Foreign creditor stay away from commercial court

Foreign creditor stay away from commercial court

Abdul Khalik, The Jakarta Post, Jakarta

Lengthy court proceedings as well as ambiguous rulings have
prompted many creditors, especially foreign companies, to take
their cases against local indebted firms from the commercial
court to the district court.

From past experiences it was evident that creditors had little
hope of regaining their money from debtors through the commercial
court, experts said.

"The court has made many inconsistent and dubious rulings that
have dissatisfied creditors over the last five years. Those
decisions made many creditors reluctant to file their cases with
the court," Luhut Pangaribuan, an expert in business law, told
The Jakarta Post on Sunday.

Records from the Jakarta Commercial Court show that the number
of bankruptcy cases filed there decreased over the past four
years. The court was set up in 1998.

After an euphoric period from 1998 to 1999 -- with over 100
cases filed within that period -- the number of lawsuits filed
dropped to 84 cases in 2000, 61 cases in 2001, 39 cases in 2002,
and 38 cases in 2003.

A lawyer who specializes in handling bankruptcy cases, Rahmat
Bastian, acknowledged that many commercial court rulings were
questionable, and in favor of debtors, forcing his foreign
clients to turn to the district court.

Rahmat said that the Jakarta Commercial Court had dismissed
last year a petition filed by creditors -- led by OCM
Opportunities Fund LLP -- to declare PT Tri Polyta Indonesia, the
country's largest maker of polypropylene resins, bankrupt. The
judges had claimed that there was no proof that the OCM
representative who signed the petition truly represented OCM,
even though there was sufficient evidence that the debtor was
bankrupt.

Another shortcoming, said Rahmat, was that the court was blind
the use of fictitious creditors by debtors. These so-called
creditors weakened the position of real creditors as, according
to the law, the vote to declare a company bankrupt must be made
by two third of the creditors present at the general meeting, he
said.

"The judges must examine these proposed creditors by checking
their documents. Why are they reluctant to check phony
creditors?" he wondered.

Rahmat complained that many rulings were only made after
months of delay. He said that this was against Law No. 4/1998 on
bankruptcy, which stipulates that a ruling must be handed down
within 30 days after the case is filed.

Court records show that rulings on 11 cases in 1999 were
delayed to 2000, 10 cases in 2000 were delayed to 2001, five
cases in 2001 were delayed to 2002 and four cases in 2002 were
delayed to 2003.

"All of these problems compel my clients to file their cases
with district courts rather than the commercial court. District
courts facilitate a quicker decision-making process, the ruling
is immediately enforceable while it also allows us to confiscate
assets to guarantee the credit payment," said Rahmat

Luhut said another reason why many foreign creditors refused
to file bankruptcy cases with the commercial court was rampant
bribery in the court system.

"Money is used as a weapon to win the case. Foreign companies
are unfamiliar with this practice, prompting them to stay away
from the court," said Luhut.

In 2002, the court ruled the local unit of Canada's Manulife
Financial Corp. (MFC) bankrupt even though it was profitable. The
Supreme court overruled that decision after international
pressure. Earlier, the court rejected the petition of China Class
Commercial to declare Jasindo bankrupt.

Cases at commercial court

year case filed case closed

1999 100 cases 77 cases
2000 84 cases 72 cases
2001 61 cases 51 cases
2002 39 cases 32 cases
2003 38 cases 33 cases