Sumitomo rethinks Indonesian investment after legal spat
Sumitomo rethinks Indonesian investment after legal spat
Dow Jones, Jakarta
Japan's Sumitomo Corp. said it may "rethink" its commitment to Indonesia if it loses a court battle that threatens to bankrupt its local joint venture chemicals business.
Sumitomo said in a statement that Indonesia's weak bankruptcy laws have allowed a dispute over the company, PT Satomo Indovyl Monomer, to end up in a local court rather than going for arbitration in Switzerland in accordance with the joint venture agreement.
According to Sumitomo, the South Jakarta District Court ruled this year that Satomo be liquidated. The Japanese company said its joint venture partner - PT Sulfindo Adiusaha, which it claims is in turn owned by Durability Enterprises, a company linked to Hong Kong-based Emperor Group - called for the bankruptcy ruling after a commercial dispute with Sumitomo.
Christina Ng, a spokeswoman for Emperor Group in Hong Kong, said the firm has no shareholding nor commercial relationship with Sulfindo and Durability. The Hong Kong company offered no further comment on the issue.
But Indonesian Bank Restructuring Agency spokesman, Raymond van Beekum, said IBRA sold Sulfindo to Durability in 2001. Durability said at the time it was owned by Emperor Group, van Beekum said.
Sulfindo spokesman Nugroho, who is based at the company's factory in a town near Jakarta, said the joint venture owes it more than US$10 million. Sulfindo wants to end the partnership with Sumitomo and recoup that debt through liquidating the joint venture's assets, he added.
The Supreme Court overturned the bankruptcy ruling against the joint venture on appeal from Sumitomo, which claims it doesn't owe anything to Sulfindo. But Sulfindo is appealing that ruling at the Supreme Court and a decision is due soon, Nugroho said.
"We are now waiting for the Supreme Court's decision in the case," he told Dow Jones Newswires.
Sulfindo doesn't acknowledge the need to go to international arbitration, Nugroho said. But Sumitomo claims the joint venture agreement which set up Satomo stipulates that any commercial disputes should be settled by a panel of experts in Geneva.
Indonesia's image among foreign investors has taken a dive in recent years as local courts failed to enforce decisions by international arbitration rulings in commercial disputes. Due to concerns about corruption in Indonesia's legal system, foreign investors say they are unwilling to put money here without some guarantee of arbitration overseas in case of disputes.
"We are having to rethink our commitment to the country," said Makoto Honjo, head of acquisitions at Sumitomo's chemical business unit. "If Sulfindo is allowed to get away with this, it will only encourage others to abuse the bankruptcy process," he added.
Sumitomo says it has invested more than $300 million in 74 ventures in Indonesia ranging from infrastructure to natural resources.