Policy recommendations for competitive Global Port City

The success of the Colombo Port City is not dependent on the Colombo Port City Economic Commission Bill (“Bill”) itself, but in building an ecosystem that fosters sustainable financial industry growth. This ecosystem shall comprise of business environment, human capital, infrastructure, financial sector development and a reputation which shall lead to the emergence of a broad, deep, dynamic, and stable financial center at the Colombo Port City. To maintain the flow of capital, the Government is required to implement regulatory and economic reforms which will bring an upswing in demand and activity. 

The advantages of developing this zone with a foreign partner or synergies from different parts of the world, include sharing development costs, tapping into the expertise and experience of partner countries and foreign zone developers and thus gaining preferential access to an established investor network.This does not mean that Sri Lankan businesses should be excluded from engaging in business in Colombo Port City and as such it is recommended that the Bill be amended to reflect this. 

Recommendations
1.The Commission
It is recommended that the Bill should minimize the wide discretion granted to theCommissioners and have a fair and transparent regulatory structure, to meet the desired economic and social potential of Colombo Port City.  Only predictable policies and oversight can overcome these challenges, as well as minimum bureaucratic interferences.
Section 4(6) of the Bill appears to suggest that activities of theColombo Port City would be controlled by the “Minister in charge” and decisively and finally by the President, which is no different to the current law of the land.
Furthermore,Section 65(3) allows for the President to issue a Land Grant under the Crowns Land Ordinance in the name of the Commission, in respect of all land comprising the Area of Authority of the Colombo Port City whereby the Commission will be empowered to lease or transfer on a freehold basis as provided in Section 6(1)(c)(d)(e) and (f) of the Bill, giving the Commission the power to lease and sell the marketable lands within the zone.

The large concentration of power vested in the Commission is further seen in Section 6(v)(w)(x)(y) and (z) where the Commission facilitates the formulation of regulations, facilitates expeditious resolution on commercial disputes, makes recommendationson policy formulation to the President or Minister, notwithstanding anything to the contrary in any other written law, allowing them discretion to disregard national law. The Bill grants the  Commission power toseek the concurrence of the Securities and Exchange Commission and the Condominium Management Authority allowing the Commission to compel such regulatory bodies.

Qualifications of Commissioners 
The requirement for qualifications of those appointed to the Commission and/or operators, applicants should be stipulated in the Bill for the investors to rest assured that such applicants have the financial capacity, technical and managerial expertise, and associated track record of relevant development or operational projects, required for developing or operating the zone. Therefore, it is essential that the appointment process of the Commission be de-politicized. 

2. Separate Judicial System
When a special economic zone is established, the maximum benefit can only be achieved by creating separate legal administrative arrangements in relation to it.

Section 63 of the Bill allows for courts to give priority to legal proceedings instituted on civil and commercial matters, where the cause of action has arisen within Colombo Port City, to hear cases speedily on a day-to-day basis to ensure the expeditious disposal of the same. 

“The World Bank ranks Sri Lanka 164 out 190 in contract enforcement and Sri Lanka takes on average nearly four years to enforce a contract.”

The question that arises here is whether the abovementioned Section shall be able to foster investor confidence in the enforcement of contracts.The Sectiondoes not suggest that there is an independent judicial system for Colombo Port City, with its own courts and an independent judicial authority, which deals with civil and commercial transactions arising from and within Colombo Port City. The same laws that apply to the Courts in Colombo will be implemented and adopted for civil and commercial transactions that are carried out within or have a qualifying connection with Colombo Port City, and as such disputes may arise as to the importance of enforcement cases in the Courts in Colombo. With increased commercial activities in Colombo Port City, the number of cases before these Courts will no doubt multiply in the
years to come. 

It is therefore recommended to have a separate judicial system (with its own independent courts and judges) modelled on common law and English legal tradition so that the court process is akin to the procedure of the English courts. This may provide certainty as to the rights, liabilities and obligations of persons in relation to civil and commercial matters and the ability toimpose restrictions, suspensions and sanctions in relation to disputes arising in Colombo Port City. At present, the Bill does not exempt Colombo Port City from all federal civil and commercial laws but only those in Schedule III.

3.Incentives and Exemptions
The laws set out in Schedule II of the Bill are required to be reformed in line with the Master Plan developed for Colombo Port City, to govern the incentives, exemptions,and prohibitions applicable to Businesses of Strategic Importance.Section 52 and 71(p) deal with the Minister in consultation with the Commission specifying guidelines on the grant of incentives to a Business of Strategic Importance (“BOSI”)for forty (40) years which appears to be at the discretion of the Commission. A framework that sets out a series of rules (for example incentives including infrastructure, tax, customs exemptions and simpler administrative procedures) will ensure greater transparency in investment and production.

It may be prudent for the Commission to prioritize productivity enhancers over tax incentives when adopting policies. The provision of excellent infrastructure, reliable power and skilled labour is much more important than incentives and focus on better governance is the key to a successful Colombo Port City. 

4.Reforms and new laws
A robust legal and regulatory framework remains key to ensure the success ofColombo Port City. For example, insolvency laws should facilitate a more efficient and effective bankruptcy restructuring regime for stakeholders operating in Colombo Port City. Banking laws should be reformed,or separate financial services should be provided in the zone to make structuring and financing for companies in Colombo Port City faster, flexible and
more cost effective. 

5.Employment Laws
The Bill does not guarantee the employment of locals, both skilled and unskilled in the Colombo Port City and as such grants the Commission the power to determine who can reside in, be employed in or visit Colombo Port City and it is recommended that this be amended to guarantee more inclusion ofSri Lankan citizens. 

Employment laws should be introduced to deal with paternity leave, end of service settlements to support the workforce based in Colombo Port City, whilst protecting and balancing the needs and interests of both employers and employees as the current law in Sri Lanka is in favour of the employees requiring the prior written consent of the workman and the Commissioner of Labour to terminate employment. Some modern zones are now implementing gender equality regulations, such as anti-discrimination rules and support services such as childcare and schooling facilities and as such solid regulatory framework and strong institutions are critical success factors.  

Criminal Laws and Anti- Money Laundering Laws
The Bill does not confirm whether the federal criminal laws, including the Prevention of Money Laundering Act,Convention on the Suppression of Terrorist Financing Act and Financial Transaction Reporting Regulations will apply to Colombo Port City.

A relaxation of certain regulations can create an environment that may prove attractive for those engaged in illicit activities such as counterfeiting, money laundering and general smuggling and regulations to deal with these oversightsare required to be adopted focusing on improving governance and enhancing international security. The Bill should allow for investigations of violations of the aforesaid laws and regulations.

6.Arbitration
The Bill states that the International Commercial Dispute Resolution Centre (ICDRC) shall be established for the purposes of offering conciliation, mediation, adjudication, arbitration and any other alternate dispute resolution services. It also requires that all agreements entered by authorised persons shall contain a provision requiring mandatory reference of any dispute that may arise within the Colombo Port City to the ICDRC. 

The question that would arise is whether ICDRC would become a successful and trusted dispute resolution institution as are: ICC, LCIA, ICSID and SCC, to name the leaders. While it may be easy to set up a new arbitral tribunal in the form of ICDRC, the key factor in determining the success of a commercial arbitration facility, is where the term ‘success’ is to be understood as equivalent to ‘popularity.’

Finally, international arbitration institutions do not adjudicate disputes themselves but rather administer proceedings, a decent pool of potential arbitrators is not just a plus – it is a must. With regard to the qualifications of members of an institution such as ICDRC, the high academic standing of arbitrators-to-be is usually regarded as an advantage. It should be also borne in mind that certain disputes, may require particular non-legal expertise. Therefore, a roster of members should not be limited to lawyers, but feature some high-profile
non-legal professionals.

7.Conclusion 
Ports and cities are historically strongly linked and ports can become the drivers of urban economic growth,where there may be a distinctive correlation between the success of a port and the development of an urban area. Strategic policy formulation is essential in increasing port-city performance and as such the success of Colombo Port City shall depend on this. 

Sustainable port development can be achieved by partnerships and cooperation with stakeholders such as community groups in Sri Lanka and it is essential that this process be de-politicized, with a more open, accountable, and transparent negotiation and
decision-making process.

The Master Plan of Colombo Port City which depicts rich urban opportunities and a robust framework can be made a reality, leading up to increased FDI if the Bill is amended to reflect long-term and stable policies for the development of Sri Lanka with local stakeholders for a prosperous future.
(The writer is a Barrister-at-Law)