Indonesian State Owned Upstream Oil and Gas Regulator Invalidated by Constitutional Court


BPMIGAS (the Indonesian state upstream oil and gas regulator) has effectively been invalidated by the Constitutional Court.

On November 13, 2012, the Constitutional Court annulled certain provisions of Law 22 of 2001 on Oil and Gas ("Oil and Gas Law") that referred to the phrase "Regulator Company" as well as its function in representing the Government of Indonesia ("GOI") in contracts and in managing the industry on the grounds that such provisions were unconstitutional. In a binding decree, the Court declared that articles 1, 4, 41, 44, 45, 48, 59, 61, and 63 of the Oil and Gas Law had violated Article 33 of the Indonesian Constitution.

This decision follows a judicial review action commenced by several organizations and individuals that claimed that the very existence of BPMIGAS violated Article 33 of the Indonesian Constitution which provides that the "land, waters and natural resources within shall be under the powers of the State and shall be used to the greatest benefit of the people.” It has been reported that in striking down the provisions of the Oil and Gas Law, the Constitutional Court was "liberating" the management of the oil and gas sector which had become highly influenced by foreign parties and therefore contrary to the concept that such resources should be under state control.

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