Sri Lanka moves to repeal expropriation law, assets not yet returned

ECONOMYNEXT – Sri Lanka has moved a law to repeal a 2011 expropriation law which had delivered a massive blow to the country’s investment environment, but stopped short of returning assets to previous owners, despite their not being paid compensation.

Sri Lanka did not get as much foreign investment as expected after the end of a 30 year war partly due to the 2011 expropriation law, which showed that the state and nationalist legislators could make investors lose their entire investment compared to partial damaged from war risk.

Some investors, including opposition activists who were named, were not compensated. Two firms listed in the Colombo Stock Exchange were also expropriated.

Ad Hominem

The ‘law’ exposed serious weaknesses of Sri Lanka as modern nation and weak protections unarmed citizens had from a runaway elected ruling class.

At the time legal experts said the ‘law’ was ad hominen as it targeted specific assets, violating principles of law making and it also prohibited those affected from going to court, which violated the separation of powers.

Sri Lanka’s current administration delayed repealing the law soon after it came to power and may have lost a chance to boost foreign direct investment.

It was not the first time Sri Lanka has expropriated businesses, owned by private citizens after a native ruling class got control of a European-style legislature set up by colonial rulers.

 Most expropriations were done by the left-oriented Sri Lanka Freedom Party linked administrations.

But the United National Party had also brought a law giving draconian powers to the Urban Development Authority to expropriate land from private citizens not for public purposes (eminent domain) but also to sell to other private investors.

Liberty advocates say such laws also have to be changed.

Business Destruction

"Sri Lanka has destroyed native businessmen while countries like Singapore and Thailand built native businessmen," Minister Lakshman Kirella told parliament introducing the repeal law.

"We nationalized bus companies, destroyed the De Mels, the de Soyza who were native businessmen.

"Then white investors tea plantations were expropriated. They were given land in Kenya. Those days the entire Europe bought Ceylon tea. Now they buy from Kenya."

Sri Lanka’s tea exporters, led by some Muslim exporters has since built new markets for black tea in the Middle East and Central Asia.

Under the repeal law, 11 firms will be placed under trust with the Treasury, Kiriella said.

Many of the firms that were expropriated were defunct and only had assets such as land. But Sevenagala Sugar owned by opposition activist Daya Gamage – a minister in the current administration -, Pelwatte Sugar and Hotel Developers, were listed firms.

The latter two had minority shareholders.

Kiriella said some of the firms had been given to the Board of Investment (which had leased land), other to the Urban Development Authority and some were under competent authority.

The law proposed that 11 firms be placed under trust with the Treasury.

Kiriellla said there we no moves to hand the firms back to investors but an amendment would be brought to the law allowing the subject minister to approve a change in the future.

Gamage said he was not paid a cent in compensation up to now. He said he did not want the firm back which had cost nine years of his productive life, but only wanted reasonable compensation.

The second reading was passed with 91 voting for and 69 against. (Colombo/June20/2019)