Manulife case sparks high-level talks between RI-Canada

The Jakarta Post Jakarta

The intensifying legal battle between Canadian insurance company Manulife Financial Corp., and its former Indonesian partner the Gondokusumo family has once again triggered high-level talks between the Indonesian and Canadian governments amid fears the case could strain relations between the two countries.

On Wednesday, Minister of Finance Boediono said that Canada's Deputy Prime Minister and Finance Minister John Manley had phoned him to express concern about the case.

However, Boediono said the government could not intervene in the ongoing legal process despite concerns expressed by Canadian authorities.

"We have explained this to the Canadian ambassador to Indonesia and to other Canadian officials," Boediono said.

"I hope this case won't hurt ties between the two countries."

Earlier on Tuesday, Vice President Hamzah Haz also stressed that the government would not interfere in the judicial process, and urged all parties to respect the law.

Canada is a member of the Consultative Group on Indonesia (CGI), which groups Indonesia's traditional donors.

The Commercial Court ruled Manulife's local insurance unit PT Asuransi Jiwa Manulife Indonesia (AJMI) bankrupt after a receiver of PT Dharmala Sakti Sejahtera (DSS) filed a lawsuit over unpaid dividend in 1999.

AJMI has filed an appeal with the Supreme Court.

The bankruptcy ruling was made despite the fact that AJMI is financially sound, as also admitted by the finance ministry.

Manulife has been locked in a legal battle with the Gondokusumo family, the founder of DSS, for nearly two years since it acquired the latter's 40 percent stake in AJMI in 2000 through a government auction. The purchase was immediately contested by a British Virgin Island-registered company, which Manulife said was a front set up by the Gondokusumo family.

There have been accusations that the Gondokusumo family has been trying to defraud Manulife.

There have been fears that the Manulife case would further discourage foreign investors from entering the country as it strengthens the perception of legal uncertainty here.

The World Bank's commercial arm, the International Finance Corp., has also expressed alarm about the ruling and its likely impact on investment in Indonesia. IFC is also a shareholder at AJMI.