Dispute Settlement Mechanism In Bilateral Investment Treaties (BITs)

Yetty Komalasari Dewi, Arie Afriansyah

= http://dx.doi.org/10.20473/ydk.v34i1.11403

Abstract views = 2936 times | downloads = 1404 times


The Bilateral Investment Treaty (BIT) or in Indonesia known as “Perjanjian Promosi dan Perlindungan Penanaman Modal (P4M)” contains a very powerful dispute settlement mechanism that allows investors to file a lawsuit directly against a host country allegedly violating investment protection under international law. This is known as Investor-State Dispute Settlement (ISDS). The ability of investors to “impose” their rights directly against a country without the existence of an arbitration clause is considered as one of the extraordinary achievements of the BIT innovation. This paper discusses two types of dispute resolution models contained in almost all BITs signed by Indonesia, namely State-State Dispute Settlement (SSDS) and Investor-State Dispute Settlement (ISDS). It also elaborates the weaknesses of the current dispute resolution formula, especially in the ISDS clause and provides the possibility of improvements to the formulation of the ISDS clause to better ensure a balance between the protection of foreign investors and the needs of the host country.


BIT; IIA; Dispute Resolution; Investor-State; States.

Full Text:



Jan Ole Voss, Impact of Investment Treaties on Contracts between Host States and Foreign Investors (Martinus Nijhoff Publisher 2011).

Eric Neumayer and Laura Spess, ‘Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?’ (2005) 33 World Developmen.

Esty Hayu Dewanti, ‘Persyaratan Kandungan Lokal (Local Content Requirements) Di Indonesia Dan Kaitannya Dengan Perjanjian Internasional Di Bidang Investasi (Local Content Requirements in Indonesia and Its Relations with International Agreement on Investment)’ (2012) 27 Yuridika LINK.

Henri C. Alvarez, ‘Arbitration under the North American Free Trade Agrement’ (2016) 16 Arbitration International 393.

Jason Webb Yackee, ‘Bilateral Investment Treaties, Credible Commitment, and the Rule of (International) Law: Do BITs Promote Foreign Direct Investment?’ (2008) 42 Law & Society Review.

Peter Egger and Michael Pfaffermayr, ‘The Impact of Bilateral Investment Treaties on Foreign Direct Investment’ (2004) 32 Journal of Comparative Economics.

Widhayani Dian Pawestri, ‘Dialektika Perlindungan Kepentingan Nasional Berdasarkan Konstitusi Ekonomi Dengan Basic Principle Dalam Bilateral Investment Treaties (Dialectics for the Protection of National Interest Based on Economic Constitution with the Basic Principle in Bilateral’ (2016) 31 Yuridika LINK

Mahnaz Malik, ‘The Stakes of States in Defending Investment Treaty Arbitrations: A Game of Luck and Chance?’, IV Annual Forum for Developing Country Investment Negotiators, International Institute for Sustainable Development (IISD) i (IISD 2010).

Martin Khor, ‘A Note on The Investor-State Dispute Settlement (ISDS) System in The Context of BITS, South Center’, The 7th Annual Forum of Developing Country Investment Negotiators, 4-6 December (Developing Country Investment Negotiators 2013).

UNCTAD, ‘United Nations Conference on Trade and Development, Recent Developments in Investor-State Dispute Settlement (ISDS), International Investment Agreements Issues Note, No. 1, May 2013.’, United Nations Conference on Trade and Development, Scope and Definition (United Nations 2013).

UNCITRAL, ‘UNCITRAL Rules on Transparency in Treaty-Based Investor-State Arbitration’ (UNCITRAL provision regarding transparency is valid since 1 April 2014, 2014) LINK accessed 24 May 2017.


  • There are currently no refbacks.

Copyright (c) 2019 Yuridika

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Yuridika (ISSN: 0215-840X | e-ISSN: 2528-3103) by http://e-journal.unair.ac.id/index.php/YDK/index under a https://creativecommons.org/licenses/by/4.0/.

Statcounter :

View My Stats

Yuridika has been indexed by:


Full Indexed Service