Informative book on Indonesian law reform

INDONESIA: Bankruptcy, Law Reform & the Commercial Court 2000; Timothy Lindsey, Editor; Published by Desert Pea Press, Sydney, 2000; Paperback, 314 pages

MELBOURNE (JP): Imagine a scene unraveling before you. The setting is a country in the midst of economic crisis where the government cannot seem to do anything right. Enters unannounced, a foreign government representative who promptly produces a set of demands. Among these are market liberalization and the establishment of a special court to service foreign business people. This representative has no formal training in the local law, but he is not shy in pointing out that the judges are undertrained and appear too close to the government's interests to adjudicate complex cross-jurisdictional matters.

You would be forgiven for thinking that the setting was Indonesia in 1997 when the then IMF's Michel Camdessus laid down the conditions for the government to meet before the organization could help the country out of its economic crisis.

However you were wrong. The scene depicted by Timothy Lindsey in his book about bankruptcy, law reform and the commercial court in Indonesia, actually took place in Japan in 1853.

Commodore Mathew Perry then used what Lindsey calls gunboat diplomacy to secure for the United States what no other countries wishing to trade with Japan had been able to achieve through conventional diplomacy. The Treaty of Kanagawa was duly agreed on and signed in 1854.

The shock of the humiliation, it seems, drove Japan's determination to revise the treaty. Since revision was conditional upon Japan adopting a full set of legal codes that would allow it to trade and function like a developed country (from the foreign country's viewpoint), Japan, albeit with a great deal of difficulty, made sure it met all the conditions and, in fact, by 1899 had renegotiated all the unequal treaties.

Whether Indonesia will be able to, or even choose to, meet all the terms laid down by the IMF, is still a big question. Besides, the IMF did not exactly conduct gunboat diplomacy in 1997, and did revise its conditions several times when it was obvious that Indonesia would never meet the earlier ones without hemorrhaging politically and socially.

One of the conditions which the IMF did not withdraw was the establishment of Bankruptcy Law and a Commercial Court, because the multilateral agency regarded this as essential in helping the country out of the financial dead-end.

However, between the demand and the implementation, there have been untold problems the extent of which only those involved in the project are familiar. William Neilson, for instance, indicates in his chapter on strategies and realities for donor agencies in relation to reforming commercial laws in Asia, that offshore specialists often under-appreciate the constitutional context of law reform.

Indonesia's new Bankruptcy Law is actually a massively amended Dutch-East Indies Bankruptcy Law of 1905 (Faillissments- Verordering S 1905-217). These amendments were in the form of Government Regulations to Replace Law (Peraturan Pemerintah Pengganti Undang-Undang, or Perpu) which were later confirmed as Law No 4 of 1998. This is very significant to the fact that both the Commercial Court and the Bankruptcy Law were established on Aug. 20, 1998, because Law No 4 of 1998 specifies that the jurisdiction of the Commercial Court is limited to bankruptcy cases, at least for the time being.

It is evident that the primary objective of setting up the Commercial Court was to handle bankruptcy cases. A number of companies had to be liquidated so that the creditors, many of them banks, were able to recover their assets, in order to operate properly again. The economy was suspended in an impasse, significantly because banks were stripped of cash loaned to the insolvent companies who were nonetheless still hanging on to their assets, not being declared bankrupt.

This in itself is a problem. A new law, especially one that is obviously externally initiated, usually takes a fair stretch of time to be internalized. The judges have to master the intricacies and the complexities involved, the law enforcers have to be seen doing their tasks properly so that the community can feel confident and reliant in it. Yet the Commercial Court, with its Bankruptcy Law, does not have the luxury of time. It has to work fast if it is to achieve what it was established for.

Will Indonesia emulate Japan of the 1850s and prove to the world that it has the determination necessary to crawl out -- aided nonetheless -- of the current economic crisis? More importantly, how have those involved in this endeavor fared so far?

Indonesia: Bankruptcy, Law Reform & the Commercial Court 2000 provides a lot of the answers. In this book, Tim Lindsey presents writings including his own, which detail the background, the progress report, the analyses and the prospects, of the Commercial Court and its Bankruptcy Law. It is not only very informative reading for anyone interested in following the democratic process in Indonesia with its seemingly unending teething problems, it is also a useful book for legal professionals.