Indonesia's Top Court Strikes the Direct Award of Mining Blocks — and Puts Every Priority Permit on a New Footing
On 16 July 2026 Indonesia's Constitutional Court declared the 'priority granting' language in the 2025 Minerba Law conditionally unconstitutional, ending the practice of directly appointing mining business licence areas to religious organisations, cooperatives, universities and other favoured entities. Priority allocation survives, but only through a transparent, criteria-based selection process. Muhammadiyah said it will comply; Nahdlatul Ulama said its existing special permit is unaffected. Energy Minister Bahlil Lahadalia has promised new implementing rules. The ruling resets how a permit is obtained without cancelling the permits already issued.
Watch · The story in brief
The Constitutional Court struck the direct award of mining blocks on 16 July 2026 — priority permits now run through criteria-based selection, and the permits already issued still stand.
What happened
On 16 July 2026 Indonesia's Constitutional Court partly granted a judicial review of Law No. 2 of 2025, the fourth amendment to the Mineral and Coal Mining (Minerba) Law. Led by Chief Justice Suhartoyo, the court declared the 'priority granting' phrasing in Articles 51, 51A, 60, 60A, 75 and 75A conditionally unconstitutional. The practical effect: the government can no longer directly appoint the recipient of a mining business licence area (WIUP). Priority allocation to religious organisations, cooperatives, small and medium enterprises and universities remains lawful, but it has to run through a process built on clear, objective, transparent and accountable criteria rather than a direct hand-off.
The reaction came quickly. Muhammadiyah, one of the country's largest Islamic organisations, said it would comply with the ruling and follow the new permit mechanism. Nahdlatul Ulama said the special mining permit it already holds is not affected. Energy Minister Bahlil Lahadalia insisted cooperatives and religious groups will keep their eligibility for priority licences and pledged new implementing regulations, either a ministerial regulation or a decree, to set the transparent vetting the court now requires. The 2025 law that created the direct-appointment route was itself a fast-tracked amendment that drew governance and environmental criticism when it passed.
Why it matters for dispute formation
This is a ruling about how a right is acquired, not about taking one away. The court left issued permits standing and preserved the policy goal of routing blocks to favoured domestic entities; it struck only the mechanism of direct appointment. That distinction shapes where disputes can form. There is little expropriation exposure here, because nothing already granted was cancelled. The live risk sits in the transition: a period where the old mechanism is void and the new criteria do not yet exist, during which any allocation decision can be attacked as arbitrary or as an end-run around the judgment.
For an investor, the work is to check the pedigree of a block's title. A concession that was directly appointed before 16 July, or that is still mid-pipeline, now rests on language the court has qualified, and a competitor or a civil-society petitioner can test how the replacement rules treat it. Indonesia's own arbitration record is the caution. In Churchill Mining and Planet Mining v. Indonesia the ICSID tribunal dismissed a roughly $2bn claim and ordered the claimants to pay about $9.4m in costs, finding the underlying licences rested on forged documents, a case that turned entirely on how the permits were obtained. The through-line is the same: in Indonesian mining, title provenance is where value is won or lost. A permit acquired through a process a court later voids is a weaker asset than one competed for under published criteria, and the transparent selection the court now demands is, for once, the investor-protective outcome.
Who's exposed
Exposed as the entities that received or expected mining blocks by direct appointment under the 2025 law. Muhammadiyah has said it will follow the new mechanism; Nahdlatul Ulama has said the special mining permit it already holds is not affected. The exposure is prospective: future priority allocations to these bodies must now run through a selection process, and any block still in the pipeline sits on a changed legal basis.
Exposed as the allocator that must rebuild its process. Energy Minister Bahlil Lahadalia has said cooperatives and religious groups remain eligible for priority licences and that new implementing regulations, a ministerial rule or decree, will set transparent criteria. Until those rules exist, the ministry faces a gap between a struck-down mechanism and the replacement, which is exactly where allocation decisions become contestable.
Exposed as the operators whose smelter and processing economics assumed blocks would flow to designated partners. The court said priority allocation for downstreaming cannot be done by direct appointment without clear criteria. Investors who structured supply around a directly appointed holder now face a selection step that can change who ends up with the concession.
The historical parallel · Churchill Mining PLC and Planet Mining Pty Ltd v. Republic of Indonesia — ICSID Case Nos. ARB/12/14 and 12/40, award for Indonesia, 6 December 2016
Churchill and its Australian affiliate claimed roughly $2bn after the East Kutai regent revoked coal licences tied to their Ridlatama-group investment. The ICSID tribunal dismissed the claims as inadmissible, finding a fraudulent scheme of forged documents permeated the investment, and ordered the claimants to pay about $9.4m in costs. The case is the reference point for why title provenance governs mining value in Indonesia. The Constitutional Court's July 2026 ruling works the same seam from the other direction: by forcing priority blocks through a transparent selection process, it makes the way a permit is obtained the thing that determines whether the asset is defensible.
What to watch
- The text and timing of the ministry's new implementing regulation, and whether its selection criteria are specific enough to survive a further challenge.
- How blocks directly appointed before 16 July 2026 are treated: grandfathered, re-competed, or left in limbo pending the new rules.
- Whether any disappointed applicant or civil-society group litigates a specific allocation made in the transition window.
- Whether downstreaming partners restructure feedstock arrangements that assumed a directly appointed WIUP holder.
Sources
- The Jakarta Post — Court revokes direct appointment for mining permits (18 Jul 2026)
- The Jakarta Post — Cooperatives, religious groups to keep receiving mining concessions (22 Jul 2026)
- Petromindo — Court rejects judicial review of mining concessions for religious groups
- Kompas — Muhammadiyah complies with the Constitutional Court's decision on the new mining permit mechanism
- UNCTAD Investment Policy Hub — Churchill Mining and Planet Mining v. Indonesia (ICSID)
- Mongabay — Indonesia rushes mining law amendments, raising environmental and governance alarms
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Get the Intelligence BriefFor general information only; not legal advice, and no attorney–client relationship is formed through this article. Company names appear because the operators are exposed to a public development — not as a statement of wrongdoing or a predicted outcome. Figures are as reported by the linked sources.