House starts amending bankruptcy law

Dadan Wijaksana, Jakarta

Deliberation on a revision to the existing Bankruptcy Law began on Monday night, revealing among other things, that the final say in filing a bankruptcy suit against insurance firms and pension funds lay with the minister of finance.

The deliberation, between a government team led by Minister of Justice and Human Rights Yusril Ihza Mahendra and the House of Representatives Commission IX on financial affairs, was the first since it was submitted to the House in March 2001.

"The changes are meant to build and improve public confidence in institutions that manage public funds," Yusril said.

The deliberation followed last month's controversial bankruptcy ruling against solvent PT Prudential Life Assurance, the local unit of UK-based insurance firm Prudential Assurance Co. Ltd. The company's former agent filed the bankruptcy case over a bonus dispute. Prudential has filed an appeal with the Supreme Court.

But the court ruling has intensified calls for the government to immediately amend the flawed bankruptcy ruling, and to give the minister of finance the final say when deciding to close an insurance firm, similar to the central bank's role in deciding to close a bank.

Two years ago, the court also issued a controversial ruling when deciding a bankruptcy ruling against solvent insurance firm PT Asuransi Jiwa Manulife Indonesia, the local unit of Canada's Manulife financial group.

Yusril said that under the revised version of the bankruptcy law, the filing of a bankruptcy case would not be as easy as it has been under the existing law.

Under the existing law, a single creditor can file a bankruptcy case against a company failing to repay maturing debt. This is deemed as too simple by many.

Even Chief Justice Bagir Manan has repeatedly called for a revision to the clause, as it fails to consider the size of the debts as well as the assets of the company.

The country enacted the Bankruptcy Law in 1998 to facilitate the establishment of commercial courts to settle business disputes.

In its development, however, due to a combination of flaws in the regulations and corrupt officials, the country's commercial courts have gained little confidence in the business community, as it often produced unpredictable and even dubious rulings.

Emir Moeis, chairman of the commission, said the lawmakers would do their utmost to complete the deliberation in the current sitting period, which ends on July 15.

The proposed bill also stipulates that, in addition to the ministry of finance (for insurance, reinsurance firms and pension funds) and Bank Indonesia (for banks), the Capital Market Supervisory Agency (Bapepam) will have the authority to file a bankruptcy case against securities firms.

Also, the three institutions can file the cases themselves without the help of advocates or lawyers' offices.

As for a bankruptcy suit in relation to public interests, Yusril said that it would remain in the hands of a state attorney.

Meanwhile, Prudential welcomed the revision to the existing law, saying that the company's case has clearly exposed the flaws in the current rulings.

"Companies in Indonesia can easily be declared bankrupt, although they have a healthy financial status and are able to fulfill their obligations," a press statement said as reported by Antara.