Raja Siregar of the Friends of the Earth Indonesia (WALHI) environmental group said the court "ignored incriminating evidence" of pollution allegedly carried out by Newmont around its mine in North Sulawesi province.

"The legal process for this case should be continued to a higher level, which is the appeal court since this is a pollution lawsuit, not a case where one of the parties involved had breached their contract," he told AFP.

A 1.24 trillion rupiah (124 million dollar) suit filed by Environment Minister Rachmat Witular in April should be "solved through an arbitration court," a court ruled Tuesday.

It argued the ruling was based on a clause in Indonesia's contract with Newmont, which stipulates that disputes must be solved in an arbitration court, and also ruled that Witular had no legal authority to represent the government.

Witular filed the suit eight months after complaints emerged from residents near the mine near Buyat Bay that toxins dumped by a Newmont operation had caused neurological disorders and severe skin conditions.

Siregar said the court ruling "surprised" him since the Environmental Ministry had in the past filed environmental lawsuits and the case had already been running for some time.

"This is very surprising to me, since this case was lodged about a year ago. Why did the judges issue the ruling now instead of earlier during the beginning of the trial?" he said.

"The Environmental Ministry has the rights and is responsible to sue against any violation of the country's environmental law by any institution or individual," he added.

Andri Akbar Chaniago of the Greenlaw Indonesia environmental group told the Jakarta Post that the crux of the dispute was about environmental pollution allegedly carried out by Newmont, and not about a breach of contract.

"Yes, a (mining) contract is 'pacta sunt servanda', meaning that it should be respected by the two parties involved and solved through mediation. But that doesn't mean one of them is allowed to violate the law," he was quoted as saying.

Government lawyer Iskandar Sonhaji said he would report the court's decision to Witular and a decision whether to appeal would be made within two weeks.

Newmont Minahasa Raya, the Denver-based company's Indonesian subsidiary, and its president Richard Ness are being separately tried on criminal charges of polluting Buyat Bay near the company's now-closed gold mine there.

Prosecutors accused Newmont Minahasa Raya of illegally and intentionally causing pollution and allege Ness did nothing to stop it. He could face up to 10 years in jail if convicted.

Newmont has consistently denied the charges and maintained that the indictment is riddled with legal deficiencies.

A World Health Organisation-backed report found no evidence of pollution but Indonesian government tests showed high levels of toxins.

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