Batas Kewenangan Negara dalam Mengendalikan Investasi Asing: Perspektif Undang-Undang Nomor 25 Tahun 2007 Tentang Penanaman Modal

Abstract

This article examines the limits of state authority to control foreign investment under Law Number 25 of 2007 concerning Capital Investment and its subsequent development under the Job Creation regulatory framework. It employs normative legal research using statutory, conceptual, case, and comparative approaches. The study finds that state authority extends to investment admission and establishment, business-sector and ownership requirements, risk-based licensing, supervision, enforcement of investor obligations, legally justified restrictions, and expropriatory measures for public purposes subject to compensation. Such authority, however, is not absolute. It is constrained by legality, legitimate public purpose, non-discrimination, legal certainty, proportionality, due process, protection against arbitrary expropriation, access to remedies, and Indonesia's international investment commitments. The article develops the concept of “legally bounded regulatory sovereignty”: a broad regulatory space that remains reviewable against the legal basis of the measure, the legitimacy of its objective, necessity, proportionality of impacts, procedural fairness, and access to objection or dispute-settlement mechanisms. This framework offers a more sustainable balance between national interests and investor protection than either an exclusively investment-friendly approach or an indiscriminate protectionist model.