Abstract: Indonesia's transition to democracy brought additional problems for business managers, as it opened the way for new interest groups — the press, nongovernmental organizations (NGOs), and labor unions — to challenge the Paiton I accord. Although Paiton's investors had built defenses using the new international system of property rights, in the end the new assurances such as arbitration and insurance provided only limited protection for the company. The Paiton dispute raises important questions about why foreign firms undertook such risky projects in the first place. One factor in the decision must have been their trust that the new assurances would be effective.

Keywords: Indonesia, power projects, foreign investment, new assurances, property rights, arbitration,