Foreign Investment in Digital Infrastructure: State Control, Risk Mitigation, and Data Sovereignty
Article Sidebar
Main Article Content
Abstract
The exponential shift of global foreign direct investment toward digital infrastructure prompts host states to enforce stringent screening mechanisms and data localization policies to safeguard critical national security interests. However, these sovereign assertions inevitably clash with international investment law. Using a comprehensive doctrinal legal method through statutory, conceptual, and comparative approaches, this study examines the tension between digital sovereignty and investment protections. The results indicate that mandatory data localization and post-establishment cybersecurity interventions significantly breach Fair and Equitable Treatment standards and constitute indirect expropriation, exposing host states to massive international investor-state dispute settlement claims. Consequently, this research concludes that developing jurisdictions, particularly Indonesia, must urgently reconstruct their bilateral investment treaties. By systematically integrating specific digital security exceptions, strictly redefining intangible digital assets, implementing proportional risk-based screening, and guaranteeing independent administrative due process, host states can effectively mitigate arbitration risks while securely facilitating global digital economic market integration and data sovereignty.
Downloads
Article Details
Section
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
How to Cite
References
Anny Susilowati. “Penegakan Hukum Internasional Terhadap Serangan Siber Terhadap Infrastruktur Kritis Di Indonesia.” Aliansi: Jurnal Hukum, Pendidikan Dan Sosial Humaniora 2, no. 5 (July 2025): 122–41. https://doi.org/10.62383/aliansi.v2i5.1204.
Aurazo, Jose, and Farid Gasmi. “Digital Payment Systems in Emerging Economies: Lessons from Kenya, India, Brazil, and Peru.” Information Economics and Policy 69 (December 2024): 101113. https://doi.org/10.1016/j.infoecopol.2024.101113.
Azizah, Hasna. “Prinsip Fair and Equitable Treatment Sebagai Pembatas Host State Control Dalam Terminasi Kontrak Investasi.” Media Hukum Indonesia (MHI) 3, no. 4 (2025): 289–99. https://ojs.daarulhuda.or.id/index.php/MHI/article/view/2482.
Beqiraj, Julinda, Jean Pierre Gauci, and Iris Anastasiadou. “Disaggregation of Digital Information and Data Sovereignty Compliance.” BIICL, 2023. https://www.biicl.org/publications/disaggregation-of-digital-information-and-data-sovereignty-compliance.
Bian, Cheng. “Data as Assets in Foreign Direct Investment: Is China’s National Data Governance Compatible with Its International Investment Agreements?” Asian Journal of International Law 13, no. 2 (2023): 342–64. https://doi.org/DOI: 10.1017/S2044251322000595.
Bogaty, Théodore. “Balancing Security and Competitiveness: Why Transatlantic Investment Trust Matters Now.” American University, 2026. https://www.american.edu/sis/centers/transatlantic-policy/articles/20260430balancing-security-and-competitiveness-why-transatlantic-investment-trust-matters-now.cfm.
Dewi, Yetty Komalasari, and Arie Afriansyah. “Dispute Settlement Mechanism in Bilateral Investment Treaties (BITs).” Yuridika 34, no. 1 (January 2019): 153–74. https://doi.org/10.20473/ydk.v34i1.11403.
Dimitropoulos, Georgios. “Digital Plurilateralism in International Economic Law: Towards Unilateral Multilateralism?” The Journal of World Investment & Trade 26, no. 1–2 (2025): 116–55. https://doi.org/https://doi.org/10.1163/22119000-12340354.
———. “Investment Law and the Digital Economy.” Journal of International Dispute Settlement 16, no. 3 (June 2025): 1–20. https://doi.org/10.1093/jnlids/idaf020.
Djojosugito, Muhamad Aria Armada, and Miri Ardiansyah. “Keamanan Siber Menggunakan Kecerdasan Buatan: Tinjauan Pustaka.” RIGGS: Journal of Artificial Intelligence and Digital Business 4, no. 3 (August 2025): 3835–41. https://doi.org/10.31004/riggs.v4i3.2549.
Fitriani, Laras. “Cybersecurity Abd Digital Sovereignty: An Analysis OF National Data Governance Capacity in the Global Platform Era: A Literature Review.” Asian Digital Governance Problems 1, no. 2 (2024): 65–77. https://doi.org/10.71435/685954.
Gumati, Mirna Rahmadina. “Digital Sovereignty or Regulatory Overreach? The Case of Indonesia’s Platform Registration Policy.” Competition and Regulation in Network Industries 25, no. 4 (December 2024): 131–46. https://doi.org/10.1177/17835917251392903.
Hicks, Jacqueline. “A ‘Data Realm’ for the Global South? Evidence from Indonesia.” Third World Quarterly 42, no. 7 (July 2021): 1417–35. https://doi.org/10.1080/01436597.2021.1901570.
Hizra Marisa. “China Ambition Through Digital Silk Road and Its Impact to Indonesia.” JOELS: Journal of Election and Leadership 6, no. 2 (July 2025): 74–87. https://doi.org/10.31849/3xj1ey37.
Huang, Jiaqi. “The Evolution of Sensitive Data Governance in International Investment Law: A Dual-Jurisdictional Study.” International Journal of Law And Information Technology 34 (January 12, 2026): 1–25. https://doi.org/10.1093/ijlit/eaaf023.
Jiang, Chengze. “Research on Applying the WTO Security Exception Clause to the Security Dispute Caused by Cross-Border Data Flows.” In Proceedings of the 2021 International Conference on Social Development and Media Communication (SDMC 2021), 1364–71, 2022. https://doi.org/10.2991/assehr.k.220105.250.
Kabir, Syahrul Fauzul. “Krisis Dan Reformasi: Penyelesaian Sengketa Dalam Perjanjian Investasi Bilateral Di Negara Dunia Ketiga.” Mimbar Hukum 33, no. 2 (December 2021): 401–35. https://doi.org/10.22146/mh.v33i2.3728.
Khaleq, Ayman A, Barbara Murphy Melby, Michael A. Müller, Jane Accomando, Ulises R. Pin, Chloé Lignier, and Carol Tsuchida. “Legal and National Security Hurdles Facing Sovereign Wealth Fund Investments in Data Centers.” Morgan Lewis, 2026. https://www.morganlewis.com/pubs/2026/02/legal-and-national-security-hurdles-facing-sovereign-wealth-fund-investments-in-data-centers.
Kutbe, Harun, and Muhammad Abdullah Azzam. “Wapres: Investasi Besar Di Infrastruktur Cloud Akan Dongkrak Ekosistem Startup Turkiye.” Anadolu Agency, 2025. https://www.aa.com.tr/id/sains-dan-teknologi/wapres-investasi-besar-di-infrastruktur-cloud-akan-dongkrak-ekosistem-startup-turkiye/3749136.
Lekerai, David. “Multi-Jurisdiction Guide for Screening Foreign Investments.” DLA Piper, 2023. https://www.dlapiper.com/en/insights/topics/multi-jurisdiction-guide-for-screening-foreign-investments.
Leonard, Jessica, Prita Amalia, and An Chandrawulan. “Indonesian Perspective on The Investor–State Dispute Settlement Mechanism for Foreign Investment Dispute Settlement in The Field of Intellectual Property Rights.” Indonesia Law Review 10, no. 1 (April 30, 2020): 17–28. https://doi.org/10.15742/ilrev.v10n1.615.
Liu, Yang, and Wen Long Song. “Navigating Digital Colonialism: Sovereignty Models and Development Paths in the Global South.” Social Sciences & Humanities Open 13 (June 2026): 102546. https://doi.org/10.1016/j.ssaho.2026.102546.
Polanco, Rodrigo. “The Impact of Digitalization on International Investment Law: Are Investment Treaties Analogue or Digital?” German Law Journal 24, no. 3 (April 22, 2023): 574–88. https://doi.org/10.1017/glj.2023.30.
Prabangkara, Ali Arva, and M. Rizki Yudha Prawira. “Balancing National Security And Open Investment: Comparative Study On America’s Foreign Investment Screening Regulation For Indonesia’s Potential Adaptation.” Jurnal Locus Penelitian Dan Pengabdian 4, no. 7 (July 5, 2025): 4115–27. https://doi.org/10.58344/locus.v4i7.4460.
Putra, Ariella Gittasari, and Restu Adi. “Dampak Klausul ISDS Dalam Perjanjian Investasi Bilateral Terhadap Stabilitas Ekonomi Dan Regulasi Di Indonesia.” Dinamika Hukum & Masyarakat 6, no. 2 (2023): 57–76. https://doi.org/https://ojs.unik-kediri.ac.id/index.php/DMH/article/view/6772.
Ristić, Bojana. “The Changing Concept of Territoriality in International Investment Law: Stepping into the Digital Age.” Computer Law & Security Review 61 (July 2026): 106320. https://doi.org/10.1016/j.clsr.2026.106320.
Salladin, Anne, Falk Schöning, and Brian P. Curran. “FDI Outlook 2026: National Security Review in the Transition to a Multipolar World.” Hogan Lovells, 2026. https://www.hoganlovells.com/en/publications/fdi-outlook-2026-national-security-review-in-the-transition-to-a-multipolar-world.
Santoso, Totok Imam, Sovian Aritonang, Erna Febriani, and Mia Aksara Global Akademia. NATIONAL SECURITY: Melindungi Negara Di Era Digital. Garut: CV. Aksara Global Akademia, 2024.
Satoto, Endro, and Faisal Santiago. “Reconstruction of Indonesia’s Cyber Law System for Adaptive and Integrated Digital Crime Prevention in the Era of Technological Disruption.” Greenation International Journal of Law and Social Sciences 3, no. 2 (June 18, 2025): 309–17. https://doi.org/10.38035/gijlss.v3i2.425.
Simanjuntak, Predderics Hockop. “Perlindungan Hukum Terhadap Data Pribadi Pada Era Digital Di Indonesia: Studi Undang-Undang Perlindungan Data Pribadi Dan General Data Protection Regulation (GDPR).” Esensi Hukum 6, no. 2 (June 2025): 105–24. https://doi.org/10.35586/esensihukum.v6i2.412.
Sinta. “Equinix Completes KL1 Phase 2 Data Center in Kuala Lumpur.” Heaptalk, 2025. https://heaptalk.com/technology/equinix-completes-kl1-phase-2-data-center-in-kuala-lumpur/.
Stephenson, Sean, and Paul M. Lalonde. “The Limits of Data Localization Laws: Trade, Investment, and Data.” Dentons, 2019. https://www.dentonsdata.com/the-limits-of-data-localization-laws-trade-investment-and-data/.
Sudirman, Lu, Febri Jaya, Nur Fatihah, David Tan, and Ninne Zahara Silviani. “EU Lessons on Digital Market Dominance for Indonesia and the Philippines.” Greenation International Journal of Law and Social Sciences 4, no. 1 (April 2026): 112–28. https://doi.org/10.38035/gijlss.v4i1.790.
Sujono, Imam, and Mulyanto Nugroho. “Omnibus Law as Investment Law Reform in Indonesia Based on the Hierarchy of Legislation Principles.” Journal of Progressive Law and Legal Studies 1, no. 02 (May 2023): 47–65. https://doi.org/10.59653/jplls.v1i02.28.
White Case. “Foreign Direct Investment Reviews 2026: United States.” White Case, 2026. https://www.whitecase.com/insight-our-thinking/foreign-direct-investment-reviews-2026-united-states.
Zhang, Qianwen, and Andrew Mitchell. “Data Localization and the National Treatment Obligation in International Investment Treaties.” World Trade Review 21, no. 4 (October 2022): 391–410. https://doi.org/10.1017/S1474745621000549.
Zhang, Qianwen, and Qian Yin. “Performance Requirement Prohibitions and the Protection of Source Code in IIAs.” ICSID Review, November 2025. https://doi.org/10.1093/icsidreview/siaf018.
Zubaidah, Zubaidah, Trisatin Panggabean, Paris Alvito, Zidanul Akbar, and Cut Mirna Nadia. “Sistem Kecerdasan Buatan Dalam Bioinformatika : Trend Dan Potensi Di Masa Depan.” Jurnal Sistem Informasi Dan Ilmu Komputer 3, no. 1 (December 2024): 24–31. https://doi.org/10.59581/jusiik-widyakarya.v3i1.4430.