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ENFORCEMENT OF FIDUCIA SECURITY: Judicial Basis, Practice and Common Issues

The background of the enactment of Law No. 42 of 1999 regarding Fiducia Security is the interest to develop the economy, particularly to support financing activities. In particular, it is also intended to be a facility to create an integral fiducia security law. Fiducia Security Law regulates the principles of law on security that is absolute principle, Droit de suite, preference, priority and publicity. The existence of such principles shows that the fiducia security, as a type of security which has a position in law on security in Indonesia, has given sufficient legal certainty for the parties, particularly the ones engage in economic activities.

One of the principles which give protection to the fiducia grantee is the principle of parate executie, as provided under Article 15(2) and Article 29(1) of Fiducia Security Law. The mechanism/enforcement procedures of parate executie are as follows:

A. Enforcement of the executory power inherent to the Fiducia Certificate by the fiducia grantee (in the fiducia certificate which is made in notarial form, it includes the passage “Demi Keadilan Berdasarkan Ketuhanan Yang Maha Esa” which has executorial power with the same legal effect as a final and binding court decision), and therefore a creditor is not required to demand a court to issue a writ of execution permitting the enforcement of fiducia security in the event of a breach of the debtor.

B. The sale of fiducia object based on the fiducia grantee (bank)’s power through public auction and apply the sale proceeds for the repayment.

C. The private sale based on the consensus between the fiducia grantor (debtor) and the fiducia grantee (bank) if the highest possible price for the interest of both parties can be obtained.

The enforcement of parate executie give certain facilities to the creditor such as: easy procedures, faster, cheaper and simpler way to get repayment; certainty in selling the fiducia object; and is an exception to enforcement procedures based on the proceedings under the Civil Law (Hukum Acara Perdata). Therefore, such benefit of parate executie in order to get repayment when the debtor is in default is beneficial for enterpreneurs in financing sectors. Hence, it can be concluded that parate executie, in a normative way, is a main pillar in law on security, particularly in fiducia security.

In practice, nevertheless Fiducia Security Law is effective, several related minister regulations and the Regulation of the Head of Indonesian Police Force Number 8 of 2011 regarding the Safety in the Enforcement of Fiducia Security still have issues, particularly in enforcing fiducia security. The issues are as follows:

  • Fiducia Security Law has not accommodated the enforcement of executory power completely and comprehensively;
  • The value of the fiducia object is not sufficient, is not maintained by the debtor and result in debtor’s lossess;
  • F or fiducia objects in the form of stock/ inventory, equipment, machinery, it is often that such objects have been transferred by the debtor without the acknowledgment from the creditor;
  • Executory attachment which can directly be conducted in enforcing fiducia security, in practice the official of the public auction house requires a writ of execution from the court;
  • The possession of fiducia object by the fiducia grantor, which does not have good faith, is misused by granting another fiducia object over the same object. In this case, the fiducia object is delivered to another party, which will be the second ranking of fiducia grantee;
  • The fiducia object is sold to another third party;
  • Challenge from the fiducia grantor during the enforcement, which may raise a conflict between the officer enforcing the fiducia security and the debtor;
  • There is an unlawful criminal act by the officer enforcing the fiducia security, such as intimidating or conducting anarchy by damaging the fiducia object and conduct violent action against the debtor which lead to debtor’s losses;
  • The enforcement is suspended because the fiducia object is attached by an investigator as an evidence in a criminal case which does not have relation with the fiducia grantee;
  • The law enforcement officer does not understand/acknowledge the privilege rights of the financing institution as the fiducia grantee to directly enforce (parate executie) when the debtor is in default, therefore such officer deems that the direct enforcement by the fiducia grantee is a one-way action and unlawful;
  • The safety in enforcing fiducia security provided by police force is hard to be obtained and therefore the enforcement of fiducia security is often conducted by external collector without the safety from the police force.

The above mentioned are some of the issues arising from the enforcement of parate executie of fiducia security which requires attention from the relevant stakeholders, so that the law protection for creditors as mandated by the Fiducia Security Law, can be implemented.

-AP-