Informative book on Indonesian law reform

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.