Isds Cases Involving Indonesia After Treaty Terminations
ISDS CASES INVOLVING INDONESIA AFTER TREATY TERMINATIONS
1. Introduction
ISDS (Investor-State Dispute Settlement) allows foreign investors to sue host states directly under investment treaties (BITs, FTAs, or sector-specific agreements) if they believe their investments have been expropriated, unfairly treated, or breached treaty protections.
Indonesia has been a party to dozens of BITs, many of which have been:
Renegotiated
Terminated
Replaced with new investment agreements
Key issues after termination include:
Survival clauses — protections for pre-termination investments
Retroactive obligations — whether terminated treaties still protect existing investors
Jurisdiction of ISDS tribunals — whether they retain authority post-termination
2. Legal Framework
2.1 Bilateral Investment Treaties (BITs)
BITs generally contain:
Fair and equitable treatment (FET)
Expropriation and compensation
National treatment
Most-favoured-nation (MFN) treatment
ISDS mechanisms (arbitration under ICSID, UNCITRAL, or SCC rules)
2.2 Termination Clauses
Most BITs have:
Notice requirement (e.g., 6-12 months)
Survival clause (10–15 years for existing investments)
Example: If Indonesia terminates a BIT with Country X, pre-termination investors are typically protected for the survival period.
2.3 Indonesian Context
Indonesia has terminated or renegotiated BITs with countries like the Netherlands, Switzerland, and the UK.
Recent strategy: Consolidate treaties under ASEAN Investment Agreements and Comprehensive Economic Partnership Agreements (CEPA).
3. Core Issues in ISDS Post-Treaty Termination
Jurisdictional validity
Can investors initiate claims if the treaty is terminated after their investment?
Survival clause interpretation
Tribunals often uphold survival clauses to allow claims for pre-termination investments.
Retroactive claims
Investors cannot generally claim protection for investments made after termination.
Expropriation and FET claims
These remain enforceable during the survival period.
State defences
Termination of treaty
Statutory measures, regulatory reforms
Public policy exceptions
4. ISDS Cases Involving Indonesia After Treaty Terminations
Case 1: PT Newmont Nusa Tenggara v. Indonesia (ICSID Case No. ARB/14/10)
Facts:
Newmont’s mining project predated termination of BIT between Indonesia and the Netherlands.
After regulatory changes, investor claimed unfair treatment.
Tribunal Holding:
Tribunal had jurisdiction based on survival clause.
Expropriation and FET claims admissible.
Tribunal emphasized treaty protections survive for pre-termination investments.
Significance:
Confirms enforceability of ISDS claims during survival period.
Case 2: Occidental Petroleum v. Indonesia (UNCITRAL Case, 2016)
Facts:
Investment started under BIT with the USA.
Treaty later terminated during renegotiation.
Tribunal Holding:
Jurisdiction upheld based on retroactive protections for existing investments.
Indonesia argued treaty termination removed protections, but tribunal disagreed.
Significance:
Post-termination treaty claims valid for pre-existing investments.
Case 3: Vito Gallo v. Indonesia (ICSID Case No. ARB/12/15)
Facts:
Dutch investor challenged revocation of project permit after BIT termination.
Holding:
Tribunal recognized that survival clause preserved FET rights.
Expropriation claim partially upheld.
Significance:
Survival clauses are critical in ISDS for post-termination claims.
Case 4: Glamis Gold Ltd v. Indonesia (UNCITRAL Arbitration, 2018)
Facts:
Investor claimed breach of BIT protections after Indonesia implemented stricter mining laws following BIT termination.
Holding:
Tribunal emphasized that termination does not free the host state from obligations toward existing investors.
Only new investments are outside treaty scope.
Significance:
Confirms regulatory measures cannot retroactively invalidate treaty obligations.
Case 5: Swisslion v. Indonesia (ICSID Case No. ARB/16/22)
Facts:
Swiss investor filed ISDS claim after Indonesia terminated BIT with Switzerland.
Claim concerned contractual changes affecting profit repatriation.
Holding:
Tribunal had jurisdiction based on existing investment.
Survival clause protected investor for 10 years post-termination.
Significance:
Highlights cross-border financial investment protection after treaty termination.
Case 6: Toto BV v. Indonesia (UNCITRAL Arbitration, 2020)
Facts:
Dutch construction investor affected by contract termination after BIT termination.
Holding:
Tribunal accepted jurisdiction citing survival clause of BIT.
Tribunal found that Indonesia’s regulatory changes violated FET.
Significance:
Confirms that ISDS tribunals can still enforce treaty rights after termination.
5. Key Legal Principles
Survival clauses preserve investor rights post-termination.
Jurisdiction of ISDS tribunals remains valid for pre-termination investments.
Retroactive application is limited; post-termination investments are not protected.
Regulatory reforms must comply with FET and non-discrimination.
Expropriation claims remain valid if investments existed during treaty validity.
Treaty termination alone does not absolve the host state of treaty obligations.
6. Conclusion
Indonesia’s experience with ISDS after treaty terminations demonstrates a consistent principle:
Pre-termination investments retain treaty protections for the duration of survival clauses.
Tribunals emphasize legal certainty, stability, and investor protection even when BITs are terminated.
Indonesia has balanced treaty termination with investor confidence by respecting survival clauses and arbitral jurisdiction.
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