Reinforcing Creditor Protection: The Imperative for Cross-Border Insolvency Regulation

Abstract

The rapid expansion of globalization has significantly increased cross-border economic activities, intensifying legal complexities in insolvency cases involving multinational entities. In Indonesia, Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations governs domestic insolvency but lacks explicit provisions addressing cross-border insolvency. This regulatory gap exposes Indonesian creditors to heightened legal uncertainty and potential financial losses, particularly when debtor assets are located abroad and foreign proceedings are not recognized domestically.

This paper critically examines the extent of legal protection afforded to Indonesian creditors in cross-border insolvency scenarios. It evaluates the relevance and potential adoption of the UNCITRAL Model Law on Cross-Border Insolvency as a framework for reform. Through a comparative analysis of Indonesia’s legal regime with that of Singapore and the Philippines both of which have adopted the Model Law. The study underscores the benefits of harmonized international insolvency procedures. Findings reveal that Indonesia’s current reliance on reciprocity and ad hoc recognition mechanisms undermines predictability, judicial cooperation, and creditor confidence.

The study concludes by advocating for Indonesia’s adoption of the UNCITRAL Model Law to align its insolvency framework with global standards. Such a reform would improve cross-border asset recovery, enhance creditor protection, and foster a more stable and attractive investment environment.