Incongruous judgment

The unbelievably absurd judgment meted out by the Commercial Court last week in the bankruptcy petition against PT Asuransi Jiwa Manulife Indonesia (AJMI) only served to strengthen the public's perception of how hopelessly corrupt and incompetent is the country's court system.

The court should have outrightly thrown out the bankruptcy petition as legally defect because the lawsuit was entirely groundless. How could the receiver of a defunct company, Dharmala Sakti Sejahtera (DSS), which had been declared bankrupt by the same court in 2000, have sued AJMI for bankruptcy for nonpayment of a dividend that is the proprietary right of the shareholders?

AJMI says its shareholders meeting in February 2000, decided to retain its 1999 profit, which is not unusual for a rapidly growing company. Even though DSS was a 40 percent shareholder until it was declared bankrupt by the court over default on its debts in June 2000, DSS was legally bound to abide by the shareholders' decision.

As bizarre as it seems, it was this nonexistent dividend that was used by the receiver as the legal basis for its bankruptcy petition against AJMI. And as ludicrous and illogical it might be, the Commercial Court, which is in charge of enforcing the country's bankruptcy law, decided in favor of the plaintiff, declaring the country's fourth largest insurance firm with Rp 1.8 trillion (USS$206 million) in total assets and Rp 216 billion in solvency level bankrupt.

We don't believe the court verdict was caused by technical incompetence on the part of the judges to interpret the laws. Even though the Commercial Court is a relatively new institution, set up only in 1999, its resources have been strengthened with ad hoc judges who are expert in complex business and financial transactions.

The legal predicament faced by AJMI is only the latest, starkest example of questionable, entirely insensible court decisions in the country.

One day earlier, the Padang District Court in West Sumatra decided on June 12 not to issue an injunction asked for by state- owned PT Semen Gresik to force the directors of its 99.99 percent-owned subsidiary, PT Semen Padang, to convene an extraordinary shareholders meeting. The court decided that publicly traded Semen Gresik's request for the meeting was legally flawed. The company's articles of association require the shareholders to go to the court after their request, filed three times, remained unheeded by the Semen Padang management.

Despite this bombed-out legal system, some Cabinet ministers and many others among the political elite still wonder why foreign investors have not returned to the country. These ignoramuses have even resorted to a state of denial, shamelessly blaming the government's reform agreement with the International Monetary Fund for its failure to restore investor confidence in the country.

What makes the June 13 Commercial Court's decision so mind- bogglingly absurd is the fact that it is only the latest twist to the Manulife saga that in 2000 and 2001 got the attention of the international community, the IMF and almost all senior officials of the three branches of the government, including then president Abdurrahman Wahid.

The Canadian insurer found itself drawn into a legal quagmire soon after it bought the 40 percent stake of its bankrupt DSS partner in AJMI that was auctioned off by the government in October 2000, because an unknown company overseas, Roman Gold Assets, claimed to have acquired the DSS shares through a shell corporation in Hong Kong, Harvest Hero International, which in turn claimed to have acquired the rights to the shares from DSS.

Even though all legal evidence proved that the claimed share acquisition was false and did not meet any legal requirements, the usually inert National Police acted immediately to vigorously follow up the complaint, interrogate Manulife executives and even detained one of its vice presidents for three weeks.

Now that AJMI is in legal limbo, contingency measures are needed to contain the damage done to the company. The Supreme Court would be wise to give top priority to the appeal to be filed by AJMI and to decide on it sooner than the 30-day time limit, in view of the company's function as a trust institution with fiduciary responsibility for around 400,000 policyholders, 4,000 employees and numerous other stakeholders.

The legal sham also makes it more imperative than ever to speed up judicial reform, which is one of the core reform programs the government has agreed to with the IMF. True, the judicial branch of the government should be politically independent. But independency without accountability is anarchy.

How can the government bring the 35 recalcitrant, largest bad debtors which owe the taxpayers more than Rp 140 trillion (US$16 billion) to justice if most judges are either hopelessly incompetent or corrupt when it comes to dealing with parties with money power or cases involving huge sums of money?

Moreover, it is futile to talk about economic reform, let alone economic recovery, without an acceptably minimum degree of legal certainty because it is the framework of laws, rules and ethics and their enforcement that constitute the most crucial determinant of a country's economic condition and its degree of social cohesion and decency.