Digital infrastructure joint ventures rarely collapse because the contract was too thin. It fails because the investment structure did not anticipate what would happen when performance slips, milestones are missed, or the commercial logic between the parties begins to diverge.
The risk of joint ventures failing because the parties did not put sufficient detail into the contracts is particularly acute in Indonesia. Projects involving the use of AI in digital infrastructure are typically very large asset-based projects that require a lot of execution. Land, licenses, power and telecommunications connectivity, timing of government approvals and a long deployment period all pose challenges to foreign investors who have had a joint venture in Indonesia go wrong. Protection against such an event starts at the signing of the contracts, not when the dispute arises.
Protection starts before breach
One of the most common mistakes in cross-border digital infrastructure investments is assuming that a well-drafted shareholder agreement is enough. In Indonesia, it often is not.
The JV agreement is a private contract between shareholders, while the Articles of Association is the company’s constitutional document, notarised and registered with the Ministry of Law. Where the two conflict, the articles of association carry stronger corporate effect. This is especially true in relation to the company itself and to third parties. That means protections negotiated on paper may not produce the level of control the investor expects unless they are also embedded in the constitutional documents.
A foreign investor may believe it has secured approval rights, transfer protections, or enforcement levers. In practice, those rights may be weaker if they exist only in the private contract.
The practical lesson is clear: key protections should be implemented on a dual-track basis in both the JV agreement and the Articles of Association.
Self-help remedies matter most
When a digital infrastructure JV starts to unravel, the most effective protection is often not the formal dispute process. It is the pre-agreed remedy that creates pressure before the dispute reaches full escalation.
Trigger-based self-help remedies work best when tied to objectively verifiable events, such as failure to complete HGB transfer registration within a defined period after signing. Asset-heavy investments lose value through delay. If land transfer, power readiness, or licence delivery stalls, the foreign investor may suffer commercial damage long before an arbitral award could be obtained and enforced.
In practice, the most credible self-help provisions do three things. First, they define the trigger event with precision. Second, they fix the exercise mechanics in advance, including pricing and payment process. Third, where legally feasible, pre-executed conditional transfer arrangements support them so the non-defaulting party is not forced to renegotiate once leverage has already shifted. Indonesian-qualified counsel should verify the feasibility of these arrangements before they are relied on.
This should not be presented as aggressive drafting. In the context of digital infrastructure investment, it is prudent transaction design. The more capital-intensive and execution-sensitive the project, the more important it is to define objective default consequences before problems arise.
Arbitration is necessary, not sufficient
Arbitration still plays a significant role in cross-border JV planning in Indonesia. However, it should not be viewed as the sole layer of protection.
Many Chinese investors choose SIAC with English as the language of arbitration as it is a familiar and credible cross-border arbitration forum. An award is of little value, however, until it can be effectively enforced and the money actually recovered.
This is where the reality of enforcement of foreign arbitral awards in Indonesia comes into the picture. Foreign arbitral awards are recognized and enforced in Indonesia in principle and Indonesia is a Contracting State to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. However, the process of obtaining exequatur of a foreign arbitral award in Indonesia through the courts, specifically the Central Jakarta District Court, is neither efficient nor predictable in practice. As a result, obtaining an award is not the same as recovering value of the award in Indonesia.
This post may be read in conjunction with NDP’s guide to enforcing foreign arbitral awards in Indonesia, which sets out what enforcement of such awards may involve.
Treaty planning cannot wait
For some investors, dispute protection may extend beyond contract into treaty protection. But that analysis must happen during structuring, not after the relationship has already broken down.
Many commercial teams have an incomplete understanding of the issue described above: Even if an investment is held through an offshore SPV, treaty protection under the China-Indonesia BIT may depend on the wording of the treaty and on the tribunal’s interpretation of the question of investor nationality. Thus, the holding structure chosen for tax and exit reasons at the time of investment may have an impact on the availability of treaty-based remedies later on.
That has two implications. First, BIT and ISDS analysis should be part of early transaction planning where the investor wants to preserve multiple layers of protection. Second, offshore SPV structuring should not be discussed only as a tax or exit tool. It is also part of the dispute architecture of the investment.
Exit design is part of investment protection
Investor protection in the context of digital infrastructure projects extends far beyond the aspects of breach and enforcement. Also crucial is the question of whether a viable exit path is provided for investors in the event the relationship of cooperation fails to function as promised or that the underlying business case suddenly ceases to be viable.
In the end, exit is another design feature of the investment contract and should be discussed and agreed as part of the core provisions that govern the relation between the two investors. As with investor protection in general, this also applies to exit in digital infrastructure, and so would include the right of first refusal, tag-along rights, drag-along rights, lock-up arrangements, pricing, and transfer procedures. If an IPO is part of the investors’ intentions with their investment, they should agree on the necessary cooperation, on a time frame and on restrictions on trade that could affect liquidity on the stock exchange at the time of listing.
Indonesia is not yet a mature market, but there are indicators of liquidity emerging for digital infrastructure. DCI Indonesia is listed on the Indonesia Stock Exchange. Indosat completed a USD 170 million data center asset sale. GDS Holdings completed an infrastructure REIT listing on the Shanghai Stock Exchange in July 2025. These examples do not remove execution risk, but they do show that exits in this sector are real. They are not just a plan on paper.
Offshore SPV structuring and exit flexibility
Holding of Indonesian assets through an offshore SPV is key to improve the exit possibilities and does allow for cross-border transfers on an all-in basis without going through the usual Indonesian domestic approval machinery (provided that the Beneficial Owner provisions have been properly addressed). Offshore structuring can be particularly helpful to also improve Tax Planning and Dispute Resolution possibilities. But that is a highly specialized matter, also requiring proper analysis with respect to issues of Beneficial Ownership, Tax implications and possible Treaty implications (such as under the China-Indonesia BIT). Whether or not treaty protection will be available under such a treaty as the China-Indonesia BIT depends on the specific wording of the Treaty and on the stance that the tribunal will take with respect to the issue of Investor’s nationality, which in turn may be influenced by the holding structure chosen for commercial reasons (such as tax reasons or reasons of exit strategy).
What boards and GCs should focus on before an Indonesia joint venture dispute arises
Boards, general counsel, and investor teams should design three distinct layers of protection and align them from the outset.
Contract protection covers milestone-based obligations, approval rights, trigger events, and dual-track implementation into the Articles of Association. Dispute protection covers a credible SIAC clause, enforcement planning, and early review of treaty or ISDS options where offshore SPVs are used. Commercial protection covers realistic transfer rights, lock-up design, and a workable exit path if the JV no longer serves its original purpose.
These protections are connected, but they are not interchangeable. A strong arbitration clause cannot repair weak transfer mechanics. A good exit clause cannot compensate for protections that were never embedded in the constitutional documents. And a shareholder agreement with elegant drafting cannot substitute for objective triggers and enforceable consequences in an execution-heavy infrastructure project.
Closing
In Indonesia’s AI and digital infrastructure market, we see that the risk of an Indonesia joint venture dispute is not some remote legal scenario, but an integral part of the investment case.
What really protects the foreign investor is preparation. Clear trigger events. Real constitutional alignment between the parties. A dispute architecture that holds up under pressure. And a path to exit that is as credible as the entry. The best time to protect a JV is before anything goes wrong.
This is the third and final article in our series on AI and digital infrastructure investment in Indonesia. If you have not already, the earlier two articles in the series are worth reading alongside this one.
The first article, Why Indonesia is emerging as the next AI infrastructure frontier for foreign investors, covers the investment case, the regulatory timing window, and why the market is moving now.
The second article, Structuring a joint venture in Indonesia for AI and digital infrastructure, covers partner selection, PT PMA access, HGB valuation, governance architecture, and exit design.
NDP advises on dispute-proofing, on enforceability of foreign arbitral awards in Indonesia, and on exit strategy for cross-border JVs in the AI and digital infrastructure space in Indonesia.
Partner perspective
“Protecting digital infrastructure investments in Indonesia is fundamentally about structuring for downside from day one because when a JV relationship breaks down, legal rights alone are rarely decisive. We always advised client that the exit strategy must be designed with the same rigour as the investment thesis itself, because in Indonesia, getting in is almost always easier than getting out.”
About Nusantara DFDL Partnership
Nusantara DFDL Partnership (NDP) is an Indonesian law firm and a collaborating firm of the DFDL network, operating across Southeast Asia and the Mekong region. NDP advises foreign corporations, Chinese enterprises, and institutional investors on market entry, joint ventures, M&A, corporate advisory, and dispute resolution in Indonesia.
Legal note
This article is for general informational purposes only and does not constitute legal advice. Readers should seek independent legal counsel in relation to their specific circumstances.
