Introduction - Arbitration in Sri Lanka

IN ancient Sri Lanka, we had a non-adversarial dispute resolution systems. But from the year 1833 the Colebrook and Cameron Communion laid the foundations for adversarial and vexatious dispute resolution mechanism.

Arbitration Law up to 1995

The Arbitration Law practised in Sri Lanka until the enactment of the modern law of Arbitration in 1995 was based primarily on three statutes.

(1) Arbitration Ordinance No. 15 of 1856

(2) Chapter 51 of the Civil Procedure Code of No. 2 of 1889

(3) Reciprocal Enforcement of Foreign Judgements Ordinance No. 41 of 1921

The Arbitration Ordinance and the Civil Procedure Code provided for both compulsory Arbitration by order of court and voluntary arbitration by the consent of parties. There was hardly any institutional Arbitration and there was no possibility to obtain professional training as an Arbitrator.

The development of trade, commerce and the emphasis on foreign investment in the economy of Sri Lanka after 1978 made it incumbent for the lawmakers to modernize Sri Lankan Arbitration practice.

Arbitration Act No. 11 of 1995

The Arbitration Act of 1995 was the first Arbitration law in South Asia to be based on the United Nations Commission on International Trade Law (Uncitral) Model Law on International Commercial Arbitration and inspired by the then draft Swedish Arbitration Act.

From the establishment of Uncitral by the United Nations in 1966 with the objective of reducing confrontations in international trade, the Commission had been concerned with harmonizing the existing international arbitration rules and in adopting the Uncitral International Arbitration Rules in 1972.

The Afro-Asian Legal Consultative Committee while commending Uncitral Arbitration Rules to their member governments indicated the need for Uncitral to develop a Model Law on International Commercial Arbitration. This was done in 1985.

The Model Law has assisted many countries in South Asia to modernize and harmonize their respective Arbitration laws facilitating the application of the New York Convention on the Recognition of Enforcement of Foreign Arbitration Awards of which Sri Lanka is a party signatory along with more than 1200 other nations of the world.

The main innovative features of the 1995 act are:

(1) A valid agreement for Arbitration constitutes a bar to Court proceedings. (Section 5)

(2) The principle of Party autonomy is safeguarded in appointment and determination of the number of arbitrators, the place of Arbitration and the procedure to be followed in the Arbitration proceedings (Sections 6 (1), 7 (1), 16 (1) and 17 of the Arbitration Act).

(3) The Arbitration awards are final (Section 26) and courts have no jurisdiction to interfere in the merits of award and the award could be set aside on very narrowly defined grounds.

(4) The exclusion of appeals to the Supreme Court by the agreement of parties (Section 38) is a unique provision, which is expected to make the Arbitration process less litigious and protracted.

(5) Provision for the enforcement of foreign Arbitration awards (Sections 33 and 34) The ground of avoidance of the execution of a foreign Arbitral award are modelled after similar provisions in the New York Convention on recognition and enforcement of Foreign Arbitral Awards.

Arbitration Act came into operation on 1st August, 1995. This is the only institution of its kind in Sri Lanka.

From 1995 upto date over 5000 commercial disputes have been arbitrated in Sri Lanka mostly through ad-hoc arbitrations.

The only Institutional Arbitration Centre in Sri Lanka is the ICLP arbitration centre which has its own rules of arbitration. There are two arbitration centres for ad-hoc arbitration.

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ARBITRATION

Question: Can arbitration take place in a place other than Colombo?

PETER - Moratuwa

Answer: Under Arbitration Act No. 11 of 1995, arbitration of a dispute can take place in any part of the country.

However, under the Arbitration Act enforcement, applications under Section 31 (1) has to be made to the High Court and challenges to Arbitration awards under Section 32 should also be made to the High Court. Incidental applications should also be made to the High Court.

The High Court referred to in the Act has been defined under Section 50. "High Court" means the High Court of Sri Lanka situated in the judicial zone of Colombo or situated in such other zone, as may be, designated by the Minister with the concurrence of the Chief Justice, by Order published in the Gazette.

In the circumstances, until such time the Provincial High Courts are designated by the Minister with the concurrence of the Chief Justice even if an arbitration takes place, in a place other than Colombo, the relevant High Court before an application for enforcement should be made is the Colombo High Court.

Question: What is the difference between ad-hoc and institutional arbitration?

Nilmini PERERA - Galle

Answer: An arbitration when administered by an institution according to rules of the institution accepted by parties to the arbitration is designated as institutional arbitration.

When no specified institutional rules are referred to in the Arbitration Agreement, the arbitration that take place proceed on an ad-hoc basis on rules agreed by the arbitrators at the time of arbitration.

In many circumstances of ad-hoc arbitration, parties and arbitrators informally follow accepted model arbitration rules such as those of the Unctad.

The advantage of institutional arbitration is that the responsibility for organising the arbitration is entrusted to an arbitration institutionally. The only Institutional Arbitration Centre in Sri Lanka is that of the Institute of Commercial Law and Practice (ICLP) Arbitration Centre.

Question: I leased a car from a leading leasing company and signed the requisite agreements. I paid my monthly instalments without default except for the final two instalments.

Suddenly a team of thugs came and took the car away and the next day I received copy of award and notice from High Court of Colombo to pay the full amount?

Ivan FERNANDO - Raddolugama

Answer: When you sign any agreement you must carefully study the provisions before signing which you have not done. Most of the leasing agreements have provision for arbitration which you should know before entering into agreement.

As you have not received notice of the arbitration, you can challenge the award under Section 32 of the Arbitration Act before the High Court.

Question: I am a resident of Kandy. I have obtained an arbitration award in favour of me. Since the other party has not complied with the said award I wish to enforce the award. My lawyer says that it should be done in Colombo? What is the procedure? Can I do it in High Court of Kandy?

Ranjith FERNANDO - Kandy

Answer: If a party does not honour the award, you may obtain Court assistance to enforce it. The court which has jurisdiction at present is the High Court of Colombo.

The jurisdiction could be extended to other High Courts through a gazette notification. Please remember to file papers in the High Court of Colombo after 14 days and before one year from the award.

Question: I have entered into a contract with a contractor in respect of a building site. Now a dispute has arisen between the contractor and me about the payments.

Since there is an arbitration clause I want to initiate the arbitral proceedings. How should I select my arbitrator? Should he be a judge?

Achini FERNANDO - Wattala

Answer: Since Arbitration is a process where party autonomy governs parties could nominate their arbitrator, the members nominated by parties would appoint the Chairman of the Tribunal. Otherwise both parties could agree on a sole arbitrator.

If a party does not nominate his arbitrator you can seek the assistance of Court to nominate the arbitrator. The Arbitrator need not be a judge or a lawyer always. The parties could select their arbitrator according to the issue in dispute.

You may appoint experts in a special area such as an engineer, architect or IT expert as your arbitrator. This would enable the tribunal to function efficiently. It is also better to have a person with a legal background as an arbitrator since the arbitral proceedings could have legal issues to solve.

Another advantage is that the minds of legal professionals are set to solve disputes. There are arguments against this point of view as for bringing in the adversarial characteristics to arbitration proceedings.

However, this could be minimized with some training in internationally accepted arbitration standards. If there is an arbitration clause in an agreement, can a party obtain interim relief from the Court?

If there is an arbitration clause in an agreement the court does not have jurisdiction.

However, if the Tribunal has not been constituted or one party is delaying the appointing of Tribunal, the affected party should be able to obtain interim relief from courts considering the urgency of the issue until they obtain the relief from arbitral tribunal.

Question: There is an arbitration award against me. I was not notified about the arbitration. Can I appeal against this award?

Shana PERERA - Mt. Lavinia

Answer: Arbitration is an alternate dispute resolution method to litigation. The Arbitration process is initiated because the parties themselves have agreed to abide by the award of the arbitrator at the time of entering into agreement. This is evident from the applicability of section 5 of the Arbitration Act. Hence, the law discourages parties invoking jurisdiction of court.

However, the law provides specific limited grounds under section 32 of the Arbitration Act of 1995 where an award could be challenged to set aside the award. The application for challenge should be made to the High Court within 60 days of the award.

Proof may be furnished that a party to the agreement was under some incapacity of that the agreement was not valid in law, or that proper notice was not given of the appointment of the arbitrator or of arbitral proceedings, or that he was unable to present his case, or that the award does not fall within the terms of agreement etc.

The parties could also exclude Supreme Court jurisdiction by entering into an exclusion agreement or providing for the same in the arbitration clause at initial stages or on a subsequent date.

Question: What is the difference between mediation and facilitation?

Alex SAMARATUNGA - Colombo

Answer: The terms Mediation and Facilitation are often confused because of common attributes. Many facilitators who enter disputes as innocent service providers often at the request of the disputants themselves end up becoming mediators.

Many mediators mainly due to the power they wield over the disputants end up as uninvited arbitrators of the dispute. Among the common characteristics, both mediators and facilitators are third parties who have no direct stake in the disputed matters.

Neither the mediators no, the facilitators wield any authoritative decision making powers like a judge or an arbitrator. While the judges and arbitrators decide on the matters in dispute the mediators and facilitators could only assist the parties to negotiate a solution to the matters in dispute.

The litigants do not choose the judges whereas mediators and facilitators like in the case of arbitrators should be acceptable to the parties.

However, arbitrators, mediators and facilitators all should share two common characteristics, neutrality, and impartiality.

They should be neutral in that they should not have special relationship with the parties before, during or after the conflict resolution process. They should be impartial in that they should not be biased or seen to be biased.

The distinction between mediation and facilitation lies more in the theoretical definitions than evinced in actual practice.

Mediation is defined as 'the intervention into a dispute or negotiation of an acceptable, impartial and neutral third party who has no authoritative decision making power, to assist contending parties to voluntarily to reach their own mutually acceptable settlement of issues in dispute."

Mediators generally preside and direct the discussions and utilize caucuses with parties to frame and reframe issues to reduce tension and persuade the parties to arrive at interest based sustainable solution to their dispute.

Facilitation on the other hand is a less onerous process where it only refers to the use of third party who is impartial towards the issues being discussed, to provide procedural assistance to group participants to enhance communication, provide negotiation skill training, access to technical resources and generally establish a conducive environment of decision making.

Facilitators may or may not participate in the core discussions of the substantial issues of the dispute.

Computer crimes

Question: What are the crimes that can be identified to use of computer through internet? Is there any law to avoid such situation?

Nimalka SOYZA - Wennappuwa

Answer: Other offences like cheating, criminal misappropriation can be committed by persons. In addition to those general offences there are special offences especially under IT, such as Hacking, cracking, bombing etc.

But these special offences have not been identified by our law upto date since we don't have a Computer Crimes Act available in Sri Lanka.

Ombudsman's recommendations

Questions: I am a former employee of a State Corporation who retired after nearly 40 years of service. When gratuity was paid to me on cessation of employment, a sum of 25,762.30 was deducted on the grounds that there was an overpayment of salary, allowances etc. with which I disagreed.

I made representations on this matter to the Commissioner of Labour and the Human Rights Commission but failed to obtain any relief.

Thereafter, I wrote to the Ombudsman who inquired into my complaint and came to the conclusion that he was satisfied that denying 40% salary increase already paid is unreasonable and recommended that it be paid to me. This is a part of the above total recovery.

The amount payable is Rs. 14,664.80. I have been making persistent representations to my previous employer to implement the recommendation of the Ombudsman but the employer has been finding various excuses and has not implemented it. Please advise me how I could compel my former employer to implement the recommendation of the Ombudsman.

H.W. GOONASEKERA - Panadura

Answer: Your facts are incomplete as to why the Commissioner of Labour declined to grant relief according to the payment of Gratuity Act No. 12 of 1983.

If the Commissioner's decision is unlawful or ultra-virus there may be a possibility to challenge the same by way of writ application. As the Ombudsman's decision is in your favour it would give additional weight to your writ application.

There is no specific mechanism to enforce the recommendations of the Ombudsman. However, the majority of the recommendations are generally carried out by the relevant departments against which such recommendations are made.

Ombudsman in his annual report to the Parliament mentioned about the recommendations that have been implemented by different agencies. Relief could be sought in that way, but if you need further assistance, you could contact the Legal Aid Commission at our Colombo office.

Termination

Question: I am an employee at a certain company. I need to know whether the employer can terminate the services of the employee without issuing a Letter of Termination?

Ashan PERERA - Wellampitiya

Answer: Yes on the grounds of constructive termination, the employer can terminate the employee without issuing a Letter of Termination.

The employee may claim that his services have been constructively terminated by his employer. The constructive termination of employment may arise where the employer has induced or forced an employee to tender a Letter of Resignation. ''

A constructive termination of employment could arise where the employer has so conducted himself which obligates the employee to abandon his employment.

In such a situation, the burden is on the employee to establish by satisfactory evidence that there was an intention on the part of the employer to terminate his services.

Suspect and accused

Question: What is bail? Who is referred to as a "suspect" and who is an "accused"?

Senaka LIYANAGE - Nittambuwa

Answer: Bail connotes the release of a person suspected of any offence from state custody in an undertaking that he will attend courts when requested to do so.

When a person is under suspicion with regard to any offence he is referred to as a "Suspect". Once charges are filed against him he is referred to as an "accused'.

Rent

Question: I have rented out a room in a house said to have been constructed before 1970. Construction was probably without the approval of the Local Authority as the first assessment for rates is in the year 1982.

However, but the electoral register of the premises shows names of registered workers from the year 1971 up to now. This house has 10 rooms to let out, but they are not separately assessed for rates.

The Landlord has fallen out with me and is harassing me and is wanting me to vacate the room. I wish to know whether the premises is governed by the Rent Act and whether I can be ejected from the part of a house which is not separately assessed for rates.

James PERERA - Colombo 4

Answer: If this house has been erected before 1980 the entire house is under the purview of the Rent Act, thus if you have rented the entire house you cannot be ejected without compiling with the provisions of the Rent Act but, in this particular instance you are occupying only one room out of the ten rooms in the said house.

Therefore it is unlikely that you can be treated as a tenant for the purpose of the Rent Act.

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Legal Aid Commission centres in Sri Lanka

1. Colombo Justice

Hector Yapa, Director General

Ms. Nelum Gamage, Director/Consultant

Legal Aid Commission

No. 129, Hulftsfdorp, Colombo 12.

2433618, 5335281

2. Anuradhapura

Mr. D. P. B. Mahadiulwewa

A. A. L. - Regional Director

Court Complex, Anuradhapura

025-2224465

3. Kandy

Mr. U. R. N. Ranathunga

A. A. L. - Regional Director

New Court Complex, Gatambe, Peradeniya

081-2388978

4. Kurunegala

Mr. D. V. Senevirathne

A. A. L. - Regional Director

Court Complex, Kurunegala

037-2229641

5. Galle

Mr. K. P. D. Gunerathne

A. A. L. Regional Director

Court Complex, Fort, Galle

091-2226124

6. Hambantota

Ms. Lakshmi Wijenayaka

A. A. L. - Regional Director

Chief Ministers

Office Complex, Hambantota

047-2221092

7. Nuwara Eliya

Ms. Thamara Damayanthi

A. A. L. Legal Officer

Court Complex, Nuwara Eliya

052-2235260

8. Moneragala

Ms. Shanthi Jayasingha

A. A. L. - Legal Officer

Court Complex, Moneragala

055-2276191

9. Ampara

Ms. Chanchala Dhanushi

A. A. L. - Legal Officer

Court Complex, Ampara.

063-2223496

10. Kegalle

Ms. S. Senanayaka

A. A. L. - Legal Officer

Court Complex, Kegalle.

035-2231790

11. Chilaw

Mr. Pradeep Shanthappriya

A. A. L. - Legal Officer

Court Complex, Chilaw

032-5672457

12. Akkaraipattu

Mr. A. C. Rizwan

Coordinator/AAL District

Court Complex, Akkaraipattu

13. Balapitiya

Mr. Sanjaya Wijesinghe

Coordinator/AAL

No. 618, Walagedara, Balapitiya

091-2255753

14. Matara

Ms. Rajika Prasadini

Coordinator/AAL

No. 38, Lawyers Complex, Fort, Matara

041-2233815

15. Vavunia

Mr. M. Sittampalam

A. A. L. - Director

Court Complex, Vavunia

024-2221899

16. Trincomalee

Mr. K. Sivapalan

Coordinator/AAL

Court Complex, Trincomalee

026-222293

17. Kalmunai

Mr. M. S. Kariyappa

Coordinator/AAL

Court Complex, Kalmunai

067-2223710

18. Jaffna

Ms. Shantha Abhimanasingham

A. A. L. Director

District Court Complex, Jaffna

19. Ratnapura

Ms. R. M. I. R. Rajapakshe

A. A. L. - Director

Court Complex, Ratnapura

20. Batticaloa

Mr. K. Narayanpille

Coordinator/AAL

300/1 A, Bar Road, Batticaloa

065-2223567