As A Result Of The Termination Of Bilateral Investment Treatment (BIT) Indonesia - The Netherlands Which Was Carried Out Unilaterally By Indonesia

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The Unilateral Termination of the Indonesian-Dutch Bilateral Investment Treaty (BIT): Implications and Consequences

Introduction

The Bilateral Investment Treaty (BIT) between Indonesia and the Netherlands was terminated unilaterally by Indonesia on July 1, 2015. This decision was made after the Indonesian government conveyed the announcement to the Dutch government in March 2014. The termination of the BIT has left many questions among business people, investors, and international lawyers regarding its validity. In this article, we will explore the implications of the termination of the BIT using a descriptive-analytical normative legal research approach.

The Legal Basis for BIT Regulation in Indonesia

The regulation of BITs in Indonesia is governed by several laws and regulations, including:

  • Article 11 of the 1945 Constitution: This article emphasizes the importance of protecting the rights of foreign investors in Indonesia.
  • Article 5 of Law No. 37 of 1999: This article provides the framework for the protection of foreign investments in Indonesia.
  • Article 82-87 Law No. 7 of 2014: These articles outline the procedures for the termination of international agreements, including BITs.
  • Law No. 24 of 2000: This law provides the framework for the protection of foreign investments in Indonesia and the procedures for the termination of international agreements.
  • Law No. 25 of 2007: This law provides additional protection for foreign investors in Indonesia.

In the context of international law, the basis of BITs is contained in:

  • Article 38 (1) Statutes of the International Court of Justice: This article emphasizes the importance of the protection of foreign investments in international law.
  • The 1969 Vienna Convention: This convention provides the framework for the protection of foreign investments in international law.
  • GATT, GATS, and Trims: These agreements provide additional protection for foreign investors in international trade.

The Validity of the BITs Termination

Although the termination of BITs carried out by Indonesia can be considered legal based on the provisions of Article 18 (H) of Law No. 24 of 2000 and Article 85 of Law No. 7 of 2014, there are limits determined by Article 27 of the 1969 Vienna Convention. According to this provision, the termination of international agreements must be carried out in accordance with the provisions in it and cannot be done unilaterally if they do not meet certain requirements.

The principle of "Pacta Sunt Servanda" which is the basis of the implementation of international agreements also requires the signing countries to comply with the provisions agreed upon in good faith. In this case, although Indonesia argues that termination is to protect national interests, the approach taken can be questioned in terms of ethics and international law.

The Consequences of BITs Termination

The termination of Indonesian BITs has broad implications, both for Indonesia and the Netherlands. One of the direct consequences is the application of Survival Clause, which means that Dutch investors who have been operating in Indonesia before the date of termination will still receive protection from the provisions of the BIT for 15 years after stopping.

This provides guarantees for investors who have invested, although technically the agreement has been stopped. For Dutch investors who want to enter Indonesia after termination, they need to look at other alternatives for protection, such as new BIT agreements or through other mechanisms such as bilateral agreements or free trade agreements (FTA).

The Impact on Future Bilateral Investment Relations

In the context of globalization and the complexity of international investment relations, the unilateral termination of the Indonesian-Dutch BIT has a significant impact that must be considered. Although on the one hand it is considered valid according to national law, there are many aspects that need to be considered, both from the point of view of international law and in terms of impact on future bilateral investment relations.

In the future, it is essential for Indonesia to evaluate its legal approach and consider the long-term benefits of mutually beneficial investment relations with partner countries, including the Netherlands. This can be achieved by:

  • Revising the BIT agreement: Indonesia can revise the BIT agreement to make it more favorable to both countries.
  • Establishing new investment agreements: Indonesia can establish new investment agreements with the Netherlands that provide better protection for investors.
  • Improving the investment climate: Indonesia can improve the investment climate by providing a stable and predictable business environment.

Conclusion

The unilateral termination of the Indonesian-Dutch BIT has significant implications for both countries. While it may be considered valid according to national law, there are many aspects that need to be considered, both from the point of view of international law and in terms of impact on future bilateral investment relations. In the future, it is essential for Indonesia to evaluate its legal approach and consider the long-term benefits of mutually beneficial investment relations with partner countries, including the Netherlands.
Frequently Asked Questions (FAQs) about the Unilateral Termination of the Indonesian-Dutch Bilateral Investment Treaty (BIT)

Q: What is the Bilateral Investment Treaty (BIT) between Indonesia and the Netherlands?

A: The BIT is an international agreement between Indonesia and the Netherlands that provides a framework for the protection of foreign investments in Indonesia. It was signed in 1967 and has been in effect since 1968.

Q: Why was the BIT terminated unilaterally by Indonesia?

A: The Indonesian government terminated the BIT unilaterally in 2015, citing the need to protect national interests. However, the exact reasons for the termination are not publicly disclosed.

Q: Is the termination of the BIT valid according to international law?

A: The validity of the termination of the BIT is a matter of debate. While Indonesia argues that the termination is valid according to national law, there are concerns that it may not be in compliance with international law.

Q: What are the implications of the termination of the BIT for Dutch investors in Indonesia?

A: The termination of the BIT means that Dutch investors in Indonesia will no longer have the same level of protection as they did under the BIT. However, the Survival Clause in the BIT provides that Dutch investors who were operating in Indonesia before the date of termination will still receive protection from the provisions of the BIT for 15 years after stopping.

Q: What are the alternatives for Dutch investors who want to enter Indonesia after the termination of the BIT?

A: Dutch investors who want to enter Indonesia after the termination of the BIT can consider alternative mechanisms for protection, such as:

  • New BIT agreements: Indonesia and the Netherlands can negotiate a new BIT agreement that provides better protection for investors.
  • Bilateral agreements: Indonesia and the Netherlands can negotiate bilateral agreements that provide protection for investors.
  • Free trade agreements (FTAs): Indonesia and the Netherlands can negotiate FTAs that provide protection for investors.

Q: What is the impact of the termination of the BIT on future bilateral investment relations between Indonesia and the Netherlands?

A: The termination of the BIT has significant implications for future bilateral investment relations between Indonesia and the Netherlands. It may lead to a decrease in foreign investment in Indonesia and may also affect the country's reputation as a destination for foreign investment.

Q: What can Indonesia do to improve its investment climate and attract more foreign investment?

A: Indonesia can improve its investment climate by:

  • Revising the BIT agreement: Indonesia can revise the BIT agreement to make it more favorable to both countries.
  • Establishing new investment agreements: Indonesia can establish new investment agreements with the Netherlands that provide better protection for investors.
  • Improving the investment climate: Indonesia can improve the investment climate by providing a stable and predictable business environment.

Q: What is the role of the Indonesian government in promoting foreign investment in the country?

A: The Indonesian government plays a crucial role in promoting foreign investment in the country. It can do this by:

  • Providing a stable and predictable business environment: The government can ensure that the business environment is stable and predictable, which is essential for attracting foreign investment.
  • Offering incentives: The government can offer incentives to foreign investors, such as tax breaks and other forms of support.
  • Promoting the country's investment opportunities: The government can promote the country's investment opportunities through various channels, such as trade missions and investment promotion agencies.

Q: What is the role of the Dutch government in promoting foreign investment in Indonesia?

A: The Dutch government also plays a crucial role in promoting foreign investment in Indonesia. It can do this by:

  • Providing support to Dutch companies: The government can provide support to Dutch companies that are interested in investing in Indonesia.
  • Promoting the country's investment opportunities: The government can promote the country's investment opportunities through various channels, such as trade missions and investment promotion agencies.
  • Encouraging Dutch companies to invest in Indonesia: The government can encourage Dutch companies to invest in Indonesia by providing them with information and support.