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Tue, 28 April 2015 20:49:12
Sri Lanka court orders changes to investment concession framework
11 Oct, 2008 08:13:34
Oct 11, 2008 (LBO) – Sri Lanka's Supreme Court has called for new laws to cut political interference in investment projects and the handing out of concessions, following the reversal of an illegal sale of state lands in which a former president was involved.
In a judgement which reversed a transfer of state land to build a golf course, Supreme Court justice Shirani Tillewardene rapped two state bodies which gave land and tax concessions to the controversial project illegally, at the behest of politicians.

The judgement slammed the Board of Investment (BOI), a state investment promotion agency and the Urban Development Authority (UDA) which had powerful laws to acquire land for development or other purposes, of acting illegally to please politicians.

"As long as the investment infrastructure remains politicized to the extent as revealed in this case, coercive forces will continue to relegate the autonomy afforded to these institutions to the realm of theory and transactions laced with characteristics of fraud and corruption will continue to be shuffled through to completion," the Supreme Court said.

"The main method by which such imbalance can be countered is through establishing appropriate and complete guidelines by which state actors are to operate, a terrain largely left empty by current legislation."

While court cannot legislate, it was able to direct authorities to "concretize and legislate law" to fill a "void" relating to lack of supervision, court said.

"The UDA and BOI, and all other agencies involved with the investment process in Sri Lanka must take steps to create publicly available guidelines regarding the mechanisms of approval," the Supreme Court said.

"Whatever the legislation drafted it must ultimately accord with the sovereignty vested in the People by furthering the Doctrine of Public Trust."

The Supreme Court said the BOI had wrongfully given out tax concessions which ballooned from a 15 percent rate to a complete tax holiday by progressively raising the investment volume to Asia Pacific Golf Course Ltd.

The investment value which was first listed as 250,000 US dollars which qualified for a 15 percent rate for 15 years had been raised through stages to a cost of 1.96 billion rupees.

Court faulted BOI for not examining the financial capacity of the original shareholders to invest in such a project, or even checking whether a foreign investor that was listed as J Yangihara, a 'Japanese' individual, who was said to be the principal investor, actually existed.

"In fact it does not appear that any inquiry was made as to whether Mr Yangihara even existed," court said and that at the time of issuing its approval the BOI "had never even learned of Mr Yangihara's first name."

Court said the BOI "without a shadow of doubt failed to discharge its duties" and had violated public trust.

The golf course was ultimately sold at a huge profit to Sri Lanka's Access Group, who developed the site.

Court also slammed UDA for betraying public trust by giving for commercial development land which was acquired for flood retention as a wetland.

The UDA had progressively altered conditions in a lease to develop 140 acres of wetland and given more land completely free of charge through a license. Some of it had later been converted to a 99-year lease.

Court said state agencies were "over eager" in entertaining the application.

Court faulted former President Chandrika Kumaratunga for pushing the project and ordered her to pay three million rupees as compensation to the state over the golf course deal which in which an associate, Ronnie Peiris was involved.

Court said Peiris had received a disguised brokerage fee of 57.2 million rupees according to revenue authorities for "peddling executive favours" through president Kumaratunga. Peiris was ordered to pay two million rupees.

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