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Indonesian investors await legal relief

Indonesian investors await legal relief

LIKE THEIR cultures, the legal systems of Australia and its largest near neighbour, Indonesia, bare little comparison. But it is hoped the Indonesian Government will make changes soon to attract…

LIKE THEIR cultures, the legal systems of Australia and its largest near neighbour, Indonesia, bare little comparison. But it is hoped the Indonesian Government will make changes soon to attract more foreign investment.

“Indonesian company law is just 53 pages long compared to Australia’s 2000,” says Clayton Utz’s Barry Irwin, who worked in Jakarta for three years.

“The statutes passed by parliament are statements of general principle and don’t address the detailed implementation of the law.”

Many Jakarta firms steer clear of the courts as much as possible due to the inefficiency of the legal system, as well as its vulnerability to corruption.

Freehills partner Hadyn Dare acted for Canadian insurer Manulife in 2002, when it eventually won its appeal in the Supreme Court to overturn a bankruptcy declaration, initiated by its Indonesian joint venture partner.

“Joint venture partners can use the court system to really screw you if they want to, because it is impossible to get a spurious case struck out,” says a Freehills partner who worked in Indonesia for 11 years. He advises clients to avoid litigation at all costs. “In that case, we had no confidence whatsoever in the impartiality of the Indonesian courts.”

Despite this, and legislative restrictions on practising there, a smattering of Australian law firms have found demand for their skills and advice in the archipelago.

It is hoped the opportunity will be taken at the Indonesia Infrastructure 2006 summit, to be held next week in Jakarta, to announce legal changes that will help kickstart foreign investment in major infrastructure projects.

See Indonesia Report p20

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