Protection of Foreign Investment in Indonesia

If you are planning to start investing in Indonesia, we recommend reading today's material.

It should be noted at once that legal protection of foreign investors in Indonesia is quite inconsistent, and sometimes unpredictable. In practice, there are guarantees to protect investments, but it is extremely difficult to hold the state accountable for non-compliance.

Regulation of foreign investment in Indonesia

An investor, like any person, is the bearer of a number of rights and obligations that are inextricably linked to his investment. The protection of investor rights, as well as the protection of human rights, is carried out at two levels: national and international. At the national level, which can be called the basis for the development of the investment climate in the country, there are legal documents that create a legal basis for the coexistence of foreign investors and the state. In Indonesia, this basis is quite weak.

This is evidenced at least by the fact that in recent years more than 20 bilateral investment protection agreements have been terminated in the jurisdiction. However, if you are interested in starting an investment business in Indonesia, it is important to understand that an investor can receive international protection, as the country is a party to the comprehensive ASEAN investment agreement and the relevant free trade agreements. This means that many foreign investors retain the opportunity to invoke the means of protecting investment contracts (for example, fair and equal treatment in the face of government interference in their investments).

It is noteworthy that some of the investment protections in Indonesia have been expanded. For example, this applies to measures related to the conservation of natural resources and the environment.

Resolution of investment disputes in Indonesia

The Investment Law provides investors with ample opportunities to settle disputes in Indonesia. According to this law, the national regime applies to foreign investors, with some exceptions specified in Indonesian law and international treaties. The national regime should be understood as a regime in which investors from other countries can enjoy the same rights as local economic entities.

If you need to file a lawsuit in Indonesia, please note that various forms of legal protection are available to foreign investors. In practice, although most disputes involving foreign investors are referred to international arbitration, foreign investors can also file lawsuits in Indonesia with state administrative courts, which hear cases involving the licensing of foreign investors. Many cases involving foreign investment in Indonesia, considered by local courts, deal with taxation issues, as well as errors made by the customs authorities.

Courts have the right to conduct judicial review to ensure constitutional and regulatory coherence. The Constitutional Court is also empowered to decide in resolving financial disputes in Indonesia over jurisdiction between public authorities.

Legal assistance in disputes in Indonesia

Investors in Indonesia have a number of effective alternatives to protect their investment. It will be more effective and efficient to choose international guarantees of investor protection. Although work is being done at the national level to improve legislation, the case law is not extensive enough, so there are no practical examples of protection. Important at the initial stage is the question of the complete implementation at the legal level of all measures to ensure the protection of investor rights in Indonesia, if necessary in the future.