the UNDRIP 2007.186
It is also highly recommended that Indonesia issue legislation to ratify the Optional Protocol of the IHR Covenants, and to establish communication access for the people in the international forum when the national system is considered to have failed. Indonesia has acceded to the International Covenant on Economic, Social and Cultural Rights [ICESCR] in February 2006, but has yet to sign and ratify its Optional Protocol.187 Indonesia argues for the absence of ratification of “any international instrument establishing an individual complaint system, since several complaint mechanisms had been set up in the country, including the National Human Rights Commission and the Ombudsman”.188 However, as previously described, neither institution possesses the power to advance complaints into the justice system. As a result, many complaints have been considered as the mere rallying cries of a marginalized people.
In a normative sense, Law Number 39/1999 on Human Rights guaranteed everyone the right to submit an individual complaint to competent international mechanisms.189 However, without ratifying the Optional Protocol, it has no meaning in practice. It should be noted that Indonesia is considered “dualistic” in terms of international treaties. Hence, for international treaties to be implemented in Indonesia's legal system, they must be incorporated into domestic legislation.190 In other words, they cannot automatically be applicable without any domestic legal ratification instrument.191 However, there is a tendency for the ratification of IHR law in Indonesia to be mere rhetoric, due to the lack of clear understanding of the provisions of covenants, national legislation, and enforcement procedures.192
E. Institutional Development
Under the Indonesian system, the establishment of the National Human Rights Commission originated from the emergence of the human rights violations in East Timor during its annexation by Indonesia in order to prevent international interference.193 Indonesia enacted its first law on Human Rights (Law Number 39/1999) and created an Ad Hoc Human Rights Court under Law Number 26/2000.194 The power of the Human Rights Court was limited to the investigation of and making recommendations to related authorities.195 As such, it appears as mere rhetoric to avoid international pressure. Following these limitations, the state of Indonesia would need to empower this institution to allow it to, for example, prosecute people for any human rights violations. To that end, the revision of the Human Rights Law is required so as to increase its authority from merely hearing complaints of human rights violations, undertaking investigations, and making recommendations to the level of prosecution, and in some degree, to communicate with the International Human Rights Committee, i.e. the Committee on Economic, Social and Cultural Rights [ESCR].
Second, it would also need a National Commission on the MHA, which is specifically responsible for co-ordinating and monitoring the development of the MHA in both isolated and non-isolated places, and bringing to the national authorities any concerns that arise. This commission can represent the MHA at both the local and national level, in terms of ensuring welfare and justice concerning the people-based resource nationalism principle. This sort of MHA association is now emerging in local contexts in different forms, but there are no relations between these associations. For example, the Assembly of Aceh's Adat (the Majelis Adat Aceh, MAA) in the special province of Aceh, which was established a few decades ago, has no access (representation) to central government, as is the case with other MHA associations, such as Anak Dalam in Jambi, Dayak in Kalimantan, and others. Thus, this new MHA National Commission can be a breakthrough for the MHA, which currently remains isolated and lacks development in social, economic, and cultural areas.
F. Empowering Masyarakat Hukum Adat
It is widely considered that many laws and policies of the government lack effectiveness in terms of both communicating with and understanding their beneficiaries. It is of great concern that the current recognition of the MHA and its associated rights have yet to be well established, and can be easily misused on the ground. The central or regional governments, where the indigenous peoples’ movements emerged, have not been fully aware of their role in the potential settlement of disputes through approaches centred on people-based resource nationalism. Such failures have worsened the situation, leading to the violation of human rights. As a result, Indonesia has been cautious in reporting the implementation of Article 1 to the Human Rights Committee, preventing issues regarding the indigenous peoples’ movements from receiving international attention.
Hence, the role to educate and advocate the rights of the MHA should be a role played not only by the central government and their relevant institutions, but also by regional autonomous governments. The Human Rights Committee, or the Committee on ESCR, must give a clear assessment of the capacity of any indigenous people in each State Party to ensure their development, in addition to the report of Contracting State Parties. This may lead the National Human Rights Commission to set up the empowerment programmes for the MHA, instead of the passive role of receiving complaints and making superficial assessments for particular reasons.
Today, there are hardly any organizations in Indonesia consistently working to educate people about the rights of the MHA. In most cases, the public will only be aware when a member of the MHA has become a victim of this contest. There appears to be a lack of systematic support on the ground.196 The geographical marginalization and the lack of communication access, along with the lack of political representatives at local and national levels, have made the MHA vulnerable. More specialized support should be developed to enhance people's understanding of their rights and how to protect them using the people-based resource nationalism principle at the regional, national, and international levels.197
There is some support and empowerment by local non-governmental organizations [NGOs] with very limited resources. However, without a clear framework to integrate the national and IHR systems, the process remains isolated and disjointed. This can be seen in the empowerment programme by the local foundation Rumsram in Adat Awur forest in Biak Numfor district, Papua. This sporadic programme is intended to consolidate various clans of the MHA in the area, and provide support to manage their resources.198 Equally, the assessment and empowerment programmes by the Centre for Education and Society Development [PKPM] Aceh, to revitalize the MHA Kejereun Blang in rice farming systems in Aceh Besar, appear very limited.199 It seems as if the current programme has been considered in isolation from the human rights system and associated with political pragmatism rather than empowerment of the MHA, such as the political support by the National Alliance of Indonesian Indigenous People [AMAN] for a certain candidate for the presidency during the general election.200
Indeed, an integrated framework is required between national and IHR law to make this more effective. As such, the Committee on ESCR and the IHR Committee should actively engage in promoting and educating the MHA on their rights and entitlements, through associated human rights institutions or NGOs in Member Parties. This is to raise positive awareness of the MHA on the ground to attract the attention of local and central governments, in addition to international support, so as to more equally distribute the benefits of natural resource exploitation in Indonesia.
The central idea of this paper is the development of resource nationalism in Indonesia as a manifestation of anti-colonialism through the affirmation of sovereignty over natural resources. This then evolved into a power of the state to control natural resources for the benefit of its people, as stated in Articles 18 and 33 of the 1945 Indonesian Constitution. These, however, have been subject to varying interpretations across various governmental regimes.
During the Sukarno period, resource nationalism was construed as a means to regain control over colonial-based investments. Thereafter, during the Suharto period, it was used to liberalize natural resources for invited foreign investors through the signing of various BITs with developed states. Under this regime, the centralized state control of natural resource exploitation in the regions occurred as a coalition between foreign investors and the elites of the Suharto regime. As a result, the role of the MHA was marginalized and indigenous people derived little, if any, benefit.
After the fall of Suharto, the reform era emerged to rectify the previous approach. MK judicial review judgments increasingly considered natural resource laws, while policies emerged for the termination and negotiation of BITs. Restrictions and obligations were imposed on foreign investors and international arbitration awards were challenged. However, these actions underscored the dominance of the central government, overriding the interests of the MHA and its ability to benefit from natural resources. As such, a fundamental shift from a state-centric to people-centric resource nationalism is required. Such a move would conform with the internal self-determination principle found in Common Article 1 of the IHR Covenants.
At the domestic level, the normative system referred to in Article 33 of the 1945 Constitution has shown that state-controlled resource nationalism has become absolute and rigid. This is based on a fundamental misunderstanding of Article 33, which does not grant the right of ownership of natural resources to the state, but rather imposes a duty to control and regulate them. This error has placed indigenous people far from the benefits of the often prodigious natural resources. Lacking a clear normative framework and absent adequate procedural rights, the indigenous peoples are unable to claim the right to benefit from natural resources. This has been brought about largely by the misinterpretation of the constitution. To rectify this problem, Common Article 1 should be interpreted with Article 33 as a basis for indigenous people to demonstrate their rights regarding resource nationalism. To this end, the government has to define who and to what extent the indigenous peoples are entitled to the benefits of natural resources, to develop a mechanism to demonstrate peoples’ rights in judicial and non-judicial systems, and to prevent their marginalization.
An integrated law is needed to interpret resource nationalism under the constitution, and thereafter serve as a reference for various sectors of natural resource legislation, in both central and autonomous governments. This would cover the scope and content of the terms “state ownership” and “maximizing people benefit”, along with defining the MHA and systematic ways to measure these criteria. Such a law would help Indonesia to clarify potential tensions with its autonomous areas and foreign investors, and to meet IHR norms.
The inclusion of people-based resource nationalism to be implemented under Common Article 1 and the usage of domestic sources can serve as a guide for other post-colonial states to follow. Equally, there is an increasingly prominent role for the National Human Rights Commission to play in connecting the MHA, national, and international legal systems. This will ensure greater application of a people-based resource nationalism in a more concrete fashion, particularly through awareness of rights, and enhanced advocacy and enforcement at the domestic and international levels when it comes to the renegotiation of BITs and contracts with foreign investors.