Court verdict on Manulife upsets Canadians

Rendi A. Witular, The Jakarta Post, Jakarta

The Central Jakarta Commercial Court declared on Thursday insurance firm PT Asuransi Jiwa Manulife Indonesia (AJMI) bankrupt in a hugely controversial decision which some say would further deteriorate investors confidence in the country.

AJMI is the local unit of Canadian insurance company Manulife Financial Corp., which has been in a legal battle over the past two years with its former local partner, the Dharmala Group, not only in Indonesia but also in Singapore and Hong Kong.

Dharmala was Indonesia's leading business conglomerate, controlled by the Gondokusumo family, prior to the 1997 financial crisis.

Manulife's chief legal counsel for Asia, Mitch New, said in a statement that the court's decision was "upsetting" and would deter investment in Indonesia.

"A decision that's obviously been bought and paid for by the Gondokusumo family. We will bring this decision to everyone's attention, in the Indonesian government, World Bank, and the IMF," New was quoted by Bloomberg as saying.

Meanwhile, in an internal memo obtained by The Jakarta Post, AJMI president Philip Hampden-Smith said the management had decided to temporarily shut down its offices in Indonesia, starting Thursday afternoon. He added the company would also appeal to the Supreme Court.

Canadian Ambassador to Indonesia Ferry de Kerckhove said he was "deeply disappointed," and was "concerned about the effect this decision will have on the reputation of Indonesia as a home for the foreign investment that Indonesia so dearly needs to rebuild its economy."

"This is a matter which has received the attention of the highest levels of our governments, including the personal involvement of the Canadian Prime Minister.

"It will continue to be a pivotal part of our relations with the government of Indonesia. We hope that this decision will not have a negative affect on that relationship," he told the Post in response to the court ruling.

Canada is part of the Consultative Group on Indonesia (CGI), Indonesia's major creditors consortium.

The bankruptcy ruling was made after a receiver of the now defunct PT Dharmala Sakti Sejahtera (DSS), the one-time partner of Manulife in AJMI, filed a bankruptcy petition on May 14 on the grounds that AJMI had refused to pay Rp 22.4 billion in dividends in 1999 to DSS.

The court, presided over by Judge Hasan Basri, said that AJMI should have paid the dividend since it had booked a profit amounting to Rp 183 billion that year.

But Manulife has said there was no dividend declared for the period in question.

The ruling means that the company's assets will be sold off by a court-appointed liquidator.

Manulife currently has a 71 percent stake in AJMI. The World Bank's financial arm International Finance Corp., and local firm PT Tirta Dana Nugraha own a nine percent and 20 percent stake respectively.

Established in 1985, AJMI is the fourth-largest life insurance company in the country with total assets worth Rp 3.1 trillion.

DSS previously owned a 40 percent stake in the company. But after the heavily indebted company was declared bankrupt in May 2000, Manulife bought the shares for Rp 170 billion at a government auction in October.

The transaction, however, was immediately contested by Roman Gold Assets, which claimed to have previously bought the shares for Rp 354.4 billion in Singapore from Western Samoa-based Highmead. The latter had reportedly acquired power of attorney over the shares from Hong Kong's Harvest Hero International.

Since then, Manulife had been facing a series of lawsuits in Jakarta, which some said were being orchestrated by the Gondokusumo family to win back the AJMI stake.

In a related development, however, a Singapore High Court issued an injunction against Suyanto Gondokusumo of the Dharmala Group, his wife Jacqueline and mother Tinawati, preventing them from disposing of assets in Singapore. They also have to provide the court with a list of assets in Singapore. The ruling was issued after Manulife filed legal action on May 17.

Bloomberg said that the suit also named Suyanto's sister-in- law Lanny Angkosubroto, Roman Gold Assets and its director, Surabaya businessman Haryono Winarta, and Jakarta-based lawyer Lucas for damages for conspiring to defraud Manulife.