Academic journal article Journal of Legal, Ethical and Regulatory Issues

Legal Analysis of the Implementation of Umbrella Clauses Principle in Bilateral Investment Treaties in Indonesia

Academic journal article Journal of Legal, Ethical and Regulatory Issues

Legal Analysis of the Implementation of Umbrella Clauses Principle in Bilateral Investment Treaties in Indonesia

Article excerpt

INTRODUCTION

The welfare which produced from the occupation in Indonesia has become a very important thing for the government to do. The importance of this welfare is set forth in the preamble of the 1945 Constitution which is included in the preamble that the objective of the Unitary State of the Republic of Indonesia is to protect the entire Indonesian nation and the whole of Indonesian people, to promote the common interests and prosperity, to educate the life of the nation, freedom, eternal peace and social justice (Ghofur & Susilo, 2017). Many efforts have been made by the government in order to increase the welfare for occupation of shelter and live in the territory of the Unitary State of the Republic of Indonesia as an Indonesian citizen. These have been done in Indonesia as a country that embraces the principle of welfare state. In the doctrine of welfare states, it is disclosed that the State guarantees the well-being of every inhabitant so that the State seeks to keep the population secure for welfare. One of the most important things in improving the welfare in Indonesia is by implementing development in the economic field. According to the Indonesian Central Bureau of Statistics, "in the third quarter of 2017, the national economic growth in Indonesia reached 5.06 percent, where this growth is higher than the first and second quarter of 2017 of 5.01 percent." One aspect affecting this economic growth is the national income and employment opportunities gained by citizens. This national income can be used for development so that no more villages are left behind and gain a national progress.

The many job opportunities are also very influential on economic growth, where the No. of job opportunities for the community can reduce the unemployment rate in the community itself. Adding employment opportunities is done by opening the widest investment. This capital investment is basically divided into two kinds: direct and indirect investment. While direct investment is according to Komarudin (1983) interpreted as efforts to control ownership by an entity in a business in another country, indirect investment is defined by Suny (1976) as an investment by buying stocks/bonds in a company in such amounts, so it is not sufficient to provide control over the company to foreign investors. Direct investment or also known as foreign direct investment is divided into two parts, namely foreign investment and domestic investment. According to Article 1 (3) of Law No. 27 of 2007 on Investment, foreign investment "is an activity of investing to conduct business in the territory of the Republic of Indonesia by foreign investors, whether using the foreign capital completely or in association with the domestic investor." In article 1 point 2 of the Law, "it is said that domestic investment is an activity of investing to conduct business in the territory of the Republic of Indonesia by domestic investors by using domestic capital." The implementation of foreign investment is often done by mutual interests. The reciprocity here means that an entrepreneur from Indonesia is allowed to expand business abroad, but the entrepreneur shall also have the right to engage in business activities in Indonesia. In order to ensure that the implementation of foreign investments is operational and not mutually disadvantageous, Indonesia has several international agreements relating to investment. The international agreement on investment is divided into bilateral investment agreements as well as multiple treaties, in which Indonesia signed such kind of treaties with several countries. In the bilateral investment treaties agreement there is a class called the umbrella clauses. The principle of lateral investment agreements. This bilateral investment agreement is referred to as bilateral investment umbrella clauses is made so that host country does not issue a policy that can harm foreign investors in the country. There are several cases in which the Indonesian government is being sued by foreign investors because according to foreign investors, the policies made by the Indonesian government are harming them (Virjinia, 2007). …

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