Commercial Court needs full societal support (Part 2 of 2)

Sebastiaan Pompe , IMF Residence Legal Advisor, Jakarta

I wonder whether current problems can be remedied by even more training. The question instead seems to be how much the Judiciary values trained judges. Unless training is beneficial to judges in terms of career development, it is likely to go to waste. The Judiciary must make the quality and skill level of judges the core ingredients by which their performance is assessed and their careers are being determined. Judges must be incentivized to squeeze the most out of the training.

Currently this is not the case. Most of the 16 commercial court judges after putting in five years of hard work are being transferred to remote courts with few, if any, commercial cases. There is a pervasive sense amongst the commercial court judges that they are being dumped by the system, and that the training serves no real purpose.

The answer therefore is not to add more training mileage, but to get more out of each mile of training. It requires that a method is developed by which the benefits of training are reflected in performance assessment and career development. Quality in the end is a personnel management issue.

Third, the editorial in this newspaper of Oct. 21 argues that the current law "is too debtor-friendly" because mostly debtors win. It cites the controversial Manulife decision in this context. It is not exactly clear what is meant here: Is it the law, the court decisions, or reality?

As far as the Bankruptcy Law goes, it is quite unorthodox to qualify it as debtor friendly. It is widely accepted that the law is creditor friendly instead, according to some even overly so. It serves to recall that the low threshold for filing for bankruptcy (two debts, one of which is due and payable) was a major concern of the Canadian company, Manulife. There is an important role for the court to ensure that this low threshold is not abused, but certainly this is not a debtor friendly legal regime.

With regard to the application of the law by the Commercial Court, the contention that it is debtor friendly also is open to contention. The Commercial Court has decided 315 cases over the period 1998-2002. Of this number, creditors have won more cases than debtors, be it by a narrow margin (creditors win in 100 cases, debtors in 99).

The other cases either were uncontested bankruptcies filed by debtors themselves, were withdrawn, settled or went through successful court-supervised restructuring. There is a widely shared perception in Indonesia that despite the law, the commercial court is tough on creditors and soft on debtors. But the court decisions do not support this at all.

This is further enhanced by the relative quality and consistency of commercial court decisions. Again belying the general perception of commercial court performance, an ongoing assessment of commercial court performance by a team involving both Indonesian and foreign lawyers found that around 70 percent of the decisions are good law.

The editorial may have pointed at a problem of implementation, and meant to say that well-connected debtors tend to get away despite the law, and despite the general drift of commercial court decisions. That is a valid concern. The implementation and enforcement of court decisions continues to be problematic. In fairness, however, this to a large extent is not a legal or court issue and more strongly relates to the other law enforcement agencies.

As far as the court goes, it has actually been quite willing to confront well-connected debtors. This can be illustrated by the bankruptcy of the well connected Fadel Muhamad. He is not an isolated example, as Soeharto and TNI-related companies were declared bankrupt by the commercial court also. The powerful do not always win.

All this does not deny that there are major and evident problems, notably in enforcement. And there is a major credibility crisis. But the situation is not as uniformly and irremediably bleak as the editorial would have it.

This editorial should be welcomed and I certainly agree with the basic arguments. It would appear, however, that the challenges for the commercial court reside less in the formal framework of rules, procedures, education and so on, than in the way these are being used and applied. The core issue is how the courts and the legal professions perform, are organized, maintain their discipline and professional standards. How they view themselves, and how they define what is expected from them. These issues are not resolved by just amending a law, getting a procedure book, or holding additional training courses.

A long history of public sector failure has fostered a deep- seated skepticism in society about any institutional reform. This is understandable. The danger is that skepticism rules all, and that reform efforts are killed off by a general sense that these cannot possibly come to any good.

Judicial reform requires a clear vision and commitment as to the problems and how these should be best solved. This is not an easy process, and the editorial shows some of the difficulties. Fortunately, elsewhere that work is being undertaken with great promise. The Supreme Court and the Steering Committee for the Commercial Court have set out a comprehensive institutional reform agenda that identify problems and propose sets of clear solutions.

The results are contained in a series of reform plans, called Blueprints, which are also identified in the Government White Paper. Many of the above problems have been identified and addressed in great detail in the Blueprints. The Blueprints are among the most aggressive and forward looking reform plans designed by any Indonesian institution. They were launched by Chief Justice Bagir Manan on Oct. 9 and should serve both as the critical instrument of analysis of institutional problems, as well as the key agenda for institutional reform in this area.

The views expressed in this article are his own and do not in any way reflect those of the IMF.