Foreign creditors stay away from commercial court

Lengthy court proceedings as well as ambiguous rulings have prompted many creditors, especially foreign companies, to take their cases against local indebted firms from the commercial court to the district court.

From past experiences it was evident that creditors had little hope of regaining their money from debtors through the commercial court, experts said. ”The court has made many inconsistent and dubious rulings that have dissatisfied creditors over the last five years. Those decisions made many creditors reluctant to file their cases with the court,” Luhut Pangaribuan, an expert in business law, told The Jakarta Post on Sunday.

Records from the Jakarta Commercial Court show that the number of bankruptcy cases filed there decreased over the past four years. The court was set up in 1998. After an euphoric period from 1998 to 1999 with - over 100 cases filed within that, period - the number of lawsuits filed dropped to 84 cases in 2000, 61 cases in 2001, 39 cases in 2002, and 38 cases in 2003.

A lawyer who specializes in handling bankruptcy cases, Rahmat Bastian, acknowledged that many commercial court rulings were questionable, and in .favor of debtors, forcing his foreign clients to turn to the district court. Rahmat said that the Jakarta Commercial Court had dismissed last year a petition filed, by creditors – led by OCM Opportunities Fund LLP - to declare PT Tri Polyta Indonesia, the country's largest maker of polypropylene resins, bankrupt. The judges had claimed that there was no proof that the OCM representative who signed the petition truly represented OCM, even though there was sufficient evidence that the debtor was bankrupt.

Another shortcoming, said Rahmat, was that the court was blind the use of fictitious creditors by debtors. These so called creditors weakened the position of real creditors as, according to the law, the vote to declare a company bankrupt must be made by two third of the creditors present at the general meeting, he said.
”The judges must examine these proposed creditors by checking their documents. Why are they reluctant to check phony creditors?” he wondered.

Rahmat complained that many rulings were only made after months of delay. He said that this was against Law No.
4/1998 on bankruptcy, which stipulates that a ruling must be handed down within 30 days after the case is filed. Court records show that rulings on 11 cases in 1999 were delayed to 2000, 10 cases in 2000 were delayed to 2001, Five cases in 2001, were delayed to 2002 and four cases in 2002 were delayed to 2003.

”All of these problems compel my clients to file their cases with district courts rather than the commercial court. District courts facilitate a quicker decision-making process, the ruling is immediately enforceable while it also allows us to confiscate assets to guarantee the credit payment,” said Rahmat

Luhut said another reason why many foreign creditors refused to file bankruptcy cases with the commercial court was rampant bribery in the court system. ”Money is used as a weapon to win the case. Foreign companies are unfamiliar with this practice, prompting them to stay away from the court,” said Luhut.

In 2002, the court ruled the local unit of Canada’s Manulife Financial Corp. (MFC) bankrupt even though it was profitable. The Supreme court overruled that decision after international pressure. Earlier, the court rejected the petition of China Class Commercial to declare Jasindo bankrupt.