Preparation key to court battles against IBRA debtors

Berni K. Moestafa, The Jakarta Post, Jakarta

Sound preparation may be the only thing that will allow the government to recoup billions of U.S. dollars from bad debtors in legal battles looming over the next three to four months, analysts said on Friday.

The advice comes as few believe the debtors will meet the three-month deadline, preferring instead to face litigation or prosecution by the government.

Lawyer Hotman Paris Hutapea said the government should use the time wisely to build strong cases against the uncooperative debtors.

"All the government can do is to prepare itself better," he told The Jakarta Post.

He should know. Hotman has made a name for himself defending debtors in the commercial court, winning most of his cases.

Routine cases in which he is involved include defending bankruptcy petitions brought against his clients by the Indonesian Bank Restructuring Agency (IBRA).

IBRA is renowned for its poor track record, having lost nearly all of the 230 court cases it has brought.

Now the agency is expecting more court cases after the government gave debtors three months in which to repay their debts.

At stake is some $10 billion that is still owed to IBRA under a four-year debt settlement program, which for many debtors ends this year.

In 1998, the largest of these debtors agreed to repay some $8.8 billion in state-funded emergency loans to their banks, loans that they subsequently misused.

But, after three years most had still not done what they had agreed to do, even though they had been released from criminal liability in respect of the misused funds.

Now, the government has dropped an IBRA-backed plan to extend the time limit for repayment by up to six years, and instead slapped a three-month deadline on the debtors in the hope that the country's legal system will do the rest.

But Hotman said this could prove to be difficult.

He warned that the government might fail merely because of making the wrong decisions in respect of who to sue in the civil courts and who to prosecute in the criminal courts.

The government has said that only uncooperative debtors would be earmarked for law enforcement measures, and that it would appoint legal counsel within the next 30 days to identify them.

"Thirty days is just too little to single out bad debtors," Hotman said.

IBRA chairman for asset disposal Dasa Sutantio, who is responsible for collecting with the debts, said there were two ways to identify uncooperative debtors.

"Either they have defaulted, or breached their agreements," Dasa said, adding that to his knowledge most had defaulted.

But according to Hotman, the debtors could take court challenges against IBRA's very decision to label them uncooperative.

If IBRA claimed that the assets the debtors had surrendered in payment were insufficient to cover their debts, then the debtors could always turn to the courts and question this conclusion, he said. This could be a time-consuming process.

Bankruptcy expert Rachmat Bastian said that preparation was vital and suggested that IBRA select strong cases at the outset.

"They (IBRA) should be selective in picking their cases, and focus on those that they're sure they can win," he said.

According to Rachmat, a dose of shock therapy might be enough to scare the other debtors into paying up.

Both legal experts' skepticism about IBRA's chances of success in the courts, reflects the lack of legal certainty the country is renowned for.

Creditors have long bemoaned the corruption-riddled courts, which they say provide little legal protection and in some cases even validate acts of legal harassment taken against them.

IBRA's Dasa said that so far the agency had made no special preparations for dealing with the likely upcoming court battles.

"We have our own internal litigation unit and we'll work with the Attorney General's Office in bringing prosecutions," he said, explaining the procedures in IBRA.

IBRA's litigation unit could not be reached for comment.