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Dispute Resolution Mechanism under the New Singapore-Indonesian BIT

The Agreement between the Government of the Republic of Singapore and the Government of the Republic of Indonesia on the Promotion and Protection of Investments (“Indonesia-Singapore BIT”) came into force on 9 March 2021 after being ratified by both countries.

In the realm of dispute resolution, the Indonesia-Singapore BIT provides a sophisticated, multi-tiered dispute resolution mechanism comprising: (i) mediation; (ii) consultations; and (iii) international arbitration.

Voluntary mediation
Mediation is voluntary and a mediator may issue a written factual report upon request, but the “factual report shall not include any interpretation of this Agreement”.

Compulsory consultations and international arbitration proceedings
Investors must seek to resolve their dispute through consultations. A dispute may be submitted for resolution – including via ICSID or UNCITRAL arbitration – only if the dispute “cannot be resolved within 1 year from the date of delivery of the written request for consultations.”

Investors have a new, interventionist right to comment on the arbitral tribunal’s award. A disputing investor has the right to request to review the arbitral tribunal’s draft award, and to submit comments to the tribunal, pursuant to Article 24(4) of the Indonesia-Singapore BIT. The arbitral tribunal will be obligated to consider the comments within 45 days of receipt.

Article 25 states that the arbitral tribunal “shall order that the costs of the proceedings be borne by the unsuccessful disputing party”, to cast down vexatious claims and the risk of the State being unable to claim an award of its legal costs against an unsuccessful investor, while Article 26 confers tribunal the power to order security for costs against an investor “if there are reasonable grounds to believe that the disputing investor risks not being able to honour a possible decision”.

The ratification of the new Indonesia-Singapore BIT brings into force long-awaited protection for investors and new procedural rights, which may both give an important boost to the economic recovery of the two countries. It is however uncertain how the comments under Article 24(4) would be dealt with in view of due process considerations at the stage of enforcement of the award before domestic courts.

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