Legal Implications of Bilateral Investment Treaties (BITs) on Foreign Investment in Indonesia

Abstract

This study examines the implications of Bilateral Investment Treaties (BITs) on the dynamics of foreign investment in Indonesia, focusing on how treaty provisions, investor–state dispute settlement (ISDS) mechanisms, and regulatory reforms shape the country’s investment climate. As Indonesia has undergone significant treaty termination, renegotiation, and policy restructuring particularly after high-profile arbitration cases such as Churchill Mining and Newmont—there is a growing need to assess the evolving balance between investor protection and national regulatory autonomy. Using a qualitative descriptive approach supported by doctrinal legal analysis, this research reviews international treaty frameworks, national investment legislation, and relevant dispute cases to capture the interaction between international obligations and domestic policy space. The findings indicate that while BITs historically contributed to enhancing Indonesia’s investment attractiveness, concerns about excessive investor privileges, limitations on regulatory authority, and financial risks from arbitration claims have driven Indonesia to reformulate its investment treaty policy. The analysis also shows that the new generation of treaties emphasizes sustainable development, clearer definitions, and stronger state rights to regulate. This study contributes to academic discourse by providing a comprehensive assessment of Indonesia’s shifting investment treaty landscape and offers policy implications for designing more balanced, transparent, and development-oriented international investment agreements.