Accessibility links

Breaking News

Court Overturns Manulife-Indonesia Bankruptcy - 2002-07-08

Indonesia's Supreme Court has overturned a controversial bankruptcy ruling against the Jakarta branch of a Canadian insurance company. The case against Manulife-Indonesia had raised serious questions about the independence of Indonesia's judiciary and alarmed foreign investors.

The Supreme Court ruled that the bankruptcy order against Manulife-Indonesia was not valid, and is therefore void. Last month, Indonesia's commercial court declared the Canadian-affiliated company bankrupt, based on a complaint by a former Indonesian joint venture partner. The commercial court said the reason was that the company failed to pay dividends to shareholders in 1999.

The court ignored the fact that Manulife says its board of directors had voted against paying a dividend that year or that the company, one of Indonesia's largest insurers, showed a profit and had hundreds of millions of dollars in assets.

The Canadian government and international companies said the ruling could adversely affect foreign investment in Indonesia and raised questions about the country's judicial system. Manulife says its problems began when it tried to buy out the 40 percent shares owned by its Indonesian joint-venture partner in October 2000, after it had gone bankrupt. Since then, Manulife says it executives have been harassed and were victims of attempted extortion. Manulife-Indonesia's Director Philip Hampden Smith says his company was targeted because of its success. "Because when people see that you're successful at making money," Mr. Smith explained, "you become a target. When you look at companies in Indonesia that have done well, most of them have become targets at some time or another because, obviously, [they] maybe cash rich." Indonesia's Justice Ministry has ordered an investigation into the three commercial court judges who passed down the bankruptcy declaration. The Supreme Court's decision comes weeks ahead of the arrival of a United Nations legal expert, for a fact-finding mission on the independence of Indonesia's judiciary.