Foreign direct investment (“FDI”) plays a hugely important role in stimulating national productivity, especially within developing countries. Indeed, FDI offers several advantages for any country in which such investment takes place, such as improved employment opportunities and quality of human resources, increases in productivity and rising incomes. From a government perspective, FDI can have a significant effect on the national economic outlook, state income, public infrastructure, as well as overall national competitiveness.
 
However, the relationships that are developed between foreign investors and host governments do not always run as smoothly as expected, and the possibility of disputes arising is high. In regard to investment disputes, there are several arbitration forums in which Indonesia is acknowledged. One such forum, and one which is commonly chosen by foreign investors, is the International Centre for the Settlement of Investment Disputes (“ICSID”). The ICSID is basically a dispute-settlement mechanism which was established under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (“ICSID Convention”). The ICSID Convention was first introduced in Washington in the USA.
 
This convention was deemed a breakthrough in the realms of international law, especially in terms of its international-investment legal regime, as investors as private parties could now claim from sovereign states. The list of sovereign states covered by the convention includes Indonesia, which usually posts high investment figures.
 
Since becoming a member of the ICSID back in 1968, Indonesia has been involved in seven disputes which have led to ICSID arbitration proceedings. Indeed, just weeks ago, all eyes were on the ICSID tribunal once again, as it ultimately decided in favor of the Indonesian Government in its response to a claim which had been brought by Churchill Mining PLC and Planet Mining Pty Ltd.[1] While the glory of this moment was indeed exhilarating, the fact of the matter is that this ruling represents only the first case that Indonesia has actually won on the merits of the dispute in question at the ICSID. Prior to this case, all of the claims against Indonesia which had been brought before the ICSID forum on merit based were ultimately decided in favor of the investors concerned. Moreover, the damages claimed proved costly for Indonesia. This poor track record led to a proposal being made by international law scholars that Indonesia should renounce its ICSID membership.[2] Indeed, this suggestion not only involved the ICSID, as Indonesia itself also requested that it be allowed to exit the so-called Bilateral Investment Treaties (“BITs”), as the country’s consent as regards arbitration under the ICSID framework was established through these BITs.[3]
 
This edition of Indonesian Law Digest (ILD) will offer a basic introduction to the ICSID forum and the involvement of Indonesia within this forum. Moreover, this ILD will also discuss Indonesia’s past experiences at ICSID forums.