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.