IRFAN SETIAPUTRA & Anor

1 The applicants, Mr Irfan Setiaputra (“Mr Setiaputra”) and Mr Prasetio (collectively, the “Applicants”), are the President/CEO and the Director of Finance and Risk Management of PT Garuda Indonesia (Persero) Tbk (“Garuda Indonesia”) respectively. The Applicants are Indonesian nationals and were appointed by Garuda Indonesia’s board of directors as the airline’s joint foreign representatives for the purpose of this application.

2 Garuda Indonesia is a publicly-listed state-owned company registered in Indonesia and is Indonesia’s national airline. It is domiciled in and has its registered office in Jakarta. Its principal place of business is located at the Soekarno-Hatta International Airport, Jakarta’s main international airport. All its directors and a majority of its employees are Indonesian nationals. Garuda Indonesia’s board meetings take place in Indonesia, and key business decisions are made in its Jakarta Office.

3 Garuda Indonesia is registered in Singapore as a foreign company and maintains an office in Singapore. Its assets in Singapore are said to include aircraft that are physically in Singapore from time to time and cash.

4 The non-parties in this case are Greylag Goose Leasing 1410 Designated Activity Company (“Greylag 1410”) and Greylag Goose Leasing 1446 Designated Activity Company (“Greylag 1446”) (collectively, the “Greylag Entities”). The Greylag Entities are creditors of Garuda Indonesia.

5 The Greylag Entities are the lessors of two Airbus aircraft (the “Aircraft”). Garuda France is the lessee of the Aircraft while Garuda Indonesia is the sub-lessee of the Aircraft.

6 On 22 October 2021, one of Garuda Indonesia’s creditors commenced a set of proceeding against it in the Jakarta Commercial Court (the “PKPU Proceeding”). PKPU is an abbreviation of an Indonesian phrase which means “suspension of payments”. It is said to be a debtor-in-possession process intended to facilitate the preparation of a composition plan to restructure a company’s debts, which is then put to the creditors for voting. If the requisite threshold of votes is attained, the composition plan is presented to the court, which decides whether to homologate (ratify) the composition plan.

7 In the PKPU Proceeding, the Jakarta Commercial Court granted a temporary PKPU order starting from 9 December 2021. The temporary PKPU order was extended from time to time until a composition plan (the “Composition Plan”) was approved by 95.07% of the admitted creditors attending representing 97.46% of the total value of the debt during a creditors’ meeting on 17 June 2022. The Composition Plan was subsequently homologated by the Jakarta Commercial Court on 27 June 2022 (the “Homologation Decision”).

8 The Composition Plan seeks to enhance Garuda Indonesia’s financial performance and to make provisions to repay different classes of creditors. Crucially, several provisions in the Composition Plan sought to discharge the debts owed by various subsidiaries of Garuda Indonesia to creditors of Garuda Indonesia, one of which is Garuda Indonesia Holiday France (“Garuda France”).

9 The Greylag Entities actively participated in the PKPU Proceeding. They had registered their claims, negotiated with Garuda Indonesia regarding the terms of the parties’ contractual arrangements regarding the lease of the Aircraft, and made submissions and voted against the Composition Plan at the creditors’ meeting.

10 The Greylag Entities filed and unsuccessfully challenged the Composition Plan and the Homologation Decision before the Indonesian Supreme Court. The Greylag Entities further applied to the Indonesian Supreme Court for a civil review of the court’s decision to dismiss the appeal, but this was similarly dismissed.

11 Finally, the Greylag Entities filed an application to the Jakarta Commercial Court on 7 February 2023 to nullify the Homologation Decision based on an alleged breach of the Composition Plan (the “Nullification Application”). The Nullification Application was dismissed on 31 August 2023, although the Greylag Entities filed an appeal against that decision on 8 September 2023 (the “Nullification Appeal”). The Nullification Appeal was pending before the Indonesian Supreme Court at the time of the hearing of this application.

12 It is common ground that save for the Nullification Appeal, which is pending, there are no further avenues for the Greylag Entities to challenge the Homologation Decision and the Composition Plan under Indonesian law.

13 The Greylag Entities filed a winding up application against Garuda Indonesia in the Supreme Court of New South Wales, although that application was dismissed on the basis that Garuda Indonesia was entitled to state immunity.

14 The Greylag Entities also brought two proceedings in the French courts. The first was a liquidation proceeding commenced against Garuda France in the Paris Commercial Court on the basis that Garuda France was a debtor of the Greylag Entities. The second was an application filed in the Paris Civil Court seeking an attachment order of Garuda France’s bank accounts. Both applications were dismissed.

15 Finally, the Applicants obtained recognition of the PKPU Proceeding as a foreign main proceeding by the US Bankruptcy Court for the Southern District of New York on 26 October 2022 following the parties’ consent to an order for the PKPU Proceeding to be recognised. The parties’ consent to recognition expressly excluded any additional relief, including enforcement of the Composition Plan in the US. The Applicants then brought a separate application on 29 November 2022 seeking to enforce the Composition Plan in the US. The Greylag Entities also resisted this application on various grounds. On 24 May 2023, however, the Applicants withdrew the application.

16 The Applicants submit that given the international nature of Garuda Indonesia’s business, the PKPU Proceeding must be recognised, and the Composition Plan must be enforced internationally, especially in jurisdictions where Garuda Indonesia has assets, such as Singapore. The Applicants further say that any proceedings or enforcement action against Garuda Indonesia in Singapore would imperil its ability to make repayments under the Composition Plan, which could lead to the failure of the plan and Garuda Indonesia’s bankruptcy.

17 The Greylag Entities submit that the PKPU Proceeding should not be recognised for two reasons. First, recognition of the PKPU Proceeding is premature in light of the Nullification Application that might annul the Composition Plan and hence extinguish the substratum upon which OA 5 was brought (the “Premature Application Objection”). Second, recognition of the PKPU Proceeding would be contrary to the public policy of Singapore under Article 6 of the Third Schedule (the “Public Policy Objection”). In particular, the Greylag Entities assert that: (a) the PKPU Proceeding and the voting on the Composition Plan were conducted without equitable treatment of the creditors; and (b) the PKPU Proceeding and the voting on the Composition Plan were conducted without adequate disclosure of information.

18 The Greylag Entities further filed SIC/SUM 34/2023 (“SUM 34”) for an order that the applicants produce certain categories of documents that were allegedly material in supporting the non-parties’ arguments against recognition and enforcement.

19 SUM 34 involved the Greylag Entities’ application under O 12 r 4 of the Singapore International Commercial Court Rules 2021 seeking disclosure of various documents by the Applicants. These documents related to: (a) the commercial background and purposes regarding Garuda Indonesia and Garuda France’s structuring of the lease arrangement involving the Aircraft; (b) the reasons for providing in the Composition Plan the release of debts owed by Garuda France (the “Third-Party Release Provisions”) and the reasons given by the Jakarta Commercial Court in the Homologation Decision when approving such Third-Party Release Provisions; and (c) both consolidated and non-consolidated financial statements of Garuda Indonesia and/or its subsidiaries: at [36].

20 In the court’s view, the Greylag Entities were not able to show how the requested documents were material to the issue of public policy. None of the documents requested were material to the various grounds of public policy complaints raised by the Greylag Entities in OA 5: at [41] to [44].

21 Article 17 of the Third Schedule provides that the court must recognise a foreign insolvency proceeding if: (a) it is a foreign proceeding within the meaning of Article 2(h) of the Third Schedule; (b) the foreign representative applying for recognition is a person or body within the meaning of Article 2(i) of the Third Schedule; (c) the application meets the requirements of Articles 15(2) and (3) of the Third Schedule; and (d) the application has been submitted to the High Court in Singapore: at [52].

22 On the facts, all these requirements are met. The PKPU Proceeding falls within the definition of a “foreign main proceeding” under Art 2(h) of the Third Schedule. The Applicants are persons falling within the definition of a “foreign representative” as defined in Article 2(i) of the Third Schedule. Articles 15(2) and 15(3) of the Third Schedule were satisfied at the time of OA 5: at [56] to [58].

23 The rule in Antony Gibbs & Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399 (“the Gibbs Rule”) states that a discharge of a debt is not effective unless it is in accordance with the law governing the debt. The Gibbs Rule may create a barrier against recognition of a foreign proceeding and/or a foreign restructuring plan and/or judgment, where such foreign proceeding and the fruits of that proceeding involve the compromise or discharge of a debt governed by law other than that of the foreign proceeding. However, the Gibbs Rule does not apply where a creditor submits to the jurisdiction of the foreign court, either by submitting its claims in the foreign insolvency proceeding or otherwise agreeing to be bound thereby: at [60] and [61].

24 The Composition Plan involves the compromise of debts owed by Garuda Indonesia and, amongst others, Garuda France to the Greylag Entities under the relevant aircraft leases which are governed by New York Law. However, the Greylag Entities had registered their claims with Garuda Indonesia’s administrator. They were also kept in the loop on developments on the Composition Plan and voted against it at the creditors’ meeting. By their conduct, the Greylag Entities had submitted to the jurisdiction of the Indonesian courts in the PKPU Proceeding and are now precluded from asserting that they are not bound by the Composition Plan by virtue of the Gibbs Rule: at [60] and [61].

25 The Model Law seeks to advance the principle of modified universalism. This principle requires that national courts should, as far as is consistent with justice and the public policy of the State of that court, strive to administer the estate of an insolvent company in cooperation with the courts in the country of the principal liquidation or restructuring. This was to ensure that all of the company’s assets are distributed to its creditors under a single system. The Model Law gives effect to the principle of modified universalism through a procedural framework which not only permits but encourages cooperation and coordination between jurisdictions in cases of cross-border insolvencies: at [64] to [67].

26 Modified universalism recognises that there are differences in the insolvency laws and procedures of each State but takes the view that such differences should not stand in the way of the recognition of foreign insolvency proceedings and the benefits that would accrue to creditors as a collective whole through a global effort to coordinate the distribution of assets in a cross-border collapse: at [69].

27 In the context of cross-border insolvency, the principle of comity requires that one State accords recognition to the legislative, executive, or judicial acts of another State. A key aspect of comity requires that courts eschew an inquiry into the substantive merits of foreign law and the findings made by the foreign court in the foreign proceedings. The application of foreign insolvency laws by the foreign court and the findings reached there should ordinarily be respected by the courts where recognition is sought: at [70] to [71].

28 Recognition of a foreign proceeding under Article 17 of the Third Schedule does not require a foreign proceeding to be concluded, or that all avenues of appeal and review must be exhausted in the foreign jurisdiction before an application for recognition of the foreign proceeding is brought. A recognition application may be brought immediately after the commencement of the foreign proceeding. There is a clear necessity for the recognition application to be concluded as expeditiously as possible: at [76] and [77].

29 A recognition application granted by the Singapore courts can always be terminated under Article 17(4) of the Third Schedule if the substratum for granting that application no longer exists: at [79].

30 The court does not accept the Greylag Entities’ submission that the Nullification Appeal is a bar to the recognition of the PKPU Proceeding and enforcement of the Composition Plan as a consequent relief. In the event the Greylag Entities succeed in the Nullification Appeal, it is open to them to apply under Article 17(4) of the Third Schedule to request termination of both the recognition of the PKPU Proceeding and any ancillary reliefs granted in support of recognition: at [80].

31 Article 6 of the Third Schedule permits a court to refuse the recognition of a foreign insolvency proceeding or relief sought under the Third Schedule if doing so would be contrary to Singapore public policy: at [81].

32 Article 6 of the Third Schedule is different from Article 6 of the Model Law in only one respect – the absence of the word “manifestly” before the words “contrary to public policy”. This absence, however, does not change the applicable threshold required before a finding of a breach of Singapore public policy. Any successful challenge against recognition on the basis of Article 6 of the Third Schedule must be narrow in scope; such a challenge will succeed only if the recognition and the grant of relief are contrary to the fundamental public policy of Singapore: at [84] and [95].

33 The applicable materials interpreting the Third Schedule and the Model Law suggest that where matters of international cooperation and the recognition of the effects of foreign laws are concerned, the concept of public policy engaged in determining such issues is fundamental public policy. The inclusion of the word “manifestly” in Article 6 of the Model Law is not meant to affect in any way the standard of “public policy” as contemplated and applied. Rather, its inclusion is to make explicit what was always implicitly understood to be the test when a public policy objection is raised as a challenge to the recognition, namely that a high threshold has to be met before recognition is refused: at [85] to [88].

34 Article 8 of the Third Schedule requires any resulting interpretation of the provisions under the Third Schedule to promote the purpose and objective of the Model Law and the goals of achieving uniformity and consistency in its application. In this regard, the interpretative trend amongst various foreign jurisdictions has recognised that Article 6 of the Model Law is to be applied restrictively: at [91] and [92].

35 Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration and Article V(2)(a) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards require that any public policy objection raised in the setting aside of or refusal of enforcement of an international arbitral award must involve either exceptional circumstances, which would justify the court in refusing to enforce the award, or a violation of the most basic notions of morality and justice. This reflects the view that where arbitral awards are concerned, any ground of opposition premised on public policy will be upheld only in limited circumstances. This may perhaps explain why Parliament did not think it necessary to include the word “manifestly” when adopting Article 6 of the Model Law in the Third Schedule – because it is well-understood that where reference to “public policy” in the context of foreign law and international awards or judgments are concerned, any challenge against the application thereof must be subject to a high threshold: at [93].

36 Singapore public policy may be engaged under Article 6 of the Third Schedule where allegations are made that the creditors participating in a foreign insolvency process were not accorded due process. The requirement of due process is a fundamental tenet of international public policy. Due process requires that the creditors be notified of and be accorded an opportunity to participate in the relevant insolvency proceedings and have their views heard. The opportunity to be heard also requires that there be proper disclosure of relevant documents to creditors to enable them to make an informed decision when participating in foreign insolvency proceedings: at [98] to [101].

37 Upholding due process is ultimately part of the broader requirement that creditors participating in foreign proceedings must be treated fairly and equitably. The safeguarding of creditors’ interest requires that the court scrutinises whether the creditors have been accorded fair and equitable treatment of creditors by being able to participate meaningfully in the insolvency process. However, not every perceived form of unfairness in the treatment of creditors would be sufficient to establish a breach of Singapore public policy. It is necessary for the party alleging a breach to clearly articulate how their right to fair and equitable treatment was violated: at [105] and [106].

38 In evaluating whether there has been a breach of the right to fair and equitable treatment, the focus is not on substantive law but on procedural fairness. And even in matters of procedure, the foreign proceedings need not mirror Singapore law. Without being exhaustive, the question is whether the affected creditors had a full and fair opportunity to vote, were given adequate disclosure of information material to aid in their vote and had a full and fair opportunity to be heard in the foreign proceedings in a manner consistent with the standards of due process under Singapore law: at [107].

39 The court does not accept the Greylag Entities’ submission that there has been unfair treatment of Garuda Indonesia’s unsecured creditors owing to a lack of proper classification of unsecured creditors when voting on the Composition Plan: at [116].

40 Legally, the authorities relied on by the Greylag Entities are domestic authorities dealing only with the requirements for creditor classification under Singapore’s restructuring regime under s 210 of the Companies Act (Cap 50, 2008 Rev Ed). These authorities cannot be taken as recognising or mandating that the creation of further sub-classes of creditors is a fundamental tenet of the fair and equitable treatment of creditors under Singapore’s public policy. On the other hand, Indonesian law requires only that all unsecured creditors be put in the same class for the purposes of voting, regardless of the different extent to which they are favoured or prejudiced under the composition plan relative to their positions in the event of the debtor’s insolvency. It is common ground between the parties’ Indonesian law experts that there is no requirement under Indonesian law for creditors to be classified in the manner required under Singapore law. Thus, the nub of the Greylag Entities’ complaint is that Indonesian law lacks the requirement for further classification under Indonesian insolvency law, similar to the manner required under Singapore law. Such a submission appears to be an impermissible criticism of the structure of the Indonesian insolvency regime, as opposed to an issue of fair and equitable treatment of creditors: at [117] to [120].

41 Factually, the parties’ Indonesian law experts agree that there is no requirement under Indonesian law to offer the same repayment terms, as long as unsecured creditors within the same category are treated equally. It is thus difficult to see how the mere fact that some unsecured creditor was offered repayment terms that differed from the rest is unfair or prejudicial so as to offend Singapore public policy: at [121].

42 The court also does not accept the Greylag Entities’ submission that the alleged inadequate disclosure of information during the PKPU Proceeding amounts to a breach of their due process rights: at [130].

43 The Greylag Entities did not advance the factual basis for this allegation in their submitted evidence. This argument was advanced for the first time in the Greylag Entities’ written submissions: at [130].

44 In any case, the Applicants’ evidence is that Garuda Indonesia had kept its creditors updated on discussions relating to the restructuring. This was not contested by the Greylag Entities. Further, no attempt was made by the Greylag Entities to request information from Garuda Indonesia’s administrators in connection with the key commercial terms of the Composition Plan. Having not done so, it is impermissible for Greylag Entities to allege that they were denied such information at this time: at [131] to [132].

45 The kinds of relief granted under Article 21 of the Third Schedule may extend to the recognition and enforcement of foreign insolvency orders: at [142].

46 The proper basis for recognition and enforcement of a foreign insolvency order is under the chapeau of Article 21(1) of the Third Schedule (ie, under the limb of “any appropriate relief”), not Article 21(1)(g) of the Third Schedule: at [145].

47 In determining the appropriate relief, the court must ensure that the interests of creditors and other interested persons are adequately protected as mandated under Article 22 of the Third Schedule. In this connection, any relief sought by a foreign representative must not impinge excessively on any one entity’s interests. Indeed, relief will only be granted if the court is satisfied that the interests of the relevant persons are protected: at [154].

48 The court is satisfied that the interests of Garuda Indonesia, its creditors and other stakeholders are sufficiently protected under the Composition Plan. There is also nothing to suggest that the reliefs sought by the Applicants are inappropriate or not permitted as a matter of law: at [156] to [157].