Features
How smart is it to litigate to be proven right?
By Dhara Wijayatilake1
A disputant goes into court against another because he thinks he is right and the other is wrong and wants a court pronouncement to cement his position. After many years, huge expense, many consultations with Lawyers, many trips to the court house, postponed hearings, and even perhaps much emotional turmoil, a Judge delivers a judgment. One party is proven right and the other wrong, or the case may even be decided on a procedural matter with no determination as to who is right and who is wrong. Even the winner, if there is one is a loser. Today, there are options to litigation such as Mediation where the focus is not on being right, but on what each disputant needs and on reaching a settlement to satisfy those needs. It’s a process that is fast and cost effective. So, it’s a call to be smart – spend time and money to be right (litigation – where you may even end up being wrong) or spend much less time and much less money to satisfy needs (Mediation).
Delays in courts have reached ridiculous levels. Many Ministers of Justice over many years have attempted to reduce delays by “reforming” laws. The outcomes have not made a significant difference and the challenge to find solutions continue. One of the most comprehensive studies on Laws Delays in Sri Lanka was perhaps the one done by the “Laws Delays and Legal Culture Committee” headed by Justice R. S. Wanasundera, Judge of the Supreme Court. In its Report of October 1985 the Committee identified several causes for delays and submitted proposals to remedy them. The Report included a poignant observation that remains valid even today, ie. that in an adversarial system of justice such as ours, delays destroy justice, deterrence is lost, costs are increased, court resources are wasted and severe emotional hardship is inflicted upon litigants. In combination, these factors undermine the efficacy of the whole legal system, sapping its strength, vitality and even its integrity, and making the majority of litigants lose confidence. This observation remains valid even today. While substantive and procedural laws can be reformed in an attempt to eliminate delaying features, the legal culture which is a significant contributor can only be reformed through good practices that then constitute our legal culture. Here’s where we fail.
Laws delays is not a phenomenon that’s peculiar to Sri Lanka. It’s a problem confronting many jurisdictions across the globe. It’s this disillusionment with litigation which is rooted in the adversarial system, that has motivated a diversion to alternative methods of resolving disputes. The most popular Alternative Dispute Resolution (ADR) methods are Arbitration, Mediation and Negotiation. This article discusses Mediation which is accepted globally as an alternative that offers benefits that have proved to be meaningful.
Features of Mediation
There are many models of Mediation including Facilitative and Evaluative which are the most popular. In the 1960s, Facilitative Mediation flourished because of its marked difference in approach to conflict resolution and the resulting successes. Evaluative mediation is used by Mediators who are subject experts and offers an opinion on the strengths and weaknesses of the legal positions of the disputants leading to informed decision making by the disputants. This method is often used by judges in jurisdictions that provide for a settlement conference. This article discusses Facilitative Mediation which offers a process that’s unique in its features and is in complete contrast to litigation or Arbitration. Mediation evokes excitement because it’s speedy and cost effective, These virtues alone make a good case for opting for Mediation. There are others.
=It provides for party autonomy. Parties decide on the Mediators, the venue, the language of the mediation, the rules, and importantly, controls the outcome. No outside party sits in judgment over the dispute or how it should be settled.
=It’s informal but inspires trust. Parties sit with the Mediator and the other parties in an informal setting and engage in the process directly. They are provided ample space to speak of their concerns and participate fully while maintaining their dignity. Although there are no formalities as in a court of law, parties are required to conduct themselves in a disciplined manner. Parties are guided to move away from positions and focus on interests and needs instead.
=The procedural rules are simple and user friendly and are designed only to ensure responsible conduct. The process is not bogged down with procedural imperatives. There’s never a risk as prevails in litigation, that some flaw in complying with a procedural rule will get primacy over the core issues in the dispute, in determining the fate of the parties.
=It’s voluntary. The disputants use the option of mediation by choice and are free to walk out of a mediation at any time and are not obligated at any stage to stay in the process. This is so, even if reference to mediation is mandatory by law, based on the category of dispute and its monetary value. What is mandatory is to attempt a mediated settlement prior to proceeding to file action in a court of law.
= There’s no judgment of right vs wrong. It’s a process that seeks to find common ground to agree on a settlement that addresses the interests of both parties, and is not a process that evaluates legal entitlements although those can also be taken into account by parties when agreeing to a settlement.
=It adopts a completely non adversarial approach and therefore affords the opportunity for parties to repair fractured feelings, thus enabling an ongoing relationship.
=It’s confidential. This is an important feature of Mediation. Parties are required to sign agreement to maintain confidentiality with regard to all matters discussed. Parties agree not to divulge the substance of discussions at any other dispute resolution forum.
= The process is skillfully facilitated by a third party neutral, the Mediator. The Mediator controls the process using special skills and techniques and facilitates the disputants to reach an outcome that’s acceptable to them. The Mediator ensures that ground rules are followed to control emotions and avoid aggression during the sessions.
Neutrality of the Mediator is an important feature. The Mediator must at all times maintain independence and neutrality. If at any time, a disputant feels that this principle is breached, a mediation can be terminated.
Sri Lanka’s Mediation statutes
Mediation was first institutionalized with the enactment of the Mediation Boards Act, No. 72 of 1988 which incorporated all of the key features of Mediation. Mediation Boards now function in every Divisional Secretary’s area across the country. These have come to be known as “community Mediation Boards.” Subsequently, the Mediation (Special Categories of Disputes) Act, No. 21 of 2003 was enacted2 to provide for more specialized mediation services for certain identified categories of disputes.
The 1988 Act stipulates that certain categories of disputes must be mandatorily referred to Mediation, and also that certain disputes cannot be entertained by Community Mediation Boards.
Where reference to Mediation is mandatory, no action in respect of such a dispute can be instituted in or be entertained by a court of law unless Mediation has been unsuccessful and a certificate of non settlement from the Mediation Board is produced.
Disputes that must mandatorily be referred to Mediation are-
a) where the value of the dispute is below the monetary threshold set out in the Act, unless it’s one which gives rise to a cause of action set out in the Third Schedule to the Act.
In 1988 the monetary threshold was stipulated as Rs. 25,000/=. This has been amended from time to time and the current threshold introduced in 2016 is Rs, 500,000/=1.
The Third Schedule to the Act sets out fifteen categories of actions. These are actions in relation to disputes that were not considered suitable for settlement through community Mediation Boards.
b) where the dispute is in relation to an offence which is set out in the Second Schedule.
The Second Schedule sets out eighteen offences punishable under twenty six (26) sections of the Penal Code.
While mandatory reference to Mediation is not required in the case of disputes above Rs. 500,000/=, it is possible for the parties to submit the dispute for Mediation voluntarily, unless the dispute is one in respect of which an application for settlement cannot be entertained by a Mediation Board.
The categories of disputes that cannot be entertained by a Mediation Board, even if the value of the dispute is below Rs. 500,000/=, are the following –
where one party is the State; or
where one party is a public officer and the dispute relates to the recovery of property, money or other dues ; or
where the Attorney General has initiated proceedings in respect of an offence.
The Mediation (Special Categories of Disputes) Act, No. 21 of 2003-
The rationale for this Act was motivated by the reality that Mediation is the more appropriate method to resolve certain categories of disputes where positions based on strict legal rights and technicalities must give way to accord primacy to the needs of parties to address the underlying concerns. The challenge to reduce the litigation load in courts was also becoming a very serious one. The Act provides for the Minister to establish Mediation Boards to provide mediation services in respect of defined categories of disputes, in identified areas of the country. The category of dispute, the areas to which it will apply and the monetary threshold below which these disputes must mandatorily be referred to Mediation, are required to be set out in Orders made by the Minister1. An important statutory guideline that the Minister is required to consider to determine the categories of disputes is, “the need to provide for the meaningful resolution of disputes relating to social and economic issues.“1 It’s an important policy decision to be taken based on real needs of the people.
While the community Mediation Boards are manned by volunteers who are not required to have any specific educational qualifications, the distinguishing feature of the 2003 Act is that the Minister is required to prescribe by Regulation, the qualifications that a Mediator must possess having regard to the expertise required of Members, considering the nature of the categories of disputes that must be mediated. Different qualifications may be prescribed for different categories of disputes. The appointments are made by the same Mediation Boards Commission referred to in the 1988 Act.
Mediation Boards were established under this Act in 2005 after the Tsunami of 2004 for the resolution of tsunami related disputes and in 2015 to resolve land disputes in the Administrative Districts in the North and East. It was accepted that Mediation was the more meaningful method to address land disputes that arose after the North East ethnic conflict. The Orders currently in force as at February 2022, provide for the following1 :
It is absolutely important that the persons who will function as Mediators are trained in the techniques and skills of mediation. Without proper, adequate and focussed training, the results will be disastrous and will negate the intentions of the Act since the success of mediation in conflict resolution is totally dependent on the intrinsic value of the techniques adopted. Mediation is not a process that can succeed if you simply have the ear of a patient listener.
The UN Convention on Mediation
Mediation has increased in acceptance over the years because of its benefits. It is this popularity and its increasing use in international commercial dispute resolution that inspired UNCITRAL’s Working Group on Dispute Settlement to address the need for a harmonious regime that will set standards for the cross-border enforcement of international settlement agreements resulting from mediation. As a result of its work, the Convention on International Settlement Agreements Resulting from Mediation was adopted by the UN General Assembly (UNGA) on December 20, 2018,
The Preamble to the Convention recites that the Parties –
“recognize the value for international trade, of mediation as a method for settling commercial disputes in which the parties in dispute request a third person or persons to assist them in their attempt to settle the dispute amicably;
note that mediation is increasingly used in international and domestic commercial practice as an alternative to litigation;
considers that the use of mediation results in significant benefits, such as reducing the instances where a dispute leads to the termination of a commercial relationship, facilitating the administration of international transactions by commercial parties and producing savings in the administration of justice by States; and
are convinced that the establishment of a framework for international settlement agreements resulting from mediation that is acceptable to States with different legal, social and economic systems would contribute to the development of harmonious international economic relations “
The Convention opened for signature on August 7, 2019 in Singapore and Forty Six (46) countries including Sri Lanka became signatories on that same day. Popularly knows as the “Singapore Convention on Mediation”, it came into force on September 12, 2020. As at February, 2022 it has been signed by 55 countries and ratified by 9. Sri Lanka is now obligated to enact domestic legislation to give effect to the provisions of the Convention. UNCITRAL’s work on the Convention and its adoption by the UNGA, is evidence of the the global acceptance of Mediation to resolve commercial disputes.
The CCC- ICLP International ADR Center of Sri Lanka (IADRC)
In 2018, the Ceylon Chamber of Commerce (CCC) and the Institute for the Development of Commercial Law and Practice (ICLP) in a joint venture, incorporated a not for profit company and established a new Center, the CCC-ICLP International ADR Center (IADRC) to provide ADR services. It was a response to the need of the business community for more efficient dispute resolution. The novelty of the new Center is that it offers mediation services in addition to arbitration.
Both Institutions were aware of the global trends that favored ADR and the successes of Regional Centers. The Hong Kong International Arbitration Center (HKIAC) established in 1985, the Singapore Mediation Center (SMC) launched in 1997, the Indian Institute of Arbitration and Mediation (IIAM) established in 2001, the International ADR Center of the Indian Merchants Chamber (IIMC) established in 2015 and the Malaysian Mediation Center (MMC) established in 1999 under the auspices of the Bar Council of Malaysia, offered inspiration. These centers offered services that included Arbitration and Mediation. The Singapore Mediation Center states that, as at Feb 2022, it has mediated 5,200 matters worth over $10 billion since its launch. The rate of successful mediations is stated to be 70% with 90% of those having been settled in one day! The high rate of success can be attributed to the skill and competence and the professionalism of the Mediators. Compliance with the mediation process and using the special skills and techniques are key to achieving good outcomes and hence the absolute need for training.
The IADRC launched its Arbitration and Mediation Rules in April 2021 and has trained Mediators and Arbitrators who are available to provide services. The Arbitration Rules of the Center seek to eliminate some of the common causes for delay. It’s the only Center that offers institutionalized Mediation for commercial dispute resolution. Arbitration and Mediation services can be administered in compliance with these Rules of the Center, or the UNCITRAL Rules, or any others that may be adopted on an ad hoc basis.
The Mediation Rules of the IADRC
The CCC-ICLP Mediation Rules incorporate all the internationally recognized standards that are known to define the Mediation process. The Rules provide for the following-
To commence the Mediation, an application (a “Request for Mediation”) must be made to the Center either by one party or jointly by all disputing parties, requesting Mediation services for the settlement of the dispute.
After completing preliminary administrative steps such as obtaining, where appropriate, the consent of all parties to pursue Mediation, the parties are required to sign the “Agreement to Mediate”. This Agreement includes an obligation to “abide by and comply with the Mediation Rules of the Center or other Rules that have been agreed to.”
The language of the Mediation will be as agreed to, by the parties.
The next step is to appoint a Mediator or a panel of Mediators. The disputing parties have the discretion to nominate a Mediator from among those accredited by the Center or from outside of that list. Usually, a Mediation will be handled by a single Mediator. However, a panel could be appointed if so desired, where there are complex issues in a dispute.
Importantly, the Mediator has to be independent, impartial and neutral throughout the process. Several safeguards are included to ensure compliance with this principle.
The Mediation sessions then commence. The Mediator manages the process and will, for this purpose convene sessions on dates and times agreed to by the parties, at a neutral venue.
The process will commence with a joint session where all parties are present. The Mediator will explain the principles that apply and explain the process. Thereafter the Mediator will decide when to have joint sessions with all parties, and individual sessions (called a “caucus”) with each party.
At these sessions, the parties have the opportunity to discuss the matters in dispute from their own perspective. The statements, disclosures and proposals made at a Mediation are maintained in absolute confidence and are made without prejudice. This principle provides the confidence to disputing parties that nothing said can be used in any other dispute resolution process or other forum. The Mediator and the parties cannot be compelled to give evidence as to any matters disclosed at the Mediation in a court of law.
The Rules set out the obligations of the parties – attendance at the sessions in person and in the case of corporate entities attendance through a representative who is given full authority to sign off on a Settlement Agreement; compliance with the rule on confidentiality; full and honest disclosure of matters material to the dispute.
Parties are not entitled to legal representation at the sessions but may call in a Lawyer for the sole purpose of obtaining advice. However, a Lawyer who is a full time employee of a corporate is not excluded from participating at the sessions on behalf of a corporate entity.
During these sessions, a Mediator will not give directions or instructions on how to settle the dispute. The Mediator will however question the parties in a non coercive manner to help them reach a new understanding of the issues in dispute and of the concerns of the other party.
A Mediation is terminated either with an agreement to settle or with an agreement that no settlement is possible.
Where there is an agreement to settle, the Mediator is required to explain to the parties the terms and conditions of the settlement and the obligations that each party is assuming under the agreement. A settlement Agreement will be set in writing and signed by the parties and the Mediator. This is an agreement that binds the parties as any other agreement, and each party has a legal obligation to honour its terms and conditions.
Where the Mediator determines that continuing the Mediation is futile since it’s unlikely to result in a settlement considering the progress of the Mediation, or where a party informs that it wishes to withdraw from a Mediation, the Mediation will be terminated.
In either event, all the documents submitted to the Center by each party will be returned.
In normal circumstances a mediated agreement should stand the test of time since many steps have been taken to ensure it’s sustainability. However, the Rules provide for an application to be made to revise or revoke an Agreement on very limited grounds, ie. On the grounds that a) the terms were agreed to, without a proper appreciation of the obligations; or b) circumstances have arisen that prevent a party honoring the obligations; or c) that there was bias on the part of the Mediator. The last ground is most unlikely given the several steps that are required to be taken to ensure impartiality. However, this ground is included as a principle of good governance since it’s a vital feature of Mediation. An application to revise or revoke will be inquired into by the Center and a settlement will be attempted in compliance with the same principles that apply to a Mediation.
Mediation is not an expensive process. However there are fees to be paid. The Fees for a Mediation include Administration fees as well as fees for the Mediator/s. The fees are prescribed by the Center in a Fee Schedule and will be a predetermined sum which will be made known to the parties prior to the commencement of the Mediation. There will be no surprises.
Conclusion
Mediation is not the most appropriate method of dispute resolution for all categories of disputes. That’s accepted. Even with the twin evils of delay and expense certain causes of action need to be determined by a court of law. Mediation however, has gained global recognition as the better method for many kinds of disputes ranging from family and workplace disputes to construction and commercial disputes.
Given the potential to be speedy and cost effective, and the high level of user satisfaction, the services provided by the CCC-ICLP IADR Center will no doubt improve the commercial dispute resolution landscape in Sri Lanka. It will also contribute to improve Sri Lanka’s performance in the contract enforcement indicator in the Doing Business rankings. The enactment of domestic legislation to enable the enforcement of international mediated settlement agreements in line with the Singapore Convention will also certainly enhance Sri Lanka’s efforts to attract foreign investors. The slogan “Mediate, don’t litigate” is gaining in popularity given the reality that it’s not always smart to litigate to be right.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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