That Supreme Court Judgement

On 8 November, I penned an article, “Root Causes of Crisis,” scrutinizing various reports to distill conclusions. In that exploration, I underscored that the nation’s economic crisis finds its nucleus in the tax cuts, depletion of foreign exchange reserves/not floating the Rupee and an initial reluctance to seek IMF assistance. A critical juncture was identified, attributing responsibility for this predicament to the ruling executives/administrators. It reads as follows.

“Nevertheless, as we continue to probe further by repeatedly asking “Why” and “How,” we eventually arrive at a critical juncture where the heart of the country’s economic crisis lies, … deeper into the analysis and inquire further, the responsibility for this situation ultimately falls upon the ruling party.”

Fast forward to 14 November, which marked a historic moment when the Supreme Court delivered a definitive ruling; Ex-President Gotabaya Rajapaksa, former Finance Ministers Mahinda Rajapaksa and Basil Rajapaksa together with several administrators including two Central Bank Governors and some members of the Monetary Board were held responsible for contributing to Sri Lanka’s current economic crisis. The judgment asserted a violation of the fundamental rights of the people, citing mismanagement and a breach of constitutional obligations.

The apex court’s determination emphasised that the implicated leaders ought to have taken actions to rectify issues adversely affecting the economy, thus affirming their violation of public trust and a breach of Article 12 (1) of the Constitution. In a notable decision, the court refrained from ordering financial compensation for the petitioners, citizens, or the recovery of losses/damages from those found guilty. Instead, it ruled that each petitioner in both applications would be entitled to costs amounting to Rs. 150,000.00 each.

The Supreme Court verdict corresponds with the comprehensive understanding derived from scholarly articles, conference presentations, and reports by institutions such as UNDP, IMF, World Bank, CBSL, Research Institutions and several scholars. The petitioners pointed out three causes.

The main issues raised by the petitioners in both applications granting of leave to proceed by the Supreme Court are as follows: the introduction of tax cuts and the failure to reverse them, delay in seeking assistance from the IMF, the decision by the Monetary Board not to float the rupee, and thereafter floating the same without any safeguards, and the pay out of International Sovereign Bond of US$ 500 million on the 18 January 2022.

Global experiences

The conduct impugned in these proceedings includes illegal, arbitrary, unreasonable, or capricious executive and administrative actions and or inactions. Instances of rulers being punished by the court of law for conduct characterized as “illegal, arbitrary, unreasonable, or capricious executive and/or administrative actions” vary globally and are contingent upon the legal and political systems of individual countries. While each case is unique, some historical examples illustrate the accountability mechanisms that have been applied in different contexts.

In contrast to our Supreme Court verdict, fines and imprisonments are not waived for individuals found guilty in global cases of a similar nature. When consulted, a distinguished legal expert suggested that the complexity lay in accurately quantifying the damage.

Quantification of the damage/loss

Nonetheless, court proceedings compellingly indicate that the loss attributed to the tax cut, estimated at over Rs 681 billion and had disproportionately favoured blue-chip companies and various businesses (The VAT cut from 15% to 8%, the 2% NBT was abolished, the threshold for VAT liability was raised from 12 million to 300 million, tourism business was exempt from VAT, the tax liability to the construction industry was reduced to 14% from 28%, religious institutions were removed from tax and PAYE threshold was raised from monthly income of Rs 150,000.00 to Rs 250,000/). This imbalance, in turn, compelled the government to resort to money printing, resulting in over 70% inflation. Then persistent artificial pegging of the US dollar further exacerbated the situation, causing a monthly reduction of nearly USD 400 million in expat remittances per month.

On the agricultural loss caused by the organic fertiliser policy-blunder, the Hector Kobbekaduwa Agrarian Research and Training Institute (HARTI) conducted a survey involving 703 farmers cultivating many crops in several districts to investigate the situation both before (2020/21 Maha season) and after (2021/22 Maha season) the banning of chemical fertiliser and agrochemicals. There was a significant setback as the total cultivated area experienced a 26 percent decline, leading to a substantial 52 percent reduction in yields following the policy shift. This revelation highlights that transitioning to entirely organic cultivation is neither desirable nor sustainable.

Many tea planters also lamented a decline in their yield by around 30% attributed to the unavailability of Urea and agrochemicals, although the extent of this impact is challenging to quantify precisely.

Imprisonments

In 2017, South Korea witnessed the impeachment and subsequent criminal charges against former President Park Geun-hye, including abuse of power, bribery, and corruption-related offences. The Supreme Court sentenced her to a total of 30 years in jail with an additional five years for abuse of power. In the same year, former Brazilian President Luiz Inácio Lula da Silva faced conviction and served over 18 months in prison for corruption and money laundering. In 2018, Malaysia’s ex-Prime Minister Najib Razak faced charges related to the embezzlement of funds, leading to his conviction in 2020 with a 12-year prison sentence for criminal breach of trust, abuse of power, and money laundering. In 2009, former Peruvian President Alberto Fujimori was sentenced to prison for human rights abuses and corruption, highlighting accountability for both human rights violations and corruption, with a 25-year prison term.

Fines and/or confiscation of assets

Confiscation of assets can be a part of the legal proceedings and penalties imposed on individuals found guilty in instances of financial misconduct, corruption, or mismanagement. However, the specific outcomes can vary depending on the legal framework of the country, the nature of the charges, and the decisions made by the judicial system. Here are a few examples related to the individuals mentioned in your previous queries:

In the case of former South Korean President Park Geun-hye, after her conviction on charges of corruption and abuse of power, the court ordered her to pay fines totaling 18 billion won (approximately £12 million or $17 million). The fine could be considered a form of financial penalty.

In the case of Luiz Inácio Lula da Silva, as part of Operation Car Wash, the legal proceedings led to the freezing of assets and the seizure of properties, demonstrating an effort to recover ill-gotten gains.

In the case of former Malaysian Prime Minister Najib Razak, who was found guilty in connection with the 1Malaysia Development Berhad (1MDB) scandal, there were asset seizures and efforts to recover funds.

When former Peruvian President Alberto Fujimori was sentenced highlighting accountability for both human rights violations and corruption, he was ordered confiscation of approximately USD 8.5 million, plus interest, held in a Swiss bank account.

Conclusion

It is important to note that the legal processes and outcomes can differ significantly from one case to another, and the confiscation of assets is subject to the laws and regulations of the respective countries. Additionally, the success of asset recovery efforts depends on the effectiveness of legal mechanisms, international cooperation, and the willingness of relevant authorities to pursue such actions.

The above global examples highlight instances where leaders faced legal consequences for conduct deemed illegal, arbitrary, or corrupt. Legal systems and the nature of charges vary, but common threads include the importance of independent judicial processes, the role of investigative bodies, and the willingness to hold leaders accountable for their actions.

The recent Supreme Court judgment in Sri Lanka reflects a broader global context where legal consequences are sought for leaders engaging in questionable executive and administrative actions. The convergence of analyses and the court ruling emphasizes the importance of accountability and the imperative to address root causes for sustainable recovery.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT University, Malabe. He is also the author of the “Doing Social Research and Publishing Results”, a Springer publication (Singapore), and “Samaja Gaveshakaya (in Sinhala). The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for.)