Indonesian logging firm fined a record US$1.2 billion for deforestation

PT Merbau Pelalawan Lestari, an Indonesian logging firm that used to supply to APRIL, has been ordered by Indonesia's Supreme Court to pay a S$1.7 billion fine for illegal deforestation, the highest penalty in the country's history.

Haze in Orchard Road Singapore
Orchard Road in Singapore during the record 2015 Southeast Asian haze. By Nick-D - Own work via Wikimedia Commons, CC BY-SA 4.0

Indonesian logging firm PT Merbau Pelalawan Lestari (MPL)  has been ordered by the country’s Supreme Court to pay a Rp 16 trillion (S$1.7 billion) fine for unlawful forest clearing outside its concessions, the biggest penalty for environmental damage in the country. 

In a verdict passed on August 18 and reported by regional media on Nov 17, the Supreme Court said that MPL — which has in the past supplied pulpwood to Indonesia’s second biggest pulp and paper firm, Asia Pacific Resources International Resources Limited (APRIL) — cleared about 5,500 hectares of protected trees within its license areas in Pelalawan regency in Indonesia’s Riau province. 

The firm was also found to have illegally logged a further 1,873 hectares outside its concession area. 

In total, these infractions, which were committed between 2004 and 2006, cost the state about 16 trillion rupiah in losses, said the Supreme Court. Its decision marked the end of three years of legal proceedings, which began in 2013, when Indonesia’s environment ministry filed a lawsuit against the company.

The case was initially rejected by the Pekanbaru high court, following which the ministry raised an appeal to the Supreme Court.

Both Indonesian government officials and forest campaigners welcomed the latest decision, which reinforces the government’s hardline stance against deforestation ever since the country experienced its worst haze crisis on record last year. 

In August this year, for example, the Palembang High Court in South Sumatra found pulpwood firm Bumi Mekar Hijau, a unit of APRIL’s main competitor Asia Pulp and Paper (APP), guilty of setting fire to its land, and ordered it to pay US$5 million in damages. 

That same month, a Jakarta district court also ordered a sago plantation firm, PT National Sago Prima  to pay a US$76 million fine for failing to stop fires on its concessions. 

Regarding the MPL verdict, Rasio Ridho Sani, the environment ministry’s director-general for law enforcement, told The Straits Times that the decision would hopefully deter other firms from illegal activities. 

“The ministry will take immediate steps to execute the follow-up action,” he added.  

Rusmadya Maharuddin, a forest campaigner with Greenpeace Indonesia, praised the environment ministry’s tenacity in pursuing the case for three years, and noted that “the fine fits the crime”. 

However, he added that APRIL’s response to the case “raises further serious questions”.  

In a November 17 statement, the company said that “MPL is not affiliated with APRIL” or its parent firm, the Royal Golden Eagle group. “We have not sourced fibre from MPL since February 2015,” said the firm, adding that it will now immediately terminate its supplier contract with the firm. MPL is no longer listed as a supplier on the company’s sustainability dashboard

An APRIL spokesman also clarified with Eco-Business that the company used mixed hardwood from MPL between 2002 and 2009, and acacia from 2012 to 2015. It added that it has a series of documents to prove the legality of the wood, and that it had complied with all government regulations for these transactions. 

But Rusmadya noted: “There is no reference (on the dashboard) to purchases having stopped in February 2015, nor any indication that APRIL has taken action to address the wrongdoings of this supplier until the court decision this week.”

He added: “These do not look like the actions of a company committed to implementing best practice in its supply chain.”

In response, APRIL told Eco-Business that it did not suspend relations with MPL, or launch its own investigation into whether the supplier had acted illegally back in 2013, “out of respect for the due process of law”.  

However, the company will not source from MPL in the future, said the spokesman. 

The company added: We remain committed to only source fiber from legal sources with relevant supporting documents.”  

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