While Indonesia’s legal market remains one dominated by larger, well-established firms, a rising number of smaller firms are also cropping up. These agile organizations bring with them specialist knowledge, unique expertise, an in-depth understanding of the market, and the drive to make a name for themselves.
Solid economic growth combined with low inflation has, in recent years, led to an increase in business in Indonesia, which is only growing more attractive to international investors and businesses. The trickle-down effect has resulted in a greater need for legal and regulatory know-how and lawyers who are equipped to handle business issues and navigate a changing market landscape. As a result, opportunities for firms and lawyers have continued to grow.
Playing an increasingly prominent role in this maturing market have been small firms that have risen in profile through their specialist expertise and client relationships. While their headcounts may be on the smaller side, these firms are helping to shape the Indonesian legal market, taking on a growing roster of clients and bringing with them a fresh nimble, approach.
RELATIONSHIPS ARE PARAMOUNT
The Jakarta-based Muhammad Karnova established his own firm, Karnova & Co., last year after spending more than 15 years practicing at Hadiputranto Hadinoto & Partners, Baker McKenzie’s Indonesian network firm. Driven in part by the desire to make more time for his family and improve his work-life balance, Karnova was also attracted to the prospect of launching his own practice in order to specialise in areas where he felt he could “serve clients better.”
One calculated decision he took was to ensure that his firms’ work focused mainly on M&A and corporate finance. “From our inception, we’ve tried to limit the nature of the work that we do and wanted to excel in a limited area of practice, he says. “We do not provide full legal services to our clients. However recently, given requests from some of our Indonesian clients (mostly family businesses), on a very selective basis, we provide private wealth legal advisory services as well.
Primarily serving large Indonesian family businesses and groups (which makes up around 80 percent of the firm’s work) and international companies (which makes up around 20 percent), Karnova feels that the firm is also able to be flexible enough to cater to individual client needs and accommodate specific requests, winning it repeat clients.
Karnova says that his practice is built on a bedrock of trust. “The firm is flourishing because of the trust of certain anchor clients of the firm which are generally large Indonesian organizations and family businesses, and also repeated mandates and referrals that the firm received from a number of U.S. and UK-based law firms,” he notes. “This is the aspect of my young firm’s history that makes me most proud.”
Winning and retaining trust is essential for many reasons, he adds. “As a small and independent local firm, getting mandates/referrals from these institutions could be very challenging given panel requirements etc,” says Karnova. “As such, when such trust is being given, and transformed to mandates/referrals which are repeatedly received, this is really an achievement for our firm. It demonstrates that, despite our small and independent setting, we can deliver top quality work at the same level of our larger and more established competitors.”
Strong client relationships and adaptable services which can be tailored to specific needs are among the key qualities offered by small firms that can trump larger, more well-known competitors. And Indonesia’s small firms are acutely aware of this fact.
Fadriyadi Kudri of boutique Jakarta law firm Kudri & Djamaris considers the close connections the firm has forged as essential from a business strategy position, and a point of pride.
In addition to providing commercially sensible legal advice, the firm was established with the goal of providing broad legal services while retaining a reputation for being cost-effective. The partners also make it clear that client relationships are at the heart of every working relationship.
“We work hard to listen to our clients, know the business and the people and understand the expectations of our clients,” Kudri says, noting that the team has since built up a reputation for these qualities. An emphasis on relationships and time spent invested in building strong connections has led foreign investors to regularly choose the firm,” he adds.
This has enabled the firm to stand out, both to would-be clients, and within the local legal market generally. “We believe that through the trust and relationships we have built with our clients that we are where we are today,” Kudri says.
OPPORTUNITIES EVERYWHERE
While these firms are small, when it comes to the clients they work with, their size doesn’t preclude them from getting mandates from big names or focusing on highly complex cases.
Another small firm making its mark in the Indonesian legal market is Siregar Setiawan Manalu Partnership (SSMP). Based in Jakarta, SSMP was founded by partners Nien Rafles Siregar, Bobby R. Manalu and Rudi Setiawan. Siregar says, currently, the bulk of the firm’s work has been made up of bankruptcy and insolvency cases of “several different well-known national and multinational companies.”
“With the partners being experienced and registered administrators and receivers under the Indonesian Administrator and Receiver Association, our small firm currently has more than 12 ongoing bankruptcy and insolvency cases,” he adds.
With solid relationships with large companies in its arsenal, SSMP has notched up a number of achievements since it was established three years ago. As well as counting high profile clients over the past three years, “rapid growth in the number of clients from different fields of business practices, and the amount of trust given from high-profile clients in representing their interests” are among the team’s successes.
“We have maintained and ensures that all legal services that we provide are swift, proactive, accurate and keeping the clients’ interests in mind,” Siregar says.
For the partners at Kudri & Djamaris, oil and gas companies have also presented a wealth of opportunities, Kudri says: “We are regularly engaged by multinational and national companies to provide expert advice and opinions on Indonesian laws, regulations, and practices. We also perform work in Indonesia on behalf of them.”
Ever adaptive, Kudri & Djamaris has also worked as the legal counsel in various commercial dispute resolution cases that were settled through the court by civil proceedings in Indonesia as well as through arbitration forums, Kudri says, explaining that the firm has taken on both domestic and international arbitration.
“Further, we also acted on behalf of several foreign creditors in the Suspension of Debt Payment Obligation (PKPU) case of Indonesian largest telecommunication company which took place in Commercial Court at Central Jakarta District Court. We represented Japanese major electronics companies in multiple tax dispute matters in the level of Case Review in the Supreme Court of the Republic of Indonesia,” he says.
While the work may be impressive, the firm is aware of the challenges it faces in an ever-expanding, and competitive, market. “Currently, there are a number of newly established law firms in Indonesia, and this is primarily due to the fact that Indonesia became one of the most attractive countries to invest in,” Kudri says. As the number of firms grows, the challenge for Kudri & Djamaris will be to “enhance our quality and value in order to compete thoroughly in the legal market in Indonesia,” Kudri adds.
AN ADVANTAGE IN SERVICE
But while the legal market may be crowded, small firms may have an advantage over the big names and traditional practices when it comes to meeting (and delivering) client needs. For Siregar of SSMP, being part of a smaller firm helps the partners work more collaboratively and communicate quickly, compared to the hierarchy and slow movement that may be present in larger, more bureaucratic firms.
“By being a small firm, we have several important benefits include the ease in clear and direct communication, discussion, and effectiveness in scrutinizing legal related work as a team,” Siregar says. “Other great advantages would be for each of the lawyers to know each other’s strategy and expertise in order to reach maximum productivity while maintaining quality in the most efficient time frame.”
In addition to being better connected to fellow partners, those operating in small firms can nimbly address any missing steps or areas for improvement within the client experience and tailor their processes according to their client. Karnova observes that partner-heavy involvement in every stage of the transaction process is something that clients “really appreciate,” and is often something that is missing when clients engage big law firms.
AREAS FOR GROWTH
For each of these small Indonesian firms manoeuvring within the country’s rapidly changing market and chasing developing opportunities, having a grasp of the key areas of work which may expand in the future is essential.
For Kudri & Djamaris, an area of expected growth lays within the Suspension of Debt Payment Obligation, a mechanism which can be used by a debtor to re-negotiate with their creditor or creditors, with the negotiation being carried out by a court assistant.
Kudri says this process is “rapidly becoming prominent considering the fact that there are numerous companies having trouble in paying back their investors or creditors in running their business.” He explains: “In order to survive, the companies file a petition of Suspension of Debt Payment Obligation. The benefit of filing this petition is the companies may run their business by themselves.”
At the same time, lawyers have also kept track of Indonesia’s growth and evolving market through other areas of their work. “Our firm frequently handles numerous arbitration cases, whether [it is a] domestic and international arbitration case… Arbitration cases are mostly about contract dispute in energy and mineral resources. Recently here in Indonesia, there are numerous contract disputes which the clause of dispute settlement shall be settled through arbitration. Accordingly, the number of arbitration cases is rapidly increasing,” Kudri observes.
Siregar of SSMP adds that since 2015, Indonesia’s various district courts have experienced an increase in bankruptcies and Suspension of Debt Payment cases. He observes that due to the centralized and increasing amount of business activities in Jakarta, as the capital city of Indonesia, these cases are only becoming more common.
“Based on Indonesia’s current legal market statistics, the obvious fast-growing segment are mostly correlated with bankruptcy and insolvency, which is slowly climbing in numbers due to the rapid rotation of business’ life cycle in Indonesia,” Siregar notes.
LOOKING TO THE FUTURE
When it comes to looking forward to the coming years, Siregar of SSMP predicts many changes and a continuation of new opportunities. “As Indonesia is seeing a lot of economic growth, there might be increased investments across a variety of industries and sectors. Foreign direct investment is flowing rapidly into the country as there are great opportunities in the potential growth of infrastructure and cultivation of rich natural resources, both for the purpose of trade and development of the country,” he suggests.
“The legal market will be filled with new types of issues to be raised, such as the issue relating to electronic media and technology. Currently Indonesia has a regulation on Information and Electronic Transaction, however as the technologies evolve, the future Indonesia legal market will slowly include technological issues in the near future.”
While this would in turn doubtlessly result in additional work for small firm with relevant skills to meet such work, he is not blindsided by the positives of the market, observing that there are still deeply rooted challenges that firms and businesses must be aware of.
“Indonesia is still in its peak in fighting against corruption and bribery. One of the greatest challenges people are facing, especially in the Indonesian legal market are issues related to uncertainties of law. The existence of the uncertainties of law is a challenging issue, knowing that it is possible to be misused by any people or legal bodies both in corporation and governmental institutions, affecting greatly the transparency of procedural matters in Indonesia,” Siregar says.
“An advantage of operating in the Indonesian legal market as this country is thriving and growing in a great manner. Not only several of the business fields but all of them, we are really appreciated that this country also has rapid growth in the supporting area of business to elevate the market and the last but not least is the continuity of development which makes the Indonesian market more conducive and guaranteed.”
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