Title
INVESTMENT PROTECTION AGREEMENT BETWEEN THE REPUBLIC OF INDONESIA AND THE EUROPEAN UNION
Preamble
The Republic of Indonesia, hereinafter referred to as "Indonesia", and
The European Union, hereinafter referred to as "the Union",
hereinafter individually referred to as a "Party" and jointly referred to as the "Parties",
RECOGNISING their longstanding and strong partnership based on the common principles and values reflected in the Framework Agreement on Comprehensive Partnership and Cooperation between the European Community and its Member States, of the one part, and the
Republic of Indonesia, of the other part, signed in Jakarta on 9 November 2009, and their important economic, trade and investment relationship; including as reflected in the Comprehensive Economic Partnership Agreement between the European Union and Indonesia, signed in XX on dd/mm/yyyy (hereinafter referred to as the "Comprehensive Economic Partnership Agreement");
DESIRING to further strengthen their economic relationship as part of, and in a manner coherent with, their overall relations, and convinced that this Agreement will create a new climate for the development of investment between the Parties;
DETERMINED to strengthen their economic, trade and investment relationship in accordance with the objective of sustainable development, in its economic, social and environmental dimensions, and to promote investment under this Agreement;
CONVINCED that this Agreement will create a stable and predictable environment for investment, thus providing an opportunity to enhancing the competitiveness of their companies in global markets;
RECOGNISING the importance of transparency as reflected in their commitments in the Comprehensive Economic Partnership Agreement;
SEEKING to establish clear and mutually advantageous rules governing investment between the Parties;
REAFFIRMING their commitment to the Charter of the United Nations signed in San Francisco on 26 June 1945 and having regard to the principles articulated in the Universal Declaration of Human Rights adopted by the General Assembly of the United Nations on 10 December 1948;
BUILDING on their respective rights and obligations under the Agreement Establishing the World Trade Organization, done at Marrakesh on 15 April 1994, and other multilateral, regional and bilateral agreements and arrangements to which both Parties are a party, in particular, the Comprehensive Economic Partnership Agreement;
HAVE AGREED as follows
Body
Chapter 1. OBJECTIVE AND GENERAL DEFINITIONS
Article 1.1. Objectives
The Parties, reaffirming their commitment to create a better climate for the development of investment between them, hereby lay down the necessary arrangements for the effective protection of investment.
Article 1.2. Definitions
For the purposes of this Agreement:
(a) "activities performed or services supplied in the exercise of governmental authority" means activities performed or services supplied neither on a commercial basis nor in competition with one or more economic operators;
(b) "covered investment" means an investment which is
(i) owned, directly or indirectly, or controlled, directly or indirectly (1), by an investor of one Party in the territory of the other Party,
(ii) established in accordance with the applicable laws (2), and (iii) in existence at the date of entry into force of this Agreement or established thereafter;
(c) "economic activities" mean activities of an industrial, commercial or professional character and activities of craftsmen, including the supply of services, except for activities performed or services supplied in the exercise of governmental authority;
(d) "freely convertible currency" means a currency which can be freely exchanged against currencies that are widely traded in international foreign exchange markets and widely used in international transactions; (3)
(e) "investment" means every kind of asset, which has the characteristics of an investment, such as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk, and a certain duration. Forms that an investment may take include:
(i) an enterprise;
(ii) shares, stocks and other financial instruments, including rights derived therefrom;
(iii) turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts;
(iv) claims to money, or to other assets or to any contractual performance having an economic value;
(v) intellectual property licences and similar rights conferred pursuant to domestic law, including any concessions to search for, cultivate, extract or exploit natural resources;
(vi) other tangible or intangible, movable or immovable property, including intellectual property, as well as any other property rights, such as leases, mortgages, liens, and pledges.
Investments that neither confer control nor a lasting interest ("portfolio investment") in a juridical person of the other Party shall not constitute an investment for the purposes of this Agreement.
For greater certainty:
(a) "claims to money" does not include claims to money that arise solely from commercial contracts for the sale of goods or services from the territory of a Party to the territory of the other Party or the financing of such contracts through the extension of credits; and
(b) an order or judgment entered in a judicial or administrative action or an arbitral award made in an arbitral proceeding shall not constitute in itself an investment.
(f) "investor of a Party" means:
(i) a natural person of a Party; or
(ii) a juridical person of a Party
that has made a covered investment in the territory of the other Party;
(g) "juridical person" means any legal entity duly constituted or otherwise organised under the applicable law, whether for profit or otherwise, and whether privately-owned or governmentally-owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association;
(h) "juridical person of a Party" means:
(i) for the European Union, a juridical person set up in accordance with the laws of the European Union or of at least one Member State of the European Union and engaged in substantive business operations (4) in the territory of the European Union; and
(ii) for Indonesia, a juridical person set up in accordance with laws of Indonesia and engaged in substantive business operations in the territory of Indonesia;
(i) "measure" includes any measure by a Party, whether in the form of a law, regulation, rule, procedure, decision, administrative action, or any other form;
(j) "measures of a Party" means any measures adopted or maintained by (5):
(i) central, regional or local governments or authorities; and
(ii) non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities
(k) "natural person of the EU" means a national of one of the Member States of the European Union according to its legislation (6) and a "natural person of Indonesia" means a national of Indonesia according to its legislation; (7)
(l) "operation" includes the conduct, management, maintenance, use, enjoyment, sale or other disposal of an investment by an investor of one Party in the territory of the other Party;
(m) "returns" means all amounts yielded by or derived from an investment or reinvestment, including profits, dividends, capital gains, royalties, interest, payments in connection with intellectual property rights, payments in kind and other lawful income;
(n) "service" includes any service in any sector but not services supplied in the exercise of governmental authority;
(o) "territory" means the area to which this Agreement applies in accordance with the Article 6.11 (Territorial Application);
(p) "TFEU" means the Treaty on the Functioning of the European Union,
(q) "TRIPS Agreement" means the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement;
(r) "WTO" means the World Trade Organization; and
(s) "WTO Agreement" means the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh on 15 April 1994.
Chapter 2. INVESTMENT PROTECTION
Article 2.1. Scope
1. This Agreement applies to:
(a) covered investments;
(b) investors of a Party in respect of a covered investment
as regards any measure adopted or maintained by a Party and affecting the operation of such investment.
2. This Agreement applies to measures adopted or maintained by (1):
(a) central, regional or local governments and authorities; and
(a) non-governmental bodies in the exercise of powers delegated by central, regional or local
governments or authorities.
3. Articles 2.3 (National Treatment) and 2.4 (Most-Favoured-Nation Treatment) do not apply to:
(a) audio-visual services;
(b) national maritime cabotage (2); and
(c) domestic and international air transport services, whether scheduled or non-scheduled, and services directly related to the exercise of traffic rights, other than:
(i) aircraft repair and maintenance services;
(ii) the selling and marketing of air transport services;
(iii) computer reservation system (CRS) services;
(iv) groundhandling services
5. For greater certainty and subject to paragraph 6, a Party?s decision not to issue, renew or maintain a subsidy
(a) in the absence of any specific commitment under law or contract to issue, renew, or maintain that subsidy; or
(b) in accordance with any terms or conditions attached to the issuance, renewal or maintenance of the subsidy,
shall not constitute a breach of the provisions of this Agreement.
6. For greater certainty, nothing in this Agreement shall be construed as preventing a Party from discontinuing the granting of a subsidy or requesting its reimbursement, where such action has been ordered by one of its competent authorities listed in Annex 2-B, or as requiring that Party to compensate the investor therefor.
7. Articles 2.3 (National Treatment) and 2.4 (Most-Favoured-Nation Treatment) do not apply to subsidies granted by the Parties (3) and to government procurement.
8. For greater certainty, this Agreement shall not apply to any dispute between the contracting parties to a government procurement contract arising from a breach of a provision thereto.
Article 2.2. Investment and Regulatory Measures
1. The Parties reaffirm the right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, safety, environment including climate change, public morals, social or consumer protection, privacy and data protection, sustainable development or promotion and protection of cultural diversity.
2. For greater certainty, the provisions of this Agreement shall not be interpreted as a commitment from a Party that it will not change the legal and regulatory framework, including in a manner that may negatively affect the operation of covered investments or the investor?s expectations of profits.
Article 2.3. National Treatment
1. Each Party shall accord to investors of the other Party and to covered investments, as regards their operation in its territory, treatment no less favourable than the treatment it accords, in like situations, to its own investors and their investments.
2. The treatment to be accorded by a Party under paragraph 1 means, with respect to a government of a subnational region of Indonesia, treatment no less favourable than the most favourable treatment accorded in like situations, by that government to investors, and to investments of investors, of that subnational region.
3. The treatment to be accorded by a Party under paragraph 1 means, with respect to a government of or in a Member State of the European Union, treatment no less favourable than the most favourable treatment accorded in like situations, by that government to investors of that Member State and to their investment in its territory.
Article 2.4. Most Favoured Nation Treatment
1. Each Party shall accord to investors of the other Party and to covered investments, as regards their operation in its territory, treatment no less favourable than the treatment it accords, in like situations, to investors and investments of any third country.
2. Notwithstanding paragraph 1, a Party shall not be obliged to extend to investors of the other Party or to their covered investments the benefits of any treatment accorded to investors and investments of any third country pursuant to any international investment treaty or other trade agreement in force or signed prior to the date of entry into force of this Agreement.
3. Paragraph 1 shall not be construed to oblige a Party to extend to the investors of the other Party the benefit of any treatment resulting from:
(a) an international agreement for the avoidance of double taxation or other international agreements or arrangements relating wholy or mainly to taxation.
(b) measures providing for the recognition of qualifications, licences or prudential measures as provided for in Article VII of the General Agreement on Trade in Services or its Annex on Financial Services.
4. For greater certainty the "treatment" referred to in paragraph 1 does not include investor-to-state dispute settlement procedures provided for in other international investment treaties and other trade agreements.
5. The substantive provisions in other international investment or trade agreements do not in themselves constitute "treatment" as referred to in paragraph 1 and thus cannot give rise to a breach of this Article. However, measures applied pursuant to such provisions can constitute "treatment" as referred to in paragraph 1 and thus give rise to a breach of this Article.
Article 2.5. Treatment of Investors and of Covered Investments
1. Each Party shall accord to covered investments and to investors of the other Party with respect to their covered investments fair and equitable treatment and full protection and security in accordance with paragraphs 2 to 5.
2. A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 through measures or series of measures that constitute:
(a) denial of justice in criminal, civil or administrative proceedings; (4)
(b) fundamental disregard of due process, including a fundamental breach of transparency, in judicial and administrative proceedings;
(c) manifest arbitrariness (5);
(d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; or
(e) harassment, coercion, abuse of power or corruptive practices.
3. When applying the above fair and equitable treatment obligations a tribunal may take into account whether a Party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the covered investment, but that the Party subsequently frustrated. For greater certainty, the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor's expectations does not constitute a breach of this Article, even if there is loss or damage to the covered investment as a result.
4. For greater certainty, "full protection and security" refers to the Party's obligations to take such measures as may be reasonably necessary to ensure the physical protection and security of covered investments and of investors with respect to their covered investments.
5. For greater certainty, a determination that there has been a breach of another provision of this Agreement, or of any other international agreement, does not in itself establish that there has been a breach of this Article.
Article 2.6. Compensation for Losses
1. Investor of a Party whose covered investments suffer losses owing to war or other armed conflict, revolution, a state of national emergency, revolt, insurrection or riot in the territory of the other Party shall be accorded by that Party, with respect to restitution, indemnification, compensation or other form of settlement, treatment no less favourable than that accorded by that Party to its own investor or to the investor of any third country, whichever is more favourable to the investor.
2. Without prejudice to paragraph 1 of this Article, investor of a Party who, in any of the situations referred to in that paragraph, suffer losses in the territory of the other Party shall be accorded adequate restitution or compensation by the other Party (6), if these losses result from:
(a) requisitioning of their covered investment or a part thereof by the latter's armed forces or authorities; or
(b) destruction of their covered investment or a part thereof by the latter's armed forces or authorities, which was not required by the necessity of the situation.
Article 2.7. Expropriation
1. Neither Party shall nationalise or expropriate a covered investment either directly or indirectly through measures having an effect equivalent to nationalisation or expropriation (hereinafter referred to as "expropriation") except:
(a) for a public purpose; (7)
(b) under due process of law;
(c) in a non-discriminatory manner; and
(d) against payment of prompt, adequate and effective compensation. (8)
For greater certainty, this paragraph shall be interpreted in accordance with Annex 2-A (Expropriation).
2. The compensation referred to in paragraph 1 shall amount to the fair market value of the investment at the time immediately before the expropriation, or the impending expropriation, became known, whichever is earlier. The determination of the fair market value shall be based on the principles and criteria recognised in international financial standards, as appropriate.
3. The compensation shall also include interest at a normal commercial rate from the date of expropriation until the date of payment and shall, in order to be effective for the investor, be paid and made transferable, without delay in a freely convertible currency in accordance with the Article 2.8 (Transfers).
4. Notwithstanding paragraphs 1, 2, and 3, in the case that Indonesia is the expropriating Party, any measure of direct expropriation relating to land shall be:
(a) for a public purpose in accordance with the applicable domestic laws and regulations (9); and
(b) upon payment of compensation equivalent to the market value in accordance with the applicable domestic laws and regulations.
5. The investor affected shall have a right, under the law of the expropriating Party, to prompt review of its claim and of the valuation of its investment, by a judicial or other independent authority of that Party, in accordance with the principles set out in this Article.
6. This Article does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights in accordance with the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreements ("TRIPS Agreement"), or to the revocation (10), limitation or creation of intellectual property rights to the extent that such revocation, limitation or creation is consistent with [Chapter XX Intellectual Property and] the TRIPS Agreement.
Article 2.8. Transfers
1. Each Party shall permit all transfers relating to a covered investment to be made in a freely convertible currency, without restriction or delay and at the market rate of exchange prevailing on the date of transfer with regard to the currency to be transferred. Such transfers include:
(a) contributions to capital, such as principal and additional funds to maintain, develop or increase the investment;