Singapore Court Recognises Indonesian PKPU Proceedings For The First Time

• Published date: 25 March 2024
• Subject Matter: Insolvency/Bankruptcy/Re-Structuring, Financial Restructuring, Insolvency/Bankruptcy
• Law Firm: Herbert Smith Freehills
• Author: Jonathan Tang, Daniel Waldek and Prawidha Murti

In a move that facilitates the seamless integration of cross-border insolvency proceedings between Singapore and Indonesia, Singapore's International Commercial Court has for the first time granted recognition of Indonesian PKPU proceedings in Re PT Garuda Indonesia (Persero) Tbk [2024] SGHC(I) 1.

Given the regional proximity between Singapore and Indonesia, there are a multitude of businesses and sectors that operate in both jurisdictions. Insolvency professionals, creditors and debtors involved in insolvency proceedings in Indonesia, who wish to extend the PKPU protections to assets or claims located in Singapore, will benefit. The grant of protective relief in Singapore will assist in the implementation of a restructuring plan globally, ensuring that the debtor company is protected from adverse actions in both Singapore and Indonesia while pursuing its eventual restructuring.

Indonesia has a vibrant and lively restructuring scene. The PKPU process is well utilised as a more efficient legal option if compared to the more time-consuming informal restructuring process. There is now precedent for cross-border protections in both Singapore and Indonesia being "recognised" in the other. In the PT Pan Brothers Tbk judgment, the Indonesian court had effectively extended the stay under Singapore's moratorium over an action commenced in Indonesia.

The statutory framework for recognition

Singapore adopted of the UNICTRAL Model Law on Cross-Border Insolvency (the "Model Law") through the Third Schedule of the Insolvency, Restructuring and Dissolution Act 2018 ("IRDA").

This established a statutory procedure through which foreign insolvency proceedings can be "recognised" in Singapore. As long as the foreign insolvency proceeding satisfies the entry criteria, the insolvency practitioner (in most cases, the administrator or its equivalent) can apply for relief in Singapore to further the aims of the domestic insolvency proceedings.

The relief that can be granted is wide-in-scope and can be tailored on a case-by-case basis. Common "baseline" reliefs include the extension of an in personam moratorium on claims against the debtor company (to prevent competing claims being brought in Singapore), or the grant of express powers to the administrator to collect and distribute assets located in Singapore.

Background to Garuda Indonesia's restructuring proceedings in Indonesia

Garuda Indonesia is the Indonesian national airline. It had been registered in Singapore as a foreign company since 1952 and has...