(LBO) - Sri Lanka's Board of Investment, the state investment promotion agency, has deleted a page which 'guaranteed' investors freedom from expropriation, raising questions of heightened political risk, lawmakers said.
Sri Lanka passed a law to expropriate assets of 37 businesses, in several of which foreign investors were involved, after rushing it to parliament as an urgent bill, despite the existence of article 157 in the constitution which guaranteed freedom from nationalisation.
An official said the change was part of a revamp of the website which has been re-launched and a direct link has been provided to the relevant section on the constitution elsewhere.
Lawmakers at a debate Wednesday said while the parliament had been informed that the draft law was not inconsistent with the constitution, they do not know what else was said in a Supreme Court determination on the bill.
Sri Lanka's 1978 constitution, enacted by then President J R Jayewardene has been criticized as a document that placed him above the law, destroyed the remnants of a public service paving the way to arbitrary rule and undermined civil liberties.
But it guaranteed freedom from expropriation allowing foreign investors who had been driven away through nationalist and socialist experiments earlier, to come back after Sri Lanka's unemployment hit levels seen in the US during the Great Depression.
Economic Foundation
Opposition lawmaker Wijedasa Rajapakse, during Wednesday's debate on the expropriation bill said during the 1970s closed economy the only foreign investment to come to Sri Lanka was a Japanese ceramic plant.
"Not a dollar, not a pound came," Rajapakse said. "So the economy did not progress.
"That is why J R Jayewardene built the open economy. The open economy was built upon nothing else but that article 157 of the constitution...
"It is by showing 157 that the BOI was built. The first certificate we give foreign investors is a guarantee of the article 157. What is that? It says please investor we will not enact any law that hurts the foreign investors."
The until last week, Sri Lanka BOI had a webpage (http://www.investsrilanka.com/attractive.asp) titled 'Attractive & Transparent Laws'.
"The safety of foreign investment is guaranteed through the acceptance by two third majority of Parliament of the Constitutional Guarantee of Investment Protection Agreements," the webpage said.
"Under article 157 of the country's constitution, the agreement enjoys the force of law and no legislative, executive or administrative action can be taken to contravene the provisions of a bilateral investment agreement otherwise than in the interests of national security."
The page also listed countries Sri Lanka had bilateral investment protection treaties with.
As of Friday morning the link was still re-directed to the front page of the BOI.
Economic Liberty
"No matter what the government does now to control the damage done by enacting the Expropriation Law the devastating impact of it will be seen in the next six to twelve months," opposition lawmakers Harsh de Silva said in a statement.
"We tried our best as a responsible opposition to warn the government they were heading in the wrong direction, but, we, along with all right thinking people were ignored. Manipulating the website can never right this wrong."
At Wednesday's debate de Silva explained that property rights are vital to economic freedom and growth.
He said in the United States - which is the world's largest recipient of foreign investment - the right to life, liberty and property were enshrined as pre-existing rights in the constitution.
There were safeguards to ensure that a 'tyranny of majority' could not steal freedoms of citizens through parliamentary absolutism.
"I know that minister Basil Rajapaksa and everyone here actually believes in the market economy," de Silva said.
"Economic liberty is a pre-condition for growth and prosperity"
Promises
Economic development minister Basil Rajapaksa told parliament Friday that the state would not expropriate any other businesses in the future and all nationalised businesses had some connection to the state such as land grants, tax breaks or being previously state-run.
The expropriation law was passed despite widespread calls for its withdrawal from opposition groups, Buddhist religious leaders, the island's Bar Association, trade chambers and rights activities.
Sri Lanka's ruling coalition of President Mahinda Rajapaksa has a two thirds majority in parliament and also already changed the constitution once to lift a term limit on the presidency and end a constitutional council to oversee the public service.
BOI agreements have explicit conditions promising freedom from expropriation and also international arbitration in some or all cases.
The deleted web page also promised settlement of disputes under the International Convention for the Settlement of Investment Disputes (ICSID) and said investors "may also refer disputes for arbitration under the rules of the International Chamber of Commerce."
Lawyers say Sri Lanka may be exposed to breach of contract suits over expropriation, especially where investors have substantially complied with the other conditions and rules.
LBO
