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

The Constitutional Court of Indonesia decided case 184/PUU-XXIII/2025 on 16 July 2026, in a material review of Law 4/2009 on Mineral and Coal Mining as last amended by Law 2/2025. The petitioners, Wahyu Ilham Pranoto, Muhammad Faza Aulya'urrahman, Fauzan Akbar Mulyasyah, Yudi Amsoni, Nasidi and Sharon, challenged Pasal 35(1) of the Mining Law, under which mining business is conducted on the basis of business licensing from the central government, together with the ownership rule in Pasal 92, and asked the Court to read the licensing rule as a contract or cooperation scheme, rather than a business licence, as the proper legal form for state relations with mining operators.

Legal Reasoning

The Court framed the case around the meaning of state control under Article 33 of the 1945 Constitution. It held that state control over natural resources is not ownership in the civil law sense but a constitutional authority to regulate, administer, manage and supervise their use for the greatest prosperity of the people.

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

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

Measuring both regimes against the five functions, the Court held that business licensing is the appropriate system for giving effect to the state's right of control in mineral and coal mining: under a contract the state is bound for a long period and can apply policy changes only by renegotiation, while under licensing it sets mining areas and requirements, evaluates, supervises and sanctions permit holders, and can revoke permits. The House of Representatives argued that if state control were exercised through a civil scheme such as a production-sharing contract, as the petitioners sought, legal problems would follow. The scheme would reduce the authority inherent in the state's right of control, because a contractual relationship creates parity between the parties. It would also expose state assets, which could be pledged in performance of the contract and claimed by operators seeking compensation for losses. The state would risk losing command over a strategic resource in the event of default, dispute or other legal problems, to the detriment of the public interest, in tension with Article 33(3).

Turning to the ownership rule itself, the Court noted that business licensing in mining consists of the IUP and the IUPK. Pasal 92 of the Mining Law provides that holders of an IUP or IUPK are entitled to own the minerals, including associated minerals, or coal that they have produced after meeting production levies, with the exception of associated radioactive minerals. The Court did not rule on that provision: because the petitioners misquoted Pasal 92 and cited the amending law under a wrong title, it found the object of that part of the petition unclear (obscuur) and did not consider it further.

The Ruling

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

Read the full decision in the official record.

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

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Correction (27 September 2026): this post was checked against the official text of MK 184/PUU-XXIII/2025 and corrected. What changed: The merits concerned Pasal 35(1) UU 2/2025 (mining conducted under central-government business licensing), rejected; Pasal 92 was ruled obscure; Those citations appear only in the DPR's statement; the Court cited 001-021-022/PUU-I/2003 and 160/PUU-XXIII/2025 and held state control is not civil-law ownership; 36/PUU-X/2012 is not cited in the Court's reasoning; the quotation is in the DPR's statement; Court measured contract and licensing regimes against the five functions: contracts bind the state long-term; licensing lets it set areas, evaluate, sanction and revoke; This is DPR argument point 12, not the Court's reasoning; Court declared the Pasal 92 challenge obscure (misquoted text, wrong statute title) and did not consider it; the ex situ reading is the DPR's. Also: 2 minor corrections of detail. Report errors to contact@crpg.id.