8 - Investment Agreements and Regulatory Space in Indonesia

Summary

This chapter considers how Indonesia's policies in relation to investment treaty drafting have changed over time and the extent to which these changes may have been driven by concerns to protect regulatory space.Despite having signed a relatively large number of treaties relative to other Asian States and being an important destination for foreign direct investment, Indonesia has faced few claims and has never been ordered to compensate an investor for violations of an investment treaty.It is also observed that the volume of laws and regulations on the books in Indonesia has increased dramatically since the beginning of the new millennium, with little evidence that the threat of investment treaty claims has affected the extraordinary growth of legislation and regulation comprising Indonesia's "legal jungle".Indonesia has nevertheless sought to modernise its investment treaties, including to add provisions clarifying or limiting the scope of the fair and equitable treatment standard and the circumstances in which a regulatory measure may amount to indirect expropriation.The chapter also briefly considers what Indonesia's treaty practice reveals about its position in relation to reform of Investor-State Dispute Settlement, including its efforts to promote the use of conciliation.