Court of Appeal enters judgment by granting Constitutional injunction against Health Minister as final relief in arbitration dispute

• Case filed by Spectrum Pharmatech Lanka concerning Pharmaceutical Production Zone in Oyamaduwa, Anuradhapura 

The Court of Appeal recently granted, as the final relief, an Injunction against the Minister of Health in Application bearing No: CA/INJ/3/2024. 

This was pursuant to an application which was preferred by Spectrum Pharmatech Lanka Ltd., the Zone Developer in the “Suwa Siri Pura” Pharmaceutical Production Zone in Oyamaduwa, Anuradhapura. 

In March 2024 the Court of Appeal had granted interim relief as prayed for by the petitioner and injuncted the Minister of Health and State Minister of State Ministry of Production, Supply and Regulation of Pharmaceuticals restraining them from taking any steps to act in contravention to the Development and Management Agreement, the agreement to arbitrate and altering the positions with the investor tenants in the Pharmaceutical Zone in Oyamaduwa until the disputes were heard in Arbitration.

The intended Zone is expected to produce a substantial portion of Sri Lanka’s medicinal requirement and generate over 2000 direct jobs and 5000 indirect jobs. This project would be able to significantly reduce the Government spending on medicine which currently stands well above $ 700 million. It will also significantly contribute to the goal of the Government to achieve 60% of total medicine requirement to be fulfilled locally, where currently only 15% of the total requirement is sourced from local manufacturers.

The judgment has considered the positions of the petitioner where it had been highlighted to Court that the Ministry of Health had turned a blind eye to the requests of the petitioner concerning the disputes which had arisen in respect of the development of the Zone as the initially represented number of Investors (above 20) who were to setup plants at the Zone had not done so, or not paid the requirement payments to the petitioner. The sharp increase in construction expenses due to the economic crisis has also been considered which hindered the overall development of the Zone.

The judgment further reiterates the submissions of the petitioner where, in the circumstances and the ensuing deadlock situation, the petitioner had no option but to resort to arbitration in the context where the Ministry had threatened to terminate the agreement with the petitioner and also to alter the agreements with the investors concerning the buyback agreements, effectively rendering the Oyamaduwa Zone nugatory. It had been further submitted that the lacklustre approach of the Ministry was also evident in that even after sending the Notice of Arbitration in March 2024, the petitioner also had to file another Application in the Commercial High Court urging the Minister of Health to appoint an arbitrator to commence arbitral proceedings as per such Notice of Arbitration.

The judgment has also considered the position of the respondents, where it had been submitted to Court that some of the investors who had contributed funds to be projected were displeased with the lack of progress. Furthermore, it had also been submitted that the Zone Developer had not adhered to the timeline presented by the petitioner’s company itself.

The judgment has concluded that, as alleged, there is a reasonable suspicion that the respondents are currently engaging in attempts to modify the existing agreements with investors in a manner that would permit the investors to exit the Zone entirely. Therefore, in light of such actions which pose a significant risk of causing irreparable harm and fundamentally altering the status quo, the Court has found it necessary to intervene to preserve the current conditions and prevent any further irreparable damage until the arbitration process can be properly convened and conducted. As such, the Court has recognised the importance of arbitral proceedings and contractual relationship between the parties.

Court of Appeal Justice M.C.B.S. Morais and Justice R. Gurusinghe delivered the judgment granting the final relief which was prayed for by the petitioner, i.e., the constitutional injunction against the Minister of Health restraining the Minister from taking any steps to act in contravention to the contract between the petitioner and the respondents in any manner whatsoever including by taking any steps to alter the positions with the investor tenants and the Pharmaceutical Zone in Oyamaduwa, Anuradhapura until the disputes are resolved by Arbitration. The proceedings in the case have been terminated and the injunction is thus effective for a period of 3 months or the commencement of the arbitral proceedings, whichever comes first.

On behalf of the petitioner, Counsel Nishan Sydney Premathiratne, Attorney-at-Law appeared with Sidath Gajanayaka and Nimashi Fernando, Attorneys-at-Law, on the instructions of Sarravanan Neelakandan Law Associates.

On behalf of the respondents, Manohara Jayasinghe, Deputy Solicitor General appeared with Printha Kunaratnam, State Counsel instructed by C. Lokuge, Asst. State Attorney.