Investors need to be incentivised

• Port City needs to be attractive in order to compete with successful forums such as Singapore and Dubai, says Attorney-at-Law Nishan Sydney Premathiratne

Attorney-at-Law and Ministry of Justice Sector Specialist for Commercial Law Reform Nishan Sydney Premathiratne was of the view that Investors need to be incentivised and that the Special Economic Zone (SEZ) intended to be created through the Port City Bill has to be able to successfully attract investors to a level which is on par to Singapore and Dubai. 

He also added that in the backdrop where the Port City project commenced in 2014 and has been continued throughout the last seven years, it is common ground that all governments saw the benefits of this project. And that it is heartening to see a Draft Bill being put down at this stage. 

Premathiratne also mentioned that notwithstanding that the constitutionality of the Bill being ultimately decided by the Supreme Court, on an overall macroeconomic consideration of the Bill, without looking at it from any political angle, but from a perspective of promoting investor confidence, the Bill could be considered to be a step in the right direction in an attempt to regularise the affairs within the SEZ. 

He added further that all governments in our country ultimately should aspire to attract Foreign Direct Investments (FDIs) and not to burden the country with more debt. A properly regularised SEZ with a proper legal framework would ultimately ensure that Sri Lanka is able to promote this nation as an international commercial hub on a global scale rather than cursing the dollar hitting the region of about Rs. 400/500 in the next four to five years. Premathiratne highlighted the following attributes of the Bill in a nutshell:

Schedule 2 and 3 of the Bill only provide reasonable exceptions/incentives/exclusions to regulate and expedite matters that could transpire in the SEZ.

Arbitration which is part and parcel of the Sri Lankan law is to be the main form of dispute resolution in respect of disputes which arise within the SEZ between the Colombo Port City Economic Commission (“Commission”) and an authorised person or an employee of an authorised person where relevant and between the Commission and a resident or an occupier, which is to be heard and dispensed at the International Dispute Resolution Centre which is to be setup. The law of the arbitration would be governed in terms of the Sri Lankan Arbitration Act.

The criminal law of the country would apply in respect of all forms of offences which can transpire within the SEZ.

The President can appoint members subject to the mandatory criteria of being possess of relevant knowledge, expertise and experience and national or international recognition, in the fields of Investment, Finance, Law, Information Technology, Engineering, Business or Accountancy. 

And in the event the President violates such mandatory criteria, the President could also be amenable to Judicial Review by way of a fundamental rights application preferred to the Supreme Court.

There are no ouster clauses precluding any legal action or suit to be instituted against the commission. And in any event even with an ouster clause, an administrative body such as the Commission would be amenable to Judicial Review, which is settled in term of our Sri Lankan Law.

Acts such as the Board of Investment Act has precluded ex parte enjoining orders against BOI licensees which is not the case in respect of any authorised person identified and empowered by the Commission. Thus, they are susceptible to all forms of legal remedies without any restrictions.

Any entity which seeks to be a listed company engaging in business in the SEZ has to abide by the mandatory listing and the laws in respect of securities within Sri Lanka.

Financial institutes desiring in engaging in banking activities within the SEZ has to obtain banking license from the Monetary Board.

Entertaining only FDIs which have to be freshly made and restricting foreign currency deposits in local banks being transferred to the SEZ is a good as it envisages a potential in increasing direct FDI’s to Port City.

Prioritising disputes arising within the SEZ will further attract investor confidence, especially when Sri Lanka is ranked 173 in the World Bank Doing Business Index to enforce a contract taking 1,400 days. In any event this would be only in relation to limited matters as most of the disputes would be adjudicated by alternate dispute resolution at the International Dispute Resolution Centre to be setup. 

Moreover with the Ministry of Justice intending to create an Investor Dispute Division in the Commercial High Court and increasing the number of courts islandwide expanding the Rs. 20 billion allocated at the Budget. At the appropriate time the system will be fully geared to provide this incentive to investors.

A plain reading of the Bill indicates that the purpose of setting up the “Colombo Port City Economic Commission” is “to provide for the identification of a Single Window Investment facilitator for the promotion of ease of doing business within such Zone” all powers/discretion granted to the Commission has been granted with a view to provide the Commission with the required tools to carry out this purpose. 

This concept is heartening if such can be properly implemented ensuring that investors are not diverted to different institutions to obtain various approvals (A BOI one-stop-shop concept is still in force for investors).

Authorised persons permitted to engage in business within the Port City being permitted to engage in business outside the SPZ with the permission of the Commission is however restricted and to be governed also under the laws of Sri Lanka.