Foreign company complains over court's handling of case

Urip Hudiono, The Jakarta Post, Jakarta

Amid the government's efforts to improve Indonesia's investment climate, another commercial dispute involving a foreign company has been dealt with by the courts in a way that could once again cause investors to question the level of legal certainty here.

PT Kangar Consolidated Industries (KCI), a subsidiary of U.S.- based packaging giant Owens Illinois, has been sued by PT Multi Inti Trada in the East Jakarta District Court for an alleged wrongful termination of a distribution agreement between the two companies.

But what is making KCI extremely concerned, a source close to the case told The Jakarta Post, is that the trial procedures appear to be rife with irregularities, including the court's disregard of a pre-trial mediation process and an immediate order to freeze KCI's assets.

This asset preservation order, in particular, has jeopardized KCI's ongoing operations and has forced the company to postpone any further consideration of business expansion and investment.

Owens Illinois is the world's largest glass packaging manufacturer. It is publicly listed on the New York Stock Exchange, and has since 1971 been operating in Indonesia through KCI, investing some US$100 million in the process.

The firm had been planning to invest another $30 million to expand next year, prior to the case.

Explaining KCI's discontent regarding the case, the source mentioned how the panel of judges had neglected Supreme Court Regulation No. 2/2003, which obliges the court to order contesting parties to undertake mediation before the case goes to trial.

KCI also considered the panel of judges to have violated Supreme Court Circular No. 5/1975, as they issued an asset preservation order when the evidence and proofs necessary for such a course of action -- such as KCI management fleeing the country -- had not been met.

The source also mentioned KCI's disquiet about that fact that Rp 30 billion (about US$3 million) in mostly non-material damages was being claimed by Multi Inti Trada, which was grossly in excess of the amount Multi Inti Trada could reasonably expect to earn under the distribution agreement.

The court issued the asset preservation order on July 26, two months after Multi Inti Trada filed its civil suit on May 26, with no mediation attempt in between.

KCI was only permitted to address the court on Aug. 3, after the ruling was issued. On Aug. 29, it filed a complaint about the case with the court and reported the alleged irregularities to the Supreme Court and the Judicial Commission.

The judges hearing the case are Damsuri Nungtjik, Ewit Soetriadi and Sumardiyatmo.

Laywer Zaky Tandjung of Hiswara Bunjamin & Tandjung, which represents Multi Inti Trada, denied any irregularities in the case, which appeared to be proceeding in his client's favor.

Zaky explained that Multi Inti Trada had repeatedly sought an amicable settlement of the dispute, but received no response from KCI.

"The asset preservation order is also normal in the circumstances, and is stipulated in the Civil Law Procedures Code," he said.

The trial has been adjourned until Nov. 15, with both sides having submitted their concluding arguments during the last hearing on Oct. 18. The court is now expected to hand down its verdict in the case.