The Council of the European Union has received a proposal from the European Commission for a Council Decision to conclude an Investment Protection Agreement between the EU and Indonesia, with the full text of the Agreement attached as Annex 1. The proposal, dated 29 June 2026, aims to create a stable and predictable environment for investment between the two parties, strengthening their economic relationship.
The Agreement applies to "covered investments" – investments owned or controlled by an investor of one Party in the territory of the other, established in accordance with applicable laws, and existing at or after the Agreement's entry into force. Key protections include national treatment (Article 2.3), most-favoured-nation treatment (Article 2.4), fair and equitable treatment (Article 2.5), compensation for losses (Article 2.6), and rules on expropriation (Article 2.7). However, national treatment and most-favoured-nation treatment shall not apply to audio-visual services, national maritime cabotage, and most air transport services (Article 2.1(3)). They also do not apply to subsidies or government procurement (Article 2.1(6)). The Agreement reaffirms each Party's right to regulate for legitimate policy objectives, and shall not be interpreted as a commitment not to change the legal framework (Article 2.2).
Policy orientations and trade-offs The Agreement balances investment protection with regulatory autonomy. It grants investors non-discriminatory treatment and protection against expropriation, but carves out sensitive sectors (audio-visual, maritime cabotage, air transport) and excludes subsidies and government procurement from core obligations. This reflects a compromise between attracting foreign investment and preserving policy space for public services and industrial policy.
Stakeholder impact - EU investors in Indonesia: gain legal protections and recourse against discriminatory treatment or uncompensated expropriation, reducing investment risk. - Indonesian regulators: retain flexibility to regulate in the public interest, including changing laws, but must comply with fair and equitable treatment standards. - EU and Indonesian service providers in excluded sectors (audio-visual, maritime cabotage, air transport): remain subject to domestic regulation without the Agreement's non-discrimination protections. - EU and Indonesian governments: maintain ability to grant subsidies and conduct public procurement without facing investor claims under national treatment or MFN.
Institutional follow-up The Council will now examine the proposal. If adopted, the European Parliament will need to give its consent before the Agreement can enter into force. The Agreement will then be binding on the EU and its Member States.