Indonesia’s mining sector continues to undergo significant regulatory developments aimed at strengthening governance, enhancing transparency, and promoting fair competition. One of the latest developments is the issuance of Minister of Energy and Mineral Resources Decree No. 365.K/MB.01/MEM.B/2026 (“MEMR Decree 365/2026”), which establishes technical guidelines for obtaining approval to engage subsidiaries and affiliated companies in mining services activities within the mineral and coal mining sector. The decree represents an important shift in the Government’s approach to regulating intra-group arrangements and is expected to have a substantial impact on mining companies and mining services providers operating in Indonesia.
Under Indonesia’s mining regulatory framework, holders of Mining Business Licenses (IUP) and Special Mining Business Licenses (IUPK) commonly engage third-party contractors to perform various mining services activities, including overburden removal, mining operations, transportation, construction, and supporting operational services. Historically, many mining groups have relied on subsidiaries or affiliated entities holding Mining Services Business Licenses (IUJP) to provide such services. These arrangements are often implemented for operational efficiency, centralized management, and group-wide resource utilization. However, the Government has increasingly scrutinized these practices due to concerns regarding market concentration, competition, and equal opportunities for independent mining services providers.
MEMR Decree 365/2026 seeks to address these concerns by introducing a more stringent approval regime for the use of subsidiaries and affiliated companies in mining services activities. The decree reinforces the principle that mining companies should prioritize qualified mining services providers located within the relevant regency or municipality where mining activities are conducted. This policy aligns with the Government’s broader objective of increasing participation by local businesses and ensuring that economic benefits generated by mining activities contribute to regional development.
A central feature of the decree is the restriction on the engagement of affiliated mining services companies without prior governmental approval. Under the new framework, an IUP or IUPK holder may not engage a subsidiary or affiliate holding an IUJP unless approval has first been obtained from the Minister of Energy and Mineral Resources. The regulation adopts a broad interpretation of affiliation, covering not only direct share ownership relationships but also situations where the mining company and the mining services provider share one or more ultimate beneficial owners. By focusing on beneficial ownership in addition to formal corporate structures, the Government aims to ensure that affiliated arrangements are subject to greater transparency and regulatory oversight.
The decree does not completely prohibit the use of affiliated mining services providers. Instead, it establishes a controlled mechanism through which approval may be granted under specific circumstances. In particular, the Minister may approve the engagement of subsidiaries or affiliates where such arrangements are necessary to support government-assigned projects, strategic national initiatives, mineral processing and refining activities, coal development and utilization programs, or projects intended to support domestic mineral and coal supply. This approach reflects the Government’s effort to balance commercial realities and national economic priorities with the need for stronger governance and competition within the mining sector.
From a procedural perspective, MEMR Decree 365/2026 provides a clearer approval process than previously existed. Companies seeking to engage affiliated mining services providers must submit an application accompanied by supporting documentation demonstrating the qualifying circumstances and the relationship between the relevant entities. Once the application is deemed complete, the Minister is required to issue a decision within fourteen working days. Any approval granted will correspond to the scope of business activities and classifications contained in the relevant IUJP and will generally remain effective throughout the validity period of the IUJP.
The practical implications of this decree are significant. Mining companies that currently utilize affiliated mining contractors should carefully review their corporate structures, contractual arrangements, and beneficial ownership relationships to determine whether their existing arrangements fall within the scope of the new requirements. Businesses may need to reassess procurement strategies, amend contractual structures, or obtain the necessary approvals to ensure ongoing compliance. Failure to comply with the applicable requirements may expose companies to regulatory risks, operational disruptions, or challenges during government audits and inspections.
The decree also reflects a broader regulatory trend in Indonesia toward enhanced corporate governance and beneficial ownership transparency. Regulators are increasingly adopting a substance-over-form approach when assessing commercial arrangements, particularly in sectors involving strategic natural resources. As a result, companies should not assume that compliance can be achieved solely through formal corporate structuring. Instead, businesses should evaluate the underlying ownership and control relationships within their group structures and ensure that all affiliated transactions are properly documented and compliant with applicable regulations.
For investors and multinational corporations active in Indonesia’s mining sector, MEMR Decree 365/2026 serves as a reminder of the importance of conducting comprehensive legal and regulatory due diligence. Existing mining investments, acquisition targets, joint ventures, and contractor arrangements may require reassessment to identify potential compliance issues arising from affiliated-party relationships. Early identification of such issues can help businesses mitigate risks and avoid delays in project implementation or operational activities.
Overall, MEMR Decree 365/2026 represents a significant regulatory development for Indonesia’s mineral and coal mining industry. While the regulation introduces additional compliance obligations for mining companies and mining services providers, it also provides greater clarity regarding the circumstances under which subsidiaries and affiliated entities may participate in mining services activities. Companies operating in the sector should proactively review their structures and contractual arrangements to ensure compliance with the evolving regulatory framework and to minimize potential legal and operational risks.
Given the increasing regulatory scrutiny of affiliated transactions and beneficial ownership structures in the mining sector, early legal assessment and compliance planning are becoming increasingly important for mining companies, contractors, and investors operating in Indonesia.
Schinder Law Firm advises Indonesian and international businesses on corporate, commercial, regulatory, mining, investment, and tax-related matters, including regulatory developments affecting the mineral and coal mining sector. Companies seeking to assess the implications of MEMR Decree No. 365.K/MB.01/MEM.B/2026 on their corporate structure, affiliated-party arrangements, mining services agreements, beneficial ownership considerations, or overall regulatory compliance obligations may contact Schinder Law Firm at info@schinderlawfirm.com for further consultation.
Author:
Dewi Susanti