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Agency, ever managed to obtain rulings in their favor following the revision of Indonesia's century-old and outdated Dutch bankruptcy law.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