By Austin I Pullé –
The first in a series of essays about constitutional reforms addresses two issues. First, can Parliament be a legitimate and acceptable originator of a new constitution? Second, why is there a pressing need to repair, or perhaps reconstruct, the invisible infrastructure that is essential for the country to pull itself out of the swamp and to resume the arduous journey to becoming a modern state and a decent society?
a) Whence the new constitution? News stories illustrate the obscene tragedy that is present day Sri Lankan society. The first set of stories reports that more than Rs. 150 million is being used by a drafting committee tasked to produce a new constitution. The latest story is about a horde of brown-nosers, including the head of the supposedly independent police commission who probably used his official vehicle and free gas, who gathered to greet the puppet master at the VIP lounge at the airport and gorged on drinks and food unpaid for. The second is about schoolchildren who save half of their school lunches so that their starving mothers can eat the other half. One is reminded of Amartya Sen’s observation that “starvation is the characteristic of some people not having food to eat. It is not a characteristic of there being not enough food to eat” (“Poverty and Famines: An Essay on Entitlement and Deprivation”.) The callous disregard of the needy shown by diverting precious resources for foreign jaunts with a team of cronies and stays in luxury hotels, a bloated cabinet with luxurious perks, and other wasteful expenditures on ego boosting trips to foreign gatherings are telling insights into the character and values of those who control the fate of the country. These two realities should never be lost sight of when challenging the legitimacy of the present new constitution drafting exercise.
The first constitution was in the form of an Order-in-Council. The next two were enacted by governing parties that got lopsided majorities because of the first past the post system that did not proportionately represent the popular vote. The people were not consulted by means of a referendum about the contents of any of these constitutions. Referenda as the Swiss have demonstrated is an authentic ascertainment of the people’s will in a democracy. Or, as the UK Supreme Court observed in the case recently decided on the proposed Scottish referendum, “A lawful referendum * * * would undoubtedly be an important political event * * * A clear outcome, * * * would possess the authority, in a constitution and political culture founded upon democracy * * *.” Can therefore anyone be surprised that none of the constitutional amendments have been put to a referendum with the courts playing a part, albeit allowed by the Constitution, in suggesting ways and means by which a referendum could be avoided and the People’s wishes ignored? Despite all these amendments, the lot of the People has not improved and the latest Berggruen Governance Index plots a steady decline in the quality of governance.
The previous practice of republican constitutions originating from Parliament should not be allowed to continue. Parliament can never be the source of a new constitution that meets the true needs of the People. Most of us have at one time or another experienced the Dunning Kruger state of mind. Sociologists explain that the “Dunning Kruger effect” takes over when persons overestimate their own abilities and competence because they lack relevant knowledge and skills. Sri Lanka is one of the few countries where the Dunning-Kruger effect is observable across the spectrum of the branches of government, public administration and the professions, starting from the very top for many administrations past and present. A new constitution produced by the drafting committee and rushed through Parliament will, because of the Dunning-Kruger effect and the addiction to perks at public expense entrench much that is foul and despicable in the present system.
Given past constitutional amendments and judicial decisions reviewing the same, it is evident that ignorance of comparative constitutional law and best practices in constitutionalism is woefully evidenced in the outcomes. There is a noticeable lack of moral and practical imagination of those entrusted with drafting constitutional changes. Appointment commissions, members of which are appointed through a constitutional council dominated by politicians, are proposed as the Deus Ex Machina that will cure the country’s ills. That’s wishful thinking and ignores the tectonic shift that has occurred in the political scene where the People are not so much interested in appointment commissions, unable to discern ethical obligations as vividly illustrated by the Police Commission chairman who probably abused public resources such as his car and driver provided for work related travel to go to the airport in order to pay homage to his idol, as in stopping waste, fraud, nepotism and corruption, ills that benefit those who govern but impoverish the millions.
Given the low level of education of parliamentarians and their lower level of ethics, it would be national self-immolation to trust to this lot the task of bringing into being a new constitution needed to realize the sovereignty of the People and to safeguard their fundamental rights. How can one entrust the fashioning of the new social contract to a herd of dumb cattle that raise their hands to vote for one amendment and then turn around and vote for another amendment that repudiates the values of a previous amendment and yet again vote to reinstitute the values of the previous amendment? Accordingly, it is of vital importance that the People demand that the making of a new constitution proceed in a way different from previous constitution establishment exercises. The alternative way should focus on the needs of the People rather than the present stale old ways of alternating between setting up toothless appointment commissions, reverting to presidential appointments unconstrained by considerations of merits or anti-nepotism, and which keeps the ecosystem of fraud, corruption, waste and despotism undisturbed.
Legal systems in their wisdom have directed an examination of the source as an indication of legitimacy. In America, the fruit of the poisonous tree doctrine excludes material gathered from unlawful or unconstitutional means. Equity has a maxim, ex turpi non causa oritur, or from a bad cause an action cannot arise. The insight into source and effects has a bearing into the constitution making of the country. The Cardinal who claims to have seen the draft of the new constitution has expressed his disgust at the many provisions that would pulverize fundamental freedoms. What self-respecting society can allow its fundamental charter, the constitution, to originate from a sewer like assembly consisting of a convicted murderer, a convicted extortionist, unindicted individuals like the prison invading gun toting thug, and assorted psychopaths and sociopaths? In other words, the origins of a constitution matter, and in Sri Lanka, parliament is no longer a legitimate origin of the constitution. A better way has to be found. Accepting the current exercise is similar to a flock of chickens signing up to a chicken protection plans drafted by the fox.
It should be obvious that the People of Sri Lanka will be engaged in an existential struggle to prevent a new constitution that will violate their liberties. Popular opinion must convey in unequivocal terms that any new constitutional draft that originates from the government party in Parliament will be rejected. The People in a referendum, and not Parliament, should be entrusted with providing fundamental inputs and in accepting of rejecting the proposed new constitution.
Civic society groups who have engaged with governance problems on a daily basis are best suited to consult the people and draft a set of constitutional principles (with alternatives) and have them converted into specific proposals. Indubitably, they have the education and knowledge of contemporary constitutional models to undertake this task. This community is a good starting point. Expert drafts-persons from Sri Lanka and within the Commonwealth should be entrusted with the task of converting broadly agreed principles of constitutional governance into a specific text.
The Aragalaya movement has made it clear that the island is no longer a country for corrupt old men. The aspirations of a new generation tired of identity politics, victims of waste, fraud and corruption, and no longer trusting the usual bunch of scoundrels that prised a boastful strongman out of office is in no mood for another round of constitutional musical chairs. The current lot must be set sailing to Byzantium. However, all sections of civil society need to turbo charge the resistance by producing a draft of a constitution of a modern state making it clear that the priority is and always will and should be the welfare of the People. Otherwise if there is more of the same, such as a military larger than that of the U.K with a budget that exceeds the combined budget of health and education, Sri Lanka will become like Bismarck’s Prussia which was an army with a state.
b) Repairing the Invisible Infrastructure:
When millions are suffering from hunger and acute malnutrition, the government goes its merry way by having a cabinet and state ministers exceeding fifty with all their perks and privileges with an incidental focus on the economy, the cost of living, inflation and job creation, here too by begging Arab countries, which like Qatar is a way station to the crematoria for South Asians, to take in more migrant labour. The much needed investments, especially high tech related investments, will not come from local investors, many of whom are relocating to tax friendly Singapore, but from blue chip foreign investors. The much needed growth will not come from exporting commodities in a world where there is a glut of agriculture based commodities but by new technologies that leverage the intellectual property of blue chip foreign investors.
Foreign investors locate Greenfield operations in the host country either because of the size of the local market in order to avoid import tariffs (India and China) or to extract resources (African countries), or because of both (Indonesia). Like Singapore, Sri Lanka does not have either of the above. Investors don’t look for cheap labour, because outsourcing has replaced relocation in cutting down on labour costs.
Would Elon Musk set up an Tesla manufacturing plant in the country or would potential foreign investors flock to Sri Lanka because of the least used international airport in the world, six lane highways in Hambantota where the buffalo roam but not where the deer and the antelope play, a cricket stadium in the South or the Lotus Tower in the West? Not the investors that Sri Lankan should attract.
The glaring difference between Singapore and Sri Lanka is that while the latter has bloated physical infrastructure, a source of lucrative kickbacks and of little use to a foreign investor, the former has not only world class physical infrastructure, including a world class airport and sea port, but also a blue chip invisible infrastructure. What foreign investors require, as well as the vast majority of Sri Lankans need, is the invisible infrastructure of Singapore. The country’s planners would have to bridge the gap between Singapore’s invisible infrastructure and Sri Lanka’s invisible infrastructure that is in a shambolic state of disrepair. Fixing the invisible structure would require slaying some sacred cows while going about setting a level playing field.
For foreign investors, lavish tax holidays given out like cotton candy by the BOI will be attractive but not because of the usual reasons. All the studies show that tax holiday incentives play a negligible part in an investor’s decision. The Economist Intelligence Unit will not recommend investment because of the Lotus Tower, the world’s most underutilized airport, and the Colombo Port City. Investors would pay taxes if required if the host country is a good bet but in Sri Lanka’s case, given the rampant corruption in tax collection, investors would want to be free of the attention of the tax person. Millions who read about the Thico Group must be wondering why there have not been reports of the tax department publishing the list of depositors and finding out the origins of such large amounts of money and whether tax had been paid. Because of this, taxes that a high grade foreign investor would otherwise be prepared to pay are lost to the country. Tax and customs integrity important to a foreign investor cry out for drastic upgrading in any invisible infrastructure project.
This invisible infrastructure consists of a rule of law, a functioning legal system, predictability, and professionals such as accountants, lawyers, doctors, and other service professional who are not only competent but also upholders of their respective professional ethics.
Few, if any, would assert that the rule of law criteria listed by Tom Bingham’s book, “The Rule of Law” can be found in Sri Lanka. The principles that the late Lord Bingham lists make up the plinths of the much needed invisible infrastructure.
The first plinth is a clear set of laws that provide predictability. Take for example, the investment protection treaties that Sri Lanka has ratified. The Singapore-Sri Lanka Free Trade Agreement was signed in a ceremony before the then president and the Prime Minister of Singapore. Notwithstanding this solemn signing, that president, predictably shamed the country, by asking the Singapore PM for revisions. The investment protection chapter in the FTA confers what is called the “national treatment” promise to Singapore investors. In other words, apart from excluded topics such as land ownership, a Singapore investor is to be treated like a local Sri Lankan citizen. Let us assume that a Singapore citizen who is qualified as an accountant, recognized by Sri Lanka, wishes to set up shop in Sri Lanka. She can only do that if there is a law that allows her to do so. As there is no law, she can be injuncted from establishing an accountancy practice. She will then have the right to sue the Sri Lankan state before the International Centre for Investment Disputes or some other arbitral body for breaching its obligations under the FTA. And she will win.
As every law student should know, Sri Lanka has a dualist system that treats the international law system and the national law system as separate. In other words, Sri Lanka’s international obligations do not automatically become converted into national law unless parliament makes that change into the local law. The then Minister of Trade of the 2015 government proclaimed in his stupefying ignorance that parliamentary action was unnecessary to convert the FTA into local law. No one including his then prime minister, now the President, nor even someone from the AG’s department or the schools of law found it fit to challenge this nonsensical howler. Of course, the howler has taken another form with the President demanding that this FTA be “implemented” having not realized that the FTA not being a self-executing treating needs careful conversion into local law so as to make it effective. His diktat, despite the 20th A, has no effect unless Parliament goes about converting the FTA provisions into law.
The provision regarding foreign investment protection in the constitution merely addressed expropriation. Any new constitution must address the means whereby international obligations including investment protection should be converted to local law. This would prevent a recurrence of decisions such as Singarasa v Attorney General with its cringe-worthy reasoning. Ideally, the executive before it ratifies an international treaty should transmit the same to the legislature together with a draft of the implementing legislation, unless the treaty is a self-executing treaty.
Investment protection treaties typically provide for an aggrieved investor to seek relief through international arbitration either at the International Centre for the Settlement of Investment Dispute (“ICSID”) or arbitration under UNCIITRAL Rules. Sri Lanka defending its conduct in these fora will find it an expensive exercise. In future investment protection treaties, Sri Lanka could ask its country counterpart to restore the traditional customary international law rule relating to exhaustion of local remedies, which I dispensed with in most investment protection agreements. As its name suggests, the rule requires the investor to try to resolve its problems with the host country as a pre-condition to starting an international arbitration.
The other country would probably resist the inclusion of such a pre-condition unless Sri Lanka can credibly point out that the local courts are competent and independent and would be impartial in a dispute between a foreign investor and the state. This Sri Lanka will find difficult to do.
The output of the higher courts, especially in the field of constitutional jurisprudence, has been uneven. To take an example of constitutional jurisprudence, the courts have found the executive presidency’s powers to be almost sacrosanct simply on the basis that the executive president is directly elected by the People. This myopic reading ignores the fact that the executive president is no more than the delegate of the sovereign People under Article 3 of the Constitution and the separation of powers doctrine enshrined in Article 4 implies checks and balances. The American president despite being directly elected, albeit through the mechanism of the Electoral College, has to get his ambassadorial, cabinet, and sub-cabinet nominees approved by the Senate. A little knowledge of comparative law could have served these judicial benches well. The frailty of the premises used by the Supreme Court in greenlight the dictatorial powers of the 20th Amendment has been turned upside down by the present situation where the current president is someone shoehorned into the position not by the People and rejected by his safe constituency, but by the machinations of a master puppeteer. Yet he enjoys the powers of the draconian 20th Amendment supposedly justified on the ground that the holder has a mandate of more than fifty percent of the People.
Capacity enhancement of the judicial branch will be a long drawn out process with no guarantee of success. Instead, Sri Lanka should follow Singapore and Dubai in establishing an international commercial court consisting of Sri Lankan and eminent foreign retired judges who can hear investment disputes and private disputes, including contractual and copyright disputes, between the foreign investor and private and government parties.
The best courts will be of little use if the other pieces of legal system are dysfunctional. A commentator to Colombo Telegraph has written a piece giving chapter and verse examples of egregious misconduct by professional auditors. The legal profession is also one that, like the medical profession where prominent members hounded an innocent doctor falsely accused of sterilizing Sinhalese women, is rife with individuals who breach the ethical standards of their respective professions. Self-regulation by professions often fails in countries like Sri Lanka. In Singapore, the writer was appointed by the then chief justice, to serve on a body charged with receiving and investigating complaints against lawyers. The investigation was thorough and the members were accountable to the chief justice. In California, by contrast, 150 complaints, many of which alleged misappropriation of client funds, against the “legal legend” Tom Giradi were swept under the carpet until the California Supreme Court disbarred the attorney and the head of the California bar association tendered an abject mea culpa.
Anecdotal evidence shows that serious ethical misconduct by lawyers is rife in Sri Lanka. Foreign investors expect a competent and ethical bar. The authorities should either replicate the meaningful oversight of lawyers that prevails in Singapore or they should establish an independent professional ethics body to supervise the legal, medical, and accountancy professions, which would deliver to consumers the quality of professional care that it standard in advanced countries.
Another standard feature in investment protection agreements is the guarantee by the host state to provide full protection and security. The first ICSID case dealt with Sri Lanka’s alleged failure to meet this standard. Would potential investors seeing the picture transmitted worldwide of the brutal thug in a khaki uniform, his face contorted with rage and violence, grabbing a policewoman really believe that law enforcement would extend full protection and security to their investments?
Katharina Pistor in her book, “The Code of Capital” while exposing the inequality supported by the law and lawyers also makes two important observations. First, the high value transactions are governed either by English or New York law. Second, the high priests of these transactions are a select group of Wall Street and City of London blue chip firms. It is Sri Lanka’s misfortune to be governed by Roman Dutch law. This is exacerbated by a poor knowledge of English by many legal practitioners. To alleviate concerns of top notch foreign investors about these, the new constitution should envisage joint ventures between international firms and local counterparts. Singapore with a very good commercial bar has gone this way. Sri Lanka should follow.
*To be continued..