Prudent ruling at last<\/p>\n
The Supreme Court, as widely expected, duly overturned the
\nJakarta Commercial Court's bankruptcy ruling of April 23 against
\nthe Indonesian subsidiary of British insurance company Prudential
\nPLC, asserting that the case had been mishandled.<\/p>\n
Supreme Court Justice Mariana Sutadi explained after the
\nawarding of the verdict early last week that the case between
\nPrudential and one of its former insurance agents is not about a
\ndebt due and payable, as stipulated in the bankruptcy law, but a
\ndispute over an agreement.<\/p>\n
Businesspeople certainly welcome the ruling as further
\nevidence that the justice system in the country is not entirely
\nhopeless, as many have perceived.<\/p>\n
However relieved PT Prudential Life Assurance should have been
\nwith the prudent ruling, the damage had nevertheless been done.
\nMost businesses, especially foreign investors, remain greatly
\napprehensive, worried about the uncertainty arising from what has
\nwidely been perceived as one of the most corrupt judicial systems
\nin the world.<\/p>\n
Businesspeople are concerned about the great risk of falling
\ninto legal black holes, unless several provisions within the 1999
\nBankruptcy Law that allow judges to declare even solvent
\ncompanies bankrupt are amended.<\/p>\n
Remember the case of the Indonesian subsidiary of Canadian
\nManulife in mid-June, 2002? The fourth-largest insurance company
\nin the country was declared bankrupt by the Jakarta Commercial
\nCourt because of its failure to pay dividends (not even debt) to
\nits Indonesian shareholders. Even though this absurd verdict was
\neventually overturned by the Supreme Court, companies then had
\nexpressed great apprehension that they could fall into the same
\nlegal quicksand.<\/p>\n
The government, also, had immediately realized after the
\nbizarre ruling against Manulife that the bankruptcy law should be
\namended to prevent such an insensible decision. However, the
\ndraft amendments that were submitted to the House of
\nRepresentatives more than two years ago remain untouched.<\/p>\n
It was later the unfortunate turn of Prudential, with total
\nassets of more than US$180 million, to fall into the quicksand
\nlate last April after the Commercial Court ruled that it had
\nfailed to pay a disputed $400,000 debt to one of its former
\ninsurance agents.<\/p>\n
Apart from the absurd bankruptcy rulings, there is a long
\nstring of other bizarre court verdicts by district courts on
\ncommercial disputes, which have severely damaged public trust in
\nthe justice system and worsened legal uncertainty.<\/p>\n
Just to mention a few of them: As recently as mid-May, British
\nRowe Evans agro-group, was hit by the ruling of a district court
\nin Medan, North Sumatra, which arbitrarily annulled its $2.3
\nmillion purchase of a plantation in that province from a local
\nbusinessman. Also, early that same month, the district court in
\nSerang, Banten province, ruled that the issuance of $185 million
\nin bonds by PT Tri Polyta in 1996 was illegal and did not need to
\nbe repaid to creditors, including Merrill Lynch and Lehman
\nBrothers. In August, 2003, PT Danareksa Jakarta International
\ngained a court ruling in Jakarta that freed it from the
\nobligation to repay $180 million in syndicated loans to foreign
\ncreditors, including U.S. Lone Star Fund.<\/p>\n
Another bizarre bankruptcy ruling, such as that against
\nPrudential, could have been prevented had the amendments been
\napproved by the House.<\/p>\n
The proposed amendments include stipulations that an
\ninsurance company can be declared bankrupt only by the finance
\nminister. Such provisions are similar to the stipulations in the
\nsame law that allow banks to be declared bankrupt only by the
\ncentral bank and securities companies by the Capital Market
\nSupervisory Agency (Bapepam).<\/p>\n
The planned amendments, also, will raise the criteria for
\nfiling a bankruptcy case. At present, the criteria is simply two
\ndebts, one which is due and payable, even though the debtors, as
\nin the cases of Prudential and Manulife, have assets that far
\noutweigh their liabilities.<\/p>\n
To be sure, we need a bankruptcy system to force debtors to
\nrepay their debts in good faith but the rulings should be
\ndesigned to be fair to both the debtors and creditors.<\/p>\n
It is needless to reiterate the urgency for the House to
\nenact the proposed amendments to the bankruptcy law to close any
\nloopholes that may be used by corrupt judges or lawyers. True,
\nthe amendments would not immediately make the bankruptcy regime
\nmore effective and credible, yet better rules of the game would
\nbe a good start to improve the system, to make the procedures
\nmore clear cut.<\/p>\n
------<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/prudent-ruling-at-last-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }