The Council of the European Union has published the annexes to the proposed Council Decision on the conclusion of the Investment Protection Agreement between the EU and Indonesia, detailing rules on expropriation, dispute settlement procedures, and a code of conduct for panellists and mediators. The document, dated 29 June 2026, sets out the legal framework for handling investment disputes under the agreement.
Annex 2-A defines direct expropriation as a formal transfer of title and indirect expropriation as a measure that substantially deprives an investor of property rights. The determination of indirect expropriation requires a case-by-case, fact-based inquiry considering economic impact, duration, character, and investor expectations. Non-discriminatory measures for legitimate policy objectives—such as public health, safety, environment including climate change, public morals, social and consumer protection, and cultural diversity—do not constitute indirect expropriation, except in rare circumstances where the measure is manifestly excessive.
for the EU, the European Commission or a Member State court or tribunal when applying EU State aid law; for Indonesia, the Government of Indonesia pursuant to its law.
Annex 4-A establishes rules of procedure for dispute settlement panels. Notifications are to be sent to the Directorate-General for Trade and Economic Security of the European Commission and the Directorate-General of Legal Affairs and International Treaties of Indonesia's Ministry of Foreign Affairs. Panellists are appointed, including by selection by lot, and expenses are based on WTO standards, with assistant remuneration capped at 50% of the panellist's. An organisational meeting must be held within seven days of panel establishment. Written submissions are due within 20 days for the complaining Party and 20 days after receipt for the Party complained against. Hearings are to be held in Brussels if Indonesia is the complaining Party, and in Jakarta if the Union is the complaining Party; virtual or hybrid hearings are possible. The rules also cover confidentiality, amicus curiae submissions (from independent natural or legal persons, up to 15 pages, directly relevant), urgent cases, and translation and interpretation (working language agreed or the negotiation language).
Annex 4-B sets out a code of conduct requiring panellists to be independent, impartial, avoid conflicts of interest, disclose any interest likely to affect independence or impartiality (with a continuing duty), and perform duties thoroughly and expeditiously.
The publication of these annexes follows the proposal for a Council Decision on the conclusion of the agreement, which was submitted by the European Commission. The Council is now expected to consider the proposal and the annexes before adopting a final decision. The agreement aims to provide a structured and impartial dispute resolution process, balancing investor protection with the EU's and Indonesia's right to regulate for legitimate public policy objectives.
EU investors in Indonesia will benefit from clearer expropriation protections and a defined dispute resolution mechanism, reducing legal uncertainty. Indonesian authorities gain clarity on which measures are exempt from indirect expropriation claims, preserving policy space for public health, safety, and environmental regulation. EU and Indonesian businesses involved in investment arbitration will face procedural rules that streamline panel formation and hearings, potentially lowering costs. Civil society and environmental groups may view the exemption for legitimate policy objectives as a safeguard against investor challenges to climate and social measures, though the 'rare circumstances' exception for manifestly excessive measures could still allow claims in extreme cases.