Good commercial courts imperative for recovery

Good commercial courts imperative for recovery

Muninggar Sri Saraswati, The Jakarta Post, Jakarta

The country's commercial courts, renowned for being ineffective
and corrupt, must be reformed to encourage more investment and in
turn boost economic recovery and growth, an expert said.

Sebastian Pompe, the resident legal counsel of the
International Monetary Fund (IMF) in Jakarta, asserted that
economic growth and proper commercial law application are
intertwined.

"Therefore, the trust of the global market is much determined
by what the commercial court does. If the court does badly,
investors are afraid they will never see the money back they
invest here," he said on Wednesday.

Pompe presented his views during a ceremony marking the end of
the first phase of the IMF technical assistance program on the
country's legal reform, including on commercial courts, funded by
the Dutch government.

Indonesia has five commercial courts located in Jakarta,
Semarang, Surabaya, Makassar and Medan, with 25 judges -- 14 of
them working in Jakarta.

Bankruptcy litigation experts have lamented that the country's
commercial courts have failed to meet expectations and instead
delivered verdicts creating legal uncertainty for the business
sector.

Worse, commercial courts are known as one of the most corrupt
legal institutions in the country.

Last year, the country was stunned by the controversial ruling
of the Jakarta Commercial Court which declared PT Asuransi Jiwa
Manulife Indonesia (AJMI) bankrupt after the receiver of the now
defunct company, the former partner of Canada's Manulife in AJMI,
brought a bankruptcy petition over an unpaid dividend in 1999.

The Supreme Court overturned the decision only after
international outcry over the decision.

With such unfavorable conditions, fewer and fewer bankruptcy
petitions have been filed with the commercial courts, indicating
that creditors do not trust commercial courts to recoup their
lost money.

The low number of cases is especially evident at the Jakarta
Commercial Court, which handles most of bankruptcy cases in the
country. The Jakarta Commercial Court registered only 12
bankruptcy petitions as of April this year. In 1999, when the
court was first established, it heard more than 100 cases.

Responding to investors' concerns, Supreme Court Chief Justice
Bagir Manan said: "The results show that they are not meeting our
expectations. Therefore, we need to make improvements."

Bagir argued that many people here still consider bankruptcy
negative for businesses.

"That's incorrect. Bankruptcy is a way to settle a debt
dispute," he said.

Pompe concurred, saying that some people think that bankruptcy
is the same as unemployment.

"Bankruptcy does not kill, it revives. It is a process
whereby the law facilitates the movement of economic resources,
from non-productive enterprises to more productive enterprises.
Good bankruptcy law means more employment, not less," he said.

There were 1.4 million bankruptcies in the United States in
2001, he said. Also, the Netherlands sees an average of 633
bankruptcies per month.

In comparison, the Central Statistics Bureau reported that 835
large and medium manufacturing companies went bankrupt last year,
up from 650 the previous year.

"The U.S. and Dutch system allow entrepreneurs to go bankrupt,
but afterwards they can start again," he added.