On 4 March 2019, Australia and Indonesia signed the Australia-Indonesia Comprehensive Economic Partnership Agreement (“CEPA“). In this post, we briefly consider some of the noteworthy features of the CEPA chapter on investment and in particular its provisions regarding investor-State dispute settlement (“ISDS“).
Indonesia and Australia signed a bilateral investment treaty (“BIT“) containing ISDS provisions in 1992. Both States are also party to the ASEAN-Australia- New Zealand Free Trade Agreement (“AANZFTA”), signed by Australia in 2009 and Indonesia in 2012, which contains an investment chapter.
As we reported in a previous post, Indonesia announced in 2015 that it would seek to renegotiate and replace its older investment treaties with more modern agreements. The Australia-Indonesia BIT, however, will remain in force even after CEPA enters into force. This is in contrast to the Hong Kong-Australia Free Trade Agreement signed this week (see our post here) pursuant to which Australia and Hong Kong have agreed to terminate the Hong Kong-Australia BIT, which was signed in 1993 and became infamous in Australia after Philip Morris used the treaty to commence arbitration against Australia challenging the Tobacco Plain Packaging Act 2011.
In August last year, we reported that a new Indonesian arbitral institution had been established in mid-2016 under the name of Renewed BANI or BANI Pembaharuan (“BANI-P“), notwithstanding the continued existence of the separate institution already known as BANI. We reported that the two institutions were in dispute as to which of them could legitimately claim the right to refer to itself as BANI, and we explained that although this might at first appear to be of purely local interest, the confusion has real and serious implications for contracts that provide for arbitration under BANI rules (as many now do).
BANI-P brought the matter to the South Jakarta District Court. In August 2017 BANI-P prevailed in obtaining an order declaring it to be the rightful institution to be referred to as BANI. Meanwhile, however, the original BANI had succeeded in separate proceedings in the Jakarta State Administrative Court, obtaining a ruling nullifying the decision of the Ministry of Law and Human Rights to acknowledge and register BANI-P as an arbitral institution. BANI had also obtained a ruling from the Commercial Court confirming it as the rightful owner of the trademark name “BANI”.
Both BANI-P and BANI appealed against the decisions of the South Jakarta District Court and the Jakarta State Administrative Court. However, BANI-P has apparently elected not to appeal against the decision of the Commercial Court.
Recently, the State Administrative High Court issued a decision in favour of BANI-P and reversed the decision of the lower Administrative Court. However, the Administrative High Court made this ruling on a technical ground: it found that the administrative courts do not have jurisdiction on the matter which is effectively a civil dispute. The Administrative High Court observed that its conclusion is strengthened by the fact that there are already ongoing proceedings in the South Jakarta District Court and the Commercial Court dealing with the issue of which entity has the right to use the name of, and be recognised as, BANI.
This decision is a blow to BANI as it is now faced with two decisions that are not in its favour. Continue reading
Since its establishment in 1977, BANI (Badan Arbitrase Nasional Indonesia) has been the most active arbitral institution in Indonesia. With offices across the country, its own rules and procedures and over 100 Indonesian and foreign arbitrators on its list, BANI is well-established and has presided over a steady stream of domestic and international disputes. (Other arbitral institutions exist, but with more limited remits such as Islamic or capital markets transactions.)
For all its success, however (and there can be no doubt that BANI has been a positive influence in the development of Indonesian arbitration), BANI has found itself subject to criticism at various points in its history – most recently that it has been unable to keep up with developments and trends in international arbitration, due to the inflexible nature of its constitution.
September 2016 saw the unexpected establishment of BANI Pembaharuan, a new institution set up to deal with domestic and international general commercial arbitrations. Domestic commentary suggests that BANI Pembaharuan was set up with the stated intention of “institutionalising BANI, not creating a new BANI” (although there is a competing narrative that the BANI Pembaharuan was primarily created because of a disagreement between the BANI’s board members and one of the members of the Indonesian arbitration community).
BANI quickly issued a statement to the effect that it does not recognise BANI Pembaharuan and that its use of the “BANI” acronym is illegitimate. This was followed by multiple proceedings in the Indonesian courts concerning the new institution’s use of the “BANI” name. Regrettably, this has led to uncertainty as to which institution is rightfully entitled to administer arbitrations where parties have elected to refer to their disputes to “BANI”. Unfortunately, this uncertainty is set to continue for some time, as recent rulings from different courts have been contradictory and are likely to be appealed, prolonging the confusion.
In ADM Asia-Pacific Trading PTE Ltd v PT Budi Semesta Satria  EWHC 1427, the English Commercial Court rejected an application for an anti-suit injunction on the basis of undue delay.
This decision mirrors the Court's approach in Ecobank v Tanoh and Essar v Bank of China, which we previously covered here and here. It also reiterates that the Court's discretion to reject an application for an anti-suit injunction is not limited to instances where the delay is unconscionable or has caused prejudice to the respondent.
The judgment confirms, once again, that parties facing foreign proceedings commenced in breach of an arbitration agreement should bring an anti-suit injunction application as soon as possible after receiving notice of the foreign proceedings, regardless of any jurisdictional challenge in the foreign proceedings.
Since the Dutch government’s announcement last year that Indonesia had terminated the 1995 Bilateral Investment Treaty (BIT) between those countries, speculation has been rife regarding the status of Indonesia’s remaining BITs, signed with more than 60 countries.
On 12 May 2015, The Jakarta Post reported that the Indonesian Government intends to renegotiate its BITs, to bring greater certainty both to foreign companies doing business in Indonesia and to the Indonesian government. In particular, The Jakarta Post quotes Azhar Lubis, deputy director for investment monitoring and implementation at the Indonesian Investment Coordinating Board (BKPM), as suggesting that Indonesia may seek to restrict access to Investor State Dispute Settlement under its treaties to cases where the government has expressly consented that disputes with a particular investor may be referred to arbitration. Lubis stated that such a revision would be consistent with Indonesia’s 2007 Direct Investment Law, which stipulates that international arbitration claims should be filed based on an agreement between both parties. Continue reading
On July 8, 2014, a tribunal composed of Professor Gabrielle Kaufmann-Kohler (President), Michael Hwang S.C., and Professor Albert Jan van den Berg (the “Tribunal”), issued a Procedural Order No. 9 denying Churchill Mining PLC and Planet Mining Pty Ltd (“Claimants”) their application for provisional measures. Relying on Article 47 of the ICSID Convention and Rule 39 of the ICSID Arbitration Rules, Claimants asked the Tribunal to “recommend,” among other things, that the Republic of Indonesia (“Indonesia” or “Respondent”) (i) “refrain from threatening or commencing any criminal investigation or prosecution against the Claimants, their witnesses in these proceedings, and any person associated with the Claimants’ operations in Indonesia, including their wholly owned subsidiary (…);” and (ii) “stay or suspend any current criminal investigation or prosecution against Claimants’ current and former employees, affiliates or business partners pending the outcome of th[e] arbitration.” The Claimants also requested more general measures seeking to prevent Indonesia from threatening “the exclusivity” of the ICSID proceedings and generally aggravating the dispute.
At a time where the investor-state dispute resolution system is criticized for permitting too lax an access to treaty-based remedies through arbitration, the Churchill Mining Tribunal showed restraint and caution in addressing Claimants’ request to enjoin a host state from initiating or continuing criminal proceedings against Claimants’ witnesses and potential witnesses. The Tribunal did recognize Claimants’ theoretical right to protection against existing or threatened criminal proceedings that would be likely to impair Claimants’ rights in the arbitration. However, the Tribunal set a high bar for the evidence that Claimants would have had to adduce to establish the likelihood that their rights are indeed put at risk by Indonesia’s actions.
According to the Netherlands Embassy in Jakarta, Indonesia has informed the Netherlands that it has decided to terminate the Bilateral Investment Treaty between the two nations from 1 July 2015. The Embassy also states that “the Indonesian Government has mentioned it intends to terminate all of its 67 bilateral investment treaties“.