An Indonesian court on Tuesday rejected a bid by two companies to reinstate permits for palm oil plantations in its easternmost region of Papua, in what was seen as a test of the government's pledge to halt such land conversions to contain deforestation.

The verdict comes two months after Indonesia said it would not approve new palm oil permits even after the lapse of a moratorium on plantations.

The two companies — PT Papua Lestari Abadi (PLA) and...