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Unlawful Privatization in Sri Lanka - Supreme Court Reverses Itself

Bea Edwards, September 24, 2009

On June 4, 2009, the Supreme Court of Sri Lanka annulled the sale of the Sri Lanka Insurance Company (SLIC) to private interests, causing the ownership of SLIC to revert to the government. As a result of the court case, documents establishing the complicity of auditors from Price Waterhouse Coopers and Ernst and Young in the unethical and illicit transaction came to light. To date, however, neither company has been sanctioned and none of the individuals responsible has been held to account.

In a shocking decision handed down September 24th, however, the Supreme Court of Sri Lanka overturned its own previous ruling and will allow P.B.Jayasundara to return to public office despite his orchestration of the unlawful privatization of the former public enterprise Lanka Marine Services, Ltd. (LMSL) in August, 2002.

In the wake of the decision handed down by former Chief Justice Sarath N.Silva on July 21st, 2008, Jayasundara filed an affidavit with the Court in which he promised to refrain from taking any government position in the future. The court accepted this commitment after ruling that Jayasundara had been party to an alleged fraud that awarded 90 percent of the shares of LMSL to John Keell's Holdings, Ltd. (JKH), a private corporation in Colombo.

At the time of the sale, Jayasundara had been Chairman of the Public Enterprise Reform Commission (PERC) of Sri Lanka , and the Court ruled that his conduct had been systematically biased in favor of John Keell's Holdings. In its 2008 decision, the Court reversed the privatization of LMSL and declared that Jayasundara had colluded with S. Ratnayake of JKH, to provide the corporation with financial advantages that were contrary to the public interest. Evidence clearly shows that the value of LMSL was artificially lowered to the advantage of the buyer (JKH) and the disadvantage of the seller (the government).

A year after committing himself to refrain from serving again in government, however, Jayasundara filed a motion with the Supreme Court requesting that he be allowed to return to a high-level position in the public service. He had been requested by the President to accept the post of Secretary to the Treasury and Secretary to the Ministry of Finance.

On July 27, 2009, Nihal Sri Ameresekere filed an affidavit with the Court showing that at no time had Jayasundara contested the allegations that he had operated as Treasury Secretary and Chairman of the PERC in a manner contrary to the public interest. Ameresekere pointed out that Jayasundara's own affidavit contained only vague assertions of his integrity and ethics and that Jayasundara’s commitment to ethical conduct was factually contradicted by transactions to which he had been a party in the privatization of LMSL.

In its September 24th ruling on Jayasundara’s motion, the Supreme Court did not contest the facts in Ameresekere’s affidavit, which still stand. Nor has the fine paid by Jayasundara for misconduct been refunded. On September 25, Ameresekere filed a motion requesting that the Court prevent Jayasundara from returning to public office until the criminal investigation of the privatization of LMSL is concluded

If and when Jayasundara assumes his new public position, it will mean that no government official responsible for the unlawful sale of a revenue-producing public asset at an artificially low price to a private corporation has been meaningfully penalized for his conduct. Only the minimal fine paid by Jayasundara remains as a symbolic sanction. This Supreme Court decision also undermines the fundamental authority of the judiciary in Sri Lanka by allowing a new bench of judges to overturn the decision of a former Chief Justice without presentation of new evidence.. When interviewed, former Chief Justice Silva observed, "This is an unprecedented act and has never before happened in Sri Lanka , or for that matter, in any part of the world.” Silva explained by saying, "Under the Constitution, the Supreme Court judgment is final, and the decisions of the superior courts of any country are final and conclusive."

Jayasundara argued that his services are required by government to help to implement new development projects in the north of the country. Such an assignment returns him to a position where it is difficult to monitor the use of public funds and the potential for abuse of the public trust is high.

Click here to read a GAP report about unlawful privatization in Sri Lanka 
Click here to read correspondence of Ameresekere
Click here to read the previous Supreme Court decision 
Click here to read SLIC Supreme Court submission from Ameresekere