President of the Bar Association of Sri Lanka (BASL) Saliya Pieris and Deputy President Anura B. Meddegoda has filed a Writ petition before the Supreme Court of Sri Lanka over the issue of conversion of foreign currency earnings into Sri Lankan Rupees.
Finance Minister Basil Rajapaksa, Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal and the Monetary Board of the CBSL have been named as respondents.
In the application, 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 of 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.
In the event where payment of professional fees are made in foreign currency for the services provided by its members within or outside Sri Lanka, the BASL details that such foreign currency is remitted to and deposited in Personal Resident Foreign Currency Accounts (PRFCA), 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 petition goes on to mention 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".
It is in these circumstances, that the Petitioner invokes the jurisdiction of the Supreme Court under Article 140 of the Constitution on behalf of the members of the BASL in their own right and in the public interest and for the public benefit to have the purported Gazette Extraordinary 2251/42 of 28th October 2021 marked "P3" quashed, as being ultra vires the powers of the 1st Respondent and as being unlawful, irrational, unjustifiable, arbitrary, capricious, in breach of all principles of justice, and due process, and therefore vitiated in law and liable to be quashed.
The Petitioners state that such draconian measures of forcefully converting or threatening to convert the foreign currency of Attorneys at Law who are members of the BASL amounts to a form of expropriation of private property which is both unconstitutional and wholly illegal and which cannot be sanctioned in law.
“Such a conversion of privately owned property against the wishes and without the consent of the owner is ultra vires the powers of the Foreign Exchange Act and the Monetary Law Act as well. It is illegal and unlawful for the 1st and 2nd Respondent under the Monetary Law Act to engage in any activity which purports to usurp powers under the Foreign Exchange Act,” the petition states.
It also points out that the relationship between a Bank and a Customer is governed by the law relating to banking in Sri Lanka.
“A Bank cannot convert or utilize funds of a Customer without the express consent either orally or in writing of the Customer. Therefore, Banks cannot be coerced by the 1st Respondent under threat of sanction for non compliance by the Banks of Rule 8 of P3”, it states further.
Accordingly, the Court has been requested to Grant and Issue a mandate in the nature of a Writ of Certiorari, quashing the decision of the 1st Respondent and/or 2nd Respondent to issue Gazette Extraordinary 2251/42 of 28th October 2021 marked "P3" in terms of the Monetary Law Act No. 58 of 1949.
Further, the petitioners seek for a declaration to be granted that Gazette Extraordinary 2251/42 of 28th October 2021 marked made under Section 10(c) read with Section 68 of the Monetary Law Act No. 58 of 1949 marked "P3" is null and void and of no force or effect in law.
This move comes after the CBSL issued new Rules, as published in the Gazette Extraordinary No. 2251/42 dated 28 October 2021, in respect of repatriation of export proceeds into Sri Lanka and conversion of such export proceeds to Sri Lanka Rupees, repealing the existing Rules issued under the Monetary Law Act, No.58 of 1949. The new Rules are applicable for both exporters of goods and services in Sri Lanka.
The new Rules require exporters to convert, the residual (remaining balance of such export proceeds received), into Sri Lanka Rupees, on or before the seventh (7th) day of the succeeding month, upon meeting following authorised payments.
- outward remittances in respect of current transactions;
- withdrawal in foreign currency notes, as permitted;
- debt servicing expenses and repayment of foreign currency loans;
- purchases of goods and obtaining services including one-month commitments; and
- payments in respect of making investments in Sri Lanka Development Bonds in foreign currency up to ten per-centum (10%) of the export proceeds, so received.