Sri Lanka Brief
FeaturesNewsFormer CJ on Hedging Deal: Executive’s disregard for SC rulings may cost country over US $ 400 mn

Former CJ on Hedging Deal: Executive’s disregard for SC rulings may cost country over US $ 400 mn


Loss equal to total investment in Norochcholai power plant

By Harischandra Gunaratna
If the Executive had carried out two Supreme Court rulings way back in 2008 in respect of the Ceylon Petroleum Corporation (CPC) hedging deal, the country would not have been faced with the prospect of having to pay as much as 400 million US dollars to three banks, former Chief Justice Sarath N Silva said on Tuesday.

Lack of transparency at the highest level of government had helped the Executive keep the people in the dark as to the corrupt deal, he said.

According to the Constitution sovereignty was in the people and they had a right to know how it was being exercised, Former Chief Justice Sarath N Silva said delivering a lecture, Is the Executive a threat to people’s sovereignty?’ organised by Democratic People’s Forum, at the Public Library on Tuesday. That was the very basis of the Right to Information Bill Deputy Opposition  leader Karu Jayasuriya had moved in Parliament, he said.

It was unfortunate that the government had rejected the Bill lock, stock and barrel even without a debate, he added.

The former CJ said that affairs of Parliament and the judiciary were being conducted in a transparent manner but the same could not be said of the Executive which operated in a secretive manner. Therefore, he argued, only the Executive President, had wanted the Right to Information Bill shot down in Parliament so as to keep the people in the dark. He said that the executive had made a cat’s paw of the legislature for that purpose.

People had begun to evince a keen interest in the controversial hedging deal only after a London Court ordered the CPC to pay the Standard Chartered bank a whopping sum of US$ 162 million, the former CJ said adding that two more cases were pending—one by Citibank in Singapore and the Deutsche Bank in Washington. The amounts claimed by the two banks from the CPC amounted to US$ 200 million and US$ 60 million respectively.

Sri Lanka had paid Rs. 400 million as legal fees in respect of the first case in London and the total amount might go upto even Rs. 800 million, when the other cases were taken up, Silva said.

The hedging agreements had been signed CPC Chairman Ashantha De Mel and CPC Deputy General Manager Karunaratne in July and August 2008, he said.

The former CJ said that he had once questioned the Ashantha De Mel in his court whether the latter had passed the GCE (Ordinary Level) examination and the answer had been in the affirmative. But when asked whether he had passed the GCE (Advanced Level examination), de Mel had said that he had studied up to that level.

The former Chief Justice said that he had told De Mel that even his (Silva’s) peon possessed better educational qualifications than the CPC chairman.

Sarath Nanda Silva asked whose relation de Mel was and who had appointed him CPC Chairman. It was not certainly Minister Fowzie, he asserted.

The hedging agreement was seriously flawed and therefore even when oil prices plummeted to 40 US$ a barrel CPC had been compelled to pay as much as 140 US$ a barrel to the banks in keeping with the hedging agreement.

The former CJ asked whether such a deal would have been possible if the people had the right of information.

The Citibank had sent Minister Fowzie to the US to study hedging and Ashantha De Mel had been to Singapore and all over the world to learn about it. But, what they had done after returning home from study tours was only too well known to merit elaboration, the former CJ said.

Some civic minded citizens had moved the Supreme Court against the hedging deal in November 2008 on the grounds that their fundamental rights had been violated owing to high fuel prices and he as the Chief Justice who heard the case had been shocked and dismayed by the sheer magnitude of corruption involving that deal, the former CJ said. The Supreme Court had, in December 2008, given two rulings—one to reduce the price of a litre of petrol be reduced to Rs 100 from Rs 120 and the other to stop payments to the banks concerned, he said.

The Lanka Indian Oil Company (LIOC) had promptly complied with the Supreme Court decision and brought down the price of petrol to Rs 100, he said. But the CPC, which was responsible for the disastrous hedging deal, had refused to fall in line. The Cabinet chaired by President had decided to disregard the Supreme Court ruling, Silva said noting that government had reduced price of petrol was reduced only by Rs 2.

That was how the executive tasked with exercising people’s sovereignty had acted, the former CJ said accusing the state media of having branded the petitioners as traitors.

Sarath Nanda Silva said that that he had been abroad at the time and when he returned he had learnt that a move was being made to impeach him. He said he had been ready to fight it out, the way he had done on previous occasions.

The judiciary had been placed in a very embarrassing position because a Supreme Court ruling was not carried out, the former CJ complained. The petitioners, not wanting a clash between the judiciary and the executive, had withdrawn the petitions and the Supreme Court had quashed the rulings, including the one on payments to the banks, Silva said adding that there had been no alternative as Gen. Sarath Fonseka was leading a bitterly fought war in the Vanni at that time.

As a result the CPC now had to pay the banks, he added.

CEO of the Standard Chartered Bank had told the British Commercial Court that at a meeting where Treasury Secretary P. B. Jayasundara was present, the President had said that the government would pay the bank.

Had the executive respected the SC rulings and acted accordingly , the country would have had to pay only a small amount of money to the banks—as little as US$ two per barrel of oil—on the grounds that people’s fundamental rights had been violated by the hedging deal.

The country had had to pay a staggering amount of money to the banks involved in the hedging deal because of the arbitrary actions of the Executive, the former CJ said, demanding to know who had presented a Cabinet paper to the effect that the SC rulings at issue be disregarded.

The Former CJ asked whether the Cabinet should not be held responsible for the massive losses to the country.

He said that the hedging deal was likely to cost the country as much as US$400 which, he said, was the total cost of Norochcholai coal-fired power project.


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