The Evolution of The Dispute Settlement Mechanism in Preferential Trade Agreements

Asian Journal of International Law, Page  of 
doi:./SX
© Asian Journal of International Law, 
The Evolution of the Dispute Settlement

Mechanism in Preferential Trade Agreements
[PTAs]: The Case of Indonesia
I Gusti Ngurah Parikesit WIDIATEDJA*

Udayana University, Indonesia
ngurahparikesit@gmail.com
Abstract
The dispute settlement mechanism [DSM] under preferential trade agreements [PTAs] is
crucial to ensure adequate implementation and enforcement of commitments among con-
tracting parties. The DSM has evolved from political/diplomatic styles with a low level of
legalism to judicial styles with a high level of legalism. Indonesia has also experienced this
evolution process in its PTAs. This paper aims to show the evolution of the DSM in
Indonesian PTAs, analyzing several related factors behind this trend. The paper argues
that the evolution of the DSM from the GATT to WTO, Indonesia’s participation in
regional trade agreement, that is, ASEAN, the influence of trade partners, the existence
of domestic factors, and the ongoing WTO dispute encourage the evolution of the
DSM in Indonesian PTAs from political styles to more judicial styles with a high level
of legalism.
The existence of bilateral and regional trade agreements (hereinafter preferential trade
agreements [PTAs]) is crucial for reducing or eliminating barriers to trade. Some PTAs
have put this issue as a primary goal, which is reflected in their Preambles. For
instance, the North American Free Trade Agreement [NAFTA] refers to the reduction
of trade distortions to “create new employment opportunities and improve working
conditions and living standards”. A more recent example is in the Australia-China
Free Trade Agreement [FTA], which refers to the removal of “barriers to the trade
of goods and services and investment flows” to “create new opportunities for employ-
ment and to improve the living standards of their peoples”.
* Lecturer of Faculty of Law Udayana University, Indonesia; PhD Candidate Melbourne Law School,
Australia. The author is grateful to the anonymous reviewers of the Journal.
. North American Free Trade Agreement,  December ,  C.T.S.  (entered into force 
January ), preamble [NAFTA].
. Free Trade Agreement Between the Government of Australia and the Government of the People’s
Republic of China,  June ,  A.T.S.  (entered into force  December ), preamble
[Australia-China FTA]. See also the preamble of Agreement on Comprehensive Economic
Partnership Between the Republic of Indonesia and Australia, signed  March  (not yet in
force) [IA-CEPA], which states: “Resolving to create clear and mutually advantageous rules govern-
ing their trade and investment to promote a predictable, transparent and consistent commercial
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     
There has been an increase in the role of PTAs. They have been raised from a sup-
porter of the World Trade Organization [WTO] to become the centre point in many
countries’ trade policies. The number of PTAs has significantly increased over the last
two decades. By November ,  PTAs had been concluded, of which nearly 
PTAs were from the s. The deadlock in the WTO negotiations has stimulated
countries to seek alternative fora to proceed with their economic co-operation, par-
ticularly to increase trade and investment flows. Equally, the Organization for
Economic Co-operation and Development [OECD] negotiations on agreement in
the realm of investment failed to establish a multilateral rule-based system.
The number of states entering PTAs has evolved in various regions in which these
kinds of PTAs have several characteristics in common, as distinct from earlier ones.
Approximately two-thirds of PTAs in force are among developing countries, compared
with only twenty percent in the late s, such as the Malaysia-India FTA ().
Almost fifty percent of current PTAs involve countries from different regions (cross-
regional). Specifically, the Trans-Pacific Strategic Economic Partnership Agreement
[Trans-Pacific SEP] was negotiated initially between three countries from three different
regions—South America (Chile), Asia (Singapore), and Oceania (New Zealand).
Equally, approximately sixty-eight percent of PTAs in force focus on trade in goods,
and thirty-one percent cover trade in both goods and services. However, from  to
, the percentage of PTAs encompassing both goods and services more than doubled.
Interestingly, over the last decade PTAs have covered not only trade in goods and
services, but also more comprehensive agreements. Almost all areas of trade nego-
tiated under the WTO now are negotiated under PTAs, for example investment,
although this has traditionally been covered by Bilateral Investment Treaties
[BITs]. More recent PTAs have also included intellectual property, traditional
framework for business operations, minimise barriers, enhance economic efficiency and create a lar-
ger market with more opportunities for business.”
. David EVANS, “Bilateral and Plurilateral PTAs” in Simon LESTER, Bryan MERCURIO, and Lorand
BARTELS, eds., Bilateral and Regional Trade Agreements: Commentary and Analysis (Cambridge:
Cambridge University Press, ), at .
. The total number of the existing PTAs is available online at <http://rtais.wto.org/UI/publicsummary-
table.aspx>.
. Evans, supra note  at .
. Andreas DÜR and Manfred ELSIG, eds., Trade Cooperation: The Purpose, Design and Effects of
Preferential Trade Agreements (Cambridge: Cambridge University Press, ) at .
. World Trade Organization, World Trade Report : The WTO and Preferential Trade
Agreements: From Co-existence to Coherence (Geneva: WTO, ) at  [WTO ].
. The Comprehensive Economic Cooperation Agreement Between Malaysia and India,  February
 (entered into force  July ) [Malaysia-India CECA].
. WTO , supra note  at .
. Trans-Pacific Strategic Economic Partnership, Brunei Darussalam-Chile-New Zealand-Singapore, 
July  (Brunei Darussalam, signed  August ) (entered into force  May ) (New
Zealand and Singapore),  July  (Brunei Darussalam),  November  (Chile) [TPP].
. WTO , supra note  at .
. Ibid., at .
. Molly LESHER and Sébastien MIROUDOT, “Analysis of the Economic Impact of Investment
Provisions in Regional Trade Agreements”, OECD Trade Policy Working Paper No. ,  July
.
   :  
knowledge, energy and mineral rights, procurement, and the movement of labour.
Hence, PTAs now tend to adopt more features of the WTO Agreement. This is linked
to the importance of incorporating not only Dispute Settlement Mechanism [DSM]
procedures, but also substance in PTAs.
Indonesia has been a member of the General Agreement on Tariffs and Trade
[GATT] since  February  and the WTO since  January . Indonesia
was actively involved in groups that promoted particular trade issues during the
WTO negotiations, such as the Cairns Group, the G-, and the G-.
Indonesia has concluded PTAs with other WTO members, such as Bulgaria ()
and Australia (), and with non-WTO members, such as Uzbekistan ().
As a member of ASEAN, Indonesia has concluded PTAs with China (), India
(), Korea (), Japan (), and Australia and New Zealand ().
The DSM under PTAs is crucial in ensuring adequate implementation and enforce-
ment of commitments among contracting parties. The DSM has evolved from includ-
ing only provisions for consultation to resolve disputes to adopting WTO-like dispute
settlement systems, reflecting the important shift from political/diplomatic styles to judi-
cial styles of the DSM. Indonesia’s PTAs have also experienced this evolution process.
. See e.g. IA-CEPA, supra note , and TPP, supra note .
. World Trade Organization, “Indonesia and the WTO”, online: WTO <https://www.wto.org/english/
thewto_e/countries_e/indonesia_e.htm>.
. The Cairns Group, “Background on the Cairns Group and the WTO Doha Round”, online: The
Cairns Group <http://cairnsgroup.org/pages/wto_negotiations.aspx>.
. World Trade Organization, “Groups in the Negotiations”, online: WTO <https://www.wto.org/eng-
lish/tratop_e/dda_e/negotiating_groups_e.htm#grp>.
. Organization for Economic Co-operation and Development, “Globalization and Emerging
Economies: Brazil, Russia, India, Indonesia, China and South Africa” (Paris: OECD, ) at .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Bulgaria,  January  (entered into force  April ).
. IA-CEPA, supra note .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Uzbekistan,  May  (entered into force  September ).
. Framework Agreement on Comprehensive Economic Co-operation Between the Association of South
East Asian Nations and the People’s Republic of China,  November  (entered into force  July
) [ASEAN-China FTA].
. Framework Agreement on Comprehensive Economic Cooperation Between the Republic of India
and the Association of Southeast Asian Nations,  October  (entered into force  July )
[ASEAN-India FTA].
. Framework Agreement on Comprehensive Economic Cooperation Among the Governments of the
Member Countries of the Association of Southeast Asian Nations and the Republic of Korea, 
December  (entered into force  July ) [ASEAN-Korea FTA].
. Agreement on Comprehensive Economic Partnership among Member States of the Association of
Southeast Asia Nations and Japan,  March  [ASEAN-Japan FTA].
. Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area,  February 
(entered into force  July ) [ASEAN-ANZ FTA].
. YAN Luo, “Dispute Settlement in the Proposed East Asia Free Trade Agreement: Lessons Learned
from the ASEAN, the NAFTA, and the EU” in Lorand BARTELS and Federico ORTINO, eds.,
Regional Trade Agreements and the WTO Legal System (Oxford: Oxford University Press, ),
at .
. William J. DAVEY, “Dispute Settlement in the WTO and RTAs: A Comment” in Lorand BARTELS
and Federico ORTINO, eds., Regional Trade Agreements and the WTO Legal System (Oxford:
Oxford University Press, ), at .
     
The purpose of this paper is to show the evolutionary process of the DSM in
Indonesia’s PTAs, analyzing several related factors behind this trend. The paper
argues that the evolution of the DSM from the GATT to WTO, Indonesia’s participa-
tion in a regional trade agreement, that is, ASEAN, the influence of trade partners, the
existence of domestic factors, and the ongoing WTO dispute encourage the evolution
of the DSM in Indonesian PTAs from political styles to more judicial styles with a high
level of legalism. Hence, it is important to investigate this political-legalistic shift to
show how Indonesia has committed to improving the level of predictability and cer-
tainty of its PTAs that is necessary to support the recent development of international
trade relations. Furthermore, given the fact that two authoritarian regimes followed
by the overwhelming spirit of nationalism used to be dominant, the inclusion of
the judicial styles of the DSM in Indonesia’s PTAs is expected to build trust and con-
fidence among Indonesia’s trading partners, including their prospective investors and
traders.
To begin, this paper explains the styles of the DSM, including political- or
diplomatic-oriented styles with a low level of legalism, and judicial-oriented styles
with a high level of legalism. Then, it discusses the evolution of the DSM under the
WTO and PTAs, covering the relationship between the DSM under the WTO and
PTAs, and the DSM under the GATT and the WTO, as well as PTAs. The next section
covers the evolution of the DSM in Indonesia’s PTAs, both as a member of ASEAN
and as an individual country, showing the trend of the rise of judicial styles of the
DSM in Indonesia’s PTAs and several related factors causing this trend.
.        

Some scholars have defined the styles of the DSM in international trade agreements.
Munin classified the DSM into political or adjudicative procedures. The political
style will colour the DSM if the following features are met: the DSM has no final deci-
sion or merely political process, consensus determines the decision-making process,
and it has no pre-established or barely comprehensive legal phases. Meanwhile, if
the decision of the dispute settlement authority is binding and a third authority is
actively involved (subject to the parties’ consent) to resolve the dispute, the adjudica-
tive styles have been employed. Most trade agreements have adopted those two
styles, with the domination of one style over another. Hence, a power-oriented
approach will follow if the political styles are dominant, while a procedure where
the adjudicative styles are dominant will be shaped as rule-oriented.
. Nellie MUNIN, “The Evolution of Dispute Settlement Provisions in Israel’s PTAs: Is There a Global
Lesson?” ()  Journal of World Trade  at .
. Ibid.
. Ibid.
. Ibid.
. Ibid.
   :  
A study by Chase et al. provided a more detailed classification. A political or dip-

lomatic style of trade agreements is identified through the following features: () there
are no provisions on the dispute settlement mechanism; () agreements that call for
exclusively negotiated settlement among disputing parties and/or a dispute is referred
to the political body for resolution; and () there is the existence of veto rights, enab-
ling members to avoid the referral to a third-party adjudicator. From the last type,
although the provision has enabled third-party adjudication, it will still fall within the
classification of the political style.
Under the quasi-judicial style, trade agreements set the “automatic” right to the
involvement of third-party adjudication in the dispute settlement mechanism. The
term “automatic” refers to the absence of an obvious right granted to parties to
block the referral of a dispute to a third-party adjudicator. The next classification
is the existence of an ad hoc adjudicative body, meaning that this body is established
for deciding a particular dispute and is dissolved after it has reached a decision. This
model also covers the existence of agreements that combine an ad hoc process at the
first stage and a standing body at the appellate stage. In judicial style, the adjudica-
tive body has a greater level of independence and institutional permanence. The
members of this body are appointed for fixed periods, and have more administrative
and functional autonomy (such as budget and legal personality). In addition, there
has been a requirement for appropriate legal training for those who intend to serve as
members of an adjudicative body. Trade agreements also fall within this style if they
allow private parties to file a lawsuit directly before tribunals (standing) or indirectly
through the media of national courts (preliminary reference procedures).
Smith introduced the notion of levels of legalism, from “none”, “low”, “medium”,
“high”, to “very high”, to express the existence of the DSM in trade agreements.
The level of legalism is “none” if the agreement does not allow third-party adjudica-
tion. A “low” level refers to the participation of third-party adjudication, but where
the result provided by the adjudicative body is not binding. Meanwhile, if the deci-
sion from the adjudicative body is binding on the parties to the dispute, the level of
legalism is “medium”. The level of legalism is “high” where the agreement
. Claude CHASE, Alan YANOVICH, Jo-Ann CRAWFORD, and Pamela UGAZ, “Mapping of
Dispute Settlement Mechanisms in Regional Trade Agreements—Innovative or Variations on a
Theme”, World Trade Organization: Economic Research and Statistics Division, Staff Working
Paper,  June .
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. James M. SMITH, “The Politics of Dispute Settlement Design: Explaining Legalism in Regional
Trade Pacts” ()  International Organization  at –.
. Ibid.
. Ibid.
. Ibid.
     
administered third-party adjudication by standing tribunals. Finally, the “very

high” level refers to a situation in which agreements provided a standing tribunal
for third-party adjudication. Moreover, it enables private parties and treaty organs
to initiate disputes and impose sanctions determined by the standing tribunal. Allee
and Elsig argued that the level of legalism has recently not always been applicable.
Specifically, only a few PTAs allow private standing, and if they do, it is typically regu-
lated under BITs as opposed to PTAs.
Jo and Namgung simplified Smith’s work by classifying the level of legalism into
“low”, “medium”, and “high”. “Low” refers to a situation where agreements do
not allow for third-party adjudication, or where the decision of the third-party adju-
dication is not binding. “Medium” refers to the binding nature of the decision of a
third-party review. Finally, “high” legalism is identified by the existence of perman-
ent standing tribunals in the DSM.
.          
A. The Connection of the DSM Under the WTO and PTAs
There has been a contradictory connection between the WTO and PTAs. The
Preamble of the WTO expressly states that the ultimate objective of multilateral trad-
ing systems is “the elimination of discriminatory treatment in international trade rela-
tions” through, among other things, the application of “most-favoured-nation”
[MFN] and “national treatment”. However, PTAs establish discriminatory treatment
that WTO rules seek to eliminate. Specifically, they conclude trade agreements to
liberalize trade exclusively among them, making a network of differential treatments
within the PTAs that are not available to other WTO members. The WTO
Agreements nevertheless recognize the existence of PTAs. For instance, Article
XXIV: of GATT  states that “the provisions of this Agreement shall not
. Ibid.
. Ibid.
. Ibid.
. Todd ALLEE and Manfred ELSIG, “Dispute Settlement Provisions in PTAs: New Data and New
Concepts” in Andreas DÜR and Manfred ELSIG, eds., Trade Cooperation: The Purpose, Design
and Effects of Preferential Trade Agreements (Cambridge: Cambridge University Press, ), at
.
. Hyeran JO and Hyun NAMGUNG, “Dispute Settlement Mechanisms in Preferential Trade
Agreements: Democracy, Boilerplates, and the Multilateral Trade Regime” ()  Journal of
Conflict Resolution  at .
. Ibid.
. Ibid.
. Ibid., at .
. Marrakesh Agreement Establishing the World Trade Organization,  April ,  U.N.T.S.
,  I.L.M.  (), preamble [WTO Agreement].
. Andrew D. MITCHELL and Nicolas J.S. LOCKHART, “Legal requirements for PTAs under the
WTO” in Simon LESTER and Bryan MERCURIO, Bilateral and Regional Trade Agreements
Commentary and Analysis (Cambridge: Cambridge University Press, ), at .
. Ibid.
   :  
prevent, as between the territories of Members, the formation of a customs union or

of a free-trade area”.
As regards the DSM, there is no formal connection between the WTO and PTAs.
There are no provisions under the WTO Agreements that directly affect the function
and the structure of the DSM in PTAs. Moreover, the DSM of PTAs is not subject to
the examination of the Committee on Regional Trade Agreements [CRTA] of the
WTO. Although the WTO and PTAs have no formal connection, there has been
a dynamic development of the current PTAs that were inspired by the DSM under
the WTO. PTAs have moved from a solely political process to a more rule-oriented
style, adopting similar features of the WTO, such as the procedure stage and the lan-
guage used. This trend is indicated in the subsequent evolutionary examination of
the DSM in Indonesia’s PTAs, discussed in the next part.
B. The DSM Under the WTO

. The DSM under the GATT
The origin of the DSM under the WTO can be traced through the existence of GATT
. contracting parties might commence the dispute settlement process through
consultation. A contracting party could request this procedure if it considered
that other contracting parties had failed to carry out GATT obligations or if there
was “non-violation nullification or impairment of the benefits of GATT”.
Contracting parties might conduct consultation with or without the support of a
working party or mediator. If the consultations failed to resolve differences, the
working parties that included representatives from all interested contracting parties,
particularly the parties to the dispute, had to work collectively to “promptly inves-
tigate” and draw up a report, with recommendations or rulings, for adoption by the
contracting parties.
The panel then replaced the role of working parties to resolve a dispute among
GATT contracting parties. If a particular party was dissatisfied with the outcome
of consultations, it could request the establishment of an ad hoc panel to issue a
legal ruling on the specific matter. The panel comprised three or five independent
. General Agreement on Tariffs and Trade ,  April , Marrakesh Agreement Establishing
the World Trade Organization, Annex A,  U.N.T.S. ,  I.L.M.  (), art.
XXIV: [GATT ].
. Munin, supra note  at .
. Ibid.
. Ibid.
. Ibid., art. XXII.
. Ibid., art. XXIII.
. Leslie JOHNS, Strengthening International Courts: The Hidden Costs of Legalization (Ann Arbor,
MI: University of Michigan Press, ) at .
. The World Trade Organization, “Historic Development of the WTO Dispute Settlement System”,
online: WTO <https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/csp_e.htm>
[WTO ].
. Amelia PORGES and John H. JACKSON, “The WTO and the New Dispute Settlement” () 
American Society of International Law Proceedings  at –.
     
experts (who were not necessarily jurists) who had no relation to the parties to the
dispute. A defendant party, however, could delay or block the formation of this
panel. Through an objective assessment, the panel then issued a report that became
legally binding only after the approval of the GATT Council. Once again, the
defendant party had a veto right to block the adoption of the panel report.
Although it has not been invoked frequently, the existence of a veto right that
allows contracting parties to block the formation of the panel and the report of the
panel reflects the political or diplomatic style of dispute settlement procedure in the
GATT. There is no “automatic” right to prevent this blocking system from occurring.
Hence, the level of legalism is considered “low”, as the nature of the panel report as
third-party adjudication is not binding. However, although the level of legalism is
considered “low”, it does not mean that the level of compliance of the GATT is
also low. Hudec provided an interesting analysis by emphasizing that the remarkable
record of voluntary compliance originated mainly from a wide political consensus
among GATT contracting parties.
. The DSM under the WTO

The foremost objective of the WTO DSM is to immediately settle the WTO members’
disputes regarding the respective rights and obligations of the WTO members under
WTO law. Pursuant to Article . of the Dispute Settlement Understanding [DSU],
the speedy settlement of such disputes is “essential to the effective functioning of the
WTO and the maintenance of a proper balance between the rights and obligations of
Members”. The existing procedure of the dispute settlement process comprises four
basic phases: consultations, panel report, Appellate Body report [AB report], and
Dispute Settlement Body [DSB] adoption.
The dispute settlement phase under the WTO is started when a member requests
consultations with the other members. The responding member has to reply to
this request within ten days, and then it has to enter into good faith consultations
within thirty days after receiving the request. If the consultation is unable to settle
. Munin, supra note  at .

. Marc L. BUSCH, “Democracy, Consultation, and the Paneling of Disputes under GATT” () 
Journal of Conflict Resolution  at .
. WTO , supra note .
. Bernard HOEKMAN and Michel KOSTECKI, The Political Economy of the World Trading System:
WTO and Beyond (Oxford: Oxford University Press, ) at .
. Johns, supra note  at .
. Robert E. HUDEC, The GATT Legal System and World Trade Diplomacy (New York: Praeger,
) at .
. Peter Van den BOSSCHE, The Law and Policy of the World Trade Organization (Cambridge:
Cambridge University Press, ) at .
. Dispute Settlement Rules: Understanding on Rules and Procedures Governing the Settlement of
Disputes, Marrakesh Agreement Establishing the World Trade Organization, annex , 
U.N.T.S. ,  I.L.M.  (), art. . [DSU].
. NGUYEN Tan Son, “Towards a Compatible Interaction Between Dispute Settlement Under the
WTO and Regional Trade Agreements” ()  Macquarie Journal of Business Law 
. DSU, supra note , art. ..
   :  
the dispute within sixty days, a panel is established. Unless the members to a dispute
approve otherwise, the panel comprises three or five panellists (who are not necessar-
ily jurists) selected from the Secretariat’s lists. Despite the panellists acting in their
individual capacities, the fact that the disputing members have to agree on the panel-
lists may influence their independence. Thereafter, the disputing members present
their submission to the panel, and then the panel issues its recommendations and con-
clusion in a final report. The DSB adopts this report within sixty days, except if
there is a consensus against adoption.
When the disputing members are dissatisfied with the panel report, the Appellate
Body takes over the dispute. Unlike the panel, the AB has a “fixed” composition,
comprising seven independent legal experts who serve for a four-year term, renew-
able only once. The DSB automatically adopts the recommendations and conclu-
sions of the AB report, unless the DSB rules by consensus not to adopt the AB
report. The implementation of the recommendations (either the panel or the AB)
has to be carried out for “a reasonable period of time”. If the responding member
does not obey the final decision, the complaining member can execute temporary
trade retaliatory measures, and the degree of these measures is the subject of
arbitration.
Some experts have positively assessed the existence of the DSM under the WTO.
Zimmermann explained that, unlike the GATT, the DSB has successfully introduced
precise time limits throughout the dispute settlement process. Lockhart and Voon
presumed that appellate review in the WTO was working well, and experts remarked
on the effectiveness and efficiency of appellate review that has contributed to the
development of international trade law. Similarly, Guzman and Pauwelyn stated
that the dispute settlement process was one of the most remarkable and successful
aspects of the WTO. Bown praised how the WTO DSM effectively eliminated the
. Ibid., arts. ., ..

. Ibid., arts. ., ..
. Bernhard ZANGL, “Judicialization Matters! A Comparison of Dispute Settlement Under GATT and
the WTO” ()  International Studies Quarterly .
. DSU, supra note , art. ..
. Ibid.
. Ibid., art. ..
. Louise JOHANNESSON and Petros C. MAVROIDIS, “The WTO Dispute Settlement System –
: A Data Set and Its Descriptive Statistics” ()  Journal of World Trade .
. DSU, supra note , art. ..
. Ibid., art. ..
. Ibid., art. .
. Ibid., art. ..
. Thomas A. ZIMMERMANN, “WTO Dispute Settlement at Ten: Evolution, Experiences &
Evaluation” ()  Swiss Review of International Economic Relations  at .
. John LOCKHART and Tania VOON, “Review of the Appellate Review in the WTO Dispute
Settlement System” ()  Melbourne Journal of International Law  at .
. Andrew T. GUZMAN and Joost H.B. PAUWELYN, International Trade Law, nd ed. (South
Holland: Wolters Kluwer, ) at . See also Nicolette BUTLER, “In Search of a Model for
the Reform of International Investment Dispute Resolution: An Analysis of Existing International
and Regional Dispute Settlement Mechanisms” in Jean E. KALICKI and Anna JOUBIN-BRET,
                              
blocking system that enabled members to prevent the initiation of a dispute, the for-
mation of the panel, and the adoption of the panel report.
The WTO DSM also attracts the participation of developing countries. Brazil
(thirty-four complaints), India (twenty-five complaints), Mexico (twenty-three com-
plaints), Argentina (twenty-two complaints), and Indonesia (eleven complaints) are
among the frequent users of the system. China, which joined the WTO only in
, has filed several crucial cases against both the US and the EU. Moreover,
developing countries have successfully defeated economic superpower countries in
some WTO cases: in particular, US-Underwear, a complaint by Costa Rica;
US-Clove Cigarettes, a complaint by Indonesia; and especially US-Gambling, a com-
plaint by Antigua, which has a population of only ,.
The WTO DSM falls within the category of judicial style, with the level of legalism
being “high” due to various reasons. First, the AB is an independent and permanent
body, comprising experts (who are necessarily legal experts and who serve with fixed
terms). The AB also has more administrative and functional autonomy (such as a bud-
get and legal personality). Islam explained how the WTO became a rule-oriented
mechanism through the existence of the “covered agreements” as the source of law,
reducing the disparities of power, guarding the members’ legitimate interests, and
reducing the abusive exercise of rights. Zangl then analyzed how the panel has
been forced to meticulously base its report on legal reasoning, as otherwise its report
would be annulled or modified by the AB. Nevertheless, this is not to say that the
WTO DSM is a perfect system. The legalization of this process entails rigorous finan-
cial and human resources that are often lacking in developing countries. Equally, due
to the disparities of market power, the retaliatory remedy appears not to be an effect-
ive measure to any countries, except the powerful members, such as the US and the
EU.
C. The DSM in PTAs

Following the dynamic development of the DSM from the GATT and the WTO, PTAs
have also moved from a political style of agreements to a judicial style of agreements
eds., Reshaping the Investor-State Dispute Settlement System: Journeys for the st Century (Leiden:
Nijhoff, ), at .
. Chad P. BOWN, “Participation in WTO Dispute Settlement: Complainants, Interested Parties and
Free Riders” ()  World Bank Economic Review  at .
. World Trade Organization, “Map of Disputes Between WTO Members”, online: WTO <https://
www.wto.org/english/tratop_e/dispu_e/dispu_maps_e.htm>.
. Gary N. HORLICK and Katherine FENNELL, “WTO Dispute Settlement from the Perspective of
Developing Countries” in Yong-Shik LEE, Gary N. HORLICK, Won-Mog CHOI, and Tomer
BROUDE, eds., Law and Development Perspective on International Trade Law: The Law and
Development Institute (Cambridge: Cambridge University Press ), at .
. Rafiqul M. ISLAM, International Trade Law of the WTO (Oxford: Oxford University Press, )
at .
. Zangl, supra note  at –.
. See, for example, Chad P. BOWN, “On the Economic Success of GATT/WTO Dispute Settlement”
()  Review of Economics and Statistics  at .
. Davey, supra note  at .
   :  
with the higher level of legalism. Historically, some older agreements had no DSM. If
they had such procedures, the political or diplomatic process pragmatically settled the
dispute. Specifically, they provided consultations and possibly conciliation or medi-
ation, implying a low level of legalism. The disputing parties retained the right to
reject any legally proposed settlement. These types of PTAs include the following:
the  Southern African Customs Union [SACU] and the US-Israel FTA ().
Some agreements then modified the DSM, moving to a higher level of legalism. For
example, the  Caribbean Community [CARICOM] established the Caribbean
Court of Justice in , which replaced the tribunal, and strengthened the procedure
of dispute settlement. Next, the  SACU had no provisions on the DSM, but the
provisions were added in . The  ASEAN Protocol on dispute settlement
stipulated only the diplomatic/political process as a means of resolving a dispute. The
 Protocol on Enhanced Dispute Settlement Mechanism provided ASEAN
Members with a legalistic and rule-based dispute settlement process modelled on
the WTO’s DSU.
In general, modern PTAs have formal legal procedures to resolve disputes between
the parties, resembling the WTO dispute settlement system. Although the proced-
ural details vary from agreement to agreement, they typically provide consultations as
a means of resolving differences. If this stage fails to settle the dispute, the panel of
experts will take over the dispute and then issue a report on the virtues of the dis-
pute. The success of the WTO DSM has inspired the growing spread of the
WTO-like dispute settlement procedure. Specifically, the WTO members that pre-
viously neglected or considered it unnecessary to employ an adjudicative style of dis-
pute settlement in PTAs changed their methods. The EU’s PTAs with Mexico
and Chile, as well as Australia’s PTAs with Singapore and Thailand, are exam-
ples of these movements.
. Smith, supra note .

. Agreement on the Establishment of a Free Trade Area Between the Government of Israel and the
Government of the United States of America,  April  (entered into force  August ),
art. .
. Revised Treaty of Chaguaramas Establishing the Caribbean Community Including the Caricom
Single Market and Economy,  July  (entered into force  February ), art. -
[CARICOM].
. Martina METZGER, “Regional Cooperation and Integration in Sub-Saharan African”, UNCTAD,
Discussion Papers No. , September , at .
. Yan, supra note  at .
. Nguyen, supra note .
. Davey, supra note  at .
. David MORGAN, “Dispute Settlement under PTAs: Political or Legal?”, Legal Studies Research
Paper No. , Melbourne Law School, , at .
. Ibid.
. Economic Partnership, Political Coordination and Cooperation Agreement Between the European
Community and its Member States, of the one Part, and the United Mexican States, of the other
Part,  February (entered into force  March ), art. .
. Agreement Establishing an Association Between the European Community and the Republic of
Chile,  November  (entered into force  February ), art. .
. Morgan, supra note  at .
                              
Although having a similar DSM with the WTO, PTAs seem to be employed much
less frequently. Moreover, a number of complex dispute settlement procedures have
never been used, such as ASEAN. There are various reasons for this. Perhaps
the most plausible reason is that the successful WTO DSM has obviated the need
for PTA members to activate regional DSMs. On a daily basis, the existence of the
WTO panel and the AB is significantly supported by the WTO Secretariat, providing
them with trained experts. However, dispute settlement under the PTAs relies much
more heavily on the panellists themselves to manage all of the work.
The WTO DSM also has a more effective enforcement mechanism than PTAs.
Although regulating the DSM, some countries prefer to settle disputes through diplo-
matic resolution, as it enables a negotiated outcome, one that can consider the domes-
tic sensitivities both parties may have. Equally, few PTAs include the existence of
the appellate review, so their effectiveness and legitimacy are somewhat questioned.
WTO decisions are regarded as more legitimate because panel reports are subject to
appellate review, which has a more adjudicative character than PTAs.
.        

A. The Evolution of Indonesia’s PTAs
. Indonesia’s PTAs as an individual country
The first two of Indonesia’s PTAs after its independence in  were concluded with
Japan in  and India in , with the main objective being to promote
trade between the two parties. Specifically, both parties agreed to grant facilities
and issue any licences necessary for the importation and exportation of goods and
commodities. Each party then established schedules on an annual basis, containing
a list of goods and commodities that were available for such facilities and licences.
As a country that relied on primary commodities, Indonesia put goods and
commodities such as tea, coffee, palm oil, rubber, peanuts, and rattan on its export
schedule. Indonesia’s country partner then put goods and commodities such as
electric machinery, textiles, cotton, and metal on its export schedule. This pattern
can be seen from Indonesia’s subsequent PTAs with China (), Pakistan
. Davey, supra note  at .

. Ibid., at .
. Morgan, supra note  at .
. Ibid., at .
. Davey, supra note  at .
. Trade Agreement Between the Republic of Indonesia and Japan,  August  (entered into force 
August ) [Indonesia-Japan PTA ].
. Trade Agreement Between the Republic of Indonesia and the Republic of India,  January 
(entered into force  January ) [Indonesia-India PTA ].
. Indonesia-Japan PTA , supra note , art. I.
. Indonesia-India PTA , supra note , art. III.
. Indonesia-Japan PTA , supra note , art. II.
. Trade Agreement Between the Republic of Indonesia and the People’s Republic of China, 
November .
   :  
(), Iraq (), Bulgaria (), Romania (), and Hungary

().
The existence of the GATT  significantly influenced Indonesia’s PTAs. For
example, the trade agreement between Indonesia and Australia in  stated that
“the exchange of goods between the two countries shall be conducted in accordance
with the rights and obligations arising from their participation as Contracting Parties
to the [GATT]”. Both parties agreed to the MFN obligation in relation to import
and export charges, policies concerning the importation and exportation of
goods and commodities, customs duties, customs rules, and procedures applying to
export and import licences. Similar provisions can be found in the trade agree-
ments of Indonesia with the following countries: Malaysia (), the
Philippines (), Romania (), and Czechoslovakia ().
After the WTO was established in , Indonesia continued to conclude PTAs
with other WTO members, including Papua New Guinea (), Slovakia
(), Bulgaria (), Thailand, (), and Australia ().
Relating to the MFN principle, all agreements mainly referred to the WTO establish-
ing agreement and covered the following measures: customs duties and charges; jaw
regulations in relation to customs procedures, transit, storage, and reloading; and
domestic taxes and other charges, regulations, and requirements connected to the
. Trade Agreement Between the Republic of Indonesia and the Islamic Republic of Pakistan, 
February  (entered into force  January ).
. Trade Agreement Between the Republic of Indonesia and the Republic of Iraq,  April  (entered
into force  December ).
. Long-term Trade Agreement Between the Republic of Indonesia and the People’s Republic of
Bulgaria,  May .
. Long Term Trade Agreement Between the Republic of Indonesia and the Rumanian People’s
Republic for the period –,  October  (entered into force  January ).
. The Long Term Trade Agreement Between the Government of the Republic of Indonesia and
Hungarian People’s Republic,  April  (entered into force  April ).
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Commonwealth of Australia,  November  (entered into force  November ), art. .
. Ibid.
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of
Malaysia,  October  (entered into force  October ).
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of the Philippines,  August  (entered into force  August ).
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Socialist Republic of Romania,  March  (entered into force  March ).
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Czech Republic,  May  (entered into force  June ).
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Independent State of Papua New Guinea,  September .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Slovak Republic,  June .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Bulgaria,  January  (entered into force  April ).
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Kingdom of Thailand,  November  (entered into force  August ).
. IA-CEPA, supra note .
                              
imported goods. Indonesia also concluded trade agreements with non-WTO mem-
bers, such as Uzbekistan (). Nevertheless, the influences of the WTO agree-
ment are still dominant. For example, in the trade agreement with Uzbekistan, both
parties agreed to grant MFN treatment in all matters related to trade and economic
co-operation.
. Indonesia’s PTAs as a Member of ASEAN

In , as a Member of ASEAN, Indonesia along with other Members, started estab-
lishing PTAs that later became a stepping stone to the establishment of the ASEAN
Free Trade Area [AFTA]. In , ASEAN Members then established the
ASEAN Common Effective Preferential Tariff [CEPT] for the AFTA. They defined
CEPT as “an agreed effective tariff, preferential to ASEAN, to be applied to goods
originating from the ASEAN Member States, and which have been identified for
inclusion in the CEPT Scheme”. Further, “a product shall be deemed to be origin-
ating from ASEAN Members if at least  per cent of its content originates from any
Member State”.
In , ASEAN Members started initiating the establishment of the ASEAN
Economic Community [AEC] in . In , ASEAN Member States then commit-
ted themselves to accelerate the establishment of the AEC by . In , the
ASEAN Trade in Goods Agreement [ATIGA] was established. The objective of
this agreement was “to achieve the free flow of goods in ASEAN as one of the prin-
cipal means to establish a single market and production base for the deeper economic
integration of the region towards the realization of the AEC by ”.
ASEAN Members concluded PTAs with China (), India (), South
Korea (), Japan (), and Australia and New Zealand [AANZFTA]
(). In the FTAs’ objectives, most of the PTAs have the goals of progressively
liberalizing and facilitating trade in goods by eliminating tariff and non-tariff barriers;
. Indonesia-Bulgaria PTA, supra note , art. .

. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Uzbekistan,  May  (entered into force  September ).
. Ibid., art. .
. Agreement on ASEAN Preferential Trading Arrangements,  February  (entered into force 
August ).
. Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade
Area (AFTA),  January  (entered into force  January ).
. Ibid., art. .
. Ibid., art. .
. Cebu Declaration on the Acceleration of the Establishment of an ASEAN Community by , 
January  (entered into force  January ).
. ASEAN Trade in Goods Agreement,  February  (entered into force  April ).
. Ibid.
. ASEAN-China FTA, supra note .
. ASEAN-India FTA, supra note .
. ASEAN-Korea FTA, supra note .
. ASEAN-Japan FTA, supra note .
. ASEAN-ANZ FTA, supra note .
   :  
of gradually liberalizing trade in services with substantial sectoral coverage; and of

promoting and protecting investment and intellectual property rights.
Nonetheless, the ASEAN-Japan FTA mentioned a more specific objective by stating
that the agreement also intended to support “ASEAN economic integration, bridging
the development gap among ASEAN Member States, and enhancing trade and invest-
ment among the Parties”.
B. The Domination of Political/Diplomatic Styles of the DSM in Indonesia’s

PTAs (–)
. Indonesia’s PTAs with no DSM
During this period, Indonesia’s PTAs mostly had no provisions on the DSM, reflecting
the domination of political styles and low level of legalism. Anticipating any potential
differences in the implementation of PTAs, Indonesia’s PTAs arranged the existence of a
joint committee. For example, the Indonesia-United Arab () PTA stated that a Joint
Committee, comprising representatives of both parties, would meet to facilitate the imple-
mentation of this agreement. The meeting of this committee should be held not later
than two months after the request of either Party. This provision was also similar to
Indonesia’s PTAs with Japan (), Romania (),Australia (), Turkey
(), Bulgaria (), the US (), and North Korea ().
Some of Indonesia’s PTAs adopted consultations as a means of solving problems in
relation to the implementation of the agreement, for instance, the PTAs with Australia
(), the Philippines (), and Romania (). The PTA with Jordan
() regulated the existence of a joint commission with more detailed tasks, includ-
ing “supervising the practical implementation of the agreement and removing all
. Ibid., art. .

. ASEAN-Japan FTA, supra note , art. .
. Long Term Trade Agreement Between the Republic of Indonesia and the Government of the United
Arab Republic,  September , art. .
. Ibid.
. Indonesia-Japan PTA, supra note , art. .
. Indonesia-Romania PTA, supra note , art. .
. Trade Agreement Between the Republic of Indonesia and the Commonwealth of Australia, 
December  (entered into force  July ), art. .
. Trade Agreement Between the Republic of Indonesia and the Republic of Turkey,  September 
(entered into force  September ), art. .
. Indonesia-Bulgaria PTA, supra note , art. .
. Agricultural Commodities Agreement Between the Republic of Indonesia and the Government of the
United States of America,  October  (entered into force  October ), art. .
. Trade Agreement Between the Republic of Indonesia and the Democratic People’s Republic of Korea,
 November , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Commonwealth of Australia,  November  (entered into force  November ), art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of the Philippines,  August  (entered into force  August ), art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Socialist Republic of Romania,  March  (entered into force  March ), art. .
                              
difficulties that may arise in this respect, and assisting the development of trade, and
economic and technical cooperation”.
In the s, Indonesia’s PTAs were dominant in employing diplomatic channels
to resolve the dispute. Specifically, the Indonesia-Czech () PTA stated that any
dispute on the interpretation or implementation of this agreement “shall be settled
amicably by both contracting parties or through diplomatic channels”. This type
of provision was also found in Indonesia PTAs with Chile (), Suriname
(), Vietnam (), Ukraine (), Cambodia (), and Yemen
().
The  ASEAN CEPT provided several stages of dispute resolution. First, a
Member may request a consultation regarding any matter affecting the implementa-
tion of the agreement. This process was organized by the ministerial-level council,
comprising one nominee from each Member State and the Secretary-General of the
ASEAN Secretariat. If the consultation failed to settle the dispute, the council might
seek guidance from the ASEAN Economic Ministers [AEM].
There were both internal factors and external factors that caused Indonesia’s PTAs
in this period to be somewhat political/diplomatic with a low level of legalism. As to
internal factors, two authoritarian regimes under Soekarno (–) and Soeharto
(–) had controlled Indonesia. Jo and Namgung have postulated a “democracy
effect” to explain how the domestic politics of PTA members influence the way in
which countries incorporated their dispute settlement provisions. In Indonesia,
both authoritarian administrations tended to prioritize local elites by protecting
import-competing industries, demanding a low level of legalism to promote diplo-
matic measures instead of third-party adjudication. Equally, the spirit of national-
ism that promoted domestic industries also coloured this period so that the presence
of the DSM was considered a threat to domestic sovereignty.
. Agreement on Trade and Economic Cooperation Between the Government of the Republic of
Indonesia and the Government of the Hashemite Kingdom of Jordan,  April , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Czech Republic,  May , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Chile,  September , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Suriname,  May , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Socialist Republic of
Vietnam,  March , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of
Ukraine,  April , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Kingdom of Cambodia,  February  (entered into force  February ), art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Yemen,  February , art. .
. Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade
Area (AFTA),  January  (entered into force  January ), art. .
. Ibid.
. Jo and Namgung, supra note  at .
. Ibid., at .
   :  
The considerations of the statement of offer of Indonesia under GATT  fol-
lows the analysis mentioned above. The government of Indonesia stated that any
trade commitments would be carried out according to the economic and social devel-
opment in Indonesia. The government indicated that the predominant factor
restricting the importation of foreign goods was the limited availability of foreign
exchange. Furthermore, the government had undertaken tariff reform to encourage
and protect domestic industries. In addition, Indonesia agreed only to the elimin-
ation or reduction of tariff and non-tariff barriers imposed upon export products of
interest of Indonesia.
The next internal factor that influenced Indonesia’s PTAs was the lack of experi-
ence in negotiating PTAs. This analysis may link to the status of Indonesia as a mem-
ber of GATT . Historically, three ways were available for a government to
become a contracting party of the GATT: () original membership; () accession
under Article XXXIII; and () sponsorship after obtaining independence from a gov-
ernment that was already a contracting party. Unlike accession, becoming a GATT
contracting party through sponsorship did not require tariff negotiations, and a newly
independent country was able to join the GATT without making any tariff conces-
sions. The Article also did not specify what the obligations of this country were,
as it might be hard to impose stringent tariff obligations when it was in the process
of development and demanded special dispensations on GATT obligations.
Indonesia was the first country to become a contracting party of the GATT through
sponsorship on  February . This fact might contribute to the lack of experi-
ence in negotiating tariff concessions, both in the GATT and PTA, because Indonesia
had had no previous experience in negotiating this issue.
From external factors, Jo and Namgung stated that the development of a multilat-
eral trade regime had a substantial impact on how the DSM was established in PTAs,
reflecting what has been called the “emulation effect”. Specifically, the mechanism of
dispute settlement was more likely to have low-level legalism after the establishment
of the Uruguay Round. However, the mechanism of dispute settlement was more
likely to have a high level of legalism before the Uruguay Round. In Indonesia’s
PTAs, however, this pattern is somewhat different because the low level of legalism
was dominant before the Uruguay Round. Indonesia seemed to follow the political
. World Trade Organization, “Republic of Indonesia Permanent Mission to GATT, ‘Statement of
Offers as a Contribution to the Objective of the Trade Negotiation by the Government of
Indonesia: Additional Paragraph’” ( December ), online: WTO <https://www.wto.org/eng-
lish/docs_e/gattbilaterals_e/Kennedy__/-/-.pdf>.
. Ibid.
. Ibid.
. Ibid.
. John H JACKSON, World Trade and The Law of GATT (Indianapolis, IN: Bobbs-Merrill Company,
) at .
. Ibid., at .
. Ibid.
. World Trade Organization, “Indonesia and the WTO”, online: WTO <https://www.wto.org/english/
thewto_e/countries_e/indonesia_e.htm>.
. Jo and Namgung, supra note  at .
                              
styles of GATT  with a low level of legalism in its dispute settlement mechanism.
After the Uruguay Round, Indonesia’s PTAs, primarily through its status as a member
of ASEAN, adopted more judicial styles with a high level of legalism. Also, the influ-
ence of trade partners contributed to the style of the dispute settlement provisions in
Indonesia’s PTAs. Specifically, when Indonesia (as an autocratic country) signed PTAs
with other autocratic countries, the result of those PTAs was more likely to have a low
level of legalism.
. Indonesia’s PTAs with DSM

Even though Indonesia’s PTAs were mostly of a political style, the Indonesia-
Netherlands PTA () regulated the DSM. Specifically, if consultations or negotia-
tions fail to settle disputes, either party could submit the dispute to an arbitral tribu-
nal that comprised three members. Each party appoints one arbitrator, and the two
arbitrators then appoint a third arbitrator who is not a national of either party. If
the arbitrator fails to be appointed within two months, both parties could request the
appointment of an arbitrator by the President of the International Court of Justice.
The principles of law will be the basis for the tribunal’s decision. The dispute could
be settled amicably, at any stage, before the tribunal’s decision. Thereafter, the
foregoing provisions will not prejudice the power of the tribunal to rule the dispute
ex aequo et bono if the parties so agree. Finally, the tribunal’s decision is reached
through a majority of votes and that decision is final and binding on the parties to the
dispute.
The existence of the DSM under this PTA provided an interesting analysis. From
the independence of Indonesia in  to the establishment of the Uruguay Round
in , this PTA was the only PTA that covered the dispute settlement mechanism.
It did not follow the pattern that if an agreement adopted a low level of legalism in its
dispute settlement provisions, then subsequent agreements that shared memberships
were likely to exhibit a low level of legalism.
The status of the Netherlands as the former colonial power that ruled over
Indonesia may have influenced the negotiation of this PTA. It seems that the trail
of the superiority of the Netherlands still remains in negotiations, enabling the
Netherlands to put dispute settlement provisions (that refer to the International
Court of Justice) in the PTA with Indonesia. Nevertheless, the more sensible explan-
ation is the need for both parties to establish mutual trust. Before this PTA was signed
. Ibid., at .

. Agreement on Economic Cooperation Between the Government of the Republic of Indonesia and the
Government of the Kingdom of the Netherlands,  July , art. .
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. Ibid.
. Jo and Namgung, supra note  at .
   :  
in , Indonesia was an inhospitable country for foreign investors through its
nationalization policy. Almost all foreign enterprises (which were mostly
Dutch-owned enterprises) were nationalized. The inclusion of the dispute settle-
ment provisions was crucial for protecting the interest of the Netherlands, particularly
to anticipate unilaterally adverse policies from Indonesia. In contrast, the government
of Indonesia wanted to show its willingness and seriousness in concluding the PTA
with the Netherlands by incorporating the dispute settlement provisions. Equally,
the government intended to show how the transfer of power from Soekarno to
Soeharto had resulted in a more trustworthy government that differed from the pre-
vious one.
C. The Rise of the Judicial Styles of the DSM in Indonesia’s PTAs

(–)
. Indonesia’s PTAs with no DSM
Some of Indonesia’s PTAs still have no provisions on the DSM, reflecting a low level
of legalism. Interestingly, all Indonesia’s PTAs that have no provisions on the DSM
were concluded with other developing countries. The following reasons explain
why DSM provisions are absent. First, the role of a joint committee to settle a dispute
between the parties has been strengthened in this period, so the DSM may not be
necessary. For example, the Indonesia-Kuwait PTA () stated that any dispute
should be resolved through consultations within the Joint Committee. It did not
mean that the dispute settlement process solely relied on the Joint Committee because
the parties must “supply the Joint Committee with the information required for a
thorough examination of the dispute with the view to seeking an amicable settlement
acceptable to the Parties”. These types of provisions are also found in Indonesia’s
PTAs with Slovakia (), the Czech Republic (), Uzbekistan (),
China (), Thailand (), and Pakistan ().
. Organization for Economic Co-operation and Development, OECD Investment Policy Reviews
Indonesia  (Paris: OECD, ) at –.
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
State of Kuwait,  May , art. .
. Ibid.
. Agreement on Economic Cooperation Between the Government of the Republic of Indonesia and the
Government of the Slovak Republic,  May , art. .
. Agreement Between the Government of the Republic of Indonesia and the Government of the Czech
Republic on Economic Cooperation,  November , art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Republic of Uzbekistan,  May  (entered into force  September ), art. .
. Agreement Between the Government of the Republic of Indonesia and the Government of the
People’s Republic of China on Expanding and Deepening Bilateral Economic and Trade
Cooperation,  April  (entered into force  April ), art. .
. Trade Agreement Between the Government of the Republic of Indonesia and the Government of the
Kingdom of Thailand,  November  (entered into force  August ), art. .
. Preferential Trade Agreement Between the Government of the Republic of Indonesia and the
Government of the Islamic Republic of Pakistan,  February , art. VI.
                              
The influence of trade partners is also significant in shaping Indonesia’s PTAs. In

this period, the rise of judicial styles of the DSM in PTAs has occurred, but
Indonesia did not follow this trend. Indonesia, along with its partner developing
countries, seemed to be reluctant to put the DSM in its PTAs. The maxim the
“ASEAN Way” has influenced this trend. While the Western concept has promoted
“rule-based” regionalism, ASEAN states still emphasize consultation, informality,
and consensus in collective decision-making. Traditionally, they are reluctant to
rely on the existence of third-party adjudication,  or they do not want to establish
supranational bodies for implementing and enforcing community rules.
Finally, the fact that Indonesia and its partner developing countries have joined the
WTO and the Regional Trade Agreements [RTA] that have incorporated comprehen-
sive provisions with a better enforcement mechanism on the DSM has led to them
concluding more flexible and political styles of the DSM in their bilateral PTAs.
For example, Article  Indonesia-Thailand FTA states that “any differences between
the Parties on the interpretation or implementation of this Agreement shall be settled
amicably, through consultation or negotiation between the Parties”.
This FTA shows that, although ASEAN has established the judicial styles of the
DSM through the establishment of the ASEAN DSM and ASEAN PTAs, it does
not mean that Indonesia and Thailand will always follow the judicial styles of the
DSM in ASEAN’s scope while they conclude PTAs as an individual country. They
seem to have non-exclusive jurisdiction, meaning that, although both countries are
ASEAN Member States, the countries have retained their flexibility to decide the
DSM under different agreements.
. Indonesia’s PTAs with DSM

(a) Indonesia’s PTAs with ASEAN Member States: In this period, Indonesia’s PTAs
with ASEAN Member States regarding the DSM have been significantly strengthened
through the  Protocol on Enhanced Dispute Settlement Mechanism [the
Protocol]. All ASEAN economic agreements (the covered agreements) from the
 ASEAN Preferential Trading Arrangements and future ASEAN economic
agreements must follow the DSM under this protocol. The existence of the DSU
WTO has inspired almost all provisions in this protocol, particularly the
combination of an ad hoc panel system and a permanent Appellate Body, as well
. Sungjoon CHO and Jürgen KURTZ, “Legalizing the ASEAN Way: Adapting and Reimagining the
ASEAN Investment Regime” ()  American Journal of Comparative Law  at . See
also Jose Duke BAGULAYA, “ASEAN as Wayang Kulit: A Critique of the Constitutional,
Extra-constitutional, and Practical Fetters of ASEAN” ()  Asian Journal of International
Law  at .
. John MERRILLS, “The Means of Dispute Settlement” in Malcolm EVANS, ed., International Law
(Oxford: Oxford University Press, ), at –.
. Lay Hong TAN, “Will ASEAN Economic Integration Progress Beyond a Free Trade Area?” ()
 International and Comparative Law Quarterly  at .
. Indonesia-Thailand FTA, supra note , art. .
. ASEAN Protocol on Enhanced Dispute Settlement Mechanism,  November  (entered into
force  November ), online: ASEAN <http://asean.org/?static_post=asean-protocol-on-
enhanced-dispute-settlement-mechanism>.
   :  
as the existence of the Senior Economic Officials Meeting [SEOM] to act as the
equivalent of the DSB in the WTO DSM. This process showed the willingness of
ASEAN to move from political/diplomatic styles to the judicial styles of the DSM
with a high level of legalism.
Similar to the DSU WTO, the complaining party may request consultations if there
is any dispute under the covered agreement. The responding party must reply
within ten days and enter into consultations within thirty days. If consultations
fail to settle the dispute within sixty days, the complaining party may raise this
issue to the SEOM to request the establishment of a panel. The panel established
by the SEOM has its own working processes, as regulated by Annex II of the Protocol.
The panel has to submit its findings and recommendations to the SEOM within sixty
days, with an additional ten days for an exceptional case. This timetable shows
how the ASEAN panel is under even harder time pressure compared to the WTO
panel. The SEOM must adopt the report within thirty days, unless there is a con-
sensus not to do so or a competing party states its decision to appeal.
If the panel report is appealed, the AEM establishes the AB. The AB comprises
seven persons who are unaffiliated with any government and has the authority to uphold,
modify, or reverse the panel report. The members of the AB serve for a four-year term,
and each member may be reappointed once. There is a requirement that the members
of the AB must demonstrate expertise in law and international trade. The SEOM must
adopt the AB report, and the parties must unconditionally accept this report unless there
is a consensus not to adopt the report within thirty days. Unlike the WTO panels and
the WTO AB that only recommend to the member concerned to bring the measure into
conformity, the panel or the AB under ASEAN DSM may “suggest ways in which the
Member State concerned could implement the recommendations”.
Concerning implementation, the parties to the dispute must comply with the report
either from the panel or from the AB within sixty days after the adoption of the
report. Supervising the progress of the implementation of the findings and recom-
mendations of the panel and the AB reports, a party must provide a written report to
the SEOM. The issue of this implementation may be raised at the SEOM by any
. Yan, supra note  at .

. ASEAN DSM, supra note , art. .
. Ibid., art. .
. Ibid.
. Ibid., art. .
. Yan, supra note .
. ASEAN DSM, supra note , art. .
. Ibid., art. ().
. Ibid., art. ().
. Ibid., art. ().
. Ibid., art. ().
. Ibid., art. ().
. Yan, supra note .
. ASEAN DSM, supra note , art. .
. Ibid., art. ().
. Ibid., art. ().
                              
Member State at any time following their adoption. Equally, it must be placed on
the agenda of the SEOM meeting and must remain on the SEOM’s agenda until the
issue is resolved.
The existence of the protocol has significantly changed the DSM among ASEAN
Members from political/diplomatic styles to judicial styles with a high level of legal-
ism. Under the protocol, the Members agree to apply an “automatic” right, prevent-
ing the parties from blocking the referral of a dispute to a third-party adjudicator.
Furthermore, the AB has a greater level of independence and institutional perman-
ence. Specifically, the members of the AB are appointed for fixed terms, having expert-
ise in law and international trade. While serving on the AB, they have to be available
at all times and on short notice. Regarding the fund, the Members agree to estab-
lish a revolving fund, separate from the ASEAN Secretariat’s regular budget for
administering the DSM. Finally, in the enforcement mechanism, in addition to pro-
viding similar mechanisms to the DSU WTO, the Members will put the enforcement
issue on the agenda of every SEOM conference until it has been resolved. This
mechanism could give an influential sentence, as there will be a public shame for
non-compliance, given the cultural tradition of the ASEAN Members.
Although the ASEAN DSM seems ideal, there have been some concerns on this
DSM. The protocol does not regulate public participation and how the report from
the panel or the AB will be enforced in a national court. As regards transparency, only
limited information regarding the DSM is publicly available. In addition, there is no pro-
vision on the choice of forum. Finally, scholars have not been able to analyze the effect-
iveness of the ASEAN DSM because it has never been invoked. Nevertheless, the
existence of the ASEAN DSM that is comparable to the DSU WTO has been an import-
ant bridge for ASEAN Members to participate in the WTO, particularly while having a
dispute with other WTO Members. Equally, the presence of the ASEAN DSM will
increase Members’ knowledge and experience while formulating the DSM in PTAs
with other countries, both as an individual country and a Member of ASEAN.
(b) Indonesia PTAs as a Member of ASEAN: As a Member of ASEAN, Indonesia

concluded PTAs with China (), India (), Korea (), Japan
(), and Australia and New Zealand (). All these PTAs contained the
. Ibid., art. ().

. Ibid.
. Ibid., art. ().
. Ibid., art. .
. Yan, supra note .
. Walter WOON, “Dispute Settlement in ASEAN” Centre for International Law ( October ),
online: NUS <https://cil.nus.edu.sg/wp-content/uploads///DISPUTE-SETTLEMENT-IN-
ASEAN-KSIL-ProfWalterWoon.pdf>.
. ASEAN-China FTA, supra note .
. ASEAN-India FTA, supra note .
. ASEAN-Korea FTA, supra note .
. ASEAN-Japan FTA, supra note .
. ASEAN-ANZ FTA, supra note .
   :  
DSM, reflecting the judicial styles, with a high level of legalism. Some provisions are
comparable with the ASEAN DSM, although these PTAs have no appellate review
mechanism.
The DSM is started when any party requests consultations with any other party
in relation to any dispute arising under the agreement. The parties may also
request good offices, conciliation, and mediation that are applied voluntarily.
If the consultations fail to resolve a dispute within sixty days, the complaining
party may submit a written request to the responding party for establishing an
arbitral panel. In addition, those PTAs have allowed the participation of third
parties that have a substantial interest in a dispute as long as the responding
party agrees.
Regarding the composition of arbitral panels, an arbitral panel comprises three
arbitrators wherein each party to the dispute appoints one arbitrator. Both parties
should endeavour to agree on the third arbitrator. There is a requirement with respect
to the appropriate level of expertise or experience in law and international trade. If
the parties fail to appoint the third arbitrator who will serve as the chair, the members
of the arbitral panel will request the Director-General of the WTO to appoint the
chair. In the ASEAN-China FTA, there is an additional explanation wherein if
one of the parties is a non-WTO Member, the parties will request the President of
the International Court of Justice to appoint the chair. Unlike other PTAs, the
ASEAN-India FTA does not involve the WTO for appointing the third arbitrator.
Hence, the parties should consult each other for jointly appointing the chair within
a further period of thirty days.
There are some basic principles in the proceedings of arbitral panels. These include
the following: () the right to a minimum of one hearing before the arbitral panel; ()
an equal opportunity for both parties to the dispute to deliver initial and rebuttal sub-
missions; () a judicious opportunity for both parties to submit comments on the
interim report; and () the shielding of confidential information. Within ninety
days from the date of its establishment, the arbitral panel provides an interim report
/ draft award / draft report that contains, among other things () a descriptive part
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. ; ASEAN-Japan
FTA, art. ; ASEAN-ANZ FTA, ch. , art. .
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. ; ASEAN-Japan
FTA, art. ; ASEAN-ANZ FTA, ch. , art. .
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. ; ASEAN-Japan
FTA, art. ; ASEAN-ANZ FTA, ch. , art. .
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. ; ASEAN-Japan
FTA, art. ; ASEAN-ANZ FTA, ch. , art. .
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. ; ASEAN-Japan
FTA, art. ; ASEAN-ANZ FTA, ch. , art. 
. ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. (); ASEAN-Japan FTA, art. ();
ASEAN-ANZ FTA, ch. , art. ().
. ASEAN-China FTA, supra note , art. ()
. ASEAN-India FTA, supra note , art. ().
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. ; ASEAN-Korea FTA, art. ; ASEAN-Japan
FTA, art. ; ASEAN-ANZ FTA, ch. , art. .
                              
summarizing the opinions of the parties; and () the panel’s findings on the facts of
the dispute and on the applicability of the provisions of the agreements.
The arbitral panel should provide a final report within  days from the date of its
establishment and within thirty days from the presentation of an interim report. For
transparency, this final report will be publicly available within ten days after both par-
ties receive the report. The ASEAN-ANZ FTA provides different timetables
wherein the arbitral process must not exceed nine months from the date of establish-
ment until the date of the final report. Next, the final report is final and binding on
the parties to the dispute and is not subject to appeal.
Like the ASEAN DSM, those PTAs have no regulation on public participation.
Furthermore, there is no provision on how the report from the arbitral panels will
be executed in a national court. In addition, only limited information with respect
to the proceedings of the DSM is publicly available. Only the ASEAN-ANZ FTA
includes the provision of choice of forum. Finally, the effectiveness of the
ASEAN DSM has not been able to be analyzed as it has never been invoked.
(c) Indonesia-Japan EPA: The Indonesia-Japan Economic Partnership Agreement

[EPA]  is the first Indonesian PTA in which it, as an individual country, adopts a
rules-oriented approach, with a high level of legalism. Almost all provisions are
comparable with the ASEAN PTAs described above. Nevertheless, the difference of
this PTA is the mechanism by which the third arbitrator is decided upon. Specifically,
this PTA does not involve the Director-General of the WTO in appointing the third
arbitrator if the parties in the dispute fail to do so. They have another fifteen days to
choose the third arbitrator from the list of candidates available.
This agreement has been under ongoing revision and negotiation and was formally
signed on  March . As there is no significant discussion on the DSM, this
revision does not affect the method of resolving disputes. The main issue of this pro-
cess is the mutual commitment to open more access for trade in goods and services.
Furthermore, both countries agree to co-operate in the manufacturing industry sector
through the establishment of a new manufacturing industry development centre, cov-
ering the automotive, electronics, and textile sectors. It seems that Indonesia
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. (); ASEAN-Korea FTA, art. ();
ASEAN-Japan FTA, art. ; ASEAN-ANZ FTA, ch. , art. ().
. ASEAN-India FTA, art. ; ASEAN-China FTA, art. (); ASEAN-Korea FTA, art. ;
ASEAN-Japan FTA, art. ().
. ASEAN-ANZ FTA, supra note , ch. , art. ().
. Ibid., ch. , art. .
. Agreement Between the Republic of Indonesia and Japan for an Economic Partnership Agreement,
 August  (entered into force  July ), art. () [Indonesia-Japan EPA].
. “New Indonesian-Japanese deal to be signed in late ” The Jakarta Post ( July ), online:
The Jakarta Post <https://www.thejakartapost.com/news////new-indonesian-japanese-deal-
to-be-signed-in-late-.html>.
. Ibid.
. “Amendment of General Review of IJEPA Targeted Completion in  End” Antaranews ( July
), online: Antaranews <https://en.antaranews.com/news//amendment-of-general-review-
of-ijepa-targeted-completion-in--end>.
   :  
applies double tracts because it already has the Indonesia-Japan EPA, but Indonesia
with other ASEAN countries also has the ASEAN-Japan FTA. However, some issues
have not been covered yet under the ASEAN-Japan FTA so that they have been nego-
tiated intensively under the Indonesia-Japan EPA, for example co-operation in
employment sectors where Indonesia seeks more access to labour in Japan’s tourism
sector.
The establishment of the ASEAN DSM, along with the conclusion of ASEAN PTAs
with other countries, have encouraged the rise of judicial styles of the DSM in
Indonesia’s PTAs. As an ASEAN Member, Indonesia has PTAs which have adopted
similar DSM provisions. Moreover, there has been an emulation effect, wherein
the previous judicial PTAs of ASEAN PTAs considerably influenced the subsequent
ASEAN PTAs. The fact that the Indonesia-Japan EPA adopts a similar DSM provision
with the ASEAN PTAs reflects how the “emulation effect” also inspires Indonesia
when concluding bilateral PTAs as an individual country.
(d) Indonesia–Australia CEPA: A very new agreement signed by Indonesia was with
its neighbouring country, Australia. This agreement, which was known as the
Indonesia-Australia Comprehensive Economic Partnership [IA-CEPA], was finally
signed on  March  amid tumultuous diplomatic relations and mutual
suspicion between the two countries. Australia was disappointed with the
imposition of the death penalty on two of its citizens who had been convicted of
drug offences. Meanwhile, Indonesia was frustrated by the fact that Australia
had spied on the Indonesian cabinet. In November , Indonesia postponed
the signatory process of this agreement, complaining about Australia’s measure that
supported the relocation of Israel’s capital from Tel Aviv to Jerusalem.
Concerning international trade, historically both countries hardly traded with each
other as their commodities were not strongly complementary. This condition con-
tinued in the s and s. Although trade in real terms had grown, aggregate
Australia-Indonesia trade remained insignificant, growing from US$m in  to
US$m in . In , according to the Department of Foreign Affairs and
. “Indonesia Postpones IJEPA’ Completion to the end of ” The Insider Stories ( July ),
online: The Insider Stories <https://theinsiderstories.com/indonesia-postpones-ijepa-completion-to-
the-end-of-/>.
. Jo and Namgung, supra note  at .
. “Indonesia-Australia Finally Sign Free Trade Agreement” The Australian ( March ), online:
The Australian <https://www.theaustralian.com.au/national-affairs/foreign-affairs/indonesia-austra-
lia-finally-sign-freetrade-agreement/news-story/fdccfcebffaeaebe>.
. Amy MAGUIRE and Shelby HOUGHTON, “The Bali Nine, Capital Punishment and Australia’s
Obligation to Seek Abolition” ()  Current Issues Criminal Justice  at .
. The Australian, supra note .
. Ibid.
. H.W. ARNDT, “Trade Relations between Australia and Indonesia” ()  Economic Record 
at .
. Hal HILL, “Australia and Indonesia: Challenges and Opportunities in a ‘Small’ Economic
Relationship” ()  ASEAN Economic Bulletin  at .
                              
Trade of Australia, Australia’s trade with Indonesia was worth US$.bn, making
Indonesia its thirteenth largest two-way trading partner. Nevertheless, Australia
recognized Indonesia’s position as the largest economy in Southeast Asia and the six-
teenth largest economy in the world in , making it worthwhile to conclude a
PTA with Indonesia. Furthermore, Indonesia had a population of  million people,
with  million people in the growing middle class.
With Australia, Indonesia seems to apply double tracks, through ASEAN in the
ASEAN-ANZ FTA  and as an individual country in . However, it is not
completely true as the following issues are only covered under the
Indonesia-Australia EPA. In vocational education, Indonesia has allowed the presence
of Australian suppliers up to sixty-seven percent ownership to open technical and
vocational education in Indonesia. Next is the work and holiday arrangement,
where both parties agree to allow Australian and Indonesian travellers to work and
holiday in the other country for up to twelve months. Australia will grant work
and holiday visas for Indonesians, expanding the current , places to , by
the sixth year after the entry into force of the Indonesia-Australia CEPA.
The Indonesia-Australia CEPA is the second Indonesia PTA in which it, as an indi-
vidual country, adopts a rules-oriented approach, with a high level of legalism.
Almost all provisions are comparable with the ASEAN’s PTAs described above.
Some specific reasons explain why Indonesia has adopted this approach.
Historically, as two neighbouring countries, Indonesia and Australia have been
involved in a “love-hate relationship”. Since the independence of Indonesia in
, at least, the two biggest cases that reflected this kind of relationship were
over Papua and East Timor, in which Indonesia accused Australia of intervention
over its territory and sovereignty. In the dispute between Indonesia and the
Netherlands over Papua, Australia strongly opposed the inclusion of Papua within
Indonesia’s territory. Australia had a vital interest in the economic and political
stability of Indonesia, and felt that this inclusion would endanger Indonesia’s stability
and adversely affect Australia. In , when Australian Prime Minister John
Howard visited Jakarta, President Megawati and her ministers questioned the support
. Department of Foreign Affairs and Trade of Australia, Why has the Australian Government
Negotiated a Comprehensive Economic Partnership Agreement with Indonesia?, online: DFAT
<https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/Pages/why-has-the-australian-govern-
ment-negotiated-a-comprehensive-economic-partnership-agreement-with-indonesia.aspx>.
. Ibid.
. Ibid.
. Department of Foreign Affairs and Trade Australia, “Indonesia-Australia Comprehensive Partnership
Agreement, Outcome: Skills Development” (last updated  June ), online: DFAT <https://dfat.
gov.au/trade/agreements/not-yet-in-force/iacepa/outcomes-documents/Pages/outcomes-skills-develop-
ment.aspx>.
. Ibid.
. Ibid.
. Amry VANDENBOSCH and Mary Belle VANDENBOSCH, Australia Faces Southeast Asia: The
Emergence of a Foreign Policy (Kentucky, KY: University Press of Kentucky, ) at .
. Richard CHAUVEL, “Australia’s Strategic Environment: The Problem of Papua” ()  Journal
of Policy Analysis and Reform at –. See also Hiroyuki UMETSU, “Australia’s Response to the
West New Guinea Dispute, –” ()  Journal of Pacific History at .
   :  
of some groups in Australia for the independence of Papua, and whether the
Australian government was also involved in funding these groups.
In the case of East Timor in late , Australia’s intervention led to the worst rela-
tionship between the two countries in three decades. Australia played the role of
“regional policeman”, claiming that Indonesia had brutally occupied East Timor
since , and then initiating a movement to support the independence of East
Timor. Opposing Australia’s intervention, the Prime Minister of Malaysia,
Mahathir Mohamad, reasoned that Australia was not “Asian” in any sense and there-
fore “its attempts to become more involved in Asian affairs should be resisted by
Asian countries”.
The history of this “love-hate relationship” may influence the negotiation of this
PTA, making the presence of the DSM crucial in establishing mutual trust between
two countries. From the perspective of Indonesia, some experts analyze how the spirit
of protectionism has increased in the era of Joko Widodo’s administration. Hence,
the inclusion of the DSM will also protect the interest of Australia in preventing unilat-
erally adverse policies from Indonesia as a reflection of the spirit of that protectionism.
The second reason why the Indonesia-Australia CEPA has adopted a rules-oriented
approach, with a high level of legalism, is the successful implementation of the
ASEAN-Australia-New Zealand FTA. This FTA has inspired the negotiation process
of the Indonesia-Australia CEPA. The Preamble of this agreement expressly states that
the agreement recalls “the positive contribution made to the trade and investment
relationship between the Parties by the Agreement Establishing the ASEAN-
Australia-New Zealand Free Trade Area”.
In the Indonesia-Australia CEPA, almost all DSM provisions are the same as
the DSM provisions under the ASEAN-ANZ FTA. For example, provisions
on the choice of forum; the establishment and reconvening of panels;
the functions of panels; panel procedures; the interim and final
reports; the suspension and termination of proceedings; compliance
. Chauvel, ibid., at .

. Peter CHALK, “Australia and Indonesia: Rebuilding Relations After East Timor” () 
Contemporary Southeast Asia at .
. Derek MCDOUGALL, “Intervening in the Neighbourhood: Comparing Australia’s Role in East
Timor and the Southwest Pacific” ()  International Journal at .
. Alisa Newman HOOD, “Australia Adrift: The Timor Sea Oil & Gas Dispute” ()  Brown
Journal of World Affairs  at .
. Derek MCDOUGALL, “Australia and Asia-Pacific Security Regionalism: From Hawke and Keating
to Howard” ()  Contemporary Southeast Asia  at .
. Arianto A. PATUNRU, “Rising Economic Nationalism in Indonesia” ()  Journal of Southeast
Asian Economies, Special Issue: The Indonesian Economy in Transition: Policy Challenges in the
Jokowi Era and Beyond,  at .
. IA-CEPA, supra note , preamble.
. Ibid., art. ..
. Ibid., art. ..
. Ibid., art. ..
. Ibid., art. ..
. Ibid., art. ..
. Ibid., art. ..
                              
review; and the compensation and suspension of concessions. The fact that
the Indonesia-Australia CEPA adopts a similar DSM provision to the ASEAN
PTAs, that is the ASEAN-Australia-New Zealand FTA, reflects how the “emula-
tion effect” has inspired Indonesia and Australia when concluding a bilateral
PTA as individual countries.
Lastly, what is totally different from the Indonesia-Australia CEPA compared to
previous ASEAN PTAs is the provision to require the panels when they interpret
this agreement to “consider relevant interpretations in reports of WTO panels and
the Appellate Body adopted by the WTO Dispute Settlement Body”. The inclusion
of this provision seems to take into account two ongoing disputes that involve
Indonesia and Australia in the WTO. Coincidentally, these disputes occurred when
this agreement was being negotiated. Specifically, in Australia-Tobacco Plain
Packaging, Indonesia protested against Australian laws and regulations that imposed
restrictions on geographical indications, trademarks, and other plain packaging
stipulations on tobacco products and packaging. Indonesia claimed that this
measure conflicted with Australia’s obligations under the Trade-Related Aspects of
Intellectual Property Rights [TRIPS] and Technical Barriers to Trade [TBT]
Agreements. In Australia-Anti-Dumping Measures on A Copy Paper, Indonesia
accused Australia of violating the Anti-Dumping Agreement, as it had imposed an
anti-dumping order on A copy paper from Indonesia. This case is still waiting
for the final report from the panel that is expected to be issued in the end of .
From Indonesia’s perspective, in the Indonesia-Australia CEPA, the application of
the rules-oriented approach, with a high level of legalism, is not only because of the
influence of its trade partner, that is Australia, and its participation in ASEAN PTAs,
which is the ASEAN-Australia-New Zealand FTA, but also the influence of the
ongoing WTO dispute between Indonesia and Australia.
. 
The DSM in Indonesia’s PTAs has shifted from the political/diplomatic styles to a
more judicial style, driven by the transformation of the DSM from the GATT to
the WTO; Indonesia’s involvement in ASEAN; trade partners’ influence; the presence
of domestic factors; and the ongoing WTO dispute.
. Ibid., art. ..

. Ibid., art. ..
. Jo and Namgung, supra note  at .
. IA-CEPA, supra note , art. ..
. World Trade Organization, “Australia—Certain Measures Concerning Trademarks, Geographical
Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and
Packaging” ( August ), online: WTO <https://www.wto.org/english/tratop_e/dispu_e/
cases_e/DS_e.htm>.
. Ibid.
. World Trade Organization, “Australia—Anti-Dumping Measures on A Copy Paper”, online: WTO
<https://www.wto.org/english/tratop_e/dispu_e/cases_e/DS_e.htm>.
. Ibid.
   :  
First, how Indonesia’s PTAs incorporate the DSM is significantly influenced by the
dynamic development of the DSM under the GATT and the WTO. Following the style
and character of the DSM under the GATT, most of Indonesia’s PTAs in this era
adopted political/diplomatic styles. After the WTO was formed in , the rise of
the judicial styles of the DSM with a high level of legalism had occurred in
Indonesia’s PTAs, not only when Indonesia concluded PTAs as an individual country,
but also as a member of ASEAN. Thereafter, Indonesia’s involvement in ASEAN has
considerably shaped the styles of the DSM of its PTAs. While concluding PTAs as a
Member of ASEAN, all of Indonesia’s PTAs have adopted judicial styles of the DSM
with a high level of legalism. Furthermore, reflecting the “emulation effect”, the high
level of legalism of the DSM in previous Indonesia PTAs has had a beneficial effect on
the subsequent PTAs.
The influence of trade partners is the next factor in determining the style of the
DSM. After the GATT, Indonesia had two types of PTAs. The case of the
Indonesia-Netherland PTA () revealed an anti-mainstream trend because it was
the only PTA that included the DSM in its provision. Interestingly, although the exist-
ence of the WTO has led to the rise of judicial styles of the DSM in almost all PTAs
across the globe, not all Indonesian PTAs have adopted the DSM in their provisions,
particularly if they involved trade partners from developing countries. The presence of
domestic factors is also essential. Following the “democracy effect”, when the
authoritarian regime with its overwhelming spirit of nationalism was dominant in
Indonesia, the aftermath of its PTAs was mostly a political style, with a low level
of legalism. After Indonesia became a more democratic country through the
reformation process, the rise of judicial styles of the DSM in its PTAs has occurred.
Finally, as shown by the Indonesia-Australia CEPA (), the ongoing WTO dispute
between Indonesia and Australia has led to the application of the rules-oriented
approach, with a high level of legalism in Indonesia’s PTAs.
. The reformation process reflects the transitional process of Indonesia’s governmental systems from
authoritarian rule to democracy by amending Indonesia’s constitution. Some basic reforms are the
restriction of presidential powers, the adoption of decentralization, people’s sovereignty, direct presi-
dential election, and legislative and judicial reform. See e.g. Denny INDRAYANA, Indonesian
Constitutional Reform –: An Evaluation of Constitution-Making in Transition (Jakarta:
Kompas, ) at –.

The Evolution of The Dispute Settlement Mechanism in Preferential Trade Agreements

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The Evolution of The Dispute Settlement Mechanism in Preferential Trade Agreements

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Asian Journal of International Law, Page  of 

The Evolution of the Dispute Settlement

I Gusti Ngurah Parikesit WIDIATEDJA*

.        

A study by Chase et al. provided a more detailed classiﬁcation. A political or dip-

administered third-party adjudication by standing tribunals. Finally, the “very

prevent, as between the territories of Members, the formation of a customs union or

B. The DSM Under the WTO

. The DSM under the WTO

. Munin, supra note  at .

. Ibid., arts. ., ..

C. The DSM in PTAs

. Smith, supra note .

.        

. Davey, supra note  at .

(), Iraq (), Bulgaria (), Romania (), and Hungary

. Indonesia’s PTAs as a Member of ASEAN

. Indonesia-Bulgaria PTA, supra note , art. .

of gradually liberalizing trade in services with substantial sectoral coverage; and of

B. The Domination of Political/Diplomatic Styles of the DSM in Indonesia’s

. Ibid., art. .

. Indonesia’s PTAs with DSM

. Ibid., at .

C. The Rise of the Judicial Styles of the DSM in Indonesia’s PTAs

The inﬂuence of trade partners is also signiﬁcant in shaping Indonesia’s PTAs. In

. Indonesia’s PTAs with DSM

. Yan, supra note  at .

(b) Indonesia PTAs as a Member of ASEAN: As a Member of ASEAN, Indonesia

. Ibid., art. ().

(c) Indonesia-Japan EPA: The Indonesia-Japan Economic Partnership Agreement

. Chauvel, ibid., at .

. Ibid., art. ..

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