Indonesia's Supreme Court has overturned a bankruptcy ruling against the local insurance unit of British financial services giant Prudential.
"The Supreme Court has accepted the appeal by Prudential," said the official, Wike Widianingsih. She declined to give further details Prudential Life Assurance had been declared bankrupt in April by a Jakarta commercial court, which cited its failure to settle a consultancy contract worth 400,000 dollars with Malaysian consultant Lee Boon Siong.
Lee filed the petition after Prudential terminated his consultancy contract. He claimed 40 million dollars.
The bankruptcy ruling further damaged the reputation of Indonesia's erratic courts, which are seen as a major deterrent to badly needed foreign investment.
"The impact of these high-profile cases on perceptions of Indonesia's investment climate cannot be underestimated," said the World Bank in a report this month.
In 2002 the supreme court overturned a similar bankruptcy ruling against the fully solvent local subsidiary of Canadian insurance giant Manulife Financial Corp. which found itself involved in a local dispute.
A Supreme Court judge, Mariana, was quoted by Tuesday's Koran Tempo as saying the case was a contractual dispute between Lee and Prudential, and should not have been filed with the commercial court.
Pressure is growing to amend the bankruptcy law after the latest case. Chairman of the Indonesian Insurance Council Hotbonar Sinaga has said the main amendment is a clause stipulating that only the finance minister can file a bankruptcy petition against an insurance firm.
Prudential Life spokesperson Nini Sumohardoyo told financial newswire AFX-Asia the firm has been oporating normally despite the bankruptcy ruling. However, she said that since the original ruling, the number of customers who have surrendered their policies had been slightly above the normal monthly average.
The company has said it is financially strong, with a risk-based capital ratio of 255 percent, well above the 100 percent required by the finance ministry.