IMF wants reform of Commercial Court
Fitri Wulandari, The Jakarta Post, Jakarta
The International Monetary Fund has stepped into the public debate over the Commercial Court's bankruptcy ruling on PT Asuransi Jiwa Manulife Indonesia (AJMI), saying the case should serve as a trigger point for Indonesia to speed up reforms in the Commercial Court and revision of the Bankruptcy Law.
"Legal and judicial sector reforms remain critical to a sustained improvement in the investment climate.
"A recent high-profile controversial ruling underscores the need for an acceleration of reforms in this area," Anne Krueger, IMF's first deputy managing director and acting chair, said in a statement on Friday while disbursing US$358 million of its latest loan tranche to Indonesia.
An IMF spokesman confirmed that Krueger was referring to the bankruptcy ruling on AJMI, the Indonesian unit of Canada's insurance giant Manulife Financial Corp., according to Dow Jones.
"More forceful progress is needed, notably with respect to creation of an anticorruption commission, reform of the Commercial Court and revision of the Bankruptcy Law," Krueger stressed.
The Commercial Court declared two weeks ago AJMI bankrupt after a receiver of now closed down, former partner PT Dharmala Sakti Sejahtera (DSS) filed a bankruptcy petition over failure in 1999 to pay a dividend, payment of which shareholders had not authorized.
Lawyers have hailed the IMF appeal. However, they stressed different points on the issue.
Luhut Pangaribuan stressed the need for reform within the court, that is judges in the Commercial Court, rather than revision of the Bankruptcy Law.
"The judges need to be reformed because they are corrupt," he told the Jakarta Post over the weekend.
No matter how good the law is, the judges can always bend it or find loopholes, he stressed.
Luhut said it would take a long time for reform of the Commercial Court to bear fruit given the corrupt judges there.
As such, as a short-term solution, he suggested that the government appoint ad-hoc judges to accompany the judges in trials. The ad-hoc judges could be selected from among legal practitioners and should pass scrutiny by the House of Representatives.
"If corrupt judges were to remain in the Commercial Court, it would be better if trials in the Commercial Court were also done by ad hoc judges," he remarked.
"The ad hoc judges could be legal practitioners selected by the House of Representatives through a fit and proper test," Luhut suggested
Bankruptcy specialist Hotman Paris Hutapea also welcomed the IMF's call, but stressed the need for revision to Law No. 4/1998 on bankruptcy, which he said had many weaknesses.
Hotman said that the logic of the law was weak because a company that failed to repay one of its debts could be declared bankrupt by judges even if it was solvent, meaning it had assets much greater than its liabilities.
According to Hotman, the concept of the prevailing Bankruptcy Law was made by Dutch law expert Jerry Hoffe together with the IMF with the purpose of forcing recalcitrant local debtors to repay their debts to foreign creditors.
If revision is done, the conditions to declaring a company bankrupt should be clearer, he said.
"Are we going to declare a company bankrupt after we thoroughly examine its financial condition or just by deciding that it has failed to repay one mature debt?" he said.
Rachmat Bastian, also a bankruptcy lawyer, said should the revised law oblige judges to take into account solvency in bankruptcy cases, the revised law should also extend the period of time for the Commercial Court to deliver its verdict to allow it to examine the solvency of the company being tried.
At present, the Commercial Court has only 30 days to examine a bankruptcy petition before delivering a verdict.
"This is not enough to prove whether one company should be declared bankrupt," he said.