BASL files case against forcible foreign currency conversion

By Lakmal Sooriyagoda

The Bar Association of Sri Lanka (BASL) yesterday filed a writ petition in Court of Appeal seeking an order quashing the decision of Central Bank Governor to issue Gazette Extraordinary over the conversion of foreign currency earnings into Sri Lankan rupees.

President and Deputy President of BASL Saliya Pieris PC and Anura Meddegoda PC respectively filed this petition naming Finance Minister Basil Rajapaksa, Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal and the Monetary Board of the CBSL as respondents.

The petitioners state that members of the BASL practicing law in Sri Lanka provide professional services in Sri Lanka and outside Sri Lanka to natural and juristic persons, who are resident within and outside Sri Lanka. 
In the provision of such services in or outside Sri Lanka to a person resident outside Sri Lanka and deriving the benefit thereof outside Sri Lanka, 

the members of the BASL are paid their professional fees, both in local and foreign currency. 

The petitioners state that where payment of professional fees are made in foreign currency for the services provided by its member/s within or outside Sri Lanka, such foreign currency is remitted to and deposited in Personal Resident Foreign Currency Accounts (PRECA), Special Deposit Accounts (SDA) or other permitted accounts in licensed commercial banks in Sri Lanka, in such currency without conversion into Sri Lankan Rupees. 
The petitioners state that the members of BASL provide an important contribution in earning foreign exchange for the country and for the greater good of its citizens. 

The petitioners state that the entirety’ of the professional fees for services provided to a person resident outside Sri Lanka and derived in foreign currency is for the entirety of services provided as a professional and can by no stretch of imagination be described as “Repatriation of Export Proceeds into Sri Lanka”. 

The petitioners also state that unlike exporters and traders, the members of the BASL who earn professional fees in foreign currency remit the entirety of their professional fees to Sri Lanka, to be duly deposited in foreign currency accounts.

The petitioners said the subject of regulation of foreign exchange is vested entirely in terms of the Foreign Exchange Act upon the Minister of Finance. 

The role of the Central Bank in respect of foreign exchange regulation is limited to acting as the agent of the government in terms of directions issued in that behalf by the Minister of Finance, which the Monetary Board is statutorily duty bound to cause such directions to be carried out.  The petitioners state that the role of the Minister of Finance in the regulation of foreign exchange under the Foreign Exchange Act is distinct and different from the role of the agent of the Government, the Central Bank, under the Foreign Exchange Act. The Monetary Board has no role to play in the “regulation of foreign exchange” under the Foreign Exchange Act, as a matter of law. 

The petitioners stated that it is in that background, that the purported Gazette Extraordinary No. 2251/42 of 28th October 2021 was issued by Ajith Nivard Cabraal.