Sri Lanka urged to look at becoming leading regional arbitration centre

• Asked to capitalise on strategic location, political neutrality
• Unutilised opportunities in SAARC region for arbitration 
• Could possibly surpass revenue from merchandise exports
• Interest towards arbitration increasing among Lankan businesses 

By Nishel Fernando

Sri Lanka was recently urged to explore its potential to position the country as a leading arbitration centre in the region, capitalising on the country’s strategic location and political neutrality, which would enhance foreign inflows to the country. 

“Arbitration could be a very smart export. Since we are a neutral country, we can actually reap the benefits of our strategic location. However, we need to develop our talent; we need to compete with countries such as Malaysia, Singapore,” a Member of the Board of Governors of the Sri Lanka National Arbitration Centre (SLNAC) and the National Chamber of Commerce, President, Sujeeve Samaraweera said. 

Samaraweera was addressing the Post Annual General Meeting function of the Sri Lanka National Arbitration Centre held in Colombo last Friday.

He noted that Sri Lanka has best resources to position the country as an international arbitration centre, which could become an source of foreign exchange earnings that even has the potential to surpass revenue from typical merchandise exports. 

SLNAC Chief Legal Advisor and a Member of Board of Governors, attorney-at-law Hiran de Alwis said that as there are unutilised opportunities in the SAARC region for business. The SAARC Arbitration Council (SARCO) has expressed its willingness to co-operate with SLNAC to encourage businesses to use arbitration facilities within the region, as the cost of acquiring arbitration facilities outside the region remains expensive. 

Samaraweera pointed out that due to the nature of confidentiality, flexibility and cost element the interest in arbitration is rising rapidly in Sri Lanka with regard to international business transactions, particularly in sectors such as logistics, shipping and construction.

“For an example, holding a ship in a port costs million of dollars. Hence, those companies seek fast resolutions,” he said.

De Alwis highlighted that the policy decision taken by SLNAC to recommend UNCITRAL arbitration rules for adoption by the parties in dispute has boosted confidence towards the SLNAC as an arbitration centre, which has led to many foreign investors in Sri Lanka seeking SLNAC’s assistance to resolve their disputes. 

“Following the policy decision, there has been a very positive response from many parties, including the United Nation (UN) itself. We had a South Korean trade representative from UN visiting our centre recently and he was very surprised that we are running a centre as this without any State support, and in fact he was recommending our centre and was very happy on UNCITRAL rules being recommended,” he elaborated. 

He further noted that in terms of cross border transactions carried out by banks, the foreign parties involved in these transactions have also expressed their desire to use SLNAC to resolve matters in the contracts. 

The SLNAC on a monthly basis facilitates about 100 arbitration hearings while 70-80 percent cases get concluded within 1-2 years. 

De Alwis revealed that SLNAC is considering several new innovative proposals to increase efficiency of resolving disputes, although they don’t get involved in the dispute resolution process. 

“We have to look at the remaining 20 percent very critically and that’s one of the reasons I got involved; to make sure that the balance arbitrations that are stuck for no apparent reason are given impetus to finish soon. One of the innovative suggestions was stating the board is recommending to a tribunal to make a procedural order if possible, giving a timeline to the conclusion of arbitration.”

According to the 2018 Queen Mary University of London White & Case International Arbitration Survey, the general reputation and recognition of arbitration centres remains crucial in choosing a particular destination for arbitrational facilities, followed by the neutrality, impartiality of its legal system, the national arbitration law and its track record in enforcing arbitration and arbitral awards.

In Asia Pacific, London is the preferred centre for arbitration followed by Singapore and Hong Kong. 

However, there are several arbitration centres emerging in the Asia Pacific region, including Malaysia, South Korea while countries such as Vietnam and Myanmar are also eyeing to position themselves as regional arbitration centres. 

SLANC, the oldest institution in the country for administering arbitrations for the resolution of commercial disputes, having been established and incorporated in the year 1985, has facilitated domestic commercial arbitrations, international arbitrations, disputes of private bodies and State entities at its centre.  

Moreover, SLNAC is also an advisory body for the promotion of arbitrations, and has been a catalyst for the setting up of a specialized High Court to enforce arbitral awards and for suggestions for the original Arbitration Act based on the model law and research papers for the development of Colombo as a neutral, commercial venue for international commercial arbitrations in Asia.

It has also signed co-operation agreements with the American Arbitration Association (AAA) and also with international arbitration centres in Australia, Hong Kong and Singapore.