Indonesia’s Justice Ministry said it has recommended the firing of three judges who declared bankrupt the local subsidiary of Canadian insurer Manulife Financial Corp. after the firm alleged that bribery influenced their decision.

The move comes against a backdrop of criticism of Indonesia’s legal system over corruption and lack of transparency. A United Nations investigator recently described it as the worst he had seen but noted signs the authorities were trying to implement reform.

Toronto-based Manulife has said bribery affected the court’s decision on June 13, a ruling that stunned investors and upset the Canadian government.

On appeal, the Supreme Court swiftly overturned the judgment against the country’s fourth largest insurer.

Albertus Sugeng, a lawyer for two of the judges, said his clients had denied the allegations of bribery.

“Yes, that is true [they have denied this]. They are ready to prove it,” he said. A lawyer for the other judge was not immediately available to comment.

Justice Minister Yusril Ihza Mahendra said late yesterday that, based on a report by the ministry’s inspector general, there were indications a crime had been committed, but that this was now in the hands of police.

He said President Megawati Sukarnoputri had signed a decree temporarily suspending the three judges from duty. Officials have previously said they had already been taken off cases.

“The inspector general of the ministry has recommended the three judges be dismissed without honour from their position as judges,” Mr. Mahendra told reporters. “After I read the report from the inspector general, I agree with him.”

M. Luthfie Hakim, another lawyer for the judges, told a news conference yesterday that they would launch a lawsuit in response to the temporary suspension.

“We have decided to launch a legal action by filing a lawsuit to the Administrative Court after we receive the copy of the presidential decree,” he said.

“[This is] based on requests from families [of the judges] to launch a thorough investigation of the justice minister’s statement because [it tends toward] slander and can ruin their reputation,” he added.

The judges at the Jakarta Commercial Court ruled Manulife Indonesia bankrupt for not paying a 1999 dividend, even though the firm was solvent.

Manulife Indonesia has assets of 3.1 trillion rupiah ($340-million U.S.). But any firm with more than one unpaid debt can be declared bankrupt by a commercial judge under 1998 laws.

Mr. Mahendra said that the next steps in the process, which could lead to the judges’ firing, would be up to the Jakarta High Court.

Justice Ministry officials have previously said it would be difficult to prove the bribery allegations because they had no authority to open the judges’ bank accounts.

The case stemmed from an acrimonious legal row that stretches back two years, involving former local partner Dharmala Sakti Sejahtera. Dharmala held 40 per cent in Manulife Indonesia until Dharmala was itself declared bankrupt in 2000.

U.S. Secretary of State Colin Powell said during a visit to Jakarta last week that U.S. investors “remain concerned about the transparency of the judiciary and courts.”

Reuters, August 8, 2002