House starts amending bankruptcy law

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.