Environmental Law Case Study - Newmont In Buyat Bay Case
...companies relocate their plants to developing nations where policies are less stringent. One must be aware that the business environment in developing countries posed different risks compared to developed countries. Less stringent policies, weak law enforcement, high political instability etc. lead to high level of uncertainty in these areas. However, economic benefits offered by operating in these nations still motivate many companies to relocate their plants to these countries. These foreign direct investments (FDI) do help the local economic to grow, but often at the stake of environmental condition which lead to social disturbances.
Insurance as a tool to transfer risks might be helpful for companies unfamiliar with risks in developing nations, but not all insurers would cover those kinds of risks.
This paper takes a look at a case study of developed nation based companies which do have business activities in developing nations and faced risks which are very unlikely to appear when conducting business in developed nations.
The case involves PT Newmont Minahasa Raya (PTNMR) in Indonesia, subsidiary of Newmont Mining Corporation (NMC). PTNMR conducted gold mining activities in Indonesia and were alleged had polluted surrounding area and caused health problems to local residents.
Possibilities of covering the risks through insurance policies then discussed.
2. Newmont Buyat Bay Case
Background
NMC is the world largest gold mining company, based in Denver, USA, with core assets in North America, South America, Australia, Indonesia, and Ghana. NMC's 80%-owned subsidiary, PTNMR, operated the Mesel Gold Mine in North Sulawesi, Indonesia from 1996 to August 2004. PTNMR had acquired authorizations from Indonesian government to use submarine tailing disposal (STD) to dispose wastes from its mining operation. As known and analyzed in the...
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