The Termination of Indonesia’s BITs: Changing the Bathwater, But Keeping the Baby?

Abstract

In 2014, Indonesia began progressively to terminate the 67 bilateral investment treaties (BITs) it has signed since the late 1960s. It does not appear to be Indonesia’s intention, however, to completely abandon investor-State dispute settlement (ISDS) and it is likely that ISDS provisions will be included in a number of new regional treaties being negotiated by Indonesia, including the Regional Comprehensive Economic Partnership. Contrary to Poulsen’s theory of ‘bounded rationality’ it is suggested that Indonesia was not completely ignorant of the implications when it negotiated its first BITs in the 1960s, nor did it merely accept templates foisted upon it by the capital exporting countries of the West. Recent developments appear to confirm that, notwithstanding its decision to terminate its BITs, Indonesia still considers it important that foreign investors are assured of some minimum standards of protection, governed by international law and backed by access to neutral international dispute resolution.