Exploration of the Impact of Nominee Agreements in the Mineral and Coal Mining Industry on People's Welfare

Abstract

Non-renewable natural resources are considered a gift from God Almighty and are regulated by the Indonesian constitution, particularly Article 33 paragraph (3) of the 1945 Constitution, which demands that they be managed for the benefit of the people's welfare. However, in practice, the mineral and coal mining sector often involves investments from foreign parties who want security guarantees for their investments. This research addresses issues related to the regulation of foreign shareholding limits and the prohibition of nominee agreements in establishing mineral and coal mining business entities in Indonesia and applies concrete solutions in this context. The research method is a normative juridical approach supporting empirical juridical data. The results show that nominee agreements are often used as an invalid legal tool to protect the interests of foreign investors, even though they do not meet the legal requirements under Article 1320 of the Civil Code. For investors, nominee agreements are considered a legal solution to ensure the security of their investment in the mining sector in Indonesia. The Benefits Analysis Evaluation Study using the Cost-Benefit Analysis (CBA) Method found that nominee agreements significantly positively improve community welfare in Morowali Regency and Kutai Kartanegara Regency. However, to ensure investment security and better legal certainty, it is recommended to propose a legal idea (ius constituendum) by relaxing the foreign shareholding limit up to 51% from the establishment of the company until the exploration period of 10 years through amendments to the Mineral and Coal Mining Law.