Investment Treaty Arbitration

Last verified on Monday 31st July 2023

Investment Treaty Arbitration: Indonesia

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Overview of investment treaty programme

1. What are the key features of the investment treaties to which this country is a party?

Indonesia

 

Substantive protections

Procedural rights

BIT contracting party or MIT 

Fair and Equitable Treatment (FET)

Expropriation

Protection and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off period 

 

Local courts

Arbitration

Algeria–Indonesia BIT (2000) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Bangladesh– Indonesia BIT (22 April 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Chile–Indonesia BIT (1999) (signed, but not in force)

Yes

Yes

Yes

Yes

No

4 months

Yes

Yes

Croatia–Indonesia BIT (2002) (signed, but not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Cuba–Indonesia BIT (29 September 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Czech Republic–Indonesia BIT (21 June 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Denmark–Indonesia BIT (15 October 2009)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Finland–Indonesia BIT (2 August 2006)

Yes

Yes

Yes

Yes

Yes

Not specified

Yes

Yes

Indonesia–Guyana BIT (2008) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Iran, Islamic Republic of BIT (28 March 2009)

No

Yes

No

Yes

No

6 months

Yes

Yes

Indonesia–Jamaica BIT (1999) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Jordan BIT (9 February 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Korea, Republic of BIT (10 March 1994)

Yes

Yes

Yes

Yes

No

12 months

Yes

Yes

Indonesia–Libya BIT (2009) (signed, but not in force)

Yes

Yes

Yes

Yes

Yes

3-6 months

Yes

yes

Indonesia–Mauritius BIT (28 March 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Mongolia BIT (13 April 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Morocco BIT (21 March 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Mozambique BIT (25 August 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Philippines BIT (2001) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Poland BIT (1 July 1993)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Qatar BIT (17 February 2018)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Russian Federation BIT (15 October 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Saudi Arabia BIT (5 July 2004)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Serbia BIT (2011) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Singapore BIT (9 March 2021)

Yes

Yes

Yes

Yes

No

12 months

Yes

Yes

Indonesia–Sri Lanka BIT (21 July 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Sudan BIT (17 August 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia– Sweden BIT (18 February 1993)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia– Switzerland (2022) (signed, but not in force)

Yes

Yes

Yes

Yes

No

12 months

Yes

Yes

Indonesia– Syrian Arab Republic BIT (20 February 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia– Tajikistan (2003) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia– Thailand BIT (5 November 1998)

Yes

Yes

Yes

Yes

No

3 months

Yes

Yes

Indonesia– Tunisia BIT (12 September 1992)

Yes

Yes

Yes

No

No

6 months

Yes

Yes

Indonesia–Turkmenistan BIT (20 October 1999)

Yes

Yes

Yes

Yes

No

No

No

Yes

Indonesia–Ukraine BIT (22 June 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–United Kingdom BIT (24 March 1977)

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Indonesia–Uzbekistan BIT (11 November 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Yemen BIT (1998) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Indonesia–Zimbabwe BIT (1999) (signed, but not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

 

 

Substantive protections

Procedural rights

FTAs

Fair and Equitable Treatment (FET)

Expropriation

Protection and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off
period

 

Local courts

Arbitration

ASEAN–China Framework Agreement (2002)

No

No

Yes

Yes

No

No

No

No

ASEAN–China Investment Agreement (2009)

Yes

Yes

Yes

Yes

Yes

6 Months

Yes

Yes

AANZFTA (2009)

Yes

Yes

Yes

Yes

No

180 days

Yes (only if the Philippines or Vietnam is the disputing party)

Yes

ASEAN–EU Cooperation Agreement

Yes

No

No

Yes

No

No

No

No

ASEAN–Hong Kong, China SAR Investment Agreement (2017)

Yes

Yes

Yes

Yes

No

No

No

Yes

ASEAN–Japan EPA (2008)

No

No

No

No

No

60 days

No

Yes

ASEAN–Korean Investment Agreement (2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

ASEAN Comprehensive Investment Agreement (2009)

Yes

Yes

Yes

Yes

No

180 days

Yes

Yes

Australia–Indonesia CEPA (2019)

Yes

 

Yes

 

Yes

 

Yes

 

No

180 days

Yes

Yes

Chile–Indonesia CEPA (2017)

No

No

No

No

No

30/60 days

No

Yes

EFTA States–Indonesia EPA (2018)

No

No

No

Yes

No

45/60 days

No

Yes

Indonesia–Japan EPA (2007)

Yes

Yes

Yes

Yes

No

5 Months

Yes

Yes

Indonesia–Republic of Korea CEPA (2020)

Yes

Yes

Yes

Yes

No

At least 180 Days

Yes

Yes

OIC Investment Agreement (1981)

No

Yes

Yes

Yes

No

Not specified

No

Yes

RCEP (2020)

Yes

Yes

Yes

Yes

No

20/60 days

 

No

Yes

ASEAN–India CEC

Yes

Yes

No

Yes

No

180 days

 

Yes

Yes

ASEAN–Korea CEC

Yes

Yes

Yes

Yes

No

6 months

 

Yes

Yes

Indonesia–Chile CEPA

No

No

No

No

No

30/60 days

 

No

Yes

Answer contributed by , , , , and

Qualifying criteria – any unique or distinguishing features?

2. What are the distinguishing features of the definition of “investor” in this country’s investment treaties?

Indonesia

 

Issue

Distinguishing features in relation to the definition of “investor”

General definition

Most Indonesian BITs define investor as follows:

  • A natural person having nationality in either contracting party;
  • Any legal person duly constituted in the territory of either contracting party.

Both of these have investment in the respective contracting parties’ territory.  

Seat of investor/place of business

Typical Indonesian investment treaties only indicate the place of an investor’s place of business that is for them to invest in the territory of the contracting party. However, there are at least five BITs that provide additional phrases in which they require the investors to have their “permanent seat”, “seat”, or “principal place of business” in the other contracting party to be considered as “investor”.

Croatia, Russia and Czechia require that the legal person should have a seat, or permanent seat or performing real business activity to be considered as an investor within the context of the respective BITs. Meanwhile, Denmark and Finland require an Indonesian legal person to have a “principal” place of business in either Denmark or Finland to be considered as Denmark or Finland’s investor respectively.

Permanent seat/residents

The term “investor” typically encompasses both citizens or nationals and permanent residents of a contracting party.

However, typical Indonesian BITs only include nationals within the term of investor.

In the BIT with Singapore, it recognises non-national in the form of entities having permanent residence.

 

Answer contributed by , , , , and

3. What are the distinguishing features of the definition of "investment" in this country’s investment treaties?

Indonesia

 

Issue

Distinguishing features in relation to the concept of “investment”

Eligible assets

 

Most Indonesian BITs provide a broad definition of investment that encompasses “any kind of asset”.

However, most Indonesian BITs also provide a non-exhaustive list of what constitutes investment. Indonesian BITs typically include the following as recognised assets:

  • movable and immovable properties;
  • shares, stocks, bonds, debentures;
  • claims to money;
  • intellectual property rights;
  • any rights conferred by law or any licences, permits and/or concessions.

The BIT with Singapore specifically recognises turnkey, construction, management, production, revenue sharing, and other similar contracts within the non-exhaustive lists.

Indirect control of assets

 

Indonesian BITs provide that the investment shall refer to assets invested or owned by the investor of the contracting party.

The Saudi Arabia and Singapore BITs differ from the rest of the Indonesian BITs. In the Saudi Arabia BIT, assets “controlled” by an investor is recognised. In the Singapore BIT, an asset indirectly or directly controlled by an investor can be considered an investment.  

Protection to alteration of the assets form from the initial investment

18 of Indonesian BITs contain an explicit provision granting protection to an investment despite any alteration of the assets’ form from the initial investment.

These BITs are the BITs with:

  • Algeria
  • Czech Republic;
  • Croatia;
  • Denmark;
  • Finland;
  • Guyana;
  • Jamaica;
  • Libya;
  • Mauritius;
  • Morocco;
  • Mozambique;
  • Philippines;
  • Russian Federation
  • Saudi Arabia;
  • Serbia
  • Singapore;
  • Sweden; and
  • Thailand.

Answer contributed by , , , , and

Substantive protections – any unique or distinguishing features?

4. What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

Indonesia

 

Issue

Distinguishing features of the fair and equitable treatment standard

FET standard

 

Most Indonesian BITs contain an explicit obligation to treat investors of the respective contracting states in a fair and equitable manner. However, most of these BITs do not list the specific obligations that are owed to the investors of the respective contracting parties under the fair and equitable treatment obligation. Most BITs only contain a simple undertaking that the contracting parties will treat the other contracting party's investor in a fair and equitable manner.

Two BITs list out the specific duties under the fair and equitable treatment obligation. The Singapore and Switzerland BITs specifically mention that the fair and equitable treatment obligation requires each contracting party to not deny justice in any legal or administrative proceedings in accordance with due process of law.

The Switzerland BIT goes as far as defining breach of fair and equitable treatment to include:

  • Fundamental breach of due process, including breach of transparency, in judicial and administrative proceedings;
  • Manifest arbitrariness;
  • Targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;
  • Abusive treatment, such as coercion, duress or harassment.

Reference to international law and/or customary international law

Most Indonesian BITs do not explicitly address the relationship between the standard provided under the treaties and the minimum standard provided under international law or customary international law.

However, the Singapore and Croatia BITs differ from the other Indonesian BITs. The Singapore BIT explicitly states that the obligation to provide FET does not go beyond what is required under customary international law and does not create additional substantive rights. Similarly, the Croatia BIT explicitly references international law by providing that fair and equitable treatment obligations shall be accorded in accordance with international law.

Answer contributed by , , , , and

5. What are the distinguishing features of the protection against expropriation standard in this country’s investment treaties?

Indonesia

 

Issue

Distinguishing features of the "expropriation" standard

Indirect expropriation

The majority of Indonesia’s BITs do not make an express reference to "indirect expropriation". However, most Indonesian BITs include protection against "measures having an effect equivalent to expropriation or nationalization", which may include indirect expropriation.

Croatia, Sweden, Switzerland and Singapore BITs explicitly reference indirect expropriation, though without providing further criteria to determine what constitutes indirect expropriation.

Exceptions to expropriation

Most Indonesian BITs contain three main exceptions to expropriation albeit differing wordings. These exceptions include measures:

  • for public purpose;
  • that are non-discriminatory; and
  • the measures accompanied by prompt, adequate and effective compensation.

Algeria, Bangladesh, Cuba, Jamaica, Jordan, Mongolia, Sri Lanka, Qatar, Sudan, Syrian Arab Republic, Thailand, Ukraine, Uzbekistan and Zimbabwe also contain a "lawful purpose” exception within the first limb of general Indonesian BITs exception. The Korea, Tunisia and UK BITs particularly specify public purpose to that which is "related to the internal needs of the expropriating Party".

Compensation for expropriation

In awarding the expropriated party compensation, Indonesian BITs use different languages. Most of the Indonesian BITs utilise fair market value (FMV), market value, or market rate.

Right to review

Certain BITs grant affected investors the rights of a review to the judicial body (Thailand), judicial authority (Croatia, Czech Republic, Denmark, Finland, Guyana, Libya Serbia, Switzerland, Serbia and Singapore), due process of law (Korea Republic, and Poland, Saudi Arabia, Tunisia and the United Kingdom), and court of law (Mauritius and Mozambique).

Answer contributed by , , , , and

6. What are the distinguishing features of the national treatment/most-favoured-nation treatment standard in this country’s investment treaties?

Indonesia

 

Issue

Distinguishing features of the "national treatment" and/or "most favoured nation" standard

Scope of treatment

 

The majority of Indonesian BITs stipulate that investors from the contracting party, along with their investments, are granted treatment as advantageous or favourable as that accorded to domestic investors and their investments, or investors and investments from any other nation by the host party.

Two BITs specifically provide scope of treatment under the MFN/NT clause. These BITs are the Denmark and Finland BITs that essentially provide that NT and MFN clauses provide protections with respect to acquisition, expansion, operation, management, maintenance, use, sale or other disposal of investments.

Like circumstances

 

Most of Indonesian BITs do not provide a precondition of "like circumstances” for an MFN clause to kick in.

Only Singapore and Switzerland BITs provide such precondition by explicitly stating that each party shall accord to investment of its own investors or investors of the other party treatment no less favourable than that it accords, in like circumstances, to investment in its territory of any non-party.

However, it is to be noted that there is no definition of what constitutes as "like circumstances".

Exception to MFN

Many Indonesian BITs provide an explicit exception where investor of a contracting party may be treated less favourably than other state’s investor.  

This is particularly the case when an investor of a third party receives special advantages by virtue of agreements establishing customs unions, economic unions, monetary unions, or any other kind of similar institution on the basis of an agreement, then such special advantages are not required to be accorded to the investors of the other contracting party.

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7. What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this country’s investment treaties?

Indonesia

Issue

Distinguishing features of the "protection and security" standard

Scope of obligation

The formulation of security and protection clause varies in the Indonesian BITs. The majority of Indonesian BITs require "adequate protection and security”. The BITs that require "adequate protection and security” protection include the BITs with Algeria, Bangladesh, Chile, Croatia, Cuba, Czech, Guyana, Jamaica, Jordan, Korea, Mongolia, Philippines, Poland, Qatar, Sri Lanka, Sudan, Syrian Arab Republic, Tajikistan, Tunisia, Turkmenistan, Ukraine, Uzbekistan, Yemen, Zimbabwe.

However, 10 BITs require "full protection and security” instead of an adequate one. These BITs are the BITs with Denmark, Finland, Libya,  Serbia, Singapore, Switzerland, Thailand, United Kingdom.

There is at least one BIT that includes both "adequate" and "full" protection on this, which is Mozambique.

Customary international law

Typically, Indonesian BITs do not provide an explicit reference to either international law or customary international law.

However, explicit reference to customary international law can be found in the Indonesia–Singapore BIT, which essentially states that the obligation to provide full protection and security does not go beyond what is required under customary international law and does not create additional substantive rights.

Physical security

Indonesian BITs typically do not define the extent of protection and security obligation, particularly whether it extends to physical, legal, and commercial protection or limited to one.

The BITs with Algeria, Chile, Cuba, Turkmenistan, Uzbekistan, Ukraine and Yemen specifically define the scope of protection and security, that it only covers physical security and protection.

Answer contributed by , , , , and

8. What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

Indonesia

 

Issue

Distinguishing features of any "umbrella clause"

 

Availability of umbrella clause

Only a minority of Indonesian BITs contain an umbrella clause. These BITs are the BITs with Croatia, Denmark, Finland, Libya and the United Kingdom.

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9. What are the other most important substantive rights provided to qualifying investors in this country?

Indonesia

Issue

Other substantive protections

Armed conflict or civil unrest

Most Indonesian BITs provide the investors of a contracting party the most-favoured-nation treatment in terms of compensation, indemnification, and restitution in cases of armed conflict and/or civil unrest.

Free transfer of payment

Most Indonesian BITs guarantee free transfer of all payments relating to investment and its subsequent returns. These BITs require the free transfer of payment be "without delay" (eg, Algeria, Bangladesh, Chile, Croatia, etc), "without unreasonable delay" (eg, Korea, Poland, Tunisia), and ‘undue delay’ (eg, Libya, Philippines, Qatar, Serbia).

However, there are four BITs that provide a strict restriction for the application of a transfer clause. Libya, Serbia, Singapore and Switzerland BITs provide exact restrictions on the following:

  • In the event of serious balance of payment and external financial difficulties or threat thereof; or
  • In cases where, in exceptional circumstances, movements of capital cause or threaten to cause serious difficulties for macroeconomics management, in particular, monetary and exchange rate policies.

Subrogation

Most Indonesian BITs recognise subrogation for the insurers to step into the investor's place, subsequently allowing the insurers to recover the paid amount.

Answer contributed by , , , , and

10. Do this country’s investment treaties exclude liability through carve-outs, non-precluded measures clauses, or denial of benefits clauses?

Indonesia

Issue

Other substantive protections

National treatment and most-favoured nation treatment exceptions

Some Indonesian BITs include carve-outs from MFN and/or national treatment obligations. Most of the carve-out from MFN and/or national treatment relates to any and all existing or future international agreements relating to customs unions, monetary unions, free trade or common markets (eg, Algeria, Bangladesh, Chile, Croatia).

Other BITs also provide that the MFN and/or national treatment obligations do not apply in cases of taxation measures or to avoid double taxation (eg, Croatia, Chile, Czech Republic, Korea, Mauritius, Morocco, Mozambique, Qatar, Russian Federation, Sri Lanka).

Denial of benefits

Two BITs provide a denial of benefit clause, namely the Singapore and Switzerland BITs. As an example, under the Switzerland BIT, a contracting party may deny benefit in cases where:

  • The investor is a legal entity owned or controlled by a non-party or the denying party, and it lacks substantive business operations in the home state's territory;
  • The investor is owned or controlled by a non-party, and the denying party has enacted measures in relation to international peace and security against a non-party or persons of non-party.

The BIT with Singapore adds two more grounds to deny benefit, namely in cases where:

  • The investor is a legal entity owned or controlled by a non-party and the denying party does not maintain diplomatic relations with the non-party.
  • The investor is a natural person who is also a national of the denying party.

Right to regulate

Most of Indonesian BITs do not contain an explicit right to regulate clause. Only two BITs explicitly provide a right-to-regulate clause, namely the Singapore and Switzerland BITs.

The Singapore and Switzerland BITs essentially provide measures (including modifying laws) carried out for the protection of public health, social services, public education, safety, environment, public morals, social or consumer protection, privacy and data protection, and the promotion and protection of cultural diversity, if it negatively affects the investments of investors or interferes with the investors' expectation, do not amount to a breach under the BITs.

Security exception

 

Three BITs recognise security exceptions, namely the BITs with Qatar, Singapore and Switzerland. Under the Qatar and Singapore BITs, measures necessary for the maintenance or restoration of international peace and security, and protection of the essential security interest of the contracting party are not precluded by the BITs.

Similarly, the Switzerland BIT provides that the contracting party may deny benefits under the ground of maintenance or restoration of international peace and security.

Answer contributed by , , , , and

Procedural rights in this country’s investment treaties

11. Are there any relevant issues related to procedural rights in this country’s investment treaties?

Indonesia

Issue

Procedural rights

Institutional or ad hoc arbitration

Many Indonesian BITs refer to ICSID as the settlement forum for disputes between an investor and a contracting party. However, the Croatia, Cuba, Czech, Denmark, Guyana, Iran, Jamaica, Libya, Mozambique, Poland, Qatar, Russia, Serbia, Singapore Switzerland and Syrian Arab BITs allow the investor to choose between ICSID and an Ad Hoc Tribunal, usually under the UNCITRAL Arbitration Rules.

Time limitation for claims

 

Indonesian BITs typically do not contain a time limit for claims. The Singapore and Switzerland BITs, however, contain time limitations for claims.

The Switzerland BIT states that an investor may no longer submit a dispute to international arbitration after 24 months have passed since the disputing party’s receipt of the written request for consultations.

Meanwhile, the Singapore BIT only allows investors to submit their dispute to international arbitration within three years of the time at which the disputing investor became aware or should have reasonably become aware, of a breach of an obligation under the BIT causing loss or damage to the disputing investor or its investment.

Fork in the road clause

 

The majority of Indonesian BITs provide investors the option to choose between the judicial procedures of the contracting party or international arbitration as the dispute settlement forum.

The Chile, Guyana, Jamaica, Libya, Mauritius, Morocco, Qatar, Saudi Arabia, Serbia and Singapore BITs contain a fork-in-the-road clause where an investor's choice of forum is final and irrevocable.

Exhaustion of local remedies/waiver of local remedies

 

Korea BIT requires the investor to exhaust local remedies prior to submitting the dispute to international arbitration. The Korea BIT stipulates that an investor may only submit a dispute to international arbitration if the dispute cannot be settled through the pursuit of local remedies within 12 months.

Meanwhile, four Indonesian BITs contain a waiver of local remedies requirement, namely the Libya, Serbia, Switzerland and Singapore BIT. The Libya and Serbia BIT state that the Parties' consent to arbitration implies the waiver of their right to demand that all domestic administrative and judiciary remedies be exhausted.

On the other hand, the Singapore and Switzerland BITs require the investor to waive its rights to raise any claim or initiate any proceeding under domestic court in order to submit a claim to arbitration.

Transparency

 

The Switzerland BIT addresses the matter of transparency of arbitral proceedings. It provides a clear guide on the publication of awards and hearings as well as protection of confidential information.

Answer contributed by , , , , and

12. What is the approach taken in this country’s investment treaties to standing dispute resolution bodies, bilateral or multilateral?

Indonesia

Indonesian BITs do not provide for a permanent dispute resolution body in cases of disputes or differences.

Answer contributed by , , , , and

13. What is the status of this country’s investment treaties?

Indonesia

Indonesia is currently undergoing a process to reform its International Investment Agreements (IIAs), including BITs. Indonesia has taken a formal stance on this matter as expressed in its submissions for ISDS reform at the 37th Session of Working Group III of the United Nations Commission on International Trade. In its submission, Indonesia states that its current investment treaty provisions still enable frivolous claims, regulatory chill, and the parallel system of adjudication, which are points of concern for Indonesia. Indonesia intends to modernise its IIAs to include principles and provisions that strike a more equitable balance between the objectives of foreign investors and the host state. Consequently, Indonesia has initiated measures to agree on early termination of some BITs while planning for the others to lapse naturally.

For those BITs that have not been mutually terminated, Indonesia's strategy is to plan for these existing agreements to expire naturally, setting the stage for the renegotiation of new BIT provisions under the sunset clause period. The renegotiation of these new BITs is planned to occur during the "sunset period" – a phase during which foreign investors continue to benefit from protections under the lapsed BITs. Indonesia plans to use this period to negotiate more balanced provisions for its future BITs.

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Practicalities of commencing an investment treaty claim against this country

14. To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is there a particular person or office to whom a dispute notice against this country should be addressed?

Indonesia

Government entity to which claim notices are sent

Laws and/or regulation that governs this matter are quite silent. However, as a matter of rule, an absolute authority to represent the state lies at the President as the head of the state.

In practice, the President often distributes its authority to the relevant ministries, eg, the Ministry of Finance, Ministry of Law and Human Rights, Ministry of Foreign Affairs and the State Attorney, upon the occurrence of a dispute. The President will involve the relevant ministries that the case was brought against.

However, the Singapore BIT explicitly provides a service of documents clause where notices and other documents to settle the dispute between the contracting party and/or contracting party with the investor of the other party. The Singapore BIT explicitly provides that notices and documents in dispute shall be served on Indonesia to the Director General for Legal Affairs and International Treaties, Ministry of Foreign Affairs. 

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15. Which government department or departments manage investment treaty arbitrations on behalf of this country?

Indonesia

Government department that manages investment treaty arbitrations

There is no specific department that manages investment treaty arbitration.

As elaborated in question 14, it is typically the President as the head of state that further distributes the authority to manage investment treaty arbitration to relevant ministries upon the occurrence of arbitration.  

Answer contributed by , , , , and

16. Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external counsel are used, does the state normally go through a formal public procurement process when hiring them?

Indonesia

Internal/external counsel

For investment treaty arbitration, Indonesia typically combines the use of both internal and external counsel.

For the procurement of external counsel, by law, three main procedures can be used to appoint a counsel, namely:

  • selection;
  • direct procurement; and
  • direct appointment.

However, the President often allows the relevant ministries to carry out their procurement procedure. This is exemplified in the case of Hesham Talaat  Al-Warraq v The Republic of Indonesia, where the President specifically enacted Presidential Regulation No. 60 of 2011 on Mandate to the Minister of Finance for the Management of the Request of Arbitration from Hesham Al-Warraq under the Organization of Islamic Conference, which allows the Minister of Finance to regulate the procurement necessary for the management of the investment treaty arbitration.

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Practicalities of enforcing an investment treaty claim against this country

17. Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.

Indonesia

Washington Convention implementing legislation

Indonesia ratified the Washington Convention by enacting Law No. 5 of 1968 on the Settlement of Investment Disputes between States and Nationals of Other States.

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18. Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.

Indonesia

New York Convention implementing legislation

Indonesia has ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (New York Convention) through the issuance of Presidential Decree No. 34 of 1981 on the Ratification of Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which was signed on 10 June 1958 and was effective since 7 June 1959.

Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution (Indonesian Arbitration Law), which significantly differs from the UNCITRAL Model Law, is the only legislation that governs the enforcement of a foreign arbitral award. However, the enforcement regime under the Indonesian Arbitration Law differs from the New York Convention.

Nonetheless, the Supreme Court has issued the Supreme Court Circular Letter No. 1 of 1990 on the Procedure for the Enforcement of Foreign Arbitral Award. Albeit not being legislation, the circular letter is often referred to on the question of enforcement of foreign arbitral awards under the New York Convention.

In 2019, the Supreme Court also issued a technical guideline on the enforcement of final and binding judgments in Indonesian district courts. The technical guideline covers guidelines on the registration and enforcement of domestic and international arbitral awards in Indonesian courts.  

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19. Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?

Indonesia

Legislation governing non-ICSID arbitrations

Indonesian Arbitration Law governs arbitration seated within Indonesia, including investment arbitration (ICSID or Non-ICSID Arbitration) and/or commercial arbitration.

Similarly, Law No. 25 of 2007 on Investment (Indonesian Investment Law) does not differentiate ICSID Arbitration or Non-ICSID Arbitration for investment arbitration instituted under the law.

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20. Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional proceedings been necessary to enforce these against the state?

Indonesia

Compliance with adverse awards

From the records made public, most of the modern investment treaty arbitral awards involving the Republic of Indonesia are either settled, discontinued or ruled in favour of the state.

Should there be an adverse award against Indonesia, the award will be treated as an international arbitration award under the Indonesian Arbitration Law. Therefore, the investment treaty arbitral award, be it in favour of the state or adverse to it, is generally enforceable by the local courts. 

Despite no adverse awards against Indonesia, Indonesia has also known to have paid its obligation to the investor once it is clear that there is an obligation to do so. This is reflected in the Cemex Asia Holdings Ltd v Indonesia, ICSID Case No. ARB/04/3, where the Indonesian government decided to settle, paying the investor US$337 million from the US$400 million claimed.  

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21. Describe the national government’s attitude towards investment treaty arbitration.

Indonesia

Attitude of government towards investment treaty arbitration

The Republic of Indonesia displays significant interest in welcoming investment treaties for its jurisdiction. The government’s attitude has so far been positive with certain qualifications. This is evidenced in Indonesia’s participation in 43 BITs.

To date, Indonesia is also currently undergoing BIT reforms in order to provide more balanced BITs. Indonesia either terminates its existing BITs to agree on newer ones, or lets the BITs expire by time so Indonesia and the other contracting party can renegotiate treaty terms during the BIT’s sunset period.

Indonesia’s effort is nothing but to provide a more balanced protection for the investor, while not neglecting Indonesia’s right to regulate.

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22. To what extent have local courts been supportive and respectful of investment treaty arbitration, including the enforcement of awards?

Indonesia

Attitude of local courts towards investment treaty arbitration

The courts relatively support investment treaty arbitral awards by not annulling or impeding any investment treaty arbitration, for instance, by not issuing anti-suit injunction. There is no hostile treatment against investment treaty arbitration.

Similarly, enforcement of awards from investment treaty arbitration receives no hostile treatment from the local courts. The award from investment treaty arbitration is treated as an international arbitral award recognised under the Indonesian Arbitration Law, which is generally enforceable in Indonesia. The only difference is that the enforcement process for awards involving Indonesia as a party is carried out before the Supreme Court instead of the Central Jakarta District Court.  

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National legislation protecting inward investments

23. Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.

Indonesia

National

legislation

Substantive protections

Procedural rights

FET

Expropriation

Other

Local courts

Arbitration

Law No. 25 of 2007 on Investment

Yes

Yes

National treatment, MFN, FPS, repatriation/transfers

Yes

Yes

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National legislation protecting outgoing foreign investment

24. Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which an investor can invoke the protections?

Indonesia

Relevant guarantee scheme

Qualifying criteria, substantive protections provided and practical considerations

N/A

N/A

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Awards

25. Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties.

Indonesia

 

Awards

Cemex Asia Holdings Ltd v Indonesia, ICSID Case No. ARB/04/3, Award embodying the parties' settlement agreement, pursuant to Arbitration Rule 43(2) dated 23 February 2007.

Rafat Ali Rizvi v Republic of Indonesia, ICSID Case No. ARB/11/13, Award on Jurisdiction dated 16 July 2013.

Hesham Talaat M Al-Warraq v The Republic of Indonesia, Final Award dated 15 December 2014.

Churchill Mining and Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No. ARB/12/40 and 12/14, Award dated 6 December 2016.

Nusa Tenggara Partnership BV and PT Newmont Nusa Tenggara v Republic of Indonesia, ICSID Case No. ARB/14/15, Discontinued.

Indian Metals & Ferro Alloys Ltd v Republic of Indonesia, PCA Case No. 2015-40, Final Award dated 29 March 2019.

Oleovest Pte Ltd v Republic of Indonesia, ICSID Case No. ARB/16/26, Discontinued.

Pending proceedings

None.

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Reading List

26. Please provide a list of any articles or books that discuss this country’s investment treaties.

Indonesia

Article/Book

Alvin Yeo and Smitha Menon, 'Indonesia – Arbitrating with Foreign Parties: A Closer Look at Indonesia's Approach to Investor State Dispute Settlement', in Asian Dispute Review, Volume 18, Issue 3, 2016, pages 124–131.

Antony Crockett, 'Indonesia's Bilateral Investment Treaties: Between Generations?',  ICSID Review – Foreign Investment Law Journal, Volume 30, Issue 2, 2015, pages 437–448.

Adolf Huala, 'Indonesia, Foreign Investment and Investment Arbitration', in Foreign Investment and Investment Arbitration in Asia, 2019, pages 101–124.

Simon Barrie Sasmoyo Adiwidagdo, 'The Investment Treaty Arbitration Review: Contributory Fault, Mitigation and Other Defences to Damages', in The Investment Treaty Arbitration Review 8th Edition.

David Price, 'Indonesia's Bold Strategy on Bilateral Investment Treaties: Seeking an Equitable Climate for Investment?' Asian Journal of International Law, Volume 7, No. 1, 2017, pages 124–151.

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