The Indonesian President Ratifies Bilateral Investment Treaty between Indonesia and Singapore

November 7, 2020

On September 25, 2020, the Indonesian President ratified the Agreement dated October 11, 2018 on the Promotion and Protection of Investments between the Government of the Republic of Indonesia and the Government of the Republic of Singapore (or commonly referred to as Indonesia-Singapore Bilateral Investment Treaty or the “Indonesia-Singapore BIT”) under Presidential Regulation No. 97 of 2020. So the Indonesia-Singapore BIT is effective as of September 29, 2020.

The Indonesian Government and the Singaporean Government acknowledge the importance of having an investor-friendly environment in both countries to foster business activities, specifically in investment. Therefore, the Indonesia-Singapore BIT was created to achieve such purpose. In addition, the Indonesia-Singapore BIT will provide legal protection for Indonesian and Singaporean investors who invest in both countries.

A summary of the key provisions outlined in the Indonesia-Singapore BIT is as follows.

National Treatment and Most-Favored-Nation Treatment

Under Articles 4 and 5 of the Indonesia-Singapore BIT, both Indonesia and Singapore shall treat each other no less favorable than how it should have, with respect to the management, conduct, operation, and sale or other disposition of investments.

Expropriation

The Indonesia-Singapore BIT prohibits both countries from expropriating or nationalizing any investment, except for the following:

for a public purpose;
conducted in a non-discriminatory manner;
with compensation of prompt, adequate, and effective; and
in accordance with the due process of law.

Indemnification

In the event an investor suffers losses due to war or any other armed conflicts, civil disturbances, a state of national emergency, revolt, insurrection, riot or other similar situations in a country in which they invest, the other party is required under the Indonesia-Singapore BIT to provide the restitution, compensation, or other settlement to such investor.

Dispute Settlement

The Indonesia-Singapore BIT directs any investment disputes to be resolved through consultations and negotiations, which may be in a form of non-binding, third party procedures, such as good offices, conciliations, and mediations. This consultation must be submitted through a written request for consultation from the disputing investor to the disputing party.

If such investment dispute cannot be settled within 1 (one) year since the delivery of the written request for consultation, unless the disputing party agrees otherwise, the disputing investor may submit the dispute to the courts or tribunals of the disputing party, provided that such court or tribunal has jurisdictions over such claim. The disputing investor may also submit the claim for arbitration under the International Center for Settlement of Investment Disputes (“ICSID”) Convention and its Arbitration Rules only if both are parties to the ICSID Convention.

The disputing investor may also submit the dispute to arbitration under the ICSID Additional Facility Rules, for so long as Singapore or Indonesia is a party to the ICSID Convention. Currently, both Indonesia and Singapore are parties to the ICSID Convention.

Alternatively, a dispute claim may be submitted to any other arbitral institutions or under any other arbitration rules based on an agreement of the parties.

Better Legal protection and Safeguard for Investors

It is likely that the Indonesia-Singapore BIT would be seen as a major benefit for investors due to the presence of clauses regarding national and most-favored nation treatment, protection from expropriation, as well as access to the Investor-State Dispute Settlement (the “ISDS”) system. Further, in the event that investors suffer losses because either country happens to be politically unstable, the investors have the right to receive compensation. Particularly for the ISDS system, the investors may perceive this as beneficial because the ISDS system would be more neutral compared to the respective national law systems.

According to the Indonesia Investment Coordinating Board, Singapore is the largest contributor to foreign direct investment in Indonesia during the third quarter of 2020, with a total investment of Rp35.9 trillion.

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November 7, 2020