'Manulife verdict ludicrous, unjustifiable'
Rendi A. Witular, The Jakarta Post, Jakarta
The bankruptcy verdict handed down by the Central Jakarta Commercial Court on Canadian insurance firm PT Asuransi Manulife Indonesia (AJMI) has raised concern among experts, who say the verdict is absurd and unjustifiable from the legal point of view.
They also say the verdict will not only further damage the already bad reputation of the country's legal system but will also jeopardize the government's efforts to lure foreign investors into the country.
"This is the most absurd decision that I have seen at the Commercial Court.
"According to Bankruptcy Law No. 4/1998, a company can only be declared bankrupt if it fails to repay a matured debt. In the AJMI case, the company does not have any debt obligation," prominent lawyer Amir Syamsuddin told The Jakarta Post over the weekend.
The bankruptcy ruling was made after a receiver of the now defunct PT Dharmala Sakti Sejahtera (DSS), the one-time partner of Manulife in AJMI, filed a bankruptcy petition on May 14 on the grounds that AJMI had refused to pay Rp 22.4 billion (about US$2.5 million) in dividends for 1999 to DSS.
But AJMI said there was no dividend declared for the year as shareholders meeting in February 2000 decided to retain the 1999 profit.
The court, however, concluded that AJMI should have paid the dividend since it had booked a profit amounting to Rp 183 billion that year. AJMI has filed an appeal with the Supreme Court.
Amir added that the panel of judges should rule out the petition since it was clear that the shareholders meeting, as the highest institution of the company, had decided not to pay dividend. AJMI, therefore, no debt obligation.
"I see irregularities in this case. This can further tarnish the image of our judicial system, especially in the eyes of foreign investors," said Amir.
Amir noted the legal battle could be protracted and would not immediately end once the Supreme Court decides on the case. Should the Supreme Court uphold the Central Jakarta Court's decision, AJMI's creditors, including policyholders, who are not involved in the legal dispute, could still file a petition with the Supreme Court for a review of the decision.
Director of Insurance Affairs at the Ministry of Finance Firdaus Djaelani also regretted that in making their decision, the panel of judges failed to see the broader impact of the decision.
"By just seeing the case of a matter of debt obligation, the judges seems to underestimate the impact of the case. They should have considered how it would hurt the faith of hundreds of thousands of policy holders in the company, and the confidence of foreign investors in our country," said Firdaus.
Firdaus explained that unlike cases involving banks and securities firms, the commercial court did not need to seek advice from the government's financial authorities for its decision on bankruptcy of insurance firms. Under the bankruptcy law, the court has to seek advice from the central bank before deciding on the bankruptcy of a bank and consult with the Capital Market Supervisory Agency or Bapepam before ruling on the fate of a security firm.
Chairman of the Indonesian Insurance Council, Hotbonar Sinaga, dismissed the verdict as ludicrous.
"The decision is unacceptable given that just because of Rp 22.4 billion, which is a small sum of money, the judge declared a big company bankrupt. It is just insane," said Hotbonar.
Hotbonar pointed out that the current Insurance Law was weak in protecting insurance firms and thus should be amended.
"Actually the proposed amendment to the Insurance Law, which is still being discussed at the House of Representatives, will protect insurance companies. One of the clauses of the proposed amendment states there must an approval from the Ministry of Finance before a company can be brought to court," he said.
The amendment was submitted by the government two years ago. However, the House apparently has not given much attention to it, considering it not urgent, Hotbonar said.