Business Times

Oil hedging deals – Exercise of the Judicial Power of the people ?

By Nihal Sri Ameresekere

As enshrined in Articles 3 and 4 of the Constitution, sovereignty includes the judicial power of the people, and is inalienable. It further includes fundamental rights enshrined in Article 12 of the Constitution, to be exercised and enjoyed by the people. All organs of government, including the judiciary, are constitutionally bound to respect, secure and advance fundamental rights, without restriction or denial. These are entrenched constitutional provisions, with a strict bar enshrined in Article 75 of the Constitution, whereby even Parliament could not suspend and/or amend.

The foregoing was extensively and exhaustively determined upon by a 7-Judge Bench of the Supreme Court in its Determination in October 2002 on the aborted 19th Amendment to the Constitution. The Supreme Court Bench, presided by then Chief Justice Sarath N. Silva, also included, among others, the former Chief Justice Asoka De Silva, and present Chief Justice Shirani Bandaranayake.

This Supreme Court Determination inter-alia reiterated A.V. Dicey’s postulation on the ‘rule of law’:
“It means, in the first place, the absolute supremacy or predominance of regular law, as opposed to the influence of arbitrary power, and excludes the existence or arbitrariness of prerogative, or even of wide discretionary authority on the part of the government. Englishmen are ruled by the law, and by the law alone ….. ”.

The Supreme Court further reiterated the dicta of the Judgment by former Indian Chief Justice P.N. Bhagwati in Gupta and Others Vs. Union of India 1982 AIR (SC) 197:

“If there is one principle which runs through the entire fabric of the Constitution, it is the principle of the Rule of Law and under the Constitution, it is the judiciary which is entrusted with the task of keeping every organ of the State within the limits of the law and thereby making the Rule of Law meaningful and effective.”.

The foregoing had been cited by the late Attorney General, K.C. Kamalasabayson, President’s Counsel, who had appeared with then Addl. Solicitor General, S. Marsoof, President’s Counsel, now Supreme Court Judge.

In SC (FR) Application No. 158/2007 Justice N.G. Amaratunga, with then Chief Justice Sarath N. Silva and Justice K. Sripavan agreeing, reiterated as follows:

“The ruler's trusteeship of the resources of the State which belong to the people is a part of the legal heritage of Sri Lanka dating back at least to the third century BC as pointed out by Justice Weeramantry in his separate opinion in the International Court of Justice in the Danube Case, by quoting the sermon of Arahath Mahinda to King Devanampiya Tissa as recorded in the Great Chronicle - Mahawansa. (See Bulankulama case - 2000 (3) SLR 243 at 254-255.) This concept of the public trust which curtailed the absolute power of the monarch is in perfect harmony with the doctrine of public trust developed by the Supreme Court on the basis of the sovereignty of the people set out in Articles 3 and 4 of the Constitution, Article 12(1) and the principle of the Rule of Law, which is the basis of our Constitution. The Rule of Law is the principle which keeps all organs of the State within the limits of the law and the public trust doctrine operates as a check to ensure that the powers delegated to the organs of the government are held in trust and properly exercised to the benefit of the people and not to their detriment. When the Executive which is the custodian of the People's Executive Power "act ultra vires and in derogation of the law and procedures that are intended to safeguard the resources of the State, it is in the public interest to implead such action before Court."

It is in the context of such interpretation of the constitutional framework, that one must dispassionately and objectively focus upon the purported Oil Hedging, alias derivative deals, which have surfaced again in the public domain, with Sri Lanka’s State Agency, Ceylon Petroleum Corporation (CPC), having lost its case in the UK, with the consequent liability to a Claim of US $ 162 Mn. + interest at fair market value , compounded on a daily basis; and with two further Claims of over US $ 300 Mn., being adjudicated upon in foreign jurisdictions; thereby the Claims totaling around Rs. 55,000 million.

Attorney General, Mohan Peiris, President’s Counsel, expressed utmost confidence to the Supreme Court of succeeding in the above Cases. Accordingly, as borne out by the record vehemently objected to Leave being granted to me to proceed with two Applications, SC (FR) Nos. 404 and 481/2009, I had filed in the public interest, respectively on May 25, 2009 and June 25, 2009, in terms of the inalienable constitutional rights of the people, to exercise their judicial power, to safeguard the resources of the State and the people, in conformity with the foregoing constitutional interpretations by the Supreme Court. It is the bounden duty of the Attorney General to protect public interest and enforce the rule of law against those, who transgressed the law.

I had filed these Fundamental Rights Applications to have such purported Oil Hedging Deals annulled, as ab-initio null and void, as unenforceable illegal contracts, being wagering contracts, which are unlawful in terms of Gaming Ordinance No. 17 of 1889,attracting criminal prosecution.

In SC (FR) Application No. 481/2009, I sought anti-suit injunctions to estop legal proceedings in foreign jurisdictions to avoid multiplicity of litigations, excessive costs and inconvenience, with the Banks having acted in concert, with the same State Agency (CPC), in Sri Lanka, its own Client. I cited two celebrated Judgments to establish that Sri Lanka, where the transactions had been executed, was the appropriate and natural forum in the interest of all parties for such adjudication, to hear the issues and the questions of local law involved, taking into cognizance availability of witnesses and documents, et al.

The causes of action in my two public interest litigations were distinctly and completely different to the causes of action in the foreign litigations, which were being defended by the Attorney General, Mohan Peiris, having retained foreign Lawyers and experts, costing to date I reckon over US $ 2 million. I had sought to annul these deals as pure and simple wagering contracts. My applications in the public interest were on the premise that public institutions, functionaries and officials, had acted arbitrarily and/or capriciously, and had exposed the State and the people to colossal losses, in complete transgression of the public trust doctrine.

In addition, the Ceylon Petroleum Corporation had acted ultra-vires its own Statute, which did not empower it to dabble in such deals, and mandated that legal instruments be signed by two Directors of the Corporation. Furthermore, Section 5 of the Public Corporations (Financial Control) Act No. 38 of 1971 prohibited the incurring of such capital expenditure, without the prior specific approval of the Minister of Finance, who therefore would be ultimately responsible, even though the practice may be otherwise. A Court of Law would be bound to uphold the prevalent statutory law.

The Court of Appeal in Writ Application No. 829/2005 John Keells vs. SLPA & Others refused Notice, inter-alia, stating as follows, and which was subsequently upheld by the Supreme Court:
“Having regard to the established principles, the statute being superior, reflects the will of the legislature and takes priority over the CUF Agreement. It is an authentic expression of the legislative will and the function of the Court is to interpret the statute according to the intent of Parliament. The responsibility of this Court is to construe and enforce the laws of the land as they are and not to legislate social or government policy on the basis of the CUF Agreement …... Notice is therefore refused."

The Supreme Court having entertained such public interest actions, inter-alia, on the foregoing premises, had annulled as unlawful, illegal and fraudulent several government transactions, which had been executed, with Cabinet Approvals and Agreements finalized by the Attorney General.

On the other hand, the causes of action in the foreign legal proceedings were distinctly different. They were disputes between two contracting parties, deemed to be arising from commercial transactions. Without recognizing such distinct difference, Attorney General, Mohan Peiris, vehemently objected to Leave being granted for the exercise of the judicial power of the people to have this matter adjudicated upon by the Supreme Court of Sri Lanka, in the interest of the State and the public. The cogent question arises, as to who had instructed Attorney General, Mohan Peiris, to have so acted ?

I filed SC (FR) Application No. 404/2009 on May 25, 2009, when I came to know in May 2009 that Standard Chartered Bank, in violation of the Exchange Control Act and a directive by the Monetary Board had remitted in April 2009 US $ 107 Mn., which fact was corroborated by the Affidavit tendered to the Supreme Court by the Controller of Exchange. I filed SC (FR) Application No. 481/2009 on June 25, 2009, when I came to know in June 2009, that the foreign Banks had commenced legal proceedings in foreign jurisdictions. One such proceeding had commenced in March 2009, and the other in June 2009.

The Supreme Court Bench presided by Justice N.G. Amaratunga, comprising Justices S. Marsoof and K. Sripavan were gravely misled by Counsel, representing the Banks, including the People’s Bank, and more importantly, by Attorney General, Mohan Peiris, who vehemently objected to leave being granted. These Counsel submitted that I ought to have filed the above Applications by February 27, 2009, which was one month from the date, January 27, 2009, when certain earlier Petitions had been terminated by those Petitioners on their own motions, and I had been present in the Supreme Court on that date endeavoring to intervene in those actions, which did not materialize.

Significantly, a President’s Counsel, who appeared for A.H.M. Fowzie, a Minister representing the Government in the aforesaid previous Cases, subsequently appeared in defence of one of the foreign Banks, who was a Respondent in my two Applications. Attorney General, Mohan Peiris appeared also for Secretary to the Treasury, P.B. Jayasundera, who had then been substituted by me, after he having been restored to such office, and who had been a principal actor in the perpetration of these purported Oil Hedging alias derivatives deals. The same President’s Counsel had appeared in the Supreme Court for P.B. Jayasundera in his plea to be released for reinstatement.

CPC incurring considerable costs in foreign exchange had also engaged in addition to foreign Lawyers, a foreign expert on Hedging / Derivative transactions to assist in its defence. In the context of the several persons, who had directly and/or indirectly dealt with the matter, are not the public entitled to know, as to why only a limited number of persons had been listed, as witnesses for CPC, and some of whom had admitted to the Supreme Court in response to Order made by former Chief Justice, Asoka De Silva, that they had been sent on foreign jaunts, presumably to study Hedging / Derivative transactions, including Minister A.H.M. Fowzie, who had been invited by Citibank in June 2008 on a Derivatives Training Program to Houston and New York?

My public interest Applications filed on behalf of the people of the country on May 25, 2009 and June 25, 2009 were finally disposed of, with Leave to Proceed being refused on May 11, 2010. At the same time, Secretary to the Treasury, P.B. Jayasundera, who had vacated public office tendering an Affidavit to the Supreme Court on October 16, 2008, consequent to the adverse finding made against him in the Judgment delivered on July 21, 2008 by the Supreme Court in SC (FR) Application No. 209/2007, filed an Application on July 7, 2009 to be released of such undertaking, and such Application was disposed of on September 24, 2009 by a 7-Judge Bench, delivering Judgments on October 13, 2009. Cited below are extracts of the dissenting Judgment by Justice Shiranee Thilakawardene.

“It is my considered opinion that this application reveals fatal errors of law which would militate against any relief being granted to the Petitioner. Setting aside the obvious question raised by the facts that the Petition before us was filed a full year after the Court’s allegedly “invalid inducement” of the Petitioner’s Affidavit – a long time to suffer what the Majority contends is a patently invalid restriction – the Petitioner, amended the Petition on 21st July 2009 without obtaining permission from Court to do so. More specifically, the supporting affidavit made in connection with the amendment lacks a signature of a Justice of the Peace/Commissioner, such omission rendering invalid and false the jurat contained therein. The amended Petition dated 21st July 2009, thus remained unsupported by a valid Affidavit, and, consequently, the said Affidavit should have been rejected in limine.

When this matter was taken up on 3rd August 2009 a fresh set of papers were filed, consisting of a second amended Petition dated 31st July 2009 and a purported Affidavit dated 31st July 2009, once again without having obtained permission of Court. On the same day he sought permission to file an Affidavit within 10 days, which was “of a confidential nature”.

It was this defective, second amended Petition dated 31st July 2009 that introduced, for the first time, the allegations that the order dated 8th October 2008, which preceded the filing of the impugned affidavit, was: ………………. ”

I filed Motion on November 10, 2009, explicitly disclosing the amendments made to my Petition filed on June 25, 2009 in SC (FR) Application No. 481/2009, together with my Amended Petition dated November 10, 2009; and on November 19, 2009, I was directedby the Supreme Court Bench, presided by Justice Shirani Bandaranayake, that I should support such Motion and get approval of the Supreme Court for amending the Petition in terms of the Supreme Court Rules, and for such purpose the matter was fixed for Support, subject to objections by the Respondents, on February 11, 2010.

National and public interest has been forsaken. Certain media portrayed legal Counsel, including M.A. Sumanthiran, Attorney-at-Law, now TNA Member of Parliament, as traitors for professionally appearing to defend a media institution. In fact, M.A. Sumanthiran, Attorney-at-Law, acting in the national and public interest, appeared to prosecute and achieve the annulment of the Sri Lanka Insurance Corporation and Lanka Marine Services unlawful and illegal privatizations, whilst then Attorney General, C.R. de Silva, President’s Counsel, had opposed such Applications. The government subsequently blissfully claimed that the government reversed these privatizations ! Whereas, the government had not only failed to enforce the rule of law against the miscreants, but on the contrary have shielded them with State appointments ! Clearly, the government having dealt with armed terrorism, is intriguingly unable to deal with economic terrorism !

Would not the foregoing perpetration, in an arbitrary and capricious manner, of such dubious transactions causing colossal losses to State and the people, be akin to the colossal losses caused to the State by the infamous Amnesty of 2003, which a 5-Member Bench of the Supreme Court, presided by former Chief Justice Sarath N. Silva, and among others had included former Chief Justice Asoka De Silva and present Chief Justice Shirani Bandaranayake pronounced, as inimical to the rule of law, violative of the ‘Universal Declaration of Human Rights and International Covenant on Civil & Political Rights’, and that it had defrauded public revenue, causing extensive loss to the State ?

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Oil hedging deals – Exercise of the Judicial Power of the people ?


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