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Monday March 4th, 2024

Sections of Sri Lanka’s Online Safety Act appear non-compliant with court order: HRCSL

ECONOMYNEXT — The Human Rights Commission of Sri Lanka (HRCSL) has written to the Speaker of Parliament, pointing to sections and omissions in the Online Safety Act that HRCSL said appear to be non-compliant with the Supreme Court’s Determination on the bill.

According to the letter, dated Thursday February 08, Sections 13, 16, 19, 20, and 27 of the Online Safety Act, or the corresponding clauses of the Online Safety Bill (13, 17, 21, 22, and 31 respectively), appear non-compliant with the apex court’s determination.

The Commission said that it had highlighted in a previous communication that law enforcement authorities in Sri Lanka have encountered significant challenges in interpreting and applying existing criminal law applicable to online activity.

“We cautioned the government against proceeding with the enactment of the Bill without first engaging in meaningful institutional reform,” the letter, signed by HRCSL chairman Justice L T B Dehideniya, said.

The bill was placed on parliament’s order on October 03 and was subsequently challenged by a number of Sri Lankan citizens, after which the Supreme Court is specifically issued its determination.

Full compliance with the Court’s Determination on a Bill is crucial to guaranteeing the fundamental rights of the people of Sri Lanka, HRCSL noted.

The Supreme Court found that over 30 clauses in the Bill and certain omissions in the Bill were inconsistent with Article 12(1), and in some cases, Article 1a(1)(a) of the Constitution and determined that the Bill could only be enacted by Parliament with a special majority. However, the Court said, if all the amendments recommended by Court were introduced to the Bill during the Committee Stage of Parliament, the Bill could be enacted by Parliament with a simple majority.

“It was, therefore, incumbent on Parliament to introduce all necessary amendments recommended by Court if it was to enact the said Bill with a simple majority. If any such amendments were omitted, Parliament would be required to enact the Bill with a special majority.

“Having carefully reviewed the Online Safety Act, the Commission observes that the following sections and omissions in the Act appear to be non-compliant with the Supreme Court’s Determination on the Online Safefv Bill,” HRCSL said.

1. Section 13 (Clause 13 of the Bill)
It is observed that, at pages 46 and 47 of the Supreme Courl’s Determination, the Court proposed substantive amendments to section 13 (i.e., clause 13 of the Bill) with regard to contempt of court in addition to the amendments proposed by the Hon. Attorney General.
The Court recommended the following:
  • Confer jurisdiction in terms of Article 105(3) of the Constitution to hear and determine such cases instead of conferring jurisdiction on the Magistrates Court;
  • Subject to the provisions of section 49(3) of the Judicature Act, No. 37 of 1979, such conferring of jurisdiction shall be in addition to the powers confemed on the District Court, Family Court, Magistrate’s Court and Primary Court by section 55 of the Judicature Act No. 37 of 1919.
The precise wording recommended by the Supreme Court does not appear to be reflected in section 13 of the Act.

2. Section 16 (Clause 17 in the Bill)
The Supreme Court observed at page 5 1 of its Determination that: ‘While the ostensible aim of clause 17 [i.e., section 16 of the Act] is to protect religious sentiments from intentional and malicious falsehoods, its actual scope extends beyond the remit of “online safety” as traditionally understood’ (emphasis added)”. It also observed that ‘online safety, in its quintessential sense, is concerned with safeguarding users from immediate digital threats such as cyberbullying, phishing, scams. or exposure to harmful content. The focus is on creating a safe environment where users can navigate and interact without fear of personal harm, privacy breaches, or digital manipulation.’

The spirit of the Court’s observations appears to be that the said clause in the Bill should be deleted. However, the said clause has been retained as section 16 of the Act.

3. Section 19 (Clause 2l of the Bill)
At page 53 of its Determination, the Supreme Court observed that ‘the introduction of a specific clause that criminalises the communication of false statements with intent to cause mutiny and offences against the State is overly expansive and not strictly aligned with the intended scope of the proposed law’ (emphasis added). The Courl further observes that ‘by focusing on broader national security concerns and public order. the clause deviates from the principal objective of protecting Internet users and the public frorn online harm and providing for their safety.’

The spirit of the Coutt’s observations once again appears to be that the said clause in the Bill should be deleted. However, the said clause has been retained as section 19 of the Act.
4. Section 20 (Clause 22 of the Bill)
At page 61 of its Determination, the Supreme Court clearly recommended the amendment of the illustration in clause 22 of the Bill.
However, the relevant section in the Act, i.e., section 20, has retained the illustration in its original form, and the court’s recommendation has not been complied with.

5. Section 27 (Clause 31 of the Bill)

At pages 59 and 60 of its Determination, the Court recommended that certain services and types of material should be exempted from liability under the Bill if they meet the following criteria:

(a) If emails are the only user-generated content enabled by the service;

(b) SMS and MMS services:
1. if SMS messages are the only user-generated content enabled by the service;
2. if MMS messages are the only user-generated content enabled by the service;
3. if SMS messages and MMS messages are the only user-generated content enabled by the service;

(c) If one-to-one live aural communications are the only user-generated content enabled by the service;

(d) False statements, prohibited statements and other prohibited materials that are removed within six months from the date the Act comes into operation; and

(e) Any materials that have been uploaded or interfered by third parties.

We observe that the Supreme Court required all five of the above categories to be separately exempted from liability in order for the Bill to be deemed consistent with the Constitution. However, the manner in which the Act implements the Court’s recommendation appears to be erroneous.

Section 27(l) of the Act exempts categories (a), (b) and (c) above, while section 27(2) refers to categories (d) and (e). However, section 27(l) of theA ct is made subject to section 27(2). Therefore, under the Act, the categories in section27(l) are exempted only if they comply with the requirements set out in categories (d) or (e). Such a formulation is not in keeping with the Supreme Court’s recommendation that all five categories be separately exempted from the scope of the Act.

Additionally, the previous list of exempted categories in clause 3l of the original Bill (i.e., (a) an internet intermediary service; (b) a telecommunication service; (c) a service of giving public access to the internet; or (d) a computer resource service), are now exempted under section 27(l) of the Act only if they comply with section 27(2)of the Act, i.e., if the relevant material is removed within six months of the Act coming into operation, or if the material was uploaded or interfered with by third parties.

Prior to amendments being introduced during the Committee Stage of parliament, the above-mentioned service providers would not have been required to remove material within six months of the Act coming into operation. However, section 27(2)of the Act now requires such removal in order for an internet service provider to be exempted.

We accordingly note that section 27 doesnot fully comply with the recommendation of the Supreme Court.

The Commission is deeply concerned about the above omissions in the Online Safety Act in terms of the Act’s full compliance with the Supreme Cou(‘s Determination. Any such omission, and consequently, any remaining inconsistency with the Constitution, would have required that the Online Safety Bill be enacted only with a special majority in Parliament. Therefore, the failure to ensure full compliance with the Court’s determination may give occasion to serious concerns over whether the Act, in its current form, received the requisite number of votes in Parliament. (Colombo/Feb09/2024)

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Sri Lanka rupee opens at 308.20/50 to the US dollar

Sri Lanka stocks reversed its falling trend and gained for the first time in six sessions on Tuesday closed stronger on Tuesday (21).

ECONOMYNEXT – Sri Lanka’s rupee opened at 308.20/50 to the US dollar Monday, from 308.80/90 on Friday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.08.2026 was quoted stable at 10.90/11.00 percent.

A bond maturing on 15.09.2027 was quoted at 11.90/12.00 percent from 11.90/12.05 percent.

A bond maturing on 01.07.2028 was quoted at 12.20/30 percent from 12.15/35 percent.

The Colombo Stock Exchange opened up; The All Share was up 0.60 percent at 10,755, and the S&P SL20 was up 1.24 percent at 3,077. (Colombo/Mar4/2024)

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Sri Lanka central bank swaps top $3.2bn by December

ECONOMYNEXT – Sri Lanka’s central bank borrowed US dollars from various counterparties through swap transactions, which had topped 3.2 billion US dollars by December 2024, official data show.

The net short position, including swaps disclosed by the central bank, grew by over almost 1.28 billion US dollars from December 2022 to 3,280 million dollars.

The gross position grew from 2,263 million dollars to 3,280 million US dollars over the year.

The central bank supported some state banks with dollars to cover their dollar exposures, which had since been paid back.

By December reported gross reserves of the central bank was 4,491 million US dollars, against swaps of 3,280 billion US dollars.

Swaps of around 1500 related to the People Bank of China.

Swaps allow a central bank to increase gross reserves, without raising domestic interest rates.

Swaps with domestic counterparties lead to liquidity being injected into money markets, which can be mopped if domestic credit growth is moderate.

At the moment many private banks have large dollar positions invested outside the country, which cannot be used for transactions domestically because of a money monopoly given to macro-economists. (Sri Lanka repays debt or collects reserves of U$5bn via banking system since rate correction)

However unwinding swaps after private credit has picked, or engaging in swaps after private credit has picked up, may lead to money being injected to maintain the policy rate, leading to excess credit by banks and balance of payments deficits and or currency collapses, analysts say.

Central bank swaps in the third quarter of 2018 led to a collapse of the currency under the ‘exchange rate as the first line of defence’ policy peddled to Sri Lanka, critics have said earlier.

Domestic currency proceeds of swaps were the primary ammunition to bust East Asian currencies in 1997-98.

Any depreciation after the swap proceeds have been used for imports (effectively mis-targeting rates) a central bank will run a forex loss.

The PBOC however had put a rule, preventing the use of the swap after gross reserves fell below 3 – months of imports, preventing Sri Lanka from getting into further trouble through the use of official reserves for private imports.

Sri Lanka’s central bank also used borrowings from the Reserve Bank of India, via the Asian Clearing Union to run BOP deficits.

Losses from exposed dollar positions of central banks which have gained ‘independence’ from fiscal rules and parliaments and engaged in macro-economic policy, including the Fed, have led to taxpayers bearing the losses in the end.

Swaps were invented by the Fed in the early 1960s, as it deployed macro-economic policy (printed money for growth) threatening its gold reserves and the Bretton Woods system.

Sri Lanka has other borrowings also, including from the IMF, which has made net foreign assets of the central bank negative. (Colombo/Mar05/2024)

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Sri Lanka loses MICE tourists to Thailand on minimum room rates

ECONOMYNEXT – Sri Lanka has lost Meetings, Incentive Travel and Exhibition travelers to competitors in East Asia and India due to minimum room rates as higher standard rooms were available in other countries at lower prices, industry officials said.

President of the Sri Lanka Association of Inbound Tourist (SLAITO) Nishad Wijetunga said they the industry managed to retain a majority of booking made before the minimum room rates were imposed by the state last year.

“However, there were MICE groups that were supposed to come and cancelled Sri Lanka and went to places like Thailand and other parts of India and we lost,” Wijetunga told EconomyNext.

“We know that large groups of MICE (tourists) are affected.”

India is a key source of MICE tourists to Sri Lanka.

Sri Lanka’s businesses have got used to protectionism and try to push up prices with import taxes to extract more money from customers using the coercive power of the state, with tiles and steel being among the most prominent examples.

RELATED: Stand-alone hotels unviable in Sri Lanka due to high construction, capital costs

High priced tiles and steel in turn makes hotels expensive to build and make the leisure industry less competitive, analysts say.

However, in tourism, unlike in building materials customers are not trapped within the country and are free to move to other markets.

Managing Director of CEC Events and Travels, Imran Hassan, said the industry lost groups to East Asia due to minimum room rate.

In one instance, an operator was in discussions to get a group of 900 passengers.

“And that moved out to Thailand,” Hassan said. “Like that, there are many instances that the minimum room rate was not conducive.”

Thailand in 2023 attracted 28.04 million tourists.

A group that used to come to Sri Lanka annually used to take 40 to 50 five-star hotel rooms. This time Sri Lanka competed by offering lower standard.

“This year, they’re only giving 10 rooms to the five-star hotels,” Hassan explained. “They are staying in smaller hotels because they can’t afford it because it has become so expensive.”

“But overall, we are working with the authorities to correct it.

“We don’t mind demand and supply situation taking the rates up as in the Maldives. But what we are saying is keep an open market.”

RELATED : Sri Lanka should say good bye to minimum room rates: President

President Ranil Wickremesinghe has said Sri Lanka cannot progress with protectionism and the country has to learn to face competition. (Colombo/Mar04/2024)

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