Title
AGREEMENT BETWEEN THE SWISS FEDERAL COUNCIL AND THE GOVERNMENT OF THE REPUBLIC OF INDONESIA ON THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS
Preamble
PREAMBLE
The Swiss Federal Council and the Government of the Republic of Indonesia, hereinafter referred to as the "Parties" or individually as a "Party";
DESIRING to intensify economic cooperation to the mutual benefit of both States;
RECOGNISING that the creation of a business-friendly environment will be conducive to the stimulation of business initiative for increased investments by investors of one Party in the territory of the other Party;
ACKNOWLEDGING the important contribution that investments can make to sustainable development, and seeking to promote and facilitate such investments within the territories of the Parties;
RECOGNISING that the encouragement and reciprocal protection of investments can stimulate business initiative, foster the inflow of capital and technology, and increase economic development and prosperity in both States;
CONVINCED that these objectives can be achieved without weakening health, safety, labour and environmental standards of general application;
AFFIRMING the mutual supportiveness of investment, environment and labour policies in this respect;
REAFFIRMING their commitment to the principles and objectives set out in the United Nations Charter and the Universal Declaration of Human Rights, including democracy, the rule of law, human rights and fundamental freedoms;
HAVE AGREED AS FOLLOWS:
Body
Chapter I. DEFINITIONS AND SCOPE
Article 1. Definitions
For the Purposes of this Agreement:
1. "Freely convertible currency" means a currency, which is widely traded in international foreign exchange market and widely used in international transaction;
2. "ICSID" means the International Centre for Settlement of Investment Disputes;
3. "ICSID Additional Facility Rules" means the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes, as amended and in effect on 10 April 2006;
4. "ICSID Arbitration Rules" means the Rules of Procedure for Arbitration Proceedings (Arbitration Rules), as amended and in effect on 10 April 2006;
5. "ICSID Convention" means the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington on 18 March 1965;
6. "Investment" means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk or certain duration. Forms that an investment may take include:
(a) an enterprise;
(b) shares, stocks and other forms of equity participation in an enterprise;
(c) bonds, debentures and other debt instruments and loans; (1) (2)
(d) intellectual property rights;
(e) claims to money or to any contractual performance related to a business and having financial value; (3)
(f) turnkey, construction, management, production concession, revenue-sharing and other similar contracts;
(g) licences, authorisations, permits and similar rights conferred in accordance with the Party's laws; (4) and
(h) other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens and pledges.
The term "investment" does not include an order or judgment entered in a judicial or administrative action or an arbitral award made in an arbitral proceeding.
For the purpose of the definition of investment in this Article, returns that are invested shall be treated as investments and any alteration of the form in which assets are invested or reinvested shall not affect their character as investments.
7. "Investor" means:
(a) a natural person who, under to the law of a Party, is a national of that Party; or
(b) a legal entity, including companies, corporations, business associations and other organisations, which is constituted or otherwise duly organised under the law of that Party and has its seat, together with real economic activities, in the territory of the same Party;
that has made an investment;
8. "Locally established enterprise" means an enterprise owned or controlled directly or indirectly by an investor of a Party, established in the territory of the other Party. An enterprise is:
(a) owned by natural persons or enterprises of a Party if more than 50 per cent of the equity interest in it is beneficially owned by natural persons or enterprises of that Party;
(b) controlled by natural persons or enterprises of a Party if such natural persons or enterprises have the power to name a majority of its directors or otherwise to legally direct its actions.
9. "New York Convention" means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted at the United Nations in New York on 10 June 1958;
10. "Returns" means amounts yielded by or derived from an investment, including, but not limited to, any profits, interest, capital gains, dividends, royalties or fees;
11. "Territory" means the territory of a Party as defined by the laws of the Party concerned in accordance with international law;
12. "UNCITRAL Arbitration Rules" means the Arbitration Rules of the United Nations Commission on International Trade Law, as adopted by the United Nations General Assembly on 15 December 1976.
Article 2. Scope of Agreement
1. This Agreement applies to investments in the territory of one Party, which have been established or acquired and, where applicable, admitted (5) in accordance with its laws and regulations by investors of the other Party, whether prior to or after the entry into force of this Agreement.
2. This Agreement does not apply to claims or disputes arising from events, which occurred (6) prior to its entry into force.
3. This Agreement shall not apply to government procurement.
4. Article 5 (National Treatment) shall not apply to subsidies or grants provided by a Party, including government-supported loans, guarantees, and insurances, or to any conditions attached to the receipt or continued receipt of such subsidies or grants, whether or not such subsidies or grants are offered exclusively to investors of the Party or investments of investors of the Party.
Article 3. Taxation Measures
1. Except as provided in this Article, nothing in this Agreement shall apply to taxation measures.
2. This Agreement shall only grant rights or impose obligations with respect to taxation measures where:
(a) they are granted or imposed under Article 7 (Expropriation); or
(b) they are granted or imposed under Article 9 (Transfers).
3. Where Paragraphs 2(a) or 2(b) apply, Section One (Settlement of Disputes between a Party and an Investor of the other Party) of Chapter III (Dispute Settlement), shall also apply in respect of taxation measures.
4. Where an investor claims that the disputing Party has breached Article 7 (Expropriation) or Article 9 (Transfers) by the adoption or enforcement of a taxation measure, the competent authorities of the disputing Party may request consultations with the competent authorities of the non-disputing Party at the time that the disputing Party receives the investor's notice of intent under Article 19 (Submission of a Claim). The competent authorities of the Parties shall hold consultations with a view to determining whether the taxation measure constitutes an expropriation according to Article 7 (Expropriation) or whether Article 9 (Transfers) has been breached. Any arbitral tribunal that may be established in accordance with Section One (Settlement of Disputes between a Party and an Investor of the other Party) of Chapter III (Dispute Settlement) to consider taxation measures, shall accept as binding the decision of the competent authorities under this Paragraph.
If the competent authorities of the Parties fail to determine whether the taxation measure constitutes an expropriation according to Article 7 (Expropriation) or whether Article 9 (Transfers) has been breached within 360 days of the date of receipt of the request for consultations by the non-disputing Party, the investor may submit its claim to arbitration under Article 19 (Submission of a Claim).
5. In assessing whether a measure related to taxation constitutes expropriation, the following considerations shall be taken into account:
(a) the imposition of taxes does not generally constitute expropriation. The mere introduction of new taxation measures or the imposition of taxes in more than one jurisdiction in respect of an investment, does not in and of itself constitute expropriation;
(b) enforcement activities of the tax laws including seizure of property for the purpose of tax collection do not generally constitute expropriation;
(c) taxation measures which are consistent with internationally recognized tax policies, principles and practices do not generally constitute expropriation. In particular, taxation measures aimed at preventing the avoidance or evasion of taxes should not be considered to be expropriatory; and
(d) taxation measures which are applied on a non-discriminatory basis, as opposed to being targeted at investors of a particular nationality or specific individual taxpayers, are not likely to constitute expropriation. A taxation measure should not constitute expropriation if, when the investment is made, it was already in force and information about the measure was made public or otherwise made publicly available.
6. Nothing in this Agreement shall affect the rights and obligations of either Party under any tax convention. In the event of any inconsistency between this Agreement and any such tax convention that convention shall prevail to the extent of the inconsistency. The competent authorities under that convention shall have the sole responsibility for determining whether any inconsistency exists between this Agreement and that convention.
7. For the purposes of this Article:
(a) "tax convention" in Paragraph 6 means a convention for the avoidance of double taxation or other international taxation agreement or arrangement to which the Parties are party;
(b) "competent authorities" in Paragraph 4 means:
(i) with respect to Indonesia, the Minister of Finance or his or her authorised representative;
(ii) with respect to Switzerland, The Head of the Federal Department of Finance, or his or her authorised representative.
Chapter II. INVESTMENT PROTECTION
Article 4. Treatment of Investment
1. Each Party shall in its territory accord to investments of investors of the other Party fair and equitable treatment as well as full protection and security in accordance with this Article.
2. A Party breaches the obligation of fair and equitable treatment referenced in Paragraph 1 if a measure or series of measures constitutes:
(a) a denial of justice in criminal, civil or administrative proceedings;
(b) a fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings;
(c) manifest arbitrariness;
(d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; or
(e) abusive treatment, such as coercion, duress or harassment.
3. The Parties shall, upon request of a Party, review the content of the obligation to provide fair and equitable treatment, pursuant to the procedure for amendments set out in Article 44 (Entry into Force, Duration and Termination), in particular, whether treatment other than those listed in Paragraph 2 can also constitute a breach of fair and equitable treatment.
4. Full protection and security requires each Party to take such measures as may be reasonably necessary to ensure the protection and security of the investment.
5. When applying the above fair and equitable treatment obligation, the arbitral tribunal may take into account whether a Party made a specific written commitment to an investor to induce an investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the investment, but that the Party subsequently frustrated.
6. 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 investment as a result.
7. A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.
Article 5. National Treatment
1. Each Party shall in its territory accord to investments of investors of the other Party treatment no less favourable than that which it accords, in like circumstances (7), to investments of its own investors. (8)
2. Each Party shall in its territory accord to investors of the other Party, as regards the management, maintenance, use, enjoyment, extension, or disposal of their investments, treatment no less favourable than that which it accords, in like circumstances, to its own investors.
3. For greater certainty, the treatment to be accorded by a Party under Paragraph 1 and 2 means, with respect to a regional level of government, treatment no less favourable than the most favourable treatment accorded, in like circumstances, by that regional level of government to investors, and to investments of investors, of the Party of which it forms a part.
Article 6. Most-Favoured-Nation Treatment
1. Each Party shall in its territory accord to investments of investors of the other Party treatment no less favourable than the treatment it accords, in like circumstances, to investment of investors of any non-Party.
2. Each Party shall in its territory accord to investors of the other Party, as regards the management, maintenance, use, enjoyment, extension or disposal of their investments, treatment no less favourable than that which it accords, in like circumstances, to investors of any non-Party.
3. Treatment as referred to in Paragraphs 1 and 2 shall not include:
(a) existing bilateral or regional investment agreements that were signed or have entered into force prior to the entry into force of this Agreement;
(b) arrangements with a non-Party in the same geographical region designed to promote regional cooperation in the economic, social, labour, industrial or monetary fields within the framework of specific projects;
(c) existing or future agreements establishing a free trade area, a customs union or a common market according preferential treatment by a Party to investors of any non-Party; or
(d) existing or future agreements on the avoidance of double taxation or any other tax conventions.
4. For greater certainty, Paragraphs 1 and 2 shall not apply to international dispute resolution procedures or mechanisms in other international agreements, and shall not be construed as granting to investors dispute resolution procedures or mechanisms other than those set out in Section One (Settlement of Disputes between a Party and an Investor of the Other Party) of Chapter II (Dispute Settlement).
5. For greater certainty, substantive obligations in other international investment agreements concluded by a Party do not in themselves constitute most-favored-nation treatment as referred to in Paragraphs 1 and 2 and thus cannot give rise to a breach of this Article in the absence of concrete measures adopted or maintained by that Party pursuant to such obligations.
Article 7. Expropriation
1. Neither Party shall expropriate or nationalise an investment of an investor of the other Party either directly or indirectly through measures equivalent to expropriation or nationalisation (hereinafter referred to as "expropriation"), except:
(a) for a public purpose;
(b) in a non-discriminatory manner;
(c) on payment of prompt, adequate and effective compensation in accordance with Paragraphs 3 and 4; and
(d) in accordance with due process of law.
This Paragraph shall be interpreted in accordance with Annex A on Expropriation.
2. At the request of an investor, any measure of expropriation or valuation will be reviewed by a judicial or other independent authority in the manner prescribed by the laws of the Party taking the measure.
3. Compensation referred to in Paragraph 1(c) shall:
(a) be paid without delay (9);
(b) be equivalent to the fair market value (10) of the expropriated investment immediately before the expropriation took place (the date of expropriation) or before the impending expropriation became public knowledge, whichever is earlier;
(c) not reflect any change in value occurring because the intended expropriation had become known earlier; and
(d) be effectively realizable and freely transferable in accordance with Article 9 (Transfers).
4. The amount of compensation shall include interest at an appropriate market rate, from the date of expropriation until the date of payment. Valuation criteria used to determine fair market value may include going concern value, asset value including the declared tax value of tangible property and other criteria, as appropriate.
5. Notwithstanding Paragraphs 1, 3 and 4, any measure of direct expropriation relating to land, which shall be defined in the legislation of the expropriating Party, shall be for a public purpose and upon payment of compensation at fair market value, in accordance with the aforesaid legislation.
6. This Article does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation, or creation of intellectual property rights, to the extent that such issuance, revocation, limitation, or creation is consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement. (11)
Article 8. Compensation for Losses
1. Investors of a Party whose investments in the territory of the other Party suffer losses owing to war or other armed conflict, civil disturbances, a state of national emergency, revolt, insurrection, riot or other similar situations in the territory of the latter Party, shall be accorded by the latter Party treatment, as regards restitution, indemnification, compensation or other settlement, if any, no less favourable than that which the latter Party accords to investors of any non-Party or to its own investors, whichever is more favourable.
2. Notwithstanding Paragraph 1, an investor of a Party who, in any of the situations referred to in that Paragraph, suffers a loss in the territory of the other Party resulting from:
(a) requisitioning of the investment or part thereof by its forces or authorities; or
(b) destruction of the investment or part thereof by its forces or authorities which was not required by the necessity of the situation,
shall be accorded by the other Party restitution or compensation. With respect to compensation, the value shall not exceed the loss suffered.
Article 9. Transfers
1. Each Party shall permit all transfers relating to investments of an investor of the other Party in its territory to be made freely and without delay into and out of its territory. Such transfers include:
(a) contributions to capital, including the initial contribution, profits, capital gains, dividends, royalties, technical assistance and technical and management fees, interest and other current income accruing from any investment;
(b) proceeds from the total or partial sale or liquidation of any investment;
(c) payments made under a contract, entered into by an investor, or its investment, including payments made pursuant to a loan agreement;
(d) payments made pursuant to Article 7 (Expropriation) and Article 8 (Compensation for Losses);
(e) earnings and other remuneration of personnel engaged from abroad in connection with that investment; and
(f) payments arising out of the settlement of a dispute under Chapter III (Dispute Settlement).
2. Unless otherwise agreed with the investor, each Party shall permit such transfers to be made in a freely convertible currency at the market rate of exchange prevailing at the time of transfer.
3. Nothing in this Article shall be construed to prevent a Party from applying, in an equitable, non-discriminatory manner and in good faith, its laws relating to:
(a) bankruptcy, insolvency, or the protection of the rights of creditors;
(b) issuing, trading, or dealing in securities, futures, options, or derivatives;
(c) criminal or penal offenses;
(d) financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities;
(e) ensuring compliance with orders or judgments in judicial or administrative proceedings;
(f) social security, public retirement, or compulsory savings schemes;
(g) severance entitlements of employees; or
(h) taxation.
4. Nothing in this Agreement shall affect the rights and obligations of the members of the International Monetary Fund under the Articles of Agreement of the International Monetary Fund, including the use of exchange actions, which are in conformity with the Articles of Agreement of the International Monetary Fund.
5. A transfer shall be deemed to have been made "without delay" if effected within such a period as is normally required for the completion of transfer formalities imposed by the central bank and other relevant authorities of a Party. The said period shall commence on the day on which the request for transfer is submitted and may on no account exceed two months. Such formalities shall apply to investors without discrimination.