‘Hedging-gate’

The Supreme Court in SC (FR) Applications Nos. 535 & 536/2008 on November 28, 2008 issued interim orders staying the operation of the purported oil hedging alias derivative deals of the Ceylon Petroleum Corporation (CPC). The Supreme Court issued stay orders ex-facie on these transactions, without having before it a comprehensive analysis thereof. Therefore, I filed papers on December 10 & 11, 2008 seeking to intervene to assist and support these Applications.

Subsequently on January 27, 2009 the Supreme Court terminated proceedings in these two Cases, upon the Petitioners thereof having moved to withdraw the same. Therefore, before I was added as an intervenient party, these Cases were withdrawn by the Petitioners.

In the meanwhile, the Central Bank of Sri Lanka, the Regulator, on December 16, 2008 issued directions to the Banks concerned to suspend the operation of these deals, since as stated therein, the Monetary Board of the Central Bank had deemed these transactions to be ‘materially affected and substantially tainted’.

In any event, in terms of the Exchange Control Act, without the express permission of the Controller of Exchange, Central Bank of Sri Lanka, transfers under the capital account are prohibited. In terms of the Section 5 of the Exchange Control Act, Banks being authorised dealers of Central Bank of Sri Lanka ought to have been conversant with such statutory limitations. Since the Regulator, Central Bank of Sri Lanka had publicly notified of action being taken, there was no necessity, whatsoever, for me or any member of the public to have initiated, in the public interest, proceedings in the Supreme Court.

However, subsequently I came to know in May 2009, that Standard Chartered Bank, in violation of the Exchange Control Act and the directive by the Central Bank of Sri Lanka had remitted up to April 2009 US $ 107 m. I promptly on May 25, 2009 filed SC (FR) Application No. 404/2009. My such stance was corroborated by the Affidavit tendered to the Supreme Court by the Controller of Exchange. As reported in the media a penalty of over US $ 240 m., has consequently been imposed by the Controller of Exchange in March 2011, whilst ironically, the Attorney General had indicted other persons in the High Court for offences of far less gravity.

Thereafter, I came to know in June 2009 that the foreign Banks had commenced legal proceedings in foreign jurisdictions. Therefore, promptly on June 25, 2009 I filed in the public interest SC (FR) Application No. 481/2009. Deutsche Bank’s Arbitration proceedings before the International Centre for Investments Disputes had been registered in March 2009, and the Standard Chartered Bank’s Notice of the High Court Case in UK had been served on CPC on June 24, 2009, and as per the Affidavit dated July 10, 2009 tendered to the Supreme Court by the CPC, it was disclosed that Citibank’s institution of legal proceedings in the London Court of International Arbitration, had been notified to CPC on December 22, 2008.

Counsel, representing the Banks, including the People’s Bank, and more importantly, Attorney General, Mohan Peiris, President’s Counsel, who had been noticed under and in terms of Article 134 of the Constitution as amicus, vehemently objected to leave being granted to proceed with my public interest Applications. The Attorney General expressed supreme confidence of succeeding in the foreign legal proceedings, inasmuch as he has in the media now expressed utmost confidence to the public in succeeding with the Appeal against the Standard Chartered Bank’s Case lost by the CPC in the UK High Court. I pointed out to him then that he was on the defensive against those he conceded had done wrong, whilst I was on the offensive, initiating action to deal with those who had gambled with poor people’s monies.

These Counsel submitted that I ought to have filed the above public interest Applications by February 27, 2009, which was one month from the date, January 27, 2009, when the previous two Cases had been terminated by those Petitioners on their own motions, and that I had been present in the Supreme Court on that date endeavouring to intervene in those Cases, which however had not materialised. Significantly, the Counsel for the Controller of Exchange and Director Bank Supervision specifically stated to the Supreme Court that he was not raising such time bar objection, thereby these very relevant law enforcement Officials concerning the matter in issue, had clearly required the matter to be adjudicated upon by the Supreme Court of Sri Lanka.

The Supreme Court Bench presided by Justice N.G. Amaratunga, comprising Justices S. Marsoof and K. Sripavan by their identical Judgments, both dated May 10, 2010 in my two Applications, inter-alia, stated – “On those submissions, the Court is of the view that the failure of the Petitioner to file this Application at least within one month from 27/01/09 is fatal and as such and we uphold the objections raised by some of the Respondents on the basis of time bar and we refuse leave and dismiss the Application.”

The appearances for the Respondents in the Supreme Court were as follows:

‘Mohan Peiris, P.C. A.G. with Janak de Silva, Senior State Counsel and Milinda Gunatilleke, Senior State Counsel, instructed by the State Attorney, for Respondents, Ceylon Petroleum Corporation, Secretary to the Treasury and Hon. Attorney General.

Sanjeewa Jayawardane, with C. Alwis, Attorneys-at-Law, instructed by Julius & Creasy, Attorneys-at-Law, for Respondent, Standard Chartered Bank.

Avindra Rodrigo, with Zafry Sakkaf and Manoj Silva, Attorneys-at-Law, instructed by F.J. & G. De Saram, Attorneys-at-Law, for Respondent, Citibank.

Faiz Musthapha P.C., with Dilumi de Alwis, Attorney-at-Law, instructed by Julius & Creasy, Attorneys-at-Law, for Respondent, Deutsche Bank.

Romesh de Silva P.C., with Harsha Amarasekera and Shehan Gunawardane, Attorneys-at-Law instructed by Julius & Creasy, Attorneys-at-Law, for Respondent, Commercial Bank.

S.A. Parathalingam P.C., with Kushan de Alwis, Hiran Jayasooriya and Nishkan Parathalingam, Attorneys-at-Law, instructed by Sarath Hendavitharana and Assistants, Attorneys-at-Law, for Respondent, People’s Bank.

Dr. Harsha Cabral, with Buddhika Illangatilleke and Somanath Fernando, Attorneys-at-Law, instructed by Murugesu & Neelakandan, Attorneys-at-Law, for Controller of Exchange and Director, Bank Supervision, both of Central Bank of Sri Lanka.’

The foregoing fact, that US $ 107 m, had been remitted by Standard Chartered Bank disregarding the directive of the Central Bank of Sri Lanka and in violation of the Exchange Control Act was only known in May 2009, whilst the foreign legal proceedings came to be known only in June 2009, with one such proceeding instituted in March 2009 and another instituted in June 2009. Such sacred facts lucidly demonstrated that the causes of action in my two public interest Applications had not and could not have arisen, in that, such occurrences put in issue, had not even been in existence in February 2009, for me to have filed such Applications Nos. 404 & 481/2009, which therefore was a fiction.

Significantly, the President’s Counsel, who appeared for A.H.M. Fowzie, Minister representing the Government of Sri Lanka in the previous two Cases, which had been terminated, appeared in defence of one of the foreign Banks in my Applications. Attorney General, Mohan Peiris, President’s Counsel appeared also for Secretary to the Treasury, P.B. Jayasundera, who had then been substituted by me, after he had been restored to such office, whilst he had been a principal actor in the perpetration of these purported oil hedging alias derivatives deals. The same President’s Counsel had appeared in the Supreme Court for P.B. Jayasundera in his plea to be released for re-instatement.

Wagering contracts

I filed these Fundamental Rights Applications in the national and public interest, seeking to have such purported oil hedging deals annulled, as ab-initio null and void, as unenforceable illegal contracts, being wagering contracts, which are unlawful in terms of the Gaming Ordinance No. 17 of 1889, attracting criminal prosecution, as often reported in the media – viz:

These transactions documented on paper, though appearing to be sophisticated, were pure and simple transactions wagering on the fluctuation of uncertain future oil prices. There was no purchase or sale of any oil at all. It could have been on the uncertain movement of the price of any other commodity, or the happening of any other uncertain event, akin to betting on the outcome of cricket matches or horse races.

In Carlill Vs Carbolic Smoke Ball Co., (1892) 2 QB 484 @ 490 – 91 Hawkins J had given the following definition of ‘wagering contract’, which had been affirmed by the Court of Appeal in UK, in Ellesmere Vs Wallace (1929) 2 Ch 1 @ 24, 36, 48 – 49

“A wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties …….. In construing a contract with a view to determining whether it is a wagering one or not, the Court will receive evidence in order to arrive at the substance of it, and will not confine its attention to the mere words in which it is expressed, for a wagering contract may be sometimes concealed under the guise of language which, on the face of it, if words were only to be considered, might constitute a legally enforceable contract”

In R Vs Weisz (1951) 2 KV 611, (1951) 2 All ER 408: ‘It was held that an attempt to deceive the Court by disguising the true nature of the claim and putting forward a feigned issue was a contempt of Court and could be punished as such.’

In SC (FR) Application No. 481/2009, I sought anti-suit injunctions to stop legal proceedings in foreign jurisdictions to avoid multiplicity of litigations, excessive costs and inconvenience, with the Banks having acted in concert, with the same State Agency CPC, in Sri Lanka, its own Client. I cited two celebrated Judgments SNI Aérospatiale v Lee Kui Jack & Another (1987) 3 All ER @ 510 and Spiliada Maritime Corp v Cansulex Ltd., - (1986) 3 All ER @ 843 to establish that Sri Lanka, where the transactions had been executed, was the appropriate and natural forum in the interest of all parties for such adjudication, to hear the issues and the questions of local law involved, taking into cognisance availability of witnesses and documents, et al.

The causes of action in my two public interest litigations were distinctly and entirely different to the causes of action in the foreign litigations, which were being defended by the Attorney General, Mohan Peiris, President’s Counsel having retained foreign Lawyers and experts, costing to date reckoned over US $ 4 m. (a weekend Sinhala Newspaper cited the cost at SL Rs. 488 m). CPC incurring considerable costs in foreign exchange had also engaged in addition to foreign Lawyers, a foreign expert on Hedging / Derivative transactions to assist in its defence.

Actions distinctly different

My Applications made in the public interest were on the premise that public institutions, functionaries and officials, had acted arbitrarily and/or capriciously, gambling with poor people’s monies and had exposed the State and the people to colossal losses, in complete transgression of the ‘public trust doctrine’.

In addition, I had averred that the Ceylon Petroleum Corporation had acted ultra-vires its own Statute, which did not empower it to dabble in such deals, and such Statute mandated that legal instruments be signed by two Directors of the Corporation. A Board Decision cannot override the Statute enacted by Parliament. Furthermore, Section 5 of the Public Corporations (Financial Control) Act No. 38 of 1971 prohibited the incurring of such capital expenditure, without the prior specific approval in each instance from the Minister of Finance, who therefore would be ultimately responsible. Even though the practice may be otherwise, a Court of Law would be bound to uphold the prevalent statutory law, as in the under-mentioned Case.

The Court of Appeal in Writ Application No. 829/2005 John Keells vs. SLPA & Others refused Notice, inter-alia, stating as follows, and which was subsequently upheld by the Supreme Court:

“Having regard to the established principles, the statute being superior, reflects the will of the legislature and takes priority over the CUF Agreement. It is an authentic expression of the legislative will and the function of the Court is to interpret the statute according to the intent of Parliament. The responsibility of this Court is to construe and enforce the laws of the land as they are and not to legislate social or Government policy on the basis of the CUF Agreement… Notice is therefore refused.”

The Supreme Court having entertained such public interest actions, inter-alia, on the foregoing premises, had annulled as unlawful, illegal and fraudulent several large Government transactions, which had been executed, with Cabinet Approvals and on Agreements finalised by the Attorney General. Hence, I believe there was no bar for the Supreme Court to have acted in like manner, had it adjudicated upon and concurred with the averments I had adduced before the Supreme Court, supported by documents.

On the other hand, the causes of action in the foreign legal proceedings were distinctly different. They were allegedly disputes between two contracting parties, deemed to be arising from commercial transactions. At paragraph 571 of the Judgment dated July 11, 2011 of the UK High Court, holding against the CPC, citing several Cases the Judgment states – “Finally, it should be noted that the Courts have repeatedly emphasised the undesirability of intervening in commercial transactions…”

Without recognising such distinct difference, Attorney General, Mohan Peiris, President’s Counsel, vehemently objected to leave being granted for the exercise of the judicial power of the people, to have this matter of national and public importance, adjudicated upon by the Supreme Court of Sri Lanka, in the interest of the State and the public. The cogent question arises, as to who had instructed Attorney General, Mohan Peiris, President’s Counsel, to have so acted?

Ought not the Attorney General, Mohan Peiris, President’s Counsel have as amicus assisted the Supreme Court, since in Fundamental Rights Applications, the Attorney General is required to be noticed, under and in terms of Article 134 of the Constitution ? Ought not the Attorney General have acted to ensure the upholding of the ‘public trust doctrine’ and protect the public interest?

In UK, the Gaming Act of 1845, based upon which the Gaming Ordinance No. 17 of 1989 was enacted in Sri Lanka, had been amended with Gaming Act of 1892, with a further Financial Services Act of 1986, which provided for certain contracts not to be avoided or rendered unenforceable by the Gaming Acts of 1845 and 1892. In terms of Section 3 of the Civil Law Ordinance, since the Gaming Ordinance No. 17 of 1889 was in force in Sri Lanka, English Law would be inapplicable. Could a brothel be lawfully operated in Sri Lanka, purportedly under the law in a foreign jurisdiction, which permits the operation of brothels ?

Adequacy of evidence?

Paragraph 66 of the Judgment dated July 11, 2011 of the UK High Court, holding against the CPC reveals the names of the factual witnesses, who had been called by Attorney General, Mohan Peiris, President’s Counsel to give evidence. They had been –

Lalith Karunarathne - DGM Finance, CPC

Ashantha de Mel – Chairman, CPC

Kimarli Fernando – formerly of SCB

K. Wijetunga, Addl. Secretary, CPC

M. Wijegunawardene – Director, CPC

Saliya Rajakaruna – Member, Oil Hedging Study Group

A.H.M. Fowzie – Minister of Petroleum,

F. Ozman – formerly of SCB,

K.D. Ranasinghe - Director Economic Research, Central Bank, and

N.W.G.R.D. Nanayakkara - Addl. Director Bank Supervision, Central Bank.

At paragraphs 13, 330 and 518 of the Judgment dated July 11, 2011 of the UK High Court, it had been stated that CPC had entered into these transactions, after having consulted Nithya Partners, Attorneys-at-Law, over a number of months and they having had discussions with CPC’s Legal Officer, prior to the execution of the transactions, and once they had been confirmed to be acceptable by Nithya Partners, Attorneys-at-Law. Significantly, CPC a State Corporation had not consulted the Attorney General, contravening the normal practice.

The purported oil hedging alias derivative deals had been mooted by Governor, Central Bank Ajith Nivard Cabraal. Subsequently, Secretary to the Treasury, P.B. Jayasundera had appointed on October 19, 2006 a Study Group, comprising:

Y.M.W.B. Weerasekere - Asst. Governor, Central Bank,

H.N. Thenuwara – Asst. Governor, Central Bank,

Saliya Rajakaruna - CFO, Bank of Ceylon

Kapila Ariyaratne – Head Corporate & Institutional Baking, People’s Bank

Kanthi Wijetunga - Add. Secretary, Ministry of Petroleum

Lalith Karunarathna - DGM Finance, CPC,

V. Kanagasabapathy – Financial Management Advisor, Ministry of Finance

The Study Group by their Report dated November 16, 2006 forwarded to Secretary to the Treasury, P.B. Jayasundera had given their recommendation for CPC to proceed with oil hedging, alias derivative deals.

The foregoing study on such a complex matter, sans competence, experience and expertise, had been carried out hastily within a period of one month, and that too, as per the Statement tendered to the Supreme Court by Kapila Ariyaratne, with only 3 Meetings had, none of which he had attended, but had communicated via e-mail.

Directors of CPC in March 2007 had comprised –

Ashantha de Mel,

M. Wijegunawardene,

D.C. Gooneratne,

Kanthi Wijetunga,

M.I.M. Ali Sabry,

with P.H.N. Samarasinghe, as Secretary to the Board.

In November 2008 the Cabinet of Ministers appointed a Hedging Risk Management Committee, comprising –

W.B. Ganegala – Secretary Ministry of Petroleum

R.H.S. Samaratunga – Deputy Secretary to the Treasury

D. Widanagamachchi – Director, State Accounts

Ashantha de Mel – Chairman, CPC

P.M. Weerasinghe – Chief Economist, Central Bank,

R.A.A. Jayalath - Addl. Director, International Operation, Central Bank,

Lalith Karunaratne - DGM, CPC.

On December 16, 2008, the Monetary Board, Central Bank of Sri Lanka notified the Banks involved in the purported oil hedging deals that these transactions are ‘materially affected and are substantially tainted’. Members of the Monetary Board in December 2008 were the Governor Ajith Nivard Cabraal, Sumith Abeysinghe, then Secretary Ministry of Finance, Tilak de Soysa, Kumar Welgama and M. Ramanathan.

In the context of the several persons, having had directly and/or indirectly dealt with the matter, are not the public entitled to know, as to why only a limited number of persons had been called, as Witnesses for CPC, and some of whom in response to an Order made by former Chief Justice, Asoka De Silva, had admitted to the Supreme Court, that they had been sent on foreign jaunts by the Banks concerned, presumably to study Hedging / Derivative transactions, thereby giving rise to the question, as to whether not, they had been compromised ? At a material time, Minister A.H.M. Fowzie, had been invited by Citibank in June 2008 on a Derivatives Training Program to Houston and New York. In fact, in the previous two Cases, the Supreme Court had directed the removal from Office some of these persons.

Contempt or conflict?

Clive Edward Thomas Haswell, former CEO of Standard Chartered Bank, Colombo, at paragraph 85 of his Witness Statement dated December 21, 2010 in the UK High Court has stated thus:

“85. Even later, in 2009, when CPC owed greater amounts under the transactions, President Rajapaksa personally reassured me and the Citibank CEO about both the legitimacy of CPC’s oil hedge contracts and the Government’s willingness to meet its payment obligations. Specifically, he said that these were legal contracts and that he had no desire to fall out with international banks. I recall that this conversation took place at a breakfast meeting at the President’s residence attended by the President, Dr. P.B. Jayasundera (former Secretary to the Minister of Finance, at the time a presidential advisor) Dennis Hussey (CEO of Citibank) and me. Having consulted my diary, I see that this meeting took place on 2 February 2009. All of the discussions SCB had with CPC inevitably led back to the central Government, due to the highly centralised nature of the Sri Lankan state.”

As per the Affidavit dated July 10, 2009 of CPC tendered to the Supreme Court, Citibank had by then already notified CPC on December 22, 2008 of the legal proceedings Citibank had instituted in the London Court of International Arbitration. The foregoing Meeting as stated had taken place thereafter on February 2, 2009.

Likewise, paragraph 55 of the Deutsche Bank’s ‘Request for Arbitration’ dated February 16, 2009, submitted to the International Centre for the Settlement of Investment Disputes, Washington, US, tendered to the Supreme Court had stated thus:

“55. On 11 February 2009, Deutsche Bank Colombo was contacted by a representative of Citibank, who indicated that Mr. Basil Rajapaksa and Dr. P.B. Jayasundera and Mr. Sumith Abeysinghe, the former and current Secretary of the Ministry of Finance, respectively, requested to have meeting together with the Claimant and other Banks who had entered into oil hedging transactions with CPC (i.e. Ceylon Petroleum Corporation). The Clamant was prepared to attend in good faith and sent two representatives to this meeting, which took place on the evening of 12 February. At this meeting the Respondent made no proposal for settlement, nor did it give any indication as to when or if any such proposal would be forthcoming.”

Significantly, both the above Meetings as stated had taken place on February 2 & 11, 2009, immediately after the Supreme Court had terminated on January 27, 2009 SC (FR) Application Nos. 535 & 536 / 2008, on the Petitioners’ own motions and thereby the restraining orders having lapsed.

If the foregoing were not correct, then ought not the persons concerned have given evidence before the UK High Court and in the other foreign legal proceedings to have controverted such facts ? On the other hand, if such assertions are indeed correct, then would not the cogent serious question of contempt arise, in the context of the undertaking, which had been given by Affidavit to the Supreme Court in SC (FR) No. 209/2007 by P.B. Jayasundera on October 16, 2008, stating inter-alia, -

“I regret having continued to exercise official functions after the delivery of the Judgment by Your Lordships Court in the circumstances referred to above and apologise for same. I state that I do not hold office under the Republic or in any establishment in which the Government of Sri Lanka has an interest, purporting to represent the Government of Sri Lanka and I will not hold office in any Governmental institutions either directly or indirectly or purport to exercise in any manner executive or administrative functions”.

P.B. Jayasundera had been relieved of such undertaking by a majority decision of a 7-Judge Bench of the Supreme Court only on September 24, 2009, on his plea tendered on July 7, 2009, based upon a Letter dated May 25, 2009 addressed to him, on behalf of President Mahinda Rajapaksa, by the Secretary to the President, Lalith Weeratunga. He and those others involved, having been well and truly aware of the foregoing undertaking given to the Supreme Court, had not the aforesaid conduct been, with sheer disregard to the rule of law and the Supreme Court, the highest judiciary? Or on the other hand, was it that P.B. Jayasundera was representing the interests of the Banks concerned, which would then have tantamount to serious conflicts of interest?

Unequal treatment

My public interest Applications Nos. 404 & 481/2009 on behalf of the people vis-à-vis the purported oil hedging alias derivative deals, gambling with the monies of the people, filed on May 25, 2009 and June 25, 2009, respectively, were finally disposed of, refusing Leave to Proceed on May 11, 2010. At the same time, Secretary to the Treasury, P.B. Jayasundera, who had vacated public office tendering an Affidavit to the Supreme Court on October 16, 2008, consequent to the adverse finding made against him in the Judgment delivered on July 21, 2008 by the Supreme Court in SC (FR) Application No. 209/2007, filed an Application on July 7, 2009 to be released of such undertaking, and such Application was disposed of on September 24, 2009 by a 7-Judge Bench, delivering Judgments on October 13, 2009. Cited below are extracts of the dissenting Judgment by Justice Shiranee Thilakawardene.

“It is my considered opinion that this application reveals fatal errors of law which would militate against any relief being granted to the Petitioner.

Setting aside the obvious question raised by the facts that the Petition before us was filed a full year after the Court’s allegedly “invalid inducement” of the Petitioner’s Affidavit – a long time to suffer what the Majority contends is a patently invalid restriction – the Petitioner, amended the Petition on 21st July 2009 without obtaining permission from Court to do so. More specifically, the supporting affidavit made in connection with the amendment lacks a signature of a Justice of the Peace/Commissioner, such omission rendering invalid and false the jurat contained therein. The amended Petition dated 21st July 2009, thus remained unsupported by a valid Affidavit, and, consequently, the said Affidavit should have been rejected in limine.

When this matter was taken up on 3rd August 2009 a fresh set of papers were filed, consisting of a second amended Petition dated 31st July 2009 and a purported Affidavit dated 31st July 2009, once again without having obtained permission of Court. On the same day he sought permission to file an Affidavit within 10 days, which was “of a confidential nature”.

It was this defective, second amended Petition dated 31st July 2009 that introduced, for the first time, the allegations that the order dated 8th October 2008, which preceded the filing of the impugned affidavit, was:…

“I filed Motion on November 10, 2009, explicitly disclosing amendments to my Petition filed on June 25, 2009 in SC (FR) Application No. 481/2009, together with my Amended Petition dated November 10, 2009, essentially in the public interest to assist Court, with further facts disclosed by the Respondents in the Objections filed in the other Case No. 404/2009. Consequently on November 19, 2009, I was directed by the Supreme Court Bench, presided by Justice Shirani Bandaranayake, that I should support such Motion and get approval of the Supreme Court for amending the Petition in terms of the Supreme Court Rules, and for such purpose the matter was fixed for Support, subject to objections by the Respondents, on February 11, 2010.”

Judicial power of the people

As enshrined in Articles 3 and 4 of the Constitution, sovereignty includes the judicial power of the people, and is inalienable. It further includes fundamental rights enshrined in Article 12 of the Constitution, to be exercised and enjoyed by the people. All organs of Government, including the judiciary, are constitutionally bound to respect, secure and advance fundamental rights, without restriction or denial. These are entrenched constitutional provisions, with a strict bar enshrined in Article 75 of the Constitution, whereby even Parliament could not suspend and/or amend.

The foregoing was extensively and exhaustively determined upon by a 7-Judge Bench of the Supreme Court in its Determination in October 2002 on the aborted 19th Amendment to the Constitution. The Supreme Court Bench, presided by then Chief Justice Sarath N. Silva, also included, among others, the former Chief Justice Asoka De Silva, and present Chief Justice Shirani Bandaranayake.

This Supreme Court Determination inter-alia reiterated A.V. Dicey’s postulation on the ‘rule of law’:

“It means, in the first place, the absolute supremacy or predominance of regular law, as opposed to the influence of arbitrary power, and excludes the existence or arbitrariness of prerogative, or even of wide discretionary authority on the part of the Government. Englishmen are ruled by the law, and by the law alone…”

The Supreme Court further reiterated the dicta of the Judgment by former Indian Chief Justice P.N. Bhagwati in Gupta and Others Vs. Union of India 1982 AIR (SC) 197:

“If there is one principle which runs through the entire fabric of the Constitution, it is the principle of the Rule of Law and under the Constitution, it is the judiciary which is entrusted with the task of keeping every organ of the State within the limits of the law and thereby making the Rule of Law meaningful and effective.”

The foregoing had been cited by the late Attorney General, K.C. Kamalasabayson, President’s Counsel, who had appeared with then Addl. Solicitor General, S. Marsoof, President’s Counsel, now Supreme Court Judge.

In SC (FR) Application No. 158/2007 Justice N.G. Amaratunga, with then Chief Justice Sarath N. Silva and Justice K. Sripavan agreeing, reiterated as follows:

“The ruler’s trusteeship of the resources of the State which belong to the people is a part of the legal heritage of Sri Lanka dating back at least to the third century BC as pointed out by Justice Weeramantry in his separate opinion in the International Court of Justice in the Danube Case, by quoting the sermon of Arahath Mahinda to King Devanampiya Tissa as recorded in the Great Chronicle - Mahawansa. (See Bulankulama case - 2000 (3) SLR 243 at 254-255.) This concept of the public trust which curtailed the absolute power of the monarch is in perfect harmony with the doctrine of public trust developed by the Supreme Court on the basis of the sovereignty of the people set out in Articles 3 and 4 of the Constitution, Article 12(1) and the principle of the Rule of Law, which is the basis of our Constitution. The Rule of Law is the principle which keeps all organs of the State within the limits of the law and the public trust doctrine operates as a check to ensure that the powers delegated to the organs of the Government are held in trust and properly exercised to the benefit of the people and not to their detriment. When the Executive which is the custodian of the People’s Executive Power “act ultra vires and in derogation of the law and procedures that are intended to safeguard the resources of the State, it is in the public interest to implead such action before Court.”

It is in the context of such interpretation of the constitutional framework, that one must dispassionately and objectively focus upon the purported oil hedging, alias derivative deals, which have surfaced again in the public domain, with Sri Lanka’s State Agency, CPC, having lost the Standard Chartered Bank Case in UK, with the consequent liability to a Claim of US $ 162 m. + interest at fair market value , compounded on a daily basis; and with two further Claims of over US $ 300 m., being adjudicated upon in foreign jurisdictions; thereby the Claims totalling around Rs. 55,000 m.

Rule of law?

I was indeed appalled that the Attorney General, as well as Counsel, appearing for the People’s Bank, a State Bank, had been instructed to take such objection of alleged ‘time bar’, on a matter of such national and public importance, with colossal sums of public monies as stake. To me very clearly there appeared to be an endeavour, not to have the matters pertaining to this purported oil hedging deals adjudicated upon by the Supreme Court of Sri Lanka, exercising the judicial power of the people, under and in terms of the Constitution of Sri Lanka.

Had the Supreme Court adjudicated upon my Applications, it would have exposed in the public domain, before the people of this country, as to what exactly had transpired in shrouded secrecy in these purported oil hedging deals; giving rise to the lurking question, as to whether the persons responsible for and involved in these purported oil hedging deals were intentionally being shielded and protected, and given refuge from being exposed and arraigned before the law? This was in blatant violation of the ‘public trust doctrine’.

The Supreme Court in fact had directed that investigations be carried out into these deals. The outcome of such investigations commenced by the Criminal Investigation Department and the Bribery Commission are not known. It appears the Government had not only failed to enforce the rule of law against the miscreants, but on the contrary has shielded them with State appointments!

Sri Lanka had ratified the United Nations Convention Against Corruption as far back as March 31, 2004. Far from complying with the obligations stipulated in the Articles of the Convention, Sri Lanka has acted in flagrant breach of such obligations. Clearly, the Government having dealt with armed terrorism, has been intriguingly unable to deal with economic terrorism!

My such apprehensions then, have now been proven, in that, neither the Attorney General, nor the relevant law enforcement authorities have taken any action, whatsoever, against those, who had been responsible for and involved in these purported oil hedging alias derivative deals, whereby colossal sums of monies of the people held in trust, had been recklessly and puerilely staked, risked and gambled away, exposing the poor people to huge claims payable in valuable foreign exchange, earned and remitted by hundreds of thousands of poor people toiling overseas, particularly in the Middle East, who during the last six years up to 2010, had remitted a total sum of US $ 16,945 million, as per the Reports published by the Central Bank of Sri Lanka.

It was clear as day light that the sole intent was to prevent the exposure of this ‘sordid’ and scandalous oil hedging deals before the public of Sri Lanka, and to shield and protect, those who had been involved in and responsible for and/or compromised by the purported oil hedging deals. Subsequent inaction by the Attorney General and/or the law enforcement authorities has only proven such fact. Is it not the bounden duty of the Attorney General to protect public interest and enforce the rule of law against those, who transgressed the law?

Would not the foregoing perpetration, in an arbitrary and capricious manner, of such dubious transactions causing colossal losses to the State and the people, be akin to the colossal losses caused to the State by the infamous Amnesty of 2003, which a 5-Member Bench of the Supreme Court, presided by former Chief Justice Sarath N. Silva, and among others, included former Chief Justice Asoka De Silva and present Chief Justice Shirani Bandaranayake, had pronounced, as inimical to the rule of law, violative of the ‘Universal Declaration of Human Rights and International Covenant on Civil & Political Rights’, and that it had defrauded public revenue, causing extensive loss to the State?