Chartered Institute of Arbitrators unveils Sri Lankan branch | Daily News


Chartered Institute of Arbitrators unveils Sri Lankan branch

A new chapter in Sri Lanka’s commercial arbitration was turned last week with the launch of the Sri Lanka branch of the Chartered Institute of Arbitrators (CIArb) at a ceremony held in Colombo to mark the inauguration the of the branch.

The event was graced by Minister of Justice and Prison Reforms Thalatha Atukorala, British High Commissioner to Sri Lanka and the Maldives James Dauris, Director General of CIArb Anthony Abrahams and Patron of the Sri Lanka Branch Yuvanjan Wijayatilake PC.

Addressing the gathering Patron of CIArb, Sri Lanka Branch and Former Attorney General, Yuvanjan Wijayatilake said the inauguration of the Sri Lanka branch marks an imperative milestone in Sri Lanka’s journey to become an international commercial arbitration hub. He saidinternational arbitration warrants attention because of its historic, contemporary and future practical importance, particularly in business affairs. For centuries, arbitration has been a preferred means for resolving both transnational and domestic disputes. The liking which businesses have demonstrated for arbitration, as a means for resolving their disputes has become even more pronounced in the past several decades, as international trade and investment have flourished.

Reminiscing history he said the beginnings of arbitration can be traced back to the classical period wherein Greeks sought to reconcile differences more speedily in a Court of Reconcilement. Even the Romans wanted to put an end to litigation by means of arbitration. So arbitration as a means of dispute settlement is simultaneous, if not prior to public litigation. As for commercial arbitration, the commonly held view is that its beginnings are found in the English Merchant Guilds back in the 11th century. Whilst the main function of these guilds was to maintain and regulate trade monopoly, in addition they also undertook regulating and settling disputes and difficulties among its members. Members of these guilds were bound to bring their disputes to the guild before litigating the matter in court.

“Another method of informal resolution of disputes that enjoyed wide prevalence in England was that of the medieval Courts of Merchant where Kings offered patronage to the courts as the intention was that the foreign merchant must be treated tenderly and must not be delayed by a long series of pleadings,” Wijayatilake said .

Recalling the beginnings of arbitration in Sri Lanka he saidhaving had trading groups settled in Sri Lanka as early as the 5th century BC, and Sri Lanka’s geographical location being a convenient port in many trade routes, it was inevitable that Sri Lanka had to develop a social structure with a conciliatory dispute settlement system.

Even outside the commercial sphere in Sri Lanka, disputes have been solved in non-adversarial and more amicable set ups in both the community level – through Village Councils, and apex levels of society. This culture of conciliatory settlement of disputes was also sustained by Buddhist principles of just and equitable governance or ‘Dasaraja Dharma’.

Much later, with the introduction of English Law to govern commercial matters, basic concepts of commercial dispute resolution including arbitration as it was practiced in England infiltrated to Sri Lanka.

The Arbitration Act of 1995 was preceded by the Arbitration Ordinance of 1856 and the Civil Procedure Code of 1889 which regulated arbitration in Sri Lanka. Yet, pursuant to these laws, courts were entrusted with close supervisory powers over most of the aspects of arbitration in a way that arbitration ultimately resulted in protracted litigation. The Reciprocal Enforcement of Foreign Judgments Ordinance of 1921 was used for the enforcement of foreign arbitral awards under which awards were reduced to decrees of courts and expected to be registered and enforced by the District Court of Sri Lanka.

“These century old statutes failed in providing a mechanism for a speedier and well integrated procedure for the conduct of commercial arbitration that is adaptable to new developments in the commercial field,” Wijayatilake said adding that it was evident that the supervisory jurisdiction of the courts had to be reduced if commercial arbitration were to be made attractive as an alternate source of dispute resolution.

He said that the Arbitration Act of 1995 which was drafted based on the UNCITRAL Model Law on International Commercial Arbitration and inspired by the then draft Swedish Arbitration Act was a progressive step for arbitration in Sri Lanka. It was an effort to support the development of a modern commercial arbitration culture wherein party autonomy is held paramount, courts are prevented from interfering with the merits of the award and an award can be set aside only based on narrowly defined grounds which are consistent with the New York Convention.

However, he said in practice, the new law had few areas which stifled the smooth operation of commercial arbitrations. It is now timely that the Government and the arbitration community make amendments to enable the smooth and efficient functioning of commercial arbitration in Sri Lanka.

“Sri Lanka arbitration scene as it operates at present is not a reflection of what the framers of the UNCITRAL Model Law had in mind. One is the inordinate delays associated with both the conclusion of arbitration proceedings and the enforcement of arbitral awards. I can safely say looking at most arbitrations conducted in Sri Lanka over the past 30 years, that arbitration has not proved to be a method by which disputes are resolved expeditiously,” Wijayatilake said adding that inherent delays associated with the arbitration proceedings have made businessmen at times prefer litigation over arbitration.

He said arbitration sittings have become limited to a few hours per month and thereby the time taken to give an award and grant relief to parties lingers unreasonably. While it must be appreciated that in the recent past, more and more arbitral tribunals allow witness statements to be filed, obviating the need for an examination in chief, the tendency to have lengthy cross examinations of witnesses have resulted in unwarranted extension of the arbitration hearings.

Delays in the arbitration proceedings are augmented by the subsequent delays in enforcing the arbitral award through courts. The gamut of procedural challenges and undue delays associated with litigation result in the enforcement proceedings getting dragged on. Unless the right to appeal has been excluded by the parties, an appeal lies to the Supreme Court. Here, again there could be delay as the Supreme Court is overburdened with work and is not in a position to give priority to such appeals.

Another glaring drawback is the lack of any formal training or minimum qualifications for arbitrators and the lack of independence and impartiality of some party-appointed arbitrators. It is also notable that arbitrators lack awareness about new methods adopted in international arbitrations that use the latest technology and modes of communication to expedite the proceedings. In Sri Lanka, the tendency is to follow a procedure akin to what is followed in courts, and this has become a significant contributing factor to the inordinate delays.

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