Indonesia amending bankruptcy law

JAKARTA (JP): The government is finalizing draft amendments of the 1998 law on bankruptcy to make it better able to accommodate the latest developments in business and to improve the transparency of bankruptcy proceedings, a senior official at the justice ministry said on Thursday.

"We expect to complete the draft amendments next month," Has Natabaya, director of the National Law Development Center, said during the first day of a two-day international conference on bankruptcy reform in Indonesia.

The amendments, Natabaya added, would address the concerns of creditors, debtors and the general public over the shortcomings of both the bankruptcy law and the Commercial Court.

The chief of the Commercial Court's steering committee, Purwoto Gandasubrata, said at the conference that the Commercial Court often was criticized by litigants for what they saw as controversial decisions which frustrated creditors and damaged investor confidence in the Indonesian legal system.

"But these shortcomings must be seen against the novelty of the law and the short experience of the court (established last August). Of more importance, we are learning and making corrections along the way," Gandasubarata said.

He also said his committee had proposed the government raise the monthly salary of the country's estimated 5,000 judges to between Rp 5 million (about US$575) and Rp 15 million to increase their independence.

"Salary improvements should be part of the concerted efforts to ensure judicial independence," Gandasubrata said.

At present the monthly salary for judges ranges from Rp 1 million to Rp 2 million.

A. Zen Umar Purba, an insolvency expert at the Ministry of Justice, said Indonesian judges earned much less than lawyers and receivers.

The conference, which is being cosponsored by the Australian government, the World Bank and the International Monetary Fund (IMF), features bankruptcy experts from the United States, Australia, Japan and several other countries. It is designed to gather input to help improve the draft amendments to Indonesia's bankruptcy law.

Gregory Churchill, a bankruptcy consultant to the International Monetary Fund, said many decisions by the Commercial Court were not supported by underlying law and were inconsistent with general commercial practices and principles.

"It became evident that there are a number of problem areas that must be addressed through further training, education and opportunities for exposure to the structure of modern commercial transactions," Churchill said.

The government actually has made some improvements to the Commercial Court, including the appointment in February of four respected law professors and retired judges as ad hoc judges to the court.

However, another speaker at the conference, Daniel S. Lev of the University of Washington, contended that the Commercial Court would not improve unless the government was willing to undertake a comprehensive overhaul of the judicial system.

Lev also warned of a possible nationalistic backlash against the bankruptcy law.

David K. Linnan of the University of South Carolina shared Lev's views, citing the argument among many Indonesian businesspeople that effective insolvency proceedings meant selling out national interests to foreigners.

Linnan said this argument was poisonous to legal certainty because what the businesspeople actually wanted the court to do was disregard the rule of law.

"Indonesia needs to decide which is more important to its development: the rule of law or the interests of existing debtor- equity holders," Linnan said. (02)