Churchill's legal problems a warning to others in Indonesia

Today the New York Times took a closer look at the arbitration Churchill Mining Company filed against the Indonesian government last month.  The London company is seeking relief claiming that the government seized its coal project without due compensation.

With Churchill's recent difficulties, eyes are now on other mining companies operating in Southeast Asia's largest economy. Foreign investors have to contend with a new 20% tax on mining exports and regulations prohibiting the export of raw materials.

In speaking to the New York Times, Indonesian officials said "the regulations already in effect aim to add value to the industry by requiring miners to refine metal ores in Indonesia; in 2014, all unprocessed exports will be banned."

Since the company filed the lawsuit its stock has fallen 25%.

“What we’re seeing is the government trying to garner votes in the forthcoming presidential election by showing that it’s taking a tough line with the mining industry and an even tougher line with foreign investors in the mining industry,” said Bill Sullivan, legal adviser at a large Jakarta law office.

No decision on the $1.8 billion suit is expected until some time in 2014.