By Rohan Samarajiva –

Prof. Rohan Samarajiva

Hypocrisy

It is hypocritical for a political coalition that demonized the then government and minorities by vigorously promoting the principle of “one country, one law” to then propose to carve out the Port City development as a geographical area exempt from many of the laws and practices prevalent in the country. Those who sow the wind, reap the whirlwind. Because of this hypocrisy, the government has great difficulty doing the right thing for the country.

It is hypocritical for members of the dominant party in the previous government (now split) to protest vociferously against the special treatment proposed for investors by the Colombo Port City Economic Commission Bill. They full well know the dysfunctions of the investment environment in Sri Lanka. The then government was working on a bill on the same lines. There was discussion on placing the financial city within the jurisdiction of the English courts then.

Since Sri Lankan politics is all about short-term political games, there is not much point in getting hung up about hypocrisy. Our politicians will say one thing in opposition and do another when in government. We should hope that the electorate will punish the worst hypocrites. But the country’s economic progress cannot be held hostage on account of hypocrisy alone.    

Private interests over national interest

It is not hypocritical for the Bar Association and other intervenors to object to the proposal to establish an International Commercial Dispute Resolution Center and to the associated legal workarounds. But it is wrong and self-serving. Members of the legal profession, more than anyone else, should know how dysfunctional the country’s legal system has become. 

At the 47^th Annual Convocation of the Bar Association, the Minister of Justice said that the average time to enforce a commercial contract in this country is 1,318 days (3.5 years). It takes 9.5 years on average to conclude a criminal trial in the High Court. It is said to take one year to get a date for an appeal to be fixed for hearing a criminal matter. 

All of us who worked on improving Sri Lanka’s rank in the Ease of Doing Business Indicator know that legal-system-related factors are a main reason for Sri Lanka being relegated to the back of the class. Poor performance in resolving insolvency and enforcing contracts are major contributors to Sri Lanka being ranked 99^th out of 190 countries. On enforcing contracts, we are ranked 164^th. 

So, the previous government was right when they considered placing contracts of investors in the Port City under English commercial courts. The experts who crafted the present bill were right in making arbitration by the International Commercial Dispute Resolution Center mandatory and allowing for a fast-track engagement with the Sri Lankan courts as needed. Commercial arbitration is nothing new in Sri Lanka. To argue that it violates our Constitution is a little farfetched. 

One may quibble about why it need be mandatory. But if not, a party may choose to approach the Sri Lankan courts as part of a delaying strategy. I was once asked for Sri Lankan decisions on regulatory matters for inclusion in a compendium. The editors were surprised when I said there were none. I explained that there were plenty of cases, but no decisions. The cases were filed to get stay orders.  After that there was not much interest or progress.

But of course, professional associations rarely allow logic and the national interest to come in the way of the financial and related interests of the members. The Sri Lankan legal system is dysfunctional, partly because the interests of legal professionals are given priority over the interests of litigants and the country. It is not in their interest to admit how broken the system, they profit off, is. 

Section 63(2) of the bill is an indictment of that system:

“In order to foster international investor confidence in the ease of doing business and in the enforcement of contracts, in the national interest and in the interest of the advancement of the national economy, the inability of a particular attorney-at-law to appear before the Court on a particular date for personal reasons (including engagement to appear on that date in any other court or tribunal) shall not be a ground for postponement of commencement or continuation of the trial or be regarded as an exceptional ground warranting such postponements.”

Lawyers, individually (as a prominent politician/President’s Counsel so vividly demonstrated) and collectively, are likely to oppose it. What tragedy it would be if such a rule were to be the norm in the legal system?  How could the juniors get batting practice?    

Workarounds

The Port City bill is a workaround.  It is needed because our systems are broken. President JR. Jayewardene established the Greater Colombo Economic Commission (predecessor to the Board of Investment) as a workaround solution, by Act No. 4 of 1978 because our systems were a barrier to the attraction of needed foreign investment. We have the Katunayake and Biyagama zones and the various value-added manufacturing industries that are keeping our economy afloat, thanks to that workaround. 

The tragedy is that 43 years later we are still doing workarounds. We need these stopgap measures, but we need to give the highest importance to fix all the systems that affect all our citizens, not just the foreign investors. Specific mention is made of the doing business indicator in the Port City Commission Bill, but the indicator is not designed for enclaves but for the country as a whole. Improving the key systems across the country is what others are doing.  India is now more than 30 places ahead of Sri Lanka, thanks to dedicated task forces. China is ranked 31^st, more than 30 positions ahead of India and more than 60 ahead of Sri Lanka. I invite the readers to look at how well our competitor, Viet Nam, is doing. 

If we do not improve the ease of doing business for all, we will be overtaken by Pakistan soon. They are taking concerted action to improve performance on the components and are now just nine places behind. The workaround should not detract from the focus on system improvements throughout. Define threshold levels in the Port City Bill itself when the workarounds can be discontinued. Then we can celebrate living in a country where the legal and other systems do not require bypass.