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From Indonesia’s courts, outlandish results

Indonesia’s judicial system is widely perceived to be marred by corruption. This system has produced some odd results.

In a country where corruption is rampant in public institutions, the judiciary is perceived to be among the most corrupt. The Supreme Court, the final arbiter on matters of law, is seen by some as the most corrupt institution in the country.

Police officers, who average a monthly salary of $100, routinely demand payment in exchange for favorable treatment, or even basic protection. The public colloquially refers to their court system as the “mafia peradilan”, the judicial mafia. Citizens often hire “markus” (case brokers) to navigate the system and direct payment to the right person. Hotman Paris Hutapea, one of Indonesia’s most prominent litigators, all but admitted to the New York Times that attorneys pay bribes to influence judges.

It should come as no surprise that such a system occasionally produces strange and unanticipated results. In 2006, the Supreme Court declared bonds worth $500 million invalid, releasing issuer Indah Kiat from its obligations to repay foreign creditors. In a recent November 2012 decision, Indonesia’s Constitutional Court declared BPMigas, the country’s upstream oil and gas regulatory agency, unconstitutional, thrusting into uncertainty the future of one of Indonesia’s most important industries. The Court sided with the plaintiffs, a coalition of religious groups, in ruling that the agency had ceded too much control to foreigners. Both cases raise concerns for foreign investors.

A corrupt and unpredictable judiciary hurts the country in two ways. First and most immediately, it scares off foreign investors, whose capital Indonesia needs to sustain its rapid economic growth. Second, it alienates the public from their government, fomenting long-term social instability. Every day, ordinary citizens lose to the powerful. It has been only fourteen years since Indonesians revolted and overthrew a previous government seen as corrupt and unresponsive to their needs. If these problems persist, the steam valves of democracy may be insufficient to pacify public anger.

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Mark Friedman is a 2011 NYU Law graduate and a criminal defense attorney in New York City. He is seeking to transition into FCPA compliance. He can be contacted here.

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