Singapore palm oil firm guilty of illegal Indonesia fires fined $18m

Thursday, October 31st, 2019

Court ruling finds PT Arjuna Utama Sawit to have burnt almost 1,000 hectares of land illegally in Central Kalimantan.

Satellite imagery of "high confidence" fires on PT AUS palm oil concession, Kalimantan between October 2013 and October 2019. Credit: Global Forest Watch.

The Palangkaraya District Court in Indonesia has ordered Singaporean company PT Arjuna Utama Sawit (PT AUS) to pay Rp261bn ($18.6m) in reparations for environmental damage caused by fires at its oil palm plantation in Kalimantan.

PT AUS is a supplier to Singaporean palm oil giant Musim Mas. The 23 October sentence followed a civil lawsuit brought by Indonesia’s Ministry of Environment and Forestry (KLHK) against the company in December 2018.

PT AUS, which operates in Katingan, Central Kalimantan, was found guilty of fires that burned over 970 hectares of land. The judges found that the firm had “committed an unlawful act.”

The court also ordered PT AUS to cut down oil palm trees planted on burned land and to pay a fine of Rp700,000 ($50) per tree planted on burned land.

Ratio Ridho Sani, Director General of Law Enforcement at KLHK, told Mongabay Indonesia: “We see forest and land fires as extraordinary crimes. The corporation must be responsible for the forest and land fires at their location.”

He also indicated that the ministry will step up its efforts to combat fires linked to agribusiness. “We will use all legal instruments so that the perpetrators of forest and land fires face a deterrent, including the possibility of revocation of permits, compensation, fines, imprisonment and the dissolution of the company.”

According to Mongabay Indonesia, KLHK is currently suing 17 companies over forest and land fires. This year the ministry has sealed 83 plantations and named eight corporations in connection to illegal fires.

PT AUS complains that the judges have failed to consider all the facts and says it will appeal the court verdict. Musim Mas claims to have activated its complaint mechanism and that it is in contact with PT AUS for more information.

2013 report by WALHI revealed that PT AUS operated on peatlands without an environmental impact assessment or a permit. Greenpeace has called on the KLHK to revoke PT AUS’s permit following the court’s decision, which it sees as an overdue outcome after years of complaints about the company being implicated in illegal fires.

The announcement of fines comes just twelve days after a Singapore stock exchange-listed limestone quarry operator – GCCP Resources – announced it had signed a Memorandum of Understanding to buy PT AUS for S$220.2m ($61.5m).

It is unclear as to whether the fines will affect either the eventual sale of PT AUS or its sale price, as the GCCP deal is contingent on “the results of the financial, business and legal due diligence review conducted in respect of the Vendors and the Target being satisfactory.”

GCCP’s stated rational for buying PT AUS is to take advantage of the young age profile of the palms planted thus far and the expected uptick in demand for palm oil generated by Indonesia’s palm-based biodiesel policies.

While up to two thirds of EU palm oil imports from Indonesia are currently used for biofuels, the revised EU Renewable Energy Directive will not allow companies to claim carbon saving from palm-based biofuels from 2030 – for environmental reasons.