Business community opting for midnight laws detrimental – Arbitration expert

By Deepal V. Perera

The country’s main body engaged in resolving commercial disputes outside court, the Sri Lanka National Arbitration Centre (SLNAC), lamented that the main defect in the country’s commercial disputes is that the parties to an agreement do not read the clauses properly before signing it, thereby getting entangled in costly, time consuming and long drawn out legal embroilments when any dispute arises.

“Be it a private or government owned business entity, nowadays people merely sign business agreements without going through each and every clause in it. When things go wrong, the parties concerned become embroiled in longstanding legal disputes, which could result in wiping off the company’s earnings,” said Chief Executive Officer/Legal Advisor and Governor of the Sri Lanka National Arbitration Centre (SLNAC) Hiran De Alwis.

In an interview with the Daily FT, De Alwis said that in the majority of cases, manners in which to resolve disputes have not been set out, ensuring that appearing before a court of law is considered the final mechanism in resolving a dispute.

The Governor of the SLNAC pointed out that due to this situation, there was an increasing number of disputes now being heard before the arbitrator, amounting to around three a day.

“The main advantage of opting for arbitration is that 80% of the cases that go for arbitration would be resolved within one year with absolute secrecy ensured for the corporate concerned to resolve their disputes in a more amicable manner,” he noted.

De Alwis said that when formulating any corporate agreement, the clause relating to arbitration is done at the eleventh hour, just before the finalisation of an agreement.

“People insert the clause relating to arbitration at the final stage without giving proper weight to the clause. Because of this the arbitration clause is commonly referred to as ‘midnight laws’ among the legal fraternity,” he said.

Commenting on SLNAC’s role, De Alwis said that it was the country’s oldest institution in administration of arbitration for resolution of commercial disputes.

“Apart from facilitating local businesses to resolve their disputes, we see great potential for Sri Lanka to become a central hub in attracting international arbitration matters. International arbitration is today considered a multibillion dollar industry and if we can promote ourselves by offering independent arbitration facilities, we will be in a better position to attract international commercial disputes and resolve them,” he said.

According to SLNAC, for multinational companies, international commercial arbitration and dispute resolution is of vital financial importance. As the global financial crises ease and efforts are being made worldwide to stimulate economic growth, investments have become a key component of a strategy.

There is an increased and sudden influx of cross border disputes in the region, and Singapore for example, is in the process of gearing up for what may prove to be multibillion dollar industry,” he pointed out.

SLNAC consists of several distinguished members of the legal community and several institutional members, including Chairman Romesh De Silva, PC.