Arbitration Law in Sri Lanka
Sri Lanka's Arbitration Law is governed primarily by the Arbitration Act No. 11 of 1995, which provides a framework for both domestic and international arbitration. The Act has been designed to align with international standards, particularly those set out in the UNCITRAL Model Law on International Commercial Arbitration. Sri Lanka has also signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), ensuring the enforceability of international arbitral awards.
Here’s a detailed overview of Arbitration Law in Sri Lanka:
1. Legal Framework
- Arbitration Act No. 11 of 1995: The primary legislation governing arbitration in Sri Lanka is the Arbitration Act No. 11 of 1995. The Act incorporates elements of the UNCITRAL Model Law on International Commercial Arbitration and is designed to promote the use of arbitration as an effective alternative dispute resolution mechanism.
- UNCITRAL Model Law: The Arbitration Act closely follows the UNCITRAL Model Law, which sets international standards for the conduct of arbitration proceedings. This alignment ensures that arbitration in Sri Lanka is consistent with global norms and enhances the country's reputation as a reliable venue for arbitration.
- New York Convention (1958): Sri Lanka is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This means that Sri Lanka recognizes and enforces foreign arbitral awards, subject to limited grounds for refusal.
2. Arbitration Agreement
- Written Agreement: In Sri Lanka, an arbitration agreement must be in writing to be enforceable. The agreement may be in the form of a separate contract or an arbitration clause within a broader contract.
- Enforceability: If there is a valid arbitration agreement, Sri Lankan courts will typically uphold it and refer disputes to arbitration, unless there are grounds for the agreement to be deemed invalid (e.g., due to lack of capacity, fraud, or coercion).
- Scope of Arbitration Agreement: The arbitration agreement should clearly define the scope of the disputes that are subject to arbitration. If a dispute arises and there is an arbitration agreement in place, the court will generally refer the dispute to arbitration, unless it falls outside the scope of the agreement.
3. Arbitral Tribunal
- Number of Arbitrators: The parties are free to decide on the number of arbitrators. Typically, one or three arbitrators are appointed. In the absence of an agreement, the court or the arbitration institution may determine the number.
- Appointment of Arbitrators: The parties to the dispute usually have the freedom to select the arbitrators. If the parties fail to agree on the appointment, the court or an arbitration institution may step in to appoint the arbitrators.
- Impartiality and Independence: Arbitrators in Sri Lanka must be impartial and independent. They are required to disclose any potential conflicts of interest. If a party believes an arbitrator is biased, they may challenge the appointment, and the tribunal or court may decide whether to replace the arbitrator.
4. Arbitration Procedure
- Party Autonomy: Sri Lanka’s arbitration law respects the principle of party autonomy, meaning that the parties can agree on the rules and procedures governing the arbitration. This includes choosing between institutional or ad hoc arbitration and selecting the arbitration rules (e.g., UNCITRAL Rules, ICC Rules).
- Institutional Arbitration: Sri Lanka has a few established arbitration institutions, including the Sri Lanka Chamber of Commerce and the Colombo International Arbitration Centre (CIAC), which provide institutional arbitration services. These institutions can administer arbitration, appoint arbitrators, and assist with procedural matters.
- Ad Hoc Arbitration: If the parties prefer ad hoc arbitration, they can choose the UNCITRAL Arbitration Rules or any other rules agreed upon. The parties can also determine the procedures, provided that they are fair and consistent with the law.
- Language of Arbitration: The language of arbitration is typically determined by the parties, but English is commonly used, especially for international commercial arbitration.
5. Arbitral Awards
- Final and Binding: Once issued, an arbitral award in Sri Lanka is final and binding on the parties. The award must be complied with by the parties unless successfully challenged under limited grounds, as set out by the Arbitration Act.
- Form of Award: The award must be issued in writing and signed by the arbitrators. It should include the reasons for the decision unless the parties agree otherwise. The award must also indicate the amount of any damages or specific relief awarded.
- Types of Relief: Arbitrators in Sri Lanka can grant a wide range of remedies, including monetary damages, specific performance, or injunctive relief, depending on the nature of the dispute.
6. Recognition and Enforcement of Arbitral Awards
- Domestic Awards: Domestic arbitral awards are enforceable in Sri Lanka without the need for further judicial intervention, except in cases where there are grounds for challenging the award (e.g., procedural irregularities, fraud, or violation of public policy).
- Foreign Awards: Sri Lanka is a signatory to the New York Convention (1958), which obligates the country to recognize and enforce foreign arbitral awards. A foreign award can be enforced in Sri Lanka by applying to the court for enforcement, provided that the award meets the conditions set out in the Convention.
- Grounds for Refusal of Enforcement: A foreign arbitral award can only be refused enforcement on limited grounds, such as:
- The award was made in a country that is not a party to the New York Convention.
- The award violates Sri Lanka’s public policy.
- The party against whom the award is invoked was not given proper notice of the arbitration proceedings.
- The award deals with a dispute not covered by the arbitration agreement.
7. Judicial Review and Setting Aside of Awards
- Limited Grounds for Challenge: The grounds for challenging an arbitral award in Sri Lanka are strictly limited. A party may seek to set aside an award under the following circumstances:
- Excess of Jurisdiction: If the arbitral tribunal exceeds its powers or jurisdiction, the award can be set aside.
- Lack of Due Process: If the party was not afforded an opportunity to present their case (e.g., lack of notice or opportunity to be heard).
- Fraud or Corruption: If the award was obtained through fraudulent means or corruption.
- Public Policy Violation: If the award is contrary to Sri Lanka’s public policy or fundamental principles of justice.
- Time Limits for Challenges: A party must file a request to set aside an arbitral award within three months from the date of receiving the award.
8. Role of Courts in Arbitration
- Supportive Role: Sri Lankan courts play a supportive role in the arbitration process. They can assist in matters such as:
- Appointment of Arbitrators: If the parties fail to appoint an arbitrator or agree on the method of appointment, the court may intervene and appoint the arbitrators.
- Interim Measures: The court can grant interim measures in support of arbitration, such as freezing assets or providing temporary relief during arbitration proceedings.
- Enforcement of Awards: The court is responsible for enforcing both domestic and foreign arbitral awards, subject to the provisions of the New York Convention.
- Stay of Court Proceedings: If a party initiates court proceedings despite an existing arbitration agreement, the court will usually stay those proceedings and refer the matter to arbitration.
9. Arbitration Institutions in Sri Lanka
- Colombo International Arbitration Centre (CIAC): CIAC is the primary institution for administering arbitration in Sri Lanka. It provides services for both domestic and international arbitration and is widely recognized for its role in promoting arbitration in Sri Lanka.
- Sri Lanka Chamber of Commerce (SLCC): The SLCC also offers arbitration services, especially in domestic commercial disputes. It acts as an arbitration institution and provides a range of dispute resolution services.
10. Recent Developments and Future Outlook
- Promotion of Arbitration: Sri Lanka has taken steps to promote arbitration and alternative dispute resolution (ADR), recognizing their importance in a modern economy. The government has made efforts to improve Sri Lanka’s infrastructure for arbitration by encouraging institutional arbitration and enhancing the legal framework for dispute resolution.
- International Recognition: Sri Lanka is increasingly becoming recognized as an attractive destination for international arbitration, particularly in South Asia. As Sri Lanka’s economy grows and foreign investment increases, the demand for effective dispute resolution mechanisms such as arbitration is likely to grow.
- Reforms and Improvements: There are ongoing discussions regarding the further reform of Sri Lanka’s arbitration framework, including improving the ease of enforcement of arbitral awards and expanding arbitration awareness in the business community.
Conclusion
Arbitration Law in Sri Lanka, governed by the Arbitration Act No. 11 of 1995, is well-established and aligns with international arbitration standards. The country’s Arbitration Act reflects the principles of party autonomy, neutrality, and fairness, with provisions for both domestic and international arbitration. Sri Lanka’s adherence to the New York Convention ensures the recognition and enforcement of foreign arbitral awards, making it an attractive jurisdiction for international dispute resolution. With a growing infrastructure for arbitration, including institutions like the Colombo International Arbitration Centre (CIAC), Sri Lanka is well-positioned to be a key arbitration hub in the region.
RELATED Blog
0 comments