Indonesia Should Exit Bilateral Investment Treaties

 
Happy Rayna Stephany, Andin Aditya Rahman
 
Bilateral investment treaties (BITs) continue to be a focal point in Indonesiaafter Churchill Mining Plc (Churchill), a Britain-based mining company, filed a claim of USD 2 billion in damagesagainst the Indonesian Government.
 
Churchill’s claim was submitted to the International Center for Settlement of Investment Disputes (ICSID) against the Government for allegedly breaching their bilateral investment treaty with the United Kingdom.
 
Even though domestically the Government prevailed in the caseunder Indonesia’s judiciary system, and the claim submitted by Churcill to the ICSID is currently considered as facing challenges, the view of the public concerning bilateral investment treaties remains negative.
 
This was apparent when Hikmahanto Juwana, an international law professor from the Faculty of Law of Universitas Indonesia, proposed that Indonesia withdraw from its BITs. According to Mr. Juwana, the benefits of doing so for domestic businesses far outweighs the resultant financial risks on the Government.
 
Mr. Juwana further asserts that the double taxation provisions under BIT give no benefits to domestic corporations, as they are preoccupied with preparing and executing domestic operations.
 
“The Government must immediately end double taxation agreements,” asserted Hikmahanto during a seminar in Jakarta, last Thursday.
 
He defended his opinion by stating that regardless of any bilateral investment treaties, foreign investors will continue to identify Indonesia as a potential market abundant in natural resources.
 
Leave Behind ICSID
Moving from the BITs issue, Mr. Juwana proceeded to suggest the Government leave the ICSID as the risk of facing multi-billion dollar lawsuits is exceptionally high.
 
Similar to the view of Amir Syamsuddin, Minister of Law and Human Rights, Mr. Juwana emphasized that any foreign investor can easily file a lawsuit with the ICSID and with extraordinary amounts in damages when the Indonesian Government displays the slightest stance of being uncooperative. In contrast, continued Hikmahanto, Indonesian businesses rarely take advantage of the ICSID by suing their host state.
 
“It is time to return the Government’s sovereignty, and not be dwarfed by being sued at the ICSID. Today, it is investors that need Indonesia,” concluded Mr. Juwana
 
May be litigated against regardless
Responding to the comments delivered by Mr. Juwana, Abdul Kadir Jailani, Director of Economic, Social, and Culture Agreements at the Ministry of Foreign Affairs, stated that leaving the ICSID will not prevent future lawsuits against Indonesia at the ICSID. This view is based on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).
 
“Leaving the ICSID will not solve the issue because the Government can still be sued,” said Abdul.
 
On the issue of withdrawing from bilateral investment treaties, Mr. Jailani simply stated that Indonesian investors overseas will face similar circumstances as foreign investors in Indonesia. Additionally, this will likely cause prospective investment in Indonesia to be reconsidered.
 
(hot/kc)