More than ever, Australia has a direct interest in the reform of Indonesia's corrupt, politicised legal system. With the arrests of the main suspects in the Bali bombings it is to this legal system that Australia will now look to mete out the appropriate punishment for a horrendous crime.

Unfortunately there is little good news to suggest Indonesia's courts are acquiring the independence and courage needed for such a task. The acquittals last week of four more former Indonesian security officers over the 1999 carnage in East Timor represent yet another victory for power and political influence over justice.

The prosecutions of the Indonesian soldiers and police accused of crimes against humanity in East Timor could not have been more blatantly mishandled.

Indonesia's own human rights commission and UN investigators concluded that the rampage which killed and injured thousands, and virtually destroyed East Timor's infrastructure, was orchestrated by the Indonesian military at the highest level. Yet all 10 Indonesian officers tried so far have been found not guilty. Only two men – both ethnic East Timorese who collaborated with the Indonesian forces – have been sentenced to jail.

The acquittals raise immediate concerns that the Indonesian military will never be held to account, not only for the abuses in East Timor but in other contested areas such as West Papua and Aceh.

Under international law a sovereign nation must be given the opportunity to demonstrate accountability in its own courts before any international war crimes tribunal may be convened. The new International Criminal Court (ICC) in The Hague theoretically offers East Timor's victims an alternative forum. There is no real hope, however, that the same government which has been unwilling to punish its own will now deliver them into the jurisdiction of the ICC.

The failure of the East Timor prosecutions suggests the Megawati Government lacks courage to challenge the abuses of power which have marred the nation's legal system for so long. It is a significant failure. The integrity of Indonesia's courts is vital for many reasons. One is to regain the confidence of foreign investors, a prerequisite for any economic recovery. Another is that without access to recourse through the courts, too many aggrieved ordinary citizens are taking justice into their own hands, with extreme violence.

Yet another is terrorism. The Bali bomb suspects, all hardline Islamic extremists, do not enjoy the level of influence which has allowed the Indonesian military to act with impunity. However, the Bali accused do have their own powerful patrons within the political elite who have already used Islamic militia groups to provoke instability. How far such influence reaches is still unclear.

A highly politicised legal system is also very dangerous for another reason.

The courts may be inclined to rule with reference to the expected popular reaction to a verdict rather than the justice of the case. The possibility of a radical Muslim backlash in Indonesia could blunt Indonesia's determination to move a successful police investigation on to the next stage, successful prosecution.