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Lecturer of Faculty of Law of UGM presented by the Petitioner, Paripurna P. Sugarda, as an expert in the judicial review hearing of the Law on Deposit Insurance Agency (LPS), Wednesday (8/3) in the Plenary Courtroom of the Constitutional Court. Photo by Humas MK/Ganie.

The authority of write-off and absolute write-off is an inherent right of the Deposit Insurance Corporation (LPS) based on the juro suo uti nemo cogitur (not required to use). This was conveyed by UGM Faculty of Law lecturer Paripurna P. Sugarda as expert presented by the Petitioner in a follow-up hearing of Law No. 24/2004 on Deposit Insurance Corporation (LPS Law) on Wednesday (7/3)in the Plenary Courtroom of the Constitutional Court.

"Write-off and absolute write-off is an inherent right of LPS. When LPS has the authority to manage assets and is responsible for the management and administration of its assets and liabilities, the a quo article juncto 81 paragraph (3) of the LPS Law and Article 40 paragraph (1) of the Law on Financial System Crisis Prevention and Mitigation (PPKSK) in which the provision is inherent of the management of receivables, and receivables are part of assets in which in receivables management there is receivables settlement in which authority is write-off and absolute write-off," he explained before the Panel of Justices led by Chief of the Constitutional Court, Arief Hidayat. 

Paripurna further explained that the inherent rights arose because LPS has the authority to manage assets and is responsible for the management and administration of assets and liabilities. Management of a body basically includes management and ownership. The write-off and absolute write-off authority is undeniably a management step that belongs to the beschikkingsdaad category. 

"Therefore, the management step as referred to in Article 81 paragraph (3) of the LPS Law and Article 40 paragraph (1) of the PPKSK Law also cover the management of receivables, including write-off and absolute write-off. Therefore, LPS certainly has the authority to perform write-off and absolute write-off," he said in response to the petition No. 1/PUU-XVI/2018. 

Common Practice 

In addition, Paripurna claimed that a legal entity that has a legal relationship with other parties has the possibility of having rights that can be claimed by another party; the right arises due to a contract or provision of the law. He explained that receivables may be uncollectible, so for a bookkeeping system to reflect the true state of affairs, the legal entity typically writes receivables off its books. As for the collection of receivables, basically there are a variety of efforts for debtors who want to seek payment, and there is also a means for legal entities to remove the receivables. 

"So, it can be said that write-off and absolute write-off are reasonable and are common practice for anyone including LPS who have receivables and want to settle them," Paripurna explained before the hearing led by Chief Justice of the Constitutional Court, Arief Hidayat, accompanied by the other constitutional justices. 

Authorized 

In the statement of the House delivered by Commission III member Arteria Dahlan, the absence of write-off and absolute write-off authority in the LPS Law is because it actually has been regulated in Article 46 paragraph (3) of the PPKSK Law. "Therefore, the authority to do write-off and absolute write-off no longer needs to be regulated in the LPS Law because although it is not regulated directly in the LPS Law, it does not reduce the authority of LPS," Arteria said. 

According to Arteria, the LPS Law is aimed at securing customers’ savings, which is expected to maintain public confidence in the banking industry so as to minimize risks that will burden the state budget. The PPKSK Law was established as a legal basis for institutions to coordinate in maintaining and creating the stability of the state financial system. Thus, it complements the LPS Law in preventing and handling financial system crises. "Therefore, the write-off and absolute write-off authority of LPS is sufficiently stipulated in Article 46 paragraph (3) of the PPKSK Law," he explained. 

In addition, the authority of LPS is also contained in Article 46 paragraph (7) of the PPKSK Law regarding the provisions of procedures for write-off and absolute write-off although, Arteria acknowledged, the mandate of the article has not been implemented by the government because the government regulation is still being drafted. 

"If the PP is approved, the authority of LPS will be clear, both in terms of procedures, mechanisms, and reporting of LPS to PPKSK so that there is no need for further confirmation of authority in the LPS Law. Thus, the PPKSK Law and its implementing regulations are able to give legal authority and certainty," Arteria said. 

As for the phrase "including can perform write-off and absolute write-off on assets in the form of receivables" as requested by the Petitioners in the petitum, the House view it as equal to formulating a new norm in the LPS Law, which is the authority of the legislators, namely the House and the Government. 

LPS as Petitioner reviews Article 6 paragraph (1) letter c, Article 81 paragraph (3), and Article 33 paragraph (4) of the Deposit Insurance Agency (LPS) Law. LPS argues in the the Law on Financial System Crisis Prevention and Mitigation (PPKSK), on systemic bank debtors, the Petitioner was explicitly authorized to perform write-off and absolute write-off  (Article 46 paragraph (5) of the PPKSK Law), while on non-systemic bank debtors in the articles being reviews the authority of the Petitioner is not explicitly stated . Therefore, the Petitioner considers that the articles do not provide assurance of legal certainty and are contradictory to Article 28D paragraph (1) of the 1945 Constitution. 

Before ending the hearing, Chief Justice Arief reminded all parties that the conclusions and additional statements from various parties should be submitted no later than Thursday, March 21, 2018 at 2:00 p.m. (Sri Pujianti/LA/Yuniar Widiastuti)

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