INDONESIA Law and Practice Contributed by: Maria Sagrado, Frederick Simanjuntak and Stephanie Kandou, Makarim & Taira S.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
6.3 Foreign Court Judgments A foreign court judgment cannot be directly enforced in Indonesia. To enforce such a judgment, the con- cerned party must file a new claim with the relevant Indonesian district court. The foreign court judgment may be given evidentiary weight at the Indonesian court’s discretion, but the Indonesian court will essen- tially conduct a retrial of the case, as it is not bound by the foreign court’s findings. Foreign arbitral awards are enforceable in Indone- sia, except those involving the government of the Republic of Indonesia, and subject to the grounds for refusal under Indonesian arbitration law. Enforce- ment requires obtaining a court order (exequatur) from the Chairperson of the Central Jakarta District Court ( Ketua Pengadilan Negeri Jakarta Pusat ). However, Indonesian courts may refuse to enforce a foreign arbitral award if: • the award was rendered by an arbitrator or a board of arbitrators in a country that does not have a bilateral or multilateral agreement with Indonesia on the confirmation and implementation of foreign arbitral awards (eg, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards); • the legal relationship underlying the award is not considered commercial under Indonesian law; or • recognition or enforcement of the award would contravene public policy or public order. 6.4 A Foreign Lender’s Ability to Enforce Its Rights There are no specific restrictions on foreign lenders seeking to enforce their rights under a loan or security agreement or initiate legal proceedings against a party in Indonesia. As a general principle, if a foreign lender intends to settle a dispute through the Indonesian courts, the claim should be filed to the district court where the defendant is domiciled. However, contracts may designate a specific district court for dispute res- olution (such as the South Jakarta District Court) and may outline the preferred method of dispute resolu- tion, such as litigation or arbitration.
Upon the debtor’s declaration of bankruptcy, the lender (as a creditor) must submit its claims to the receiver for verification. Once verified, the claims are listed among the acknowledged claims, and the lend- er gains recognition as a creditor. This requires the lender to follow the bankruptcy proceedings to seek repayment, precluding the enforcement of the loan through other means, such as civil litigation. For secured debts, the lender cannot immediately enforce the security following the bankruptcy rul- ing due to an automatic stay. This stay, lasting 90 days, restricts secured creditors from pursuing cer- tain enforcement actions. However, the stay does not apply to creditors secured by cash deposits or those with set-off rights. 7.2 Waterfall of Payments The order in which creditors are paid is as follows. • Preferred creditors ( kreditur preferen ), consisting of creditors with preferred/prioritised rights, such as employees (for unpaid salary/wages) and the state (for unpaid taxes). • Secured creditors ( kreditur separatis ), consisting of creditors holding security over a debt, such as a mortgage, fiduciary, pledge, or other forms of security. • Unsecured creditors ( kreditur konkuren ), consist- ing of the remaining creditors without any preferred rights or security. In principle, the debtor’s assets are used to settle all debts, with distributions made proportionally. Howev- er, considering the above hierarchy, unsecured credi- tors often do not receive full payment of their claims. 7.3 Length of Insolvency Process and Recoveries The bankruptcy application must be granted or reject- ed within 60 working days. After the bankruptcy ruling is issued, all known creditors are notified and invited to file their claims for verification, with a newspaper announcement issued to inform any unknown credi- tors. The bankrupt debtor must first attempt to settle
214 CHAMBERS.COM
Powered by FlippingBook