ECONOMYNEXT – Counsel for beneficiaries of Sri Lanka’s Employees Provident Fund who went to Supreme Court against a planned domestic debt restructuring alleging inequity, insisted that courts had jurisdiction to rule on the matter in a hearing at Supreme Court on August 10.
Sri Lanka’s speaker Mahinda Abeywardana ruled earlier this week that courts had no jurisdiction over matter since parliament has approved the debt restructuring by a majority vote and it was a matter of public finance which was a matter for the parliament.
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Petitioners went to court saying their fundamental rights had been violated by pension funds being singled out for debt restructuring.
But Counsel M A Sumanthiran, argued that the motion was not legislation or even subsidiary legislation (regulations issued under a law which have before parliament) which had also been struck down by courts elsewhere.
The DDR motion therefore was not legislation and the invitation for debt treatment by the Minister of Finance was simply executive action, which was within the jurisdiction of the court, he said.
No other country which had restructured debt had singled out superannuation funds for debt treatment, while excluding others, Sumanthiran argued. Some had excluded pensions funds.
While Sri Lanka’s Registered Stocks Securities Ordinance provided for the government to exchange of bonds, all bond in a series had to be exchanged and not only portions belonging to a one group of holders, he said.
Counsel K Kanag-Isvaran objected saying the invitation to exchange debt flowed from a series of actions in country which was unable to repay debt and was under an International Monetary Fund agreement as well as parliamentary sanction.
It was a matter of public finance and debt.
Sri Lanka had gone to the IMF 16 times but this time it was different due to the default and Sri Lanka had to make debt sustainable. Halting debt restructuring would jeopardize the entire process, he said.
The IMF had approved 3 billion dollars of loans and given conditions including the reduction of the gross financing needs for which debt had to be restructured.
Banks which also had bonds had been impacted in several ways already, and they had depositors.
The IMF program and the government was taking action to protect the vulnerable in society and such as through the Aswesuma relief program, Kanag-Isvaran said. The case would be heard again on August 11.
In the application Chathuranga Abeysinghe, an EPF beneficiary, pleaded that the applicable law does not permit discriminatory treatment between bondholders of the same bond and the offer to exchange “would be ex facie ultra vires, grossly unreasonable, and amount to an infringement of the fundamental rights guaranteed by Article 12(1) of the Constitution.
The bond exchange was prejudicial to the interest of 2.5 million contributing members of the EPF, he said.
The Petitioner said that the government is seeking to coerce acceptance of the said proposal, by threatening tax interest of superannuation funds in the event such proposal is not accepted.
However there was no such tax to consider.
The petitioner said the offer the Government with regard to the restructuring of the Treasury Bonds, is tainted with bias and conflict of interest as the Monetary Board of the Central Bank is purportedly acting in the interest of the national economy, which is diametrically opposed to the interests of the EPF Members. (Colombo/Aug11/2023)