Another blow to RI legal system
Another blow to RI legal system
Indonesia's already less than enviable reputation for
unpredictable, erratic or outright questionable court decisions
received a boost as a result of the Central Jakarta Commercial
Court's blatantly wrong bankruptcy verdict against Manulife
Indonesia, a majority-owned local subsidiary of a reputable
Canadian insurance company.
Although widely condemned as ludicrous, irresponsible and
unjustifiable by any legal and commercial standard, the court's
decision stands out for its sheer audacity! The bankruptcy
verdict is not only expected to be overturned by Indonesia's
Supreme Court, but in view of its far-reaching consequences,
questions are also likely to be asked as to how such a verdict
could have been arrived at in the first place!
To start with, Manulife Indonesia was under no obligation to
pay dividends for the simple reason that no dividends had been
declared at the height of the economic and financial crisis in
1999, meaning that undistributed profits had been legally
retained by the company, thereby increasing its net equity or
book value.
Second, any dividend payments in 1999 would have been in clear
violation of risk-based capital ratios stipulated by the Ministry
of Finance for the Indonesian insurance sector, meaning that the
very basis of the bankruptcy verdict was illegal in the first
place. Last but not least, Manulife Indonesia's assets largely
exceeded its recognized liabilities, meaning that a perfectly
solvent company, providing employment for an estimated 4,000
people, has been for unfathomable reasons declared insolvent and
bankrupt!
Irrespective of its total lack of merit, the Manulife
bankruptcy verdict is all the more surprising since very few
bona fide creditors, including the Indonesian Bank Restructuring
Agency, ever managed to obtain rulings in their favor following
the revision of Indonesia's century-old and outdated Dutch
bankruptcy law.
The Manulife soap opera has been going on for years now and
the point has been reached where authorities at the highest level
need to intervene if sorely needed foreign investor confidence is
to be restored, and thousands of Manulife jobs saved.
JOSEPH LOUIS SPARTZ
Jakarta