1 Introduction

Indonesia is notorious for high levels of corruption. Transparency International’s Corruption Perceptions Index, perhaps the most commonly cited corruption-related survey, consistently rates the country among the world’s most corrupt.1 Post-Soeharto reforms from the late 1990s had some early success at reducing corruption, but it is widely accepted in Indonesia that many of the reforms were flawed or have since unravelled. Indeed, one often hears that, overall, corruption may, in fact, have increased—particularly judicial corruption. To avoid the Indonesian courts, foreign investors routinely include foreign arbitration clauses in contracts with Indonesian partners. However, this is not a complete solution because the enforcement of foreign arbitral awards in Indonesia is, ultimately, still subject to judicial oversight. Although there are certainly examples of successful enforcement, foreign arbitral awards remain vulnerable to challenge in Indonesian courts, which have been inconsistent in their approach to enforcement.

Indonesia has lost very few inbound investor–state disputes.2 However, following several high-profile investor–state arbitration cases, including some in which allegations of corruption were raised, the Indonesian government has become increasingly wary of investment treaty arbitration. The government has expressed concerns about the threat of claims and the costs associated with resolving disputes under bilateral investment treaties (BITs) that entitle foreign investors to arbitrate investment disputes with the Indonesian government, including in the International Centre for the Settlement of Investment Disputes (ICSID). These concerns have led Indonesia to terminate some older investment treaties and to narrow the scope of protections afforded to foreign investors in newer agreements.

In this chapter, we first offer a brief account of corruption in Indonesia and the difficulties faced by the anti-corruption institutions set up after the fall of Soeharto in 1998. We also discuss judicial corruption in Indonesia—one reason why investors seek to avoid using the Indonesian courts. We then explain the law regulating arbitration in Indonesia, focusing on challenges to arbitral awards and their enforcement, before briefly considering recent changes in the country’s policy related to investment treaties and investor–state dispute resolution. The later part of our chapter also considers two investor–state arbitrations involving Indonesia which featured allegations of corruption.

2 Corruption

After the collapse of President Soeharto’s New Order in May 1998, significant legislative and institutional reforms were initiated, ostensibly to reduce corruption. In this section we offer a brief assessment of the progress of some of the more important reforms before considering corruption in Indonesian law enforcement agencies, including the courts.

2.1 The 1999 Anti-corruption Law

This 1999 Law was introduced soon after Soeharto’s fall in response to popular calls for firm action against the systemic corruption of his regime. The Law was intended to make investigating and prosecuting corruption easier than in the past, when convictions were very rare and usually only involved minor offenders.

The 1999 Law, as amended by Law 20 of 2001, remains in force today. It defines corruption broadly, catching a wide range of behaviour, and provides severe penalties, including death.3 The Law establishes specific offences such as bribery, but Article 2(1) provides a very general catch-all offence. Under this provison, corruption occurs if someone ‘unlawfully enriches themselves or another person in a way that could damage the state finances or economy’. The elucidation (explanatory memorandum)4 to this provision defines ‘unlawfully’ to include acts that do not breach written law if those acts do not accord with ‘justice or social values existing in the community’.5

The result is that many defendants are found guilty of corruption despite not breaching any binding legal instrument.6 Many have been convicted after acting contrary to non-binding guidelines or simply because, in the eyes of the court, they have made a mistake that has caused loss to the state. Indeed, some have even been convicted after having shown compelling reasons for choosing not to comply with such guidelines.7

2.2 The Corruption Eradication Commission

The Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK) was established by Law 30 of 2002 on the KPK (amended by Law 19 of 2019) to implement the sweeping anti-corruption regime created by the 1999 Anti-Corruption Law. Although it reports to the president and is primarily accountable to the public, the KPK was initially established as an independent state agency. Its continuing credibility relies upon this independence—particularly from police and prosecutors, who are widely believed to be very corrupt, as we explain below.

The 2002 Law gave the KPK a broad power to coordinate and supervise corruption investigations and prosecutions. Using this power, the KPK could take over ongoing high-level corruption investigations and prosecutions8 or initiate its own.9 Although the KPK’s powers to initiate or take over corruption investigations were broad and virtually unilateral, jurisdictional clashes between the police and KPK have been very common, with both claiming exclusive power to handle particular cases. The institutional rivalry was worsened by the additional powers the KPK initially had that the police did not (including wiretapping without a warrant), which were said to create significant resentment.

In fact, the relationship between the police and the KPK has been fraught, with the KPK targeting senior officers in some of its investigations and prosecutions, and vice versa. This led to significant pushback from the police that threatened the KPK’s efficacy. Part of the problem appears to be that no institution, judicial or otherwise, has the power to authoritatively settle these jurisdictional disputes, even though the KPK Law seems to give the KPK power to override the police in most cases. When the KPK and police clash, it has generally been necessary for the president to intervene to break the impasse. However, successive presidents have done so only reluctantly and after much prevarication. This has allowed police to mete out significant reputational damage to the KPK, including by levelling trumped-up charges against KPK commissioners. As discussed below, legislation passed in 2019 has, unfortunately, effectively neutered the KPK and weakened its capacity to resist its opponents.

2.3 The Anti-corruption Court

The KPK Law also established an anti-corruption (Tindakan Pidana Korupsi or Tipikor) court within the Central Jakarta District Court to hear corruption cases that the KPK prosecutes. A panel of five judges presided over each trial, with a majority of them being ad hoc judges.10 Most Indonesian judges are ‘career’ judges, beginning their judicial work soon after completing their law degrees and working their way up the judicial hierarchy through a series of phased promotions. Ad hoc judges, by contrast, have not had judicial careers but rather have another type of legal experience, usually as a lawyer or academic. They are then hired as corruption court judges for a limited period, usually five years. Ad hoc judges were joined on each panel by two career judges.

The reason for this ratio was that the career judiciary is, as explained below, considered largely corrupt. As Fenwick says, the establishment of the Tipikor Court was therefore an

[a]ttempt to circumvent entirely a judicial system known to be complicit in protecting corruptors, and—at the very least—capable of being unresponsive or incompetent in the administration of justice.11

It was presumed that having a majority of ad hoc judges, who were not part of the judicial corps, would improve the likelihood of corruption cases being decided on their merits. Because career judges did not constitute a majority, the ad hoc judges would win the day if disagreement occurred along career and ad hoc lines. On the other hand, many ad hoc judges lacked the judicial experience to run trials and write judgments. It was, therefore, felt necessary to have career judges on these panels too. Rights of appeal lay to a High Anti-Corruption Court and from there to the Supreme Court, which both maintained this ratio of ad hoc to career judges.

In 2009, the national legislature, the DPR (Dewan Perwakilan Rakyat, People’s Representative Assembly), issued Law 46 on the Tipikor Court, which required the Supreme Court to establish anti-corruption courts within the general courts located in each of Indonesia’s provincial capital cities.12 The amendments also removed the guarantee that ad hoc judges would form a majority on every panel by allowing the judge chairing the panel to determine the ratio of career to ad hoc judges.

These new corruption courts have exclusive jurisdiction13 over corruption and money laundering cases, and now handle cases brought by public prosecutors, as well as the KPK. They have been widely criticised for being much less effective than the Jakarta Court was on its own and for lacking the same degree of integrity. Indeed, several of its judges have been found guilty of corruption themselves, as discussed below.

2.4 Performance of the KPK and the Anti-corruption Court

The KPK enjoyed significant public support and used its broad powers to secure hundreds of corruption convictions. Among its victims were powerful figures from key government institutions, including lawmakers, serving and retired ministers, and senior law enforcement officers, such as: the former Chief Justice of the Constitutional Court, Akil Mochtar; the former Bank Indonesia Deputy Governor, Miranda Goeltom; and the former head of the Upstream Oil and Gas Regulatory Task Force (SKK Migas), Rudi Rubiandini. The KPK also cut a swathe through the DPR and executive, successfully prosecuting numerous serving and retired politicians and decimating the political party established by former President Susilo Bambang Yudhoyono: Partai Demokrat (the Democrat Party). For a time, the KPK enjoyed a ‘perfect’ success rate, with prosecutions inevitably resulting in convictions.

This led to huge pushback by the elite from around 2008, and the KPK and the Tipikor court have since been slowly undermined. The 2009 Tipikor Court Law was seen as an attempt to decentralise corruption trials to regional areas, making it difficult to monitor them, enabling, as mentioned, nefarious practices to be introduced by prosecutors, and judges to participate in corruption themselves.

The KPK itself has also been severely weakened, particularly by Law 19 of 2019, the centrepiece of political pushback, which significantly amended the KPK Law. Through it, the political elite finally succeeded in their long-running efforts to hobble the KPK. This Law mandated the termination of investigations after two years, removed the KPK’s independence by making it part of the state bureaucracy, established a supervisory board with extensive powers of intervention, and made the KPK subject to investigation (hak angket) by the national legislature.14 The Law also removed the KPK’s crucial power to conduct wiretaps without needing external approval. Now approval must be obtained from a supervisory body that many believe will leak to suspects. Moreover, 51 staff were dismissed after taking a mandated civil-service exam containing overtly political questions intended to detect outspoken officers.15 The KPK still prosecutes, but many, including its own former commissioners, consider it to have been gutted and that its investigations and prosecutions are now often politically motivated.

Finally, although corruption among law enforcement institutions was a key reason for establishing the KPK, it has not yet turned its full attention to corruption within the police and public prosecution (although certainly it has famously pursued a small number of them). From 2010 it began targeting judges (in cases discussed below), including from the corruption courts themselves and, more recently, the Supreme Court. But it has not yet really ‘scratched the surface’ of corruption in law enforcement and judicial institutions. This is largely because corruption became so widespread and deeply embedded in these institutions during the Soeharto period that, with some adaptation, it has been able to survive, and even undermine, Indonesia’s post-Soeharto reforms.

2.5 The Judicial Mafia

In Indonesia, corrupt judges and the corrupt court administrators, prosecutors and police, and even some lawyers who work with them, are commonly referred to collectively as the ‘judicial mafia’ (mafia peradilan) or ‘legal mafia’ (mafia hukum). As the terms imply, these officials are seen as working together, including by referring opportunities for corruption to each other. Patronage networks are said to exist between lower-level and senior law enforcers, whereby subordinates channel a proportion of their illicit payments up to their superiors. Even the recruitment process for police, prosecutors and judges is said to be tainted. Many pay large sums to be employed but then recoup their investment soon after they commence work and begin receiving bribes.16

For several decades, most Indonesian courts have been suspected of being involved in corrupt practices, with many judges and court officials willing to accept bribes for favourable decisions. The precise extent of judicial corruption cannot be accurately measured; experienced lawyers have suggested that between 50 and 90% of judges take bribes.17 Even senior judges have admitted that the problem is very serious,18 with one former Supreme Court Chief Justice admitting to the existence of the ‘judicial mafia’19 and a former Constitutional Court Chief Justice describing corrupt behaviour as having ‘overrun judicial institutions with the buying and selling of decisions’.20

The Supreme Court is certainly well aware of the problem and has attempted various anti-corruption measures. In recent years, for example, it launched a ‘mystery shoppers’ programme, whereby undercover agents pose as litigants to catch judges and court staff extorting bribes.21 However, whether any judges have been ‘caught’ as part of this programme has not been publicly revealed. The Court has also introduced a system whereby announcements must be made over a loudspeaker before each court hearing, urging all parties to refrain from bribing judges and to report any attempts to the chief justice of the court, the Supreme Court or the Anti-Corruption Commission.22 But this has been widely condemned for putting the onus on litigants to help judges refrain from criminal behaviour, when judges themselves should be punishing defendants for engaging in such behaviour.23

Indeed, general scepticism of the Supreme Court’s anti-corruption efforts was strengthened after one of its judges was caught red-handed allegedly taking a bribe in 2022, with several other Supreme Court personnel alleged to be involved.24 Many argue that this is just the ‘tip of the iceberg’.25 Others we have spoken to claim that the Supreme Court is as corrupt as any other Indonesian judicial institution, and that it uses its powers of control and oversight to demand a portion of the bribes extorted by the lower courts.

For many years the phenomenon of judicial corruption in Indonesia was based largely on anecdotal accounts, primarily from lawyers and litigants, who say they either participated in it or lost a case because they refused to. While this may have helped create perceptions about high levels of corruption, it provides little by way of concrete data, and may betray biased perspectives (such as, for example, where a party cries foul after losing, even if they do not know whether the winning party paid a bribe). To be sure, some well-regarded organisations, such as Indonesia Corruption Watch26 and even a Presidential Taskforce,27 have produced research that paints a credible picture of the differing ‘modus operandi’ of judicial corruption in Indonesia, using interviews with various legal-system actors, including judges themselves. These accounts are compelling and identify precise entry points for corruption, but some accounts appear at least partly derivative of each other and, in any event, had not been confirmed by convictions of judges for corruption before 2010,28 the year the Anti-Corruption Commission began targeting judges in corruption stings.

2.6 Judicial Bribery Convictions

From 2010 until 2020, almost 30 judges were convicted of judicial corruption in open court proceedings, the judgments in which are publicly available on the Indonesian Supreme Court’s website.29 All convictions were upheld if appealed. Together, these decisions represent the most reliable dataset for enabling a general description of judicial bribery in Indonesia. Significantly, these convictions required the presiding judges to be satisfied that the defendant had met all elements of the crime of bribery to the Indonesian legal standard: ‘legally and convincingly’.

In many cases, the Anti-Corruption Commission caught the judge or court official red-handed receiving the bribe. These decisions contain significant detail about what the judge and co-conspirators did to procure the bribe, how much was sought and received, and the efforts (if any) made to conceal the transaction. Because the Commission’s arrests were usually preceded by a period of surveillance, many case files included long verbatim transcripts of recorded telephone conversations and text messages between judges, parties and intermediaries. The judges, some of whom were senior, were found guilty of accepting bribes in relation to a wide variety of cases and disputes, including property transfers, bankruptcy applications, industrial relations matters and even election disputes. However, more judges were convicted for taking a bribe to reduce sentences or acquit defendants in corruption cases than for any other type of case or dispute.

The strength of the legal position of the parties from whom bribes were sought appeared to have little effect. Judges even approached parties in almost-unassailable positions, warning them that, even though the law and facts may have favoured them, an adverse decision could still be handed down. So, for example, a witness in the corruption trial of Semarang judge Asmadinata, testified that Asmadinata had said:

If the facts are like this … I would acquit. But if the Chairperson is not willing to do this, then we can issue a light sentence of one year … it depends on what the defendant wants to give to us.30

The suggestion here was that, even though the defendant in the case Asmadinata was hearing was innocent, Asmadinata sought a bribe to prevent a conviction.

Most of the convicted judges worked in the general courts. However, judges in almost all branches of Indonesia’s first instance judicature were represented amongst those convicted, as well as higher courts and the Constitutional Court. Indeed, perhaps the most high-profile case involved Akil Mochtar, serving as Chief Justice of the Constitutional Court when he was arrested in 2013. He was found guilty of accepting bribes to fix outcomes in at least nine subnational elections and convicted of bribery and money.31 He was sentenced to life imprisonment—which remains the harshest sentence for corruption in Indonesian.32 Mochtar has never admitted to the crimes and claims that he was framed for them. However, the evidence against him contained in the case file—including over 1100 items, comprising SMS messages, transcribed telephone conversations, bank transfer and receipt records, and testimony from 115 witnesses—was overwhelming.

In some cases, a single judge worked with court staff or others to negotiate, and sometimes to receive, a bribe on the judge’s behalf. In many of these cases, the convicted judge had worked alongside other judges on the panel deciding the case to which the bribe was related, but the other judges were not pursued for corruption. These cases raise suspicions about whether the other judges knew about, or even received part of, the bribe, leading some to question why they, too, were not prosecuted. Other cases involved multiple judges who served together on the panel allocated to decide the case concerning the bribing defendant. In such cases, co-conspirators often testified against each other.33

In yet another category of cases, multiple judges from different courts conspired to extort bribes. Particularly notable here is the judicial bribery case that ensnared four judges—more than any other single case in Indonesian legal history. On 17 August 2012, the KPK arrested Semarang Anti-Corruption Court (ACC) judge Kartini Juliana Magdalena Marpaung after catching her accepting a bribe from Heru Kusbandono, a then-serving ad hoc ACC judge from Pontianak, West Kalimantan.34 At the behest of a defendant in a case the Semarang ACC was hearing, Kusbandono had contacted Marpaung and the other two members of the panel deciding the defendant’s case to negotiate a bribe for a reduced sentence. The defendant was former Speaker of the Grobogan Regional House of Representatives Muhammad Yaeni, who was being prosecuted for misusing funds for the maintenance of the Grobogan legislature’s official cars between 2006 and 2008—a case involving around Rp 1.9 billion in state losses.35 In other cases, judges who had presided over the trial of a defendant received bribes to assist with an appeal, whether lodged by the defendant or the prosecution. So, for example, judge Pasti Serefina was found to have agreed to help scupper a prosecutorial appeal against a district court decision that she helped to write. For this, she received a promise of Rp 1 billion (only Rp 500 million of which she received) and an increase to the star rating of a hotel her family owned.36

3 Arbitration

The popular belief that widespread corruption exists in government and, in particular, within the judicial system,37 is exacerbated by concerns that the Indonesian courts also lack competence in handling commercial matters, particularly in complex cases.38 To avoid using Indonesian courts, foreign investors usually opt to include arbitration clauses in the contracts they agree with Indonesian partners, whether private sector or government. Of course, arbitration is also available to help resolve disputes between Indonesian parties.

In 1999, Indonesia’s first statute dedicated to alternative dispute resolution, including arbitration, was enacted: Law 30 of 1999 on Arbitration and Alternative Dispute Resolution (the ‘Arbitration Law’).39 Before this Law, Indonesian courts usually recognised arbitration clauses by referencing the Code of Civil Procedure and Article 1338 of the Civil Code, which states that ‘All agreements made in accordance with statute apply like statutes to those who made them’. The courts could hold parties to their contracts, including any agreement to arbitrate if a dispute occurred.

Statutes governing the Supreme Court have, since 1950, declared that parties cannot appeal an arbitral decision to that court.40

3.1 Enforcement of Arbitral Awards

However, enforcement of arbitral awards, particularly foreign awards, has been problematic,41 even though Indonesia ratified the ICSID Convention in 1968 and the New York Convention in 1981.42 Indonesian courts, including the Supreme Court itself, were initially reluctant to enforce such awards, primarily due to confusion, first, about whether these conventions had become part of Indonesian law through ratification, and, second, about how enforcement would take place, given that no procedures had been produced to guide them.43 Only after the Supreme Court issued a regulation in 1990 containing such procedures did recognition and enforcement of foreign arbitral awards begin.44

Despite this, the Indonesian courts developed a reputation for interfering in awards rather than simply enforcing them. For example, in the infamous Decision 499/Pdt/VI/1988 (E.D & F. Man (Sugar) Ltd v. Yani Haryanto case), the Supreme Court avoided enforcement of a London arbitral award by deciding that the contract containing the arbitration clauses was void. Because the contract itself was void, so too was any agreement to arbitrate contained within it.

The recognition and enforcement of arbitral awards is now governed by the Arbitration Law. Although not without flaws, this statute has helped make recognition and enforcement of arbitral awards more predictable than previously. The Arbitration Law applies to arbitration specifically anticipated in a clearly expressed written agreement to arbitrate signed by the parties or agreed to after the dispute arises (Articles 1(1), 2, 4(2) and 9). This agreement to arbitrate authorises an arbitrator to make binding decisions concerning the rights and obligations of the parties (Article 4(1)). Only ‘commercial’45 disputes can be arbitrated (Article 5(1)). Parties can choose domestic or international arbitration (Article 34(1)) and can choose the governing law to resolve their disputes (Article 56(2)). The parties can choose their preferred arbitral procedures, although the Law outlines default procedures if parties make no choice (see Articles 27–51).

The main national arbitration institution is Badan Arbitrase Nasional Indonesia (BANI—Indonesian National Board of Arbitration, now also known as BANI Arbitration Center), established in 1977 by the Indonesian Chamber of Commerce and Industry (Kamar Dagang dan Industri Indonesia, KADIN).46 Compared to the judiciary, however, BANI hears relatively few disputes.47 Less than 10% of cases registered by BANI between 2014 and 2018 were international cases (i.e., involving foreign parties).48 This reflects the fact that foreign parties generally prefer to arbitrate outside Indonesia, for example in Singapore.

The choice of whether to arbitrate domestically or internationally affects how any resulting award is enforced. The Arbitration Law establishes different procedures for the registration and enforcement of domestic awards compared with international awards. Domestic awards must be registered with the registrar of the relevant district court by the arbitrator(s) or proxy within 30 days of the award being handed down (Article 59(1)).49 Before ordering execution, the district court chief judge must be satisfied that: the parties agreed to arbitrate; that the dispute between them is ‘commercial’; and that the award does not ‘violate morality and public order’ (Articles 4, 5 and 62(2)). If any of these conditions are not met, or Article 59(1) is not followed, then the award is unenforceable (Article 59(4)). Once registered, however, the award binds the parties and cannot be appealed (Article 60 and its elucidation). If one party refuses to comply with the award, the district court chairperson can enforce it upon the request of the other party (Article 61). The award will be enforced as if it were a civil judicial decision (Article 64). However, this is by no means a guarantee of quick or easy enforcement.

By contrast, only the Central Jakarta District Court can hear applications for the recognition and enforcement of international awards. The Law does not establish time limits within which registration applications must be lodged, although registration is required by the arbitrator(s) or proxy (Article 67). Again, to be enforceable, they must relate to ‘commercial law’ and not violate public order (Article 66(c)). The Arbitration Law imposes two additional requirements for international awards. First, they must have been handed down by an arbitrator or tribunal in a country that is a party to an international agreement about the recognition and enforcement of international awards to which Indonesia is also a party (Article 66(a)). Second, the award must have an exequatur (certificate of approval) from the Supreme Court of Indonesia (for international awards involving the Indonesian state as a party) or the Central Jakarta District Court chairperson (for other international awards) (Article 66(d) and (e)).

A refusal to recognise and enforce any award can be appealed to the Supreme Court (Article 68(2)), which has 90 days to decide the appeal (Article 68(3)). A decision by a Central Jakarta District Court chairperson that recognises and orders the enforcement of an international award cannot be appealed (Article 68(1)). Once the chairperson has ordered enforcement of the award, the order is conveyed to the district court with jurisdiction over the place of the debtor’s domicile or assets for implementation under Indonesian civil procedural law.50

3.2 Challenging Arbitral Awards

Critically, under Article 3 of the Arbitration Law, a district court has no jurisdiction to adjudicate a dispute involving parties already bound by an arbitration agreement. This is reinforced in Article 11, which states:

  1. (1)

    The existence of a written arbitration agreement eliminates the rights of the parties to submit the resolution of the dispute or difference of opinion contained in the agreement to the District Court.

  2. (2)

    The District Court must refuse and must not interfere in any dispute settlement which has been determined by arbitration, except in particular cases determined in this Law.

The Arbitration Law also allows the relevant Indonesian courts to annul a domestic or foreign award on three alternative fraud-related grounds:

  1. 1.

    The documents used during the arbitration hearing are later discovered to be false.

  2. 2.

    After the award has been made, a document that would have been decisive but was hidden by one party is discovered.

  3. 3.

    The award was made based on deception by one party to the dispute (Article 70).

While Article 70 appears to cast these three grounds as an exhaustive list, the General Elucidation to the 1999 Arbitration Law does not. It refers to these grounds ‘among others’ that are not specified.

In 2014, the Constitutional Court invalidated the elucidation to Article 70, which required that the existence of these types of fraud be proved in separate judicial proceedings.51 The Supreme Court had long refused to entertain annulment claims without such a judicial decision.52 It therefore seems that parties can now seek to prove fraud during proceedings for the annulment of an award.

An annulment application must be lodged with the chairperson of the relevant district court within 30 days of an award’s registration (Articles 71 and 72(1)). Annulments can then be appealed to the Supreme Court (Article 72(3)).

The 1999 Law also seeks to close off a particular avenue for judicial interference, employed by the Supreme Court in Decision 499/Pdt/VI/1988 (E.D & F. Man (Sugar) Ltd v. Yani Haryanto case), discussed above. Article 10 provides that agreements to arbitrate are severable from the main contract in which those agreements are contained. This provision means that the dispute between the parties can still be resolved by arbitration, even if the contract containing the arbitration agreement itself is of questionable validity or is, in fact, invalidated.

Despite the relatively clear wording of these provisions, some courts have simply ignored them entirely. For example, in Gatari Air Services vs Jasa Angkasa Semesta Tbk,53 the South Jakarta District Court ignored Articles 3 and 11, finding it had jurisdiction to decide a dispute regarding a contract containing an arbitration clause without giving reasons for this finding.

3.3 Judicial Enforcement of Arbitral Awards

The circumstances in which an Indonesian court can refuse to recognise an arbitral award on public order grounds are uncertain. The Law does not define ‘public order’, which is thought to leave significant scope for judicial reconsideration, including in relation to arbitral findings of fact.54

Even more contentious is whether an award can be annulled on public order grounds. On the one hand, the grounds for annulment set out in Article 70 of the Arbitration Law appear, as mentioned above, to be cast as an exhaustive list and do not mention public order. On the other, as noted above, the General Elucidation to the Law refers to these grounds, ‘among others’ that are not specified. This is legally controversial because an elucidation must not ‘add’ to or fundamentally alter the text of the statute it purports to elucidate.55 By appearing to leave the permissible grounds for annulment open, the elucidation appears to do precisely this.

Commentators have different views about the extent to which the courts avoid recognising or annulling arbitral awards in today’s Indonesia. Some emphasise that most awards are now enforced as a matter of course (although the process can be ‘extremely difficult and time consuming’)56 and that these exceptions are rarely used.57 Others point to several decisions in which awards have not been enforced or have been annulled and conclude that, unfortunately, there remains ‘great uncertainty as to the ambit of these exceptions and how the Indonesian courts will apply them’.58

Yet others still have argued, quite bluntly, that Indonesia’s courts are ‘hostile’ towards enforcing foreign arbitral awards.59 There is some merit in these claims, at least in terms of historical practice. The Supreme Court has, for example, in various cases, decided that arbitral awards about a contractual dispute cannot be enforced on public order grounds if related litigation about the dispute is pending before Indonesian courts.60 For example, in 2010, the Supreme Court held, in Astro Nusantara International BV v. PT Ayunda Prima Mitra,61 that public order was breached by an anti-suit injunction, issued by arbitrators, prohibiting the parties from pursuing litigation because their dispute was captured by an arbitration clause in their contract. The Court appeared to take this as an affront to Indonesian sovereignty rather than as an order directed at the parties. Most notorious, perhaps, was the Karaha Bodas case,62 which involved enforcement of an arbitral award issued in Switzerland and adverse to an Indonesian state-owned enterprise. The Central Jakarta District Court held that the General Elucidation to Article 70 allowed it to annul an award for violating public order, and it did so on the basis that a state-owned enterprise should not be held accountable for Indonesian regulatory changes.63

On the other hand, some notorious cases, including Karaha Bodas itself, have been overturned by the Supreme Court on appeal. In other words, although lower courts have refused recognition or enforcement in some cases, those seeking enforcement often ultimately prevail.64 However, one significant problem remains: it appears still to be common for parties losing in arbitration proceedings to oppose enforcement before Indonesia’s courts, even if they think they will probably lose on appeal.65 The vagueness of the public policy exception is often said to be the main culprit: its lack of clarity leads some practitioners to argue that it encourages losing parties to take the chance of challenging enforcement, if only to delay the inevitable, particularly if the award involves significant sums of money.66

4 Bilateral Investment Treaties and Investor–State Arbitration

According to records maintained by UNCTAD, Indonesia has signed 74 BITs and 22 bilateral or multilateral treaties containing investment provisions (TIPs). Some of these treaties have never entered into force (e.g., the 2014 ASEAN–India Investment Agreement) and, as discussed below, Indonesia has terminated some of its older BITs or has sought to renegotiate them.67

Many of Indonesia's BITs seek to encourage investment by providing the following to investors of the other state party: fair and equitable treatment; protection and security; most favoured nation provisions; and guarantees against nationalisation or expropriation. Most of the BITs also specify how investor–state disputes should be resolved. The parties should first attempt to resolve the dispute by consultation and negotiation. If this fails, Indonesia's BITs typically provide that the investor may refer the dispute to arbitration or conciliation under the ICSID Convention or, in a smaller number of cases, ad hoc arbitration under UNCITRAL Rules or arbitration under the auspices of other institutions.68

These dispute-resolution processes are largely mirrored in Article 32 of the 2007 Investment Law, which states:

  1. 1.

    Investment disputes between the government and investors are to be first settled through deliberation and consensus.

  2. 2.

    If a settlement cannot be reached by deliberation and consensus, the dispute can be settled through arbitration, alternative dispute resolution or the courts, under prevailing laws.

  3. 3.

    Investment disputes between the government and domestic investors are to be settled through arbitration, if the parties have agreed to do so, and if resolution is not achieved through arbitration, then the dispute is to be resolved in court.

  4. 4.

    Investment disputes between the government and foreign investors are to be resolved through international arbitration upon which the parties must agree.

Article 32(4) leaves scope for the Indonesian government to seek to avoid arbitration, at least if no BIT, TIP or other agreement (such as an investment contract) otherwise provides for it. Article 32(4) does not clearly stipulate how disputes between investors and the Indonesian government should be resolved if the parties cannot agree to arbitrate, much less the seat of the arbitration and procedures. It seems possible that one party could stall arbitration by refusing to agree on the particulars, although failure to agree might simply lead to the dispute being settled by the courts via Article 32(2).

The Indonesian government has recently taken steps to encourage the use of mediation in investor–state disputes, including reportedly pursuing a policy to make mediation mandatory before arbitration. The implementation of such a policy appears to be reflected, for example, in the 2019 Australia–Indonesia Comprehensive Economic Partnership Agreement, which provides that the state party to a dispute may initiate mandatory conciliation in the event of a dispute with an investor.69 Notably, however, Indonesia has continued to include provisions for investor–state arbitration even in these newer agreements.

4.1 Termination of BITs

In 2014, Indonesia announced that it intended to ‘terminate’ all its BITs, with the president claiming that they were ‘inappropriate and unjust’ and the vice president declaring that new treaties ‘adjusted to recent developments’ were needed.70 Some have argued that ‘terminate’ means ‘allow to lapse’, indicating that Indonesia will not actively rescind them, but that it will seek to renegotiate with more favourable terms upon their expiry.71 Most of Indonesia's BITs have sunset clauses allowing them to continue in force for up to 15 years after their termination or expiry (in respect of investments made prior to the date of termination).72 However, it seems that Indonesia has, in fact, sought to bring some bilateral treaties to an end earlier than their expiry date, including the sunset clauses they contain.73

At least three factors were probably behind this desire to terminate—all of which relate to the fact that these BITs generally allowed investors to submit a dispute with the Indonesian state to binding arbitration. The first and second reasons are interrelated; 2014 was an election year and economic nationalism74 is a politically popular view in Indonesia, where foreigners have, for centuries, been portrayed as the primary beneficiaries of national resource exploitation. In this context, it is considered politically advantageous to advocate against foreign investors being able to pursue large amounts from the Indonesian government, particularly after they have already extracted significant amounts of Indonesia’s natural resources.

The second reason was that, in 2014, Indonesia appears to have enjoyed the highest levels of foreign investment in its history.75 Perhaps policymakers felt that they could, therefore, afford to seek to ‘terminate’ these BITs. After all, any resulting controversy or economic damage could be dealt with by the new government. The third reason was that the Indonesian government was at the time defending itself in several arbitration proceedings, three of which were highly publicised.

The first of these arbitrations involved a Japanese–American joint venture, PT Newmont Nusa Tenggara, which sought arbitration in 2014 with ICSID in response to mineral ore export bans and pending divestments, although it ultimately withdrew this claim, reportedly after securing a reduced export obligation.76 But perhaps the most important investment dispute Indonesia has faced, and which was pending in 2014 when the government announced its intention to terminate Indonesia's BITs, is the Churchill and Planet Mining case, a USD2 billion claim in the resources sector in which allegations of corruption played a central role. We detail this cause célèbre next, followed by the third high-profile case, which involved an investment in Indonesia’s failed Bank Century.

4.2 Churchill and Planet Mining (2012)

These related cases involved disputes over the ownership of 34 licences to mine coal in East Kalimantan. Churchill (a UK company) and Planet (an Australian subsidiary) had purchased shares in the Ridlatama group, which claimed to have legitimately obtained the coal mining licences from the East Kutai local government after the previous Indonesian licence holder allowed them to lapse. Churchill had discovered a much larger deposit of coal than expected: 2.73 billion tons. This made the site the seventh-largest undeveloped coal mining asset in the world, with the potential to generate huge revenues.

The previous licence holder, Nusantara Group, claimed that it still held the licences. For its part, Indonesia claimed that the licences had not lapsed, and that the licences Churchill had presented were forgeries, detected following an audit by the National Audit Agency to verify the legitimacy of mining authorisations issued between 2006 and 2008. The audit also found that Ridlatama had not obtained permission from the Forestry Ministry to undertake mining in protected forests, required under Article 38 of the 1999 Forestry Law.

Initially, Churchill’s Indonesian partner, Ridlatama, pursued this case through Indonesia’s administrative courts, and appealed to the Supreme Court, but failed.77 In May 2012, Churchill then commenced ICSID arbitration proceedings seeking USD2 billion against the Indonesian government—namely, the president, the East Kutai regent, the Foreign Ministry, the Ministry of Energy and Mineral Resources and the National Investment Coordination Board. Initially, Indonesia challenged jurisdiction because it claimed it had not given express consent to the investment under the UK and Australian bilateral investment treaties upon which Churchill and Planet had relied, respectively. This argument was dismissed by the Tribunal in 2014 in a preliminary decision.

Indonesia ultimately won on the merits, primarily because the panel of arbitrators concluded that the licences probably were forgeries and that Churchill’s former Indonesian partner, the Ridlatama Group, was likely to be responsible. This fraudulent conduct tainted the entire investment and meant that protection under the treaties was unavailable.78 Specifically, the tribunal said that claims ‘based on documents forged to implement a fraud aimed at obtaining mining rights’ were inadmissible as a ‘matter of international public policy’. The Tribunal also noted that Churchill’s due diligence investigations into the authenticity of the licences were insufficient.

Despite ultimately prevailing, it seems clear that the government genuinely thought it could have lost the Churchill case. The matter also brought home that the central government might find itself responsible for defending the actions of local governments, including paying out over USD10 million in legal fees.79 As then-President Susilo Bambang Yudhoyono said at the time:

This is a lesson for us, [an] incident in a county [kabupaten] ... taken to arbitration ... The first defendant, yes, the President. Imagine [a] hundred countries doing things like that, especially when we’re on the wrong side and lose, it’s a remarkable implication.80

The Churchill case had a particular impact on the views of the Indonesian government and the public because it followed soon after the equally high-profile cases of Al Warraq and Rafat.

4.3 The Al Warraq and Rafat Cases (2011)

In this Singapore-based UNCITRAL arbitration, two foreign investors brought claims against Indonesia under the 1981 Agreement on Promotion, Protection and Guarantee of Investments amongst the Member States of the Organization of the Islamic Conference (OIC Investment Agreement).81 They argued that the government had expropriated their investment—Bank Century, in which they were shareholders—after a corruption scandal. They also argued that Indonesia had acted in breach of its fair and equitable treatment obligations under the OIC Investment Agreement, as Indonesian officials were involved in the alleged solicitation of bribes.

The broader scandal involving Bank Century that formed the background to this claim had consumed Indonesian politics for many months and involved allegations of impropriety in the government bailout of the Bank. Al Warraq and Rafat were accused, with others, of embezzling some of these funds.82 For this, they were tried in absentia in Indonesia, found guilty and sentenced to 15 years’ imprisonment. The Indonesian media portrayed them as two fugitives using arbitration to steal even more from Indonesia.

Indonesia ultimately won this arbitration on its merits. The Tribunal dismissed the claimants’ bribery allegations due to a lack of evidence and connection between the alleged conduct and the loss of the claimants’ investment. The Tribunal also dismissed the claimants’ damages claim as it found that they had engaged in six types of banking fraud and breached their obligation not to act in a manner ‘prejudicial to the public interest’ under Article 9 of the OIC Investment Agreement. A majority of the Tribunal invoked the doctrine of ‘clean hands’ and held that because the claimants had violated Indonesian law, they deprived themselves of protections under the OIC Investment Agreement. However, the Tribunal also found that Indonesia had treated the claimants unfairly by not allowing them to be legally represented during their trials, even though they were not present themselves. That said, Indonesia failed in its counterclaim against the claimants regarding their banking fraud because the fraud was committed against the Bank, not the state, and Indonesia's right to recover the losses suffered by the Bank was not demonstrated.83

Although, as mentioned, Indonesia ultimately won this arbitration on the merits, the Tribunal did find that Indonesia had treated Al Warraq and Rafat unfairly by not allowing them to be legally represented during their trials. This caused the government significant embarrassment and likely contributed to its decision to start terminating the BITs.

4.4 Impact of BIT Terminations

There is much to suggest that, despite Indonesia’s policy of reforming its investment treaties, in reality, very little has changed for most foreign investors.

The ASEAN Comprehensive Investment Agreement (2009), and the ASEAN free trade agreements with Australia, New Zealand, China, Japan, Korea and India, provide investor–state dispute settlements (ISDSs) for foreign investors in Indonesia. Investors from many other countries have bases upon which to bring arbitration claims. In any event, as a matter of Indonesian law, it seems clear that disputes between the government and international investors can be settled by arbitration based on the agreement between them. This is expressly provided for in Indonesia’s investment statute, as discussed. This view is further supported by a draft regulation on investment dispute resolution between the government and investors, which confirms that foreign investors continue to have access to international arbitration under treaties and investment law.

Indonesia has a good success rate in investor–state arbitration proceedings. Since it ratified ICSID in 1967, it has been involved in just eight ICSID arbitrations, and has only lost one, concerning a contractual dispute relating to the construction of a Jakarta hotel worth less than USD3 million.84 We expect that Indonesia might continue to back away from its anti-ISDS rhetoric in future as it seeks actively to attract more foreign investment, including back into the politically sensitive mining sector.85

It is also relevant that, as Indonesia’s economy grows, it may find itself pushing for similar protections in the countries in which it invests, making it more difficult to maintain an objection to those protections being offered in the country itself.

4.5 Treaty Provisions Addressing Corruption

As noted above, Indonesia has maintained investor access to arbitration in its more recent BITs and TIPs, notwithstanding the domestic political concerns regarding the risk of investor claims. Consistent with the modernisation of investment treaty provisions elsewhere, some of Indonesia's newer treaties expressly deal with the issue of corruption. For example, the 2022 Switzerland–Indonesia BIT contains the following provision:

Art. 14 Measures against corruption

(1) An investor of a Party and its investments shall refrain, before or after the establishment of an investment in the territory of the other Party, from offering, promising or granting an undue pecuniary or other advantage, directly or through intermediaries, to a public official of the other Party, for his benefit or for the benefit of a third party, so that this official or this third party acts or abstains from acting in the performance of official duties, with a view to obtaining any favour in connection with an investment.

(2) An investor of a Party and its investments, in the territory of the other Party, shall not be complicit in an act described in paragraph 1, including inciting or aiding such acts.

The BIT does not specify any consequences of an investor being involved in corruption. Given the mandatory language used, and the fact that this provision immediately precedes the BIT's provisions on investor–state dispute resolution, it should be anticipated that an investor involved in corruption may face arguments from the host state that it is not entitled to pursue claims under this BIT.86

By contrast, the 2020 Korea–Indonesia Comprehensive Economic Partnership Agreement does make clear the consequences if an investor seeking to bring claims under the agreement is involved in corruption:

Art. 7. 19 Investor–State Dispute Settlement (3(c))

Without prejudice to the scope of any applicable exceptions, non-conforming measures, principles of international law or the disputing Party’s ability to rely on such exceptions, non-conforming measures or principles of international law during the proceedings, no claim may be brought under this Article:

(c) in relation to an investment that has been established through illegal conduct including fraudulent misrepresentation, concealment or corruption. For greater certainty, this exclusion does not apply to investments established through minor or technical breaches of law.

Provisions of this nature are, however, by no means included in all of Indonesia's more recent BITs and TIPS. The 2018 Singapore–Indonesia BIT, for example, instead states in Article 13.1 that ‘[t]he Parties reaffirm that bribery and other forms of corruption in any investment activities can undermine democracy and rule of law’. Article 13.2 adds that ‘[n]othing in this Agreement shall prevent a party from undertaking measures to prevent and combat bribery and other forms of corruption, provided that such measures are not inconsistent with this Agreement’. Given the importance of Singapore as a source of foreign direct investment into Indonesia, it could be argued that this provision reflects a well-informed concern that even anti-corruption measures in Indonesia may be implemented in a manner inconsistent with international standards of investor protection.

5 Conclusion

Indonesia has long been regarded as a country with high levels of corruption. Reforms introduced after Soeharto’s New Order collapsed in 1998 included a new Corruption Law, which was intended to make investigating and prosecuting corruption much easier than in the past, as well as a powerful new Anti-Corruption Commission and an Anti-Corruption Court. These new institutions had some success, but it is now widely accepted in Indonesia that many of the reforms have been undermined by a series of amendments passed by the political elite.87 Certainly, it is publicly acknowledged—including by successive presidents and chief justices of the Supreme Court—that corruption and the ‘mafia hukum’ remain major problems in the judicial system.

To avoid the Indonesian courts, foreign investors routinely include foreign arbitration clauses in contracts with Indonesian partners. However, because the enforcement of foreign arbitral awards in Indonesia is ultimately still subject to judicial oversight, this is not a complete solution. There are certainly examples of successful enforcement, but foreign arbitral awards remain vulnerable to challenge in Indonesian courts. While the courts now seem more willing to accept these awards, their handling of them remains inconsistent and unpredictable.

As to foreign investor–state disputes, Indonesia has a reasonable record of success. Despite this, the government has now moved to terminate some older bilateral investment treaties that entitle foreign investors to submit investment disputes to arbitration. It has also begun to narrow the scope of protections afforded to foreign investors in newer agreements. This is because of government concerns about the threat of future claims and their cost to the national budget. However, as the Indonesian economy grows, and outbound investment increases, it is unclear whether Indonesia will maintain this stance.

Notes

  1. 1.

    See Transparency International 2022.

  2. 2.

    See UNCTAD n.d.-a.

  3. 3.

    Butt and Lindsey 2018, p. 284. However, the toughest penalty handed down at the time of writing was the life term imposed on former Constitutional Court Chief Justice Akil Mochtar.

  4. 4.

    The Elucidation (penjelasan) is the formal explanatory memorandum that accompanies most forms of regulation in Indonesia. For a discussion of the legal authority of elucidations, see Butt and Lindsey 2018, pp. 35–36.

  5. 5.

    This elucidation was declared unconstitutional by the Indonesian Constitution Court in 2006, but the Supreme Court has held that the Constitutional Court’s invalidation of the elucidation to Article 2(1) left a legal vacuum, which the Supreme Court needed to fill. It did so by using the Supreme Court’s own jurisprudence on Article 2(1), which incorporated the wide reading of ‘unlawfully’ that the Constitutional Court had invalidated. Although in this way the Supreme Court subverted the Constitutional Court’s decision, the Constitutional Court lacks the power to enforce its decisions and must rely on the government to implement them. Indonesia’s Supreme Court and the anti-corruption courts therefore continue to apply ‘community standards’ when determining whether defendants have committed ‘unlawful’ acts in the context of Article 2(1).

  6. 6.

    Butt 2009, pp. 181–182.

  7. 7.

    An example of some of the perverse outcomes the Supreme Court approach has produced is the string of cases involving alleged corruption in procuring items needed to run the 2004 national elections, including ballot boxes and ink. Several members of the General Elections Commission (KPU) responsible for this procurement were convicted of corruption, largely for failing to choose the cheapest tenderer, even though whether that tenderer could provide those items in time for the election was highly doubtful. Fearing that no single tenderer could deliver ‘on time’, the Commission decided to use several tenders and paid the average amount proposed in the tenders it had received. The case transcripts provide no evidence indicating that they personally benefitted from this.

  8. 8.

    These include: where the KPK receives a report or complaint about police or prosecutors failing to pursue a case or protecting the real perpetrator; a corruption investigation or prosecution stalls for no good reason, is marred by corruption itself or is interfered with by the executive, legislature or judiciary; or a circumstance arises that, according to police or prosecutors, makes a particular corruption case difficult to handle: Article 9 of Law 30 of 2002.

  9. 9.

    Article 11 of Law 30 of 2002.

  10. 10.

    Article 58(2) of Law 30 of 2002.

  11. 11.

    Fenwick, 2008, p. 413.

  12. 12.

    Article 3 of Law 46 of 2009.

  13. 13.

    Article 4 of Law 46 of 2009.

  14. 14.

    Anwar 2023, pp. 49–53.

  15. 15.

    Schütte 2021.

  16. 16.

    Goodpaster 2002, pp. 88–89.

  17. 17.

    Butt and Lindsey 2010, pp. 189–190.

  18. 18.

    Rahmi 2017.

  19. 19.

    Parlina and Dipa 2013; Zikry 2013.

  20. 20.

    Hukumonline/Ash 2013.

  21. 21.

    Movanita 2017.

  22. 22.

    Supreme Court 2019.

  23. 23.

    Butt 2023.

  24. 24.

    Aryan 2022.

  25. 25.

    Ramadhan 2022.

  26. 26.

    Wasingatu et al. 2002.

  27. 27.

    Satuan Tugas Pemberantasan Mafia Hukum 2010.

  28. 28.

    From the 1970s to 2010, only a handful of judges were prosecuted, much less convicted, for corruption in decisions that are not publicly available. See Hukumonline/Mys 2005.

  29. 29.

    Putusan (n.d.).

  30. 30.

    Semarang District Corruption Court decision 8/PID.SUS/2014/PN.TIP.SMG [37].

  31. 31.

    Central Jakarta District Court decision 10/PID.SUS/TPK/2014/PN.JKT.PST.

  32. 32.

    In 1977, the head of the State Logistics Depot in East Kalimantan, Budiadji, was convicted of corruption relating to rice sales and sentenced to life imprisonment, but then-President Soeharto reduced the sentence to 20 years and with remissions he was released in 1985: Tempo 2007.

  33. 33.

    As in Bandung District Corruption Court decision 92/PID.SUS/TPK/2014/PN.BDG; Bandung District Corruption Court decision 93/PID.SUS/TPK/2014/PN.BDG; Semarang District Corruption Court decision 128/PID.SUS/2012/PN.TIP.SMG; Semarang Corruption High Court decision 26/PID.TPK/2013/PT.SMG.

  34. 34.

    Tempo 2014.

  35. 35.

    Tempo 2012.

  36. 36.

    Bandung High Corruption Court decision 9/TIPIKOR/2015/PT.BDG [8]. See also Bandung District Corruption Court decision 83/PID.SUS./TPK/2011/PN.BDG [37].

  37. 37.

    Surveys conducted in 2001 by The Asia Foundation and AC Neilsen showed that the judiciary was widely regarded by Indonesians as among their nation’s more corrupt institutions. See Butt and Lindsey 2010.

  38. 38.

    See generally, Crouch 2019.

  39. 39.

    Law 30 of 1999 on Arbitration and Alternative Dispute Resolution.

  40. 40.

    See, for example, Law 1 of 1950 on the Supreme Court and Law 1 of 1967 on Foreign Investment, both cited in Budidjaja 2013, p. 187–188.

  41. 41.

    See, generally, Kusumadara 2021, Budidjaja 2021 and Butt and Lindsey 2018.

  42. 42.

    Ratification, respectively, by Law 5 of 1968 and Presidential Decision 34 of 1981.

  43. 43.

    See, for example, Supreme Court Decision 2944K/PTD/1983 (29 November 1984).

  44. 44.

    Supreme Court Regulation 1/1990 on Procedures for the Enforcement of Foreign Arbitral Awards.

  45. 45.

    The elucidation to Article 66(b) of the 1999 Arbitration Law lists a number of examples of activities that may be characterised as commercial, including investment.

  46. 46.

    More recently, other institutions have been established as competitors to BANI. See, generally, Satryani and Sulaiman 2022.

  47. 47.

    Between 2000 and 2008, BANI registered a total of 1008 cases. See, generally, BANI 2019.

  48. 48.

    BANI 2019, p. 4.

  49. 49.

    Although it seems that the courts are willing to allow either of the parties to seek to register the award: Sukirno et al. 2012.

  50. 50.

    Mills 2000, p. 193.

  51. 51.

    Constitutional Court Decision 15/PUU-XI-2014.

  52. 52.

    Supreme Court Decisions 01/ARB.BTL/2006; 855K/lPDT.SUS/2008; 729K/PDT.SUS/2008; 109K/PDT.SUS/2010, cited in Constitutional Court Decision 15/PUU-XI-2014, pp. 46–47.

  53. 53.

    South Jakarta District Court decision 617/PDT.G/2017/ PN.JKT.SEL, of 14 March 2018. This decision was affirmed on appeal to the Jakarta High Court decision 408/PDT/2018/PT DKI, 7 September 2018. That decision was then taken on cassation to the Supreme Court, but no decision is yet available.

  54. 54.

    See, for example, Junita 2012.

  55. 55.

    See Points 176, 178 and 186 of Schedule II of Law 12 of 201l on Lawmaking.

  56. 56.

    Ganie 2018, p. 1.

  57. 57.

    Mills 2015.

  58. 58.

    Lubis and Burke 2004; Budidjaja 2002, p. 37.

  59. 59.

    Junita 2008, p. 373.

  60. 60.

    Bankers Trust Company and Bankers Trust International Plc (Central Jakarta District Court decisions 01 and 02/Pdt/ARB.INT/1999/PN.JKT.PST).

  61. 61.

    01K/Pdt.Susu/2010 (24 February 2010).

  62. 62.

    This case is discussed at length in Rubins 2005, pp. 373–384.

  63. 63.

    Perusahaan Pertambangan Minyak dan Gas Bumi Negara (Pertamina) v. Karaha Bodas Co. LLC (District Court of Central Jakarta decision 86/Pdt.G/2000/PN.JKT.PST). See also Butt and Lindsey 2018, pp. 370–372.

  64. 64.

    Ganie 2018, p. 1.

  65. 65.

    Mon/Hukumonline 2010.

  66. 66.

    Budidjaja 2002, p. 49.

  67. 67.

    See Crockett 2018, p. 165.

  68. 68.

    This paragraph draws on Butt 2011, pp. 117–118.

  69. 69.

    The provision for mandatory conciliation (at the option of the host state) in the Australia–Indonesia agreement can be contrasted with the provision for optional mediation (requiring consent of both parties) in the 2022 Switzerland–Indonesia BIT.

  70. 70.

    Jakarta Post 2014.

  71. 71.

    Ewing-Chow and Losari 2014.

  72. 72.

    Trakman and Sharma 2014.

  73. 73.

    Peterson 2015.

  74. 74.

    See, generally, Nottage and Butt 2014; Warburton 2017, 2023.

  75. 75.

    Crockett 2018, p. 176; Pas and Damanik 2014.

  76. 76.

    Crockett 2018, p. 177.

  77. 77.

    Samarinda District Administrative Court decision 31/G/2010/PTUN-SMD; Administrative High Court of Jakarta decision 110/ B/2011/PT.TUN.JKT; Supreme Court decision 367K/TUN/2011.

  78. 78.

    Churchill Mining and Planet Mining Pty Ltd v. Republic of Indonesia, ICSID Case No. ARB/12/40 and 12/14.

  79. 79.

    Singgih 2016. In September 2012, the president issued a presidential decision that stated that, henceforth, disputes that stemmed from administrative decisions made by regional governments would not be capable of submission to ICSID (see Article 1 of Presidential Decision 31 of 2012 regarding disputes which may not be submitted for resolution within the jurisdiction of ICSID). The Decision directs the Minister of Law and Human Rights to take the necessary steps to inform ICSID of this change (Article 3 of Presidential Decision 31 of 2012).

  80. 80.

    Cited in Price 2017, p. 138.

  81. 81.

    UNCTAD n.d.-b.

  82. 82.

    Sihite 2011.

  83. 83.

    IISD 2015.

  84. 84.

    Crockett 2018, pp. 177–178; Nottage and Thanitcul 2016, pp. 27–30.

  85. 85.

    See, for example, Sihombing and Harsono 2022.

  86. 86.

    An investor involved in corruption may face such arguments in any event; see for example, Ana et al. 2023.

  87. 87.

    Anwar 2023, p. 53.