Indonesia continued from page 30 foreign-located assets( Article 212), prevent the assignment or sale of claims to foreign third parties in a manner that could disrupt domestic creditor priorities( Article 213), and prevent the use of claim transfers as a means of conducting set-off abroad( Article 214). However, these provisions do not establish a framework for recognizing foreign insolvency proceedings or for facilitating cooperation between Indonesian courts and foreign jurisdictions. As a result, the existing regime is silent on scenarios where insolvency proceedings are initiated abroad but involve assets or liabilities located in Indonesia, and vice versa.
Reform Direction: Incorporating the Model Law into Existing Legislation
Recent discussions suggest that Indonesia is not considering a full repeal of its bankruptcy law but rather intends to amend the existing framework to incorporate cross-border insolvency principles derived from the Model Law. Although legislative drafts have not been made public, the reform initiative appears to focus on enabling the recognition of foreign insolvency proceedings, granting access to local courts by foreign representatives, introducing moratorium or stay provisions in the context of cross-border cases, and promoting cooperation between courts and insolvency practitioners across jurisdictions. Challenges to Adoption Despite the promising trajectory, significant legal and institutional challenges lie ahead. Among these is a growing concern among domestic practitioners regarding the potential erosion of Indonesian judicial authority. The involvement of foreign representatives in domestic insolvency matters is perceived by some as a threat to national sovereignty. Such concerns may hinder political and institutional support for reform.
Moreover, there are serious capacity constraints. Cross-border insolvency is a complex and highly technical field, and its integration into domestic practice will require extensive education and training for judges, insolvency administrators, legal practitioners, and regulatory officials. For the reform to be effective and credible, it will need the support of the wider legal community, academia, and business associations. Without a shared understanding of its practical application, the adoption of Model Law principles could lead to uncertainty and inconsistent enforcement.
In addition to institutional challenges, Indonesia’ s broader legal framework poses doctrinal barriers to recognizing foreign court judgments. As a general rule, Indonesian law adheres to the principle of territoriality in civil procedure. Article 436 of the Reglement op de Burgerlijke Rechtsvordering( Rv) stipulates that foreign judgments are not enforceable in Indonesia, save for limited exceptions. This deep-rooted territoriality principle poses a significant obstacle to the recognition of foreign insolvency proceedings. Any new legislation would therefore need to carve out a lex specialis, explicitly permitting cross-border recognition in insolvency matters, as an exception to the prevailing territoriality principle. Conclusion If successful, the adoption of the Model Law— either in full or in a modified— would mark a substantial advancement in Indonesia’ s insolvency regime. Discussions to date indicate a preference for selective adoption, potentially guided by the implementation models used by other civil law jurisdictions that have acceded to the Model Law. However, the process remains fluid and will likely evolve in tandem with policy debates, legal refinement, and institutional capacity-building.
While challenges are inevitable, the reform represents a rare opportunity to align Indonesia’ s insolvency framework with international best practices and to respond to the growing demand for legal certainty in cross-border commercial transactions. For legal practitioners and stakeholders, the coming months may prove pivotal in shaping a more globally integrated insolvency regime in Indonesia.
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