Saturday Jul 27, 2024
Saturday Jul 27, 2024
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The question is whether we are circumventing the application of safety legislation to promote investments in the shipping and ports sector
Sweeping reforms of this nature should be cautiously implemented after broad consultation from all and sundry. The Government needs to understand that her persistent aversion and contemptuous attitude to public consultation, together with her extreme urgency to introduce laws, coupled with the acme of recklessness by the drafters and advisors, will only augment the pain and suffering in this country, and make the existing problems far worse
“Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same” – said President Roland Regan long ago. The recently proposed Economic Transformation Act seems to have grave implications for the economy, and this includes the maritime economy as well. Are we in a whirlpool of economic legal reforms where we will lose our control with our economy? The main aim of the statute is to create a ‘super-regulator’ through the creation of an office called ‘Economic Commission’. This Office is somewhat like the much-known Board of Investment (BOI). Why such a law was proposed without any broad consultation, especially with the maritime sector of Sri Lanka, remains seriously questionable! Given the lack of consultation with the maritime industry of Sri Lanka for the draft law, and its implications transcend many generations, it is dogmatic as to why hardly anyone was ever consulted. The proposed law will be tabled in the Order Paper of the Parliament on 22 May, 2024 and only two weeks are left for a citizen to challenge the draft law before the Supreme Court of Sri Lanka.
While one may laud such a mechanism for the establishment of a prompt approval mechanism – or else a super regulator that usurps and devours the other fragmented regulators – given the sweeping powers the ‘almighty’ economic commission possesses, it will lead to a plethora of abuses, making it a far worse house than the existing BOI regime.
While the over triumphant name of the draft law – ‘Economic Transformation Bill’ – has least to do with any economic transformation in the sense it is proposed, the self-congratulatory title given to the Bill itself reflects the misguided nature of the legislative intention, especially, noting the draft law’s main objective to create a super regulator for investments, which is nothing more than the ‘old wine in a new bottle’ as seen today in the BOI Act. The opulent nature of the powers vested in the super regulator, and its proclivity to become a predatory regulator, may cause inroads into many domestic industries and exports, especially maritime services and operations.
Outline of the draft law – blast from the past and the good old BOI law
When one examines the structure of the Bill, it is reminiscent of the old BOI Act – the Greater Colombo Economic Commission Law, No. 4 of 1978 – that was promulgated in the early years of the then UNP administration to foster economic development. The crux of the statute is to create a ‘super-regulator’ through the creation of an office called the ‘Economic Commission’. (See part IV) Like the old BOI Act, the draft law contains a Schedule after clauses 59 and 98; and the said Schedule includes a list of laws to determine the scope of the powers of the Economic Commission where the Commission will ‘recommend incentives and exemptions’ to be granted (see clause 45).
The clause 45 states: “The Economic Commission may recommend incentives and exemptions from the laws specified in the Schedule to this Part to be granted to investors, from time to time. Such incentives and exemptions shall become applicable upon the Minister prescribing the same by regulations made under this Part:…” (emphasis mine)
It is unclear what clause 45 is meant to achieve, given the lack of clarity. If the idea is to create a super-regulator to give approval for foreign and local investments, with necessary exemptions, by usurpation of other regulatory powers of the other regulators who operate under specific laws, we must presume that this is so, given the availability of another procedure for approval in clause 46, then it will lead to abuse. For example, the Customs Ordinance is listed as part of the Schedule, where the Economic Commission is empowered to act under any statute as long as it is listed in the schedule; in essence, the objective seems to be a somewhat translucent process, where, ultimately, one super regulator would give approval to an international investor or an investor.
Also, an ‘Office for international trade’ is created with an ‘ambassador for international trade’, among other things, to coordinate international trade matters and negotiations concerning the World Trade Organization (WTO), United Nations Conference on Trade and Development (UNCTAD), any country or country groupings in relation to international trade matters and negotiations, the Commonwealth and other international trade negotiations. (See clause 114). Further other offices created, like Office of National Productivity Commission, Sri Lanka Institute of Economics and Establishment of the Sri Lanka, etc.
For namesake, some macroeconomic objectives are listed at the very outset, and such superficial references (clauses 3 and 4), are not followed by any enforceable mechanism within the Draft law. And worse still, clauses 3 and 4 deal with the so-called national policy on economic transformation that details GDP, public debt ratios and targets that are not transposed as an enforceable basis in the draft Public Financial Management Act. This lack of comity between the two draft legislative Bills shows the possible lack of seriousness in government’s objectives stated in clauses 3 and 4 (macroeconomic targets), and axiomatically, the whole scheme seems to appease the international community.
Draconian nature of the super regulator – Economic Commission
Like the old BOI Act, the instant draft law contains a schedule which appears after clause 59. The schedule lists 12 legislations which includes Merchant Shipping Act 1971, Sri Lanka Ports Authority Act 1979, Ceylon Petroleum Corporation Act 1961, Civil Aviation Act 2010, Customs Ordinance, etc.
As said above, the idea is to create a super-regulator to give approval for foreign and local investments, with necessary exemptions, by usurpation of other regulatory powers of the other regulators who operate under specific laws. Clause 55 says: “the Minister may, in consultation with the EC Board, make regulations in regard to – determine the scope and extent of any exemption or modification of any of the written laws set out in the Schedule to this Part which may be required for the attainment of the objects of this Part especially for the promotion and facilitation of foreign direct investments;”.”
It is unclear as to what is meant by ‘scope and extent’ of the regulatory law and its possible modifications/changes that may be effected may lead to so many regulatory laws being added unnecessarily by Regulations prescribed by the Minister. To compound the matter, clause 55(2)(b)(v) states, “provide for any matter which is deemed necessary for to implement the provisions of this Part including but not limited to- amendment, addition to or variation of the Schedule to this Part;”
Clearly, the wordings are as ambitious just as much as they are capriciously broad. Clause 45 uses the words, “incentives and exemptions from the laws specified in the Schedule to this Part”, while clause 55 (a) says, “any exemption or modification of any of the written laws set out in the Schedule to this Part”. All this shows the power of the regulations to exempt from critical pieces of legislation applicable in those sectors – such as Merchant Shipping Act 1971 or Ports Authority Act 1979. While it can be understood when Customs Ordinance or Foreign Exchange Control Act is exempted from application for investments, it is incomprehensible as to what exactly the Economic Commission is trying to achieve by giving Exemptions through the Merchant Shipping Act or Ports Authority Act!
While there may be few areas one may find in this maritime legislation where exemptions can be given, it is impossible as to why the whole scheme of maritime legislations are listed for exemptions. Most aspects of these legislations are for safety purposes or for the proper functioning of the industry. Say, for example, Collision Regulations deals with matters of navigation or act as rules of the road in as dealt in The Merchant Shipping Act. Therefore, the question is whether we are circumventing the application of safety legislation to promote investments in the shipping and ports sector.
Road to indirect liberalisation – ports and shipping
Presently, the regulations under the Shipping Agency Law. Licensing of Shipping Agents Act No. 10 of 1972 specifically prevents the total foreign ownership of any ship agency in Sri Lanka, and regulations stipulate that the controlling interest should be there with the locals. With the present draft laws, especially clause 45 read with clause 55 etc., such safeguards can be exempted by these regulations for ship agencies, or may be recommended to be exempted by the Economic Commission. This may also extend to the ownership of port terminals and ports and other port reception facilities, where the safeguards in the Port authority Act can be exempted totally for any investment coming.
This threat of ‘indirect path’ to liberalisation and deregulation needs to be avoided. Any liberalisation/deregulation should be an informed decision that should be taken by the government with the private entrepreneurs collectives like Ceylon Association of Shipping Agents (CASA), Freight forwarders Associations, etc.
This thread may even transcends to other areas which are currently protected as clause 55(2)(b)(v) states, “provide for any matter which is deemed necessary for to implement the provisions of this Part including but not limited to- amendment, addition to or variation of the Schedule to this Part;”. Hence any new legislation can be just added by regulations, which can include almost any industry. Even National Environmental Act No. 47 of 1980 can also be included under these provisions for exemptions.
At least, there should be guidelines as to what extent the incentives and exemptions can be given, and there must necessarily be guidelines as to what legislations should be included for exemptions and to what extent. It is the writer’s recommendation that the list should be a closed one, and clause 55(2)(b)(v) should be removed altogether for the want of constitutionality.
Conclusion
It is therefore important that sweeping reforms of this nature should be cautiously implemented after broad consultation from all and sundry. The Government needs to understand that her persistent aversion and contemptuous attitude to public consultation, together with her extreme urgency to introduce laws, coupled with the acme of recklessness by the drafters and advisors, will only augment the pain and suffering in this country, and make the existing problems far worse.
(The writer is an Attorney, Chartered Shipbroker (UK) and UN-ITLOS Nippon Fellow 2012/2013. He holds M.Sc. Logistics (BCU-UK), LL.M (International Maritime Law) (IMO-IMLI), LL. M (International Trade Law) (Wales), LL.B (O.U.S.L).)
