Indonesia's Bold Strategy on Bilateral Investment Treaties: Seeking an Equitable Climate for Investment?

This paper examines the recent decision by the Indonesian government to terminate its Bilateral Investment Treaty (BIT) with the Netherlands when it expires on 30 June 2015. It discusses the likely driving forces behind Indonesia's decision, and its alternative future strategy. In particular, it focuses upon controversial provisions on investor-state dispute settlement (ISDS) universally included in BITs. While Indonesia's termination may appear of minor consequence at first glance, it has significant implications in terms of Indonesia's obligations under international law as well its capacity to exercise its rights as a sovereign state to act domestically in the public interest. The termination of Indonesia's first investment treaty containing the ISDS mechanism is also highly symbolic because it represents the first step in a reported strategy to review all its sixty-seven BITs. Indonesia thus joins a growing number of countries concerned about perceived excessive corporate rights enshrined in investment agreements as being incompatible with national development objectives.