Sat, 06 Mar 1999

Govt to revise seven-month old bankruptcy law

JAKARTA (JP): The government plans to revise the much- criticized seven-month old bankruptcy law before the end of the year as it still contains "several shortcomings", Minister of Justice Muladi said on Friday.

Muladi added the plan to revise the law was part of the government's and the House of Representatives' initial agenda before the law was enacted in August.

"We had an agreement with the House that should the law and its implementation have any flaws, it would be revised within a year of its enactment," he told reporters.

In the meantime, the government would also appoint several legal experts from local universities or practicing lawyers as judges in the commercial court, which was set up on the same day the law was enacted last year.

The move was aimed at creating an independent team of judges in the commercial court.

The presidential decree on the appointment of the "ad-hoc judges" was currently being drawn up, he said.

"We have proposed that the Supreme Justice submits the names of the ad-hoc candidate judges to the president, and that the latter appoints those judges," he said.

Currently the commercial court is supervised by a team of 17 judges, most of whom are also judges at the Central Jakarta district court.

Muladi said the international community including the International Monetary Fund had requested the inclusion of the ad-hoc judges as well as the law revision.

The government enacted the bankruptcy law last year to replace the previous antiquated bankruptcy code based on the 1905 Dutch insolvency ordinance, which was deemed opaque and irrelevant to contemporary cases.

Under the law, a final ruling for a credible creditor should be made in no more than 300 days after the petition is filed, including the 30-day period of appeal and 270-day period of suspension of payments.

Since it was enacted, however, many petitions on bankruptcy cases, especially those involving large local companies, have been turned down in the commercial court. Creditors' appeals to the Supreme Court were also often rejected.

Creditors and legal experts have charged that the commercial court's rulings were partial toward the debtors.

Thomson BankWatch of the Thomson Financial Services Company said on Friday this partiality toward debtors could discourage foreign creditors.

"Recent rulings by local commercial courts have gone in favor of debtors, which could diminish the incentive for distressed corporations to restructure their obligations," the report says.

"Appeals taken to the country's Supreme Court have so far gone against creditors," it adds.

The most recent was the Supreme Court's verdict which rejected a bankruptcy appeal by the International Finance Corporation -- the private investment unit of the World Bank -- and other creditors against publicly listed agricultural food producer PT Dharmala Agrifood.

As of the end of January, 38 bankruptcy cases had been filed, and 12 companies had been declared bankrupt, mostly small companies. Bigger companies, however, appeared to get off the hook more easily.

Muladi also said on Friday that Indonesia expected to sign an extradition treaty with China in the near future, as the country's trade relations with it continued to grow.

Meanwhile, the government would also keep negotiating with Singapore to produce a similar treaty, but did not place great hopes on success because of the complexity of differences in the procedural and political systems of the two countries.

"Singapore only has extradition treaties with Commonwealth countries," he said.

Local crime suspects, especially those committing white-collar crimes, often find refuge in Singapore to evade criminal charges in this country. (das)