Why Fragmentation of International Law Matters: The Case of Indonesia’s Bilateral Investment Treaty Policy and Its Impact on Its Effective Use of the WTO’s Dispute Settlement System

Torres, Jose Fernando

Indonesian Journal of International Law

An unexplored are in the discussions of fragmentation of international law is the relationship between the WTO Agreements and Bilateral Investment Treaties (BITs). Indonesia has recently challenged the United States before the Dispute Settlement Body of the World Trade Organization in a case regarding US measures affecting the importation and sale of cigarettes from Indonesia. If a WTO Panel or the Appellate Body were to find the United States’ measures inconsistent with the WTO Agreements and the United States were not to comply with the Panel or Appellate Body report, the WTO could authorize Indonesia to suspend concessions to the United States under the GATT, the GATS or the TRIPS agreement. This paper addresses the possible conflicts that might arise between the authorization to suspend concessions under the WTO Agreements on the one hand and BITs on the other. This paper argues that a BIT between Indonesia and the Unites States could severely undermine Indonesia’s position to persuade the United States to comply with an adverse ruling by the WTO in the cigarettes case.