'Manulife verdict ludicrous, unjustifiable'

'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.