Australia and Indonesia sign economic partnership agreement, including ISDS mechanism

Australia and Indonesia have now signed their Comprehensive Economic Partnership Agreement (IA-CEPA), bringing to a close a negotiating process that began in November 2010. The two countries signed the agreement on March 4, 2019. The IA-CEPA also includes an investment chapter and four related annexes, which cover an arbitrators’ code of conduct; expropriation and compensation; foreign investment policy; and public debt.

The IA-CEPA investment chapter includes, among other provisions, an ISDS mechanism. The chapter prohibits claims being brought under ISDS that relate to public health measures, as well as those that involve investments “established through illegal conduct,” though this excludes investments “established through minor or technical breaches of law.”

Frivolous or meritless claims are not allowed under the ISDS mechanism, nor are those that refer to the MFN article of that chapter, should the complainant allege “that another international agreement contains more favourable rights or obligations.”

The agreement must now undergo the ratification procedures of each side’s respective legislatures before it can enter into force.