Supreme Court rejects ruling on Manulife

Supreme Court rejects ruling on Manulife

The Jakarta Post, Jakarta

The Supreme Court said on Monday that it had overturned a
controversial bankruptcy ruling against insurance company PT
Asuransi Jiwa Manulife Indonesia (AJMI), the local unit of
Canada's Manulife Financial Corp., which had dismayed foreign
investors and threatened to spark a diplomatic fracas between
Indonesia and Canada.

Supreme Court judge Toton Suprapto told reporters Monday that
the decision was made on Friday.

The Commercial Court ruled AJMI bankrupt on June 13 after the
receiver of the now defunct PT Dharmala Sakti Sejahtera (DSS),
Manulife's former partner in AJMI, filed a lawsuit over an unpaid
dividend in 1999. However, Manulife has said that shareholders
did not authorize any dividend for the particular period.

Toton said that the Supreme Court decided to overturn the
ruling on grounds that the receiver, Paul Sukran, did not obtain
consent from supervising judges when filing the bankruptcy
petition.

Manulife welcomed the Supreme Court's ruling.

"The truth is finally revealed. We are glad that (our)
business now can return to normal," AJMI spokeswoman Nelly
Husnayati told The Jakarta Post.

The game, however, may not be completely over yet as according
to the law, Paul Sukran can still seek a judicial review if he
comes up with new evidence.

The Manulife bankruptcy ruling was controversial mainly
because AJMI is actually a solvent company as acknowledged by the
finance ministry.

AJMI is the country's fourth largest insurance firm, with a
net profit of Rp 75 billion last year and assets worth Rp 3.1
trillion.

The controversial ruling created widespread concern over the
rising legal uncertainty in the country due to a weak and corrupt
court system. Experts have said that this case could further
deter foreign investors from returning to the country. Foreign
direct investment dropped by 60 percent in the first five months
of this year.

The Canadian government had urged the Indonesian government to
intervene to overturn the ruling, which was rejected by the
latter on grounds that the government respected the legal system
and its processes. The whole case has threatened relations
between the two countries, according to some observers.

Canada is a member of Indonesia's major donors consortium
called the Consultative Group on Indonesia (CGI).

Some members of the CGI have reportedly sent a protest letter
to President Megawati Soekarnoputri over the Manulife bankruptcy
ruling.

In the wake of these protestations and criticism from various
quarters, Minister of Justice and Human Rights Yusril Ihza
Mahendra then launched an investigation into the three judges
which issued the Manulife bankruptcy ruling amid bribery
allegations.

This was followed by the Commercial Court's decision which
approved the request of Manulife to replace its own receiver on
grounds of bias due to the receiver's links to DSS and its
founder, the Gondokusumo family. The receiver, Kalisutan had
previously ordered AJMI to shut down the operation of its 73
branches, sending uncertainty to its 400,000 policyholders and
some 4,000 staffs.

Meanwhile, Yusril said Monday that his office had stepped up
the investigation into possible corruption and irregularities in
the Manulife bankruptcy ruling.

He said in Surabaya that the ministry was investigating bank
accounts of the three Commercial Court judges who handled the
case -- Hasan Basri, Ch. Kristipurnami and Tjahyono.

Manulife had said that the moves to rule its local unit
bankrupt were part of an attempt by the Gondokusumo family to
regain control of the business.

The legal battle faced by Manulife started in 2000, shortly
after it bought DSS' 40 percent stake in AJMI at a government
auction for around $20 million.

The government sold the DSS stake as part of efforts to recoup
its money channeled into the group's bank, which also collapsed
during the 1997 financial crisis. DSS itself was declared
bankrupt in March 2000.

But the purchase of the 40 percent stake was immediately
contested by little-known Roman Gold Assets Ltd., a British
Virgin Islands-registered company that claimed to have bought the
same shares in Singapore from a Western Samoa company two weeks
before the government auction.

Manulife has alleged that Roman Gold is a front set up by the
Gondokusumo family.

Manulife recently won a Singapore court order to freeze the
assets of the Gondokusumos in the island state.