On 18 September 2026, the Ministry of Energy and Mineral Resources (“MEMR”) has issued Decree No. 365.K/MB.01/MEM.B.2026 on Technical Guidelines for the Implementation of Approval for the Use of Subsidiaries and/or Affiliates in the Mineral and Coal Mining Services Business Sector (“Decree No. 365”).
Although being a relatively short decree consisting of 12 principal decrees, Decree No. 365 acts to introduce a significant regulatory requirement for the mineral and coal mining industry. It requires holders of a Mining Business License (“IUP”) or a Special Mining Business License (“IUPK”) to obtain approval before involving their subsidiaries and/or affiliates in the mineral and coal mining-services business. The Decree also introduces requirements concerning the prioritization of locally based mining-services companies and establishes specific circumstances in which the use of subsidiaries and/or affiliates may be approved.
Decree No. 365 also revokes the previous framework governing the approval for the participation of subsidiaries and/or affiliates in mining-services activities, namely Decree of the Director General of Mineral, Coal and Geothermal No. 376.K/30/DJB/2010. Accordingly, Decree No. 365 now serves as the principal technical guideline governing the approval process for the use of subsidiaries and/or affiliates in mining-services activities
The article aims to provide a general overview of the key provisions of Decree No. 365 and highlights several considerations for IUP and IUPK holders in relation to the use of mining services companies.
- Utilization of Local Mining Service Companies
Decree No. 365 requires holders of a IUP or a IUPK which engage mining services in carrying out their business activities to use the services of a company holding a Mining Services Business License (“IUJP”).
In procuring such mining services, the IUP or IUPK holder is required to prioritize the engagement of mining-services companies located in the regency/city in the vicinity of the relevant Mining Business License Area (“WIUP”) or Special Mining Business License Area (“WIUPK”). This provision reflects the requirement for mining-right holders to give priority to locally based mining-services providers in the area surrounding their mining operations.
However, Decree No. 365 does not expressly stipulate a specific sanction for failure to comply with this prioritization requirement.
- Limitation for the Involvement of Subsidiaries and Affiliates
This section of Decree No. 365 is arguably one of the most material aspects of the decree.
Under Decree No. 365, a holder of a IUP or a IUPK is prohibited from involving its subsidiaries and/or affiliates in the mineral and coal mining-services business without the prior approval of the MEMR. This provision introduces a specific regulatory approval requirement for the use of related parties as mining-services providers, meaning that an IUP or IUPK holder may no longer freely engage its subsidiaries or affiliates to provide mining services without first obtaining the requisite approval from the MEMR.
Noting that it is common for mining groups to structure their operations through multiple subsidiaries and affiliated companies, this requirement may have a significant impact on existing and future intra-group mining-services arrangements
- Determination of Subsidiaries and Affiliates
To determine the circumstances in which a mining-services company is considered to constitute a subsidiary and/or affiliate for purposes of the restriction, Decree No. 365 provides following definitions:
- direct share ownership by a holder of a IUP or a holder of a IUPK in a holder of a company holding an IUJP;
- the existence of one or more common beneficial owners between the holder of a IUP or a holder of a IUPK and the holder of an IUJP.
- Application and Approval Process
Decree No. 365 also establishes the application and approval process for the use of subsidiaries and/or affiliates in the mineral and coal mining-services business. An application for approval must be submitted to the MEMR, and the MEMR is required to grant the approval within 14 working days from the date the application is received in complete and correct form.
The approval is granted in accordance with (a) the relevant business field and sub-field covered by the IUJP of the subsidiary and/or affiliate and (b) remains valid until the expiry of the relevant IUJP. For an IUP issued by a Governor of a province in accordance with its authority, the application may instead be submitted to the relevant Governor.
- Exceptions
While Decree No. 365 sets out limitations as elaborated above, there are certain exceptions in the utilization of subsidiaries and/or affiliates in the mineral and coal mining services. Such exceptions can only be given if an IUP or IUPK holder is exercising an assignment from the Government, which includes:
- the implementation of a National Strategic Project;
- the development of mineral processing and/or refining facilities, or the development and/or utilization of coal; and/or
- the fulfilment of domestic mineral and coal requirements.
- Application to Legacy Mining Agreements
Another key point worth noting is that Decree No. 365 does not apply solely to holders of IUPs and IUPKs. The Decree expressly provides that its provisions apply mutatis mutandis to holders of Special Mining Business Licenses as a Continuation of Contract/Agreement Operations (IUPK as the Continuation of Contract/Agreement Operations), Contracts of Work (Kontrak Karya), and Coal Mining Business Work Agreements (Perjanjian Karya Pengusahaan Pertambangan Batubara or PKP2B).
Accordingly, the requirements and restrictions under Decree No. 365, including those relating to the use of subsidiaries and/or affiliates in mining-services activities, may also extend to holders operating under these legacy contractual and licensing arrangements. This is particularly relevant for mining groups that continue to operate under Contract of Work, PKP2B, or IUPK Continuation arrangements, as their existing intra-group mining-services structures should also be reviewed in light of the new requirements.
Conclusion
Under Decree No. 365, the use of subsidiaries and/or affiliates in the mineral and coal mining-services business is now subject to a specific approval requirement, while IUP and IUPK holders are also required to prioritize locally based mining-services companies. Given the potential impact of these requirements on existing and future intra-group arrangements, mining companies should review their corporate structures, beneficial ownership arrangements, and existing mining-services arrangements to determine whether the relevant approval is required.
Companies involved in government-assigned activities, including National Strategic Projects, mineral processing and/or refining, coal development and/or utilization, or the fulfilment of domestic mineral and coal requirements, should also assess whether the exceptions under Decree No. 365 may apply to their activities.
Disclaimer: This report is solely for general information only and never constitutes as legal or tax advice. The user shall further consult with any qualified advisor before referring to any or entire part of this report. Any available copyrights are reserved.
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