New commercial court, bankruptcy law launched

JAKARTA (JP): The government opened here yesterday the country's first commercial court on the same day the new bankruptcy law took effect.

The court, located at the Central Jakarta District Court, was officially opened by Minister of Justice Muladi and Supreme Court Chief Justice Sarwata Gandasubrata.

"The settlement of private debts will filter out companies which are operated inefficiently from the business community," Muladi announced at the opening.

He said the court would be able to restore confidence and return sufficient security to local and foreign investors to invest in Indonesia again.

At least 35 cases are ready to be filed, he added.

The Jakarta court will be followed by the opening of four others in Ujungpandang, South Sulawesi, Medan, North Sumatra, Semarang, Central Java, and Surabaya, East Java.

The head of the team of 17 judges, I Gde Sukarata, said yesterday no cases had been filed because the commercial court would not start full operations for at least two weeks.

The new law is part of Indonesia's commitment to the International Monetary Fund's (IMF) reform package linked to a US$46 billion rescue package for the country's ailing economy.

It replaces the antiquated bankruptcy code, based on the 1905 Dutch insolvency ordinance which has been deemed opaque and inefficient for dealing with contemporary problems.

Under the new law, a final ruling for a credible creditor should be decided in no more than 300 days after the petition is filed, including the 30-day period of appeal and 270-day period of suspension of payments.

Analysts hailed the law, saying it gave creditors some leverage.

"It will ensure that claimants do not face a setback in Indonesia's infamously inefficient court system," one said yesterday.

"Secured creditors will be able to get their hands on secured assets more quickly while unsecured creditors will finally have a weapon with which they can threaten recalcitrant borrowers."

However, its success would depend on its enforcement.

"Personnel who handle the bankruptcy cases must be well trained," another analyst said.

A potential danger lay ahead if the courts were swamped by a deluge of cases.

The law would also show the real condition of the companies.

"It will show whether a company is broke or is no longer valuable," he said.

Threat of bankruptcy proceedings would force shareholders of the companies to conduct long overdue restructuring of their business, a move which would eventually benefit them, he added. (das)