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					2/194   Sri Lanka

        Sri Lanka
        Chamber of commerce:                                Professional body:
        The Ceylon Chamber of Commerce                      Bar Association of Sri Lanka
        50 Navam Mawatha                                    153 Mihindu Mawatha
        Colombo 02                                          Colombo 12
        Sri Lanka                                           Sri Lanka.
        Tel:      +94 11 242 1745                           Tel:       +94 11 244 7134
        Fax:      +94 11 243 7477                           Fax:       +94 11 244 8090
        Email:                              Email:
        Web:                            Web:

        Post-war changes in investment                     sons outside Sri Lanka in shares of such com-             Whilst these regulations / directions have
        in and outside Sri Lanka                           panies was restricted to 40% unless special           not gone so far as to freely permit investment
                                                           approval for a higher percentage was obtained.        in and outside Sri Lanka as was anticipated,
        Anjali Fernando                                        All such investments had to be routed             the winds of change appear to be imminent.
        F J & G de Saram Attorneys-at-Law                  through a Share Investment External Rupee                 Sri Lanka already has in place a host of
        Colombo                                            Account opened at a licensed commercial               investment incentives created through the
                                                           bank in Sri Lanka and thereafter, dividends,          Board of Investment of Sri Lanka Act where
        With the end of Sri Lanka’s 30 year plus fight      liquidation proceeds of the investment could          investors can, depending on the quantum and
        with terrorism in May 2009, along with             be freely repatriated out of Sri Lanka though         area of investment, obtain tax holidays, con-
        rebuilding the northern and eastern territories    that account.                                         cessionary tax rates, customs/import duty
        of Sri Lanka, the government also had the              Since 1992, these regulations have worked         waivers, exemption from exchange control
        unenviable task of rebuilding the battered         well to attract a large number of foreign             etc.
        economy which had hitherto been shackled           investors to invest in Sri Lankan companies               Furthermore, protection to such invest-
        by the ravages of war.                             and those investors have been able to repatri-        ments is guaranteed under the Constitution
            Investments in Sri Lanka as well as invest-    ate their investments with ease.                      of Sri Lanka where provision is made that oth-
        ments outside Sri Lanka by Sri Lanka resi-             In 2007 and 2008, by a series of regula-          erwise than in the interest of national security
        dents which reap direct and indirect benefits       tions and directions, investment by eligible          no written law shall be enacted or made, and
        to Sri Lanka’s economy had to be further           foreign investors in treasury bills and bonds         no executive or administrative action shall be
        encouraged.                                        was also liberalized. As in the case of shares, all   taken, in contravention of the provision of
            The Exchange Control Act, which was            investments in that regard had to be routed           such treaty or agreement and such agreements
        drafted in the 1950’s in Sri Lanka’s socialist     through a Treasury Bond External Rupees               have the force of law.
        era, restricts, inter alia, Sri Lankan residents   Account (Tiera)/Treasury Bills External                   Sri Lanka has entered into several invest-
        from making payments to persons outside Sri        Rupees Account (Tiera 2) opened at a licensed         ment protection treaties with 25 countries
        Lanka, holding foreign currency, making            commercial bank in Sri Lanka. The mainte-             including the USA, UK, India and China.
        investments outside Sri Lanka, opening for-        nance of foreign currency deposits, subject to            Broadly the investment protection treaties
        eign bank accounts, issuing shares to non-res-     certain conditions have also been permitted.          generally provide for the fair and equitable
        idents, without the permission of the                  Post – war, there was much speculation            treatment and guarantee full protection and
        Controller of Exchange.                            that there would be a large scale liberalisation      security to the investments at all times; places
            From time to time, the stringent provi-        of the restrictions under the Exchange                an obligations not to nationalise expropriate
        sions of the above Act had been liberalised to     Control Act.                                          or subject to measures having effect equivalent
        enable investment in Sri Lankan companies              As a start, by regulations issued in March        to nationalisation or expropriation except for
        and facilitate certain payments categorised as     2010 general permission has been given to             a public purpose related to the needs of the
        non-capital payments to be made by Sri             certain persons resident in Sri Lanka and             country and against prompt, adequate and
        Lankans to persons outside Sri Lanka.              companies and firms registered in Sri Lanka to         effective compensation; guarantees the free
            Significantly, in 1992, the general permis-     open, maintain and operate foreign currency           transfer of capital and of returns from invest-
        sion of the Controller of Exchange was grant-      accounts with any bank outside Sri Lanka or           ment, subject to the right in exceptional
        ed under the Exchange Control Act to enable        close such accounts as specified in the afore-         financial or economic circumstances to exer-
        persons/entities outside Sri Lanka to invest in    said gazette.                                         cise equitably and in good faith powers con-
        shares of companies incorporated in Sri Lanka          Further a direction under the Exchange            ferred by its laws; and consents to submit to
        in almost all sectors, subject to certain condi-   Control Act in March 2010, to avoid                   the International Centre for the Settlement of
        tions.                                             investors having to maintain several types of         Investment Disputes for settlement by concil-
            Investment in shares in companies              accounts to invest through, the various invest-       iation or arbitration under the Convention on
        engaged in coastal fishing, money lending,          ment accounts such as Siera/Tiera accounts            the Settlement of Investment Disputes
        pawn broking and retail trade with a capital       were all consolidated all into a Securities           between States.
        less than $1 million was however restricted to     Investment Account through which foreign                  Sri Lanka is a signatory to the Convention
        Sri Lanka residents. In certain other key sec-     investors can invest in shares, treasury              establishing the Multilateral Investment
        tors, such as export of tea, rubber, dealing in    bills/bonds and repatriate their investments in       Guarantee Agency, to alleviate concerns relat-
        non-renewal resources etc, investment by per-      that regard.                                          ed to non-commercial risks of foreign invest-                                                                                                                        2011 EDITION
                                                                                                                                      Sri Lanka             2/195

ments, to afford a basis of fair and stable stan-    Mergers and acquisitions                            FJ&G de Saram
dards for the treatment of foreign investment                                                            The traditional “powerhouse” of the legal
etc, and has also entered into agreements for        Recommended firms                                    industry as peers describe it, FJ&G de Saram
the avoidance of double taxation.                    Tier 1                                              remains in the top tier across the board on the
    Sri Lanka has entered into a Free Trade          FJ&G de Saram                                       back of unanimous acclaim from both peers
Agreements with India and Pakistan to estab-         Julius & Creasy                                     and clients. Star partner Ayomi Aluwihare-
lish and promote free trade as well as a                                                                 Gunawardene is described by peers as an
Preferential Trade Agreement between                 Tier 2                                              “integral part of the firm’s drive for success.”
SAARC countries (Sapta).                             DL&F de Saram                                           The banking team at the firm is advising
    All of the above along with the seemingly        Nithya Partners                                     Amana Bank as it looks to establish the first
gradual relaxation in the application of the                                                             Islamic bank in Sri Lanka. A highlight trans-
Exchange Control Act will create a positive          Tier 3                                              action in progress for the team saw it advising
investor friendly climate to facilitate the resur-   John Wilson Partners                                International Finance Corporation (IFC) on
gence of the Sri Lankan economy.                     Murugesu & Neelakandan                              its proposed risk sharing agreement with
                                                     Paul Ratnayeke Associates                           National Development Bank, including mat-
                                                     Varners                                             ters relating to the legal, regulatory and cor-
                                                                                                         porate approvals required for the transaction,
                                                     Project finance                                      and the validity and enforceability of the
Capital markets                                                                                          agreement in Sri Lanka. This deal was headed
                                                     Recommended firms                                    by Aluwihare-Gunawardene and valued at
Recommended firms                                     Tier 1                                              $12.8 million.
Tier 1                                               FJ&G de Saram                                           The firm has been involved in advising on
FJ&G de Saram                                        Julius & Creasy                                     and conducting a due diligence study on com-
Julius & Creasy                                                                                          panies operating mini hydro power projects in
                                                     Tier 2                                              Sri Lanka for its client IFC in a carbon credit
Tier 2                                               DL&F de Saram                                       purchase transaction. The study will allow
Murugesu & Neelakandan                               Murugesu & Neelakandan                              IFC, acting as trustee of the IFC-Netherlands
Nithya Partners                                      Nithya Partners                                     Carbon Facility on behalf of the State of the
                                                                                                         Netherlands, to enter into an agreement with
Tier 3                                               Tier 3                                              the companies for the sale and purchase of
DL&F de Saram                                        John Wilson Partners                                greenhouse gas emission reductions. The pro-
John Wilson Partners                                 Paul Ratnayeke Associates                           ceeds of the sale may be utilised by the com-
Paul Ratnayeke Associates                            Tiruchelvam Associates                              panies to settle their outstanding debts, and
                                                                                                         has been valued at the minimum value of 4
Banking                                              While the civil war is finally over the legal        million.
                                                     market has been slow to pick up, with confi-             On the corporate side of the practice, the
Recommended firms                                     dence still “yet to hit the heights” says a         firm advised UAE client Onyx Heavy
Tier 1                                               lawyer. There are visible in-flows of capital        Industries and Constructions in September
FJ&G de Saram                                        from foreign entities, and the government has       2009 on the purchase of shares in Ceylon
Julius & Creasy                                      singled out the tourism industry as one area        Heavy Industries and Constructions, one of
Nithya Partners                                      where rapid growth should be encouraged,            the largest steel manufacturing companies in
                                                     especially in the areas ravaged by the civil war.   Sri Lanka. Work conducted by the firm
Tier 2                                                   “We can expect infrastructure-driven            included carrying out of a legal due diligence
DL&F de Saram                                        growth,” says one lawyer, “especially in the        study of Ceylon Heavy Industries and
Murugesu & Neelakandan                               underdeveloped areas where there was much           Constructions. This transaction was valued at
                                                     fighting in the past.” As with most developing       $12.5 million.
Tier 3                                               countries in Asia, energy and power are areas
John Wilson Partners                                 where aggressive investment is emphasised           Leading lawyers
Paul Ratnayeke Associates                            and growth is expected.                             Ayomi Aluwihare-Gunawardene
Tiruchelvam Associates                                   Another industry where the legal market         Tudor Jayasuriya
Varners                                              has seen development and growth is in the           Udaya Kadurugamuwa
                                                     realm of legal outsourcing service providers.
                                                     The offering of such services serves to accen-
                                                     tuate the country’s goal to become a “hub to        Julius & Creasy
                                                     southeast Asia”, says a lawyer. While not nec-      Boasting one of the longest traditions and his-
                                                     essarily a viable long term strategy, the out-      tories of the heavyweights in the domestic
                                                     sourcing of services is a beneficial develop-        legal space, Julius & Creasy again sits atop the
                                                     ment for the fostering of emerging markets,         rankings this year. “The firm has a quick turn-
                                                     and bolsters the development of corporate law       around on queries and gave advice without
                                                     in the capital.                                     qualifying it with too many if and buts and
                                                                                                         legal provisions,” says a client.
                                                                                                             The firm has been heavily involved in
                                                                                                         prominent client HSBC’s matters in Sri

2011 EDITION                                                                                                             
2/196   Sri Lanka

        Lanka. The finance practice advised the bank,      Leading lawyers                                    Environmental Resources regarding the struc-
        which acted as lead manager along with            Prabash de Saram                                   ture of its rights issues and warrants in con-
        JPMorgan Securities and Royal Bank of             Michael Sproule                                    nection with an investment of $200 million in
        Scotland, on an issuance of 144A/Reg S                                                               January 2010.
        bonds by the government of Sri Lanka valued
        at about $500 million in October 2009. The        Murugesu & Neelakandan                             Leading lawyers
        team was called upon by the same lender to        Murugesu & Neelakandan’s year was marked           Naomal Goonewardena
        provide advice on a term loan facility of $35     by the sad passing of partner Velupillai           Arittha Wikramanayake
        million to the government of Sri Lanka in         Murugesu in March 2010. Peers note that
        March 2010.                                       Murugesu was a recognised and enduring fig-
            The firm advised UAE telecommunica-            ure on the legal landscape in Sri Lanka.           Other ranked firms
        tions entity Emirates Telecommunications              Competitors cite name partner Kandiah          With a developed reputation and expertise
        Corp. (Etisalat) on its indirect acquisition of   Neelakandan an “integral” part of the firm          honed over the better part of the last century,
        Sri Lanka telecom company Tigo through its        after the passing of Murugesu.                     John Wilson Partners may lack the size and
        purchase of the entire issued share capital of        After operating for over half a century, the   head count of traditional heavyhitters in the
        Netherlands Antilles-incorporated Sark            firm provides invaluable service to a number        local market, but it has built a solid position
        Corporation, which owned Tigo. The transac-       of distinguished and loyal clients, some of        in the industry, as exemplified by its retention
        tion involved the careful navigation of the       which include corporate entity Philip Morris,      of its respectable rankings.
        closely regulated telecom industry in Sri         and banking entities HSBC, Citibank and                With the highly capable John Wilson at its
        Lanka and was valued at $207 million, and         Standard Chartered Bank.                           head, the firm has been heavily involved in
        was completed in October 2009.                                                                       domestic work, providing advice for govern-
            “The lawyers at the firm are friend and eas-   Leading lawyers                                    ment commissions as well as corporate enti-
        ily accessible. The firm is capable of handling    Kandiah Neelakandan                                ties. With proficiency in French and German,
        any type of case,” says another client.                                                              the firm is well-equipped for dealings and
                                                                                                             matters with the foreign embassies in Sri
        Leading lawyers                                   Nithya Partners                                    Lanka. The firm provides advice to foreign
        Janaki Kumaraguru                                 “We have used Nithya Partners for over ten         entities with regards to local legislation and
        R Senathi Rajah                                   years, and consider them as one of the very        regulations as well.
                                                          few firms that have sufficient in-depth knowl-           The firm boasts a considerable M&A prac-
                                                          edge to handle our transactions,” says a client.   tice and its intellectual property work is espe-
        DL&F de Saram                                     The firm is still considered the “new kid on        cially well-regarded by both peers and clients.
        After another solid year in the Sri Lankan        the block” by the older firms in the market,        Acting as an advisor and liaison in the coun-
        market, DL&F de Saram retains its consider-       despite being established over 12 years ago in     try, the firm provides support and advice to
        able presence in the rankings. Peers comment      1997.                                              leading foreign firms such as Baker &
        on the “laudable achievement” outside of the          But this is by no means an indictment of       McKenzie, Clifford Chance and Linklaters.
        traditional powers in the local legal industry.   the expertise and experience on display for        Leading lawyers: John Wilson
            In the banking and finance area, the firm       this smaller, leaner outfit. Offering its clients
        provides advice in relation to banking, finance    substantial quality over quantity, the firm
        and corporate legal matters to HSBC, specifi-      chooses its cases carefully and as one client
        cally the international call centre HSBC          puts it, “provides responsive service, displays
        Electronic Data Processing Lanka, which was       commercial savvy and is client-oriented with
        established in Sri Lanka.                         high integrity.”
            On the projects and energy front, consul-         A client praises key partners Arittha
        tant counsel Suren De Silva advised British       Wikramanayake and Naomal Goonewardena
        Investors on behalf of the firm regarding          specifically: “They are amongst the finest in
        investments in Hydro Power Projects valued        Sri Lanka.” Another capital markets client
        at about $9 million. De Silva was consulted       says: “The lawyers at the firm produce quality
        by Ceylon Electricity Board, the state-owned      work and exhibit professionalism. We also
        monopoly holder in power supply to the            appreciate being able to consult the senior
        national power grid, on setting up a coal         partners with relative short notice. We have
        power plant with NTPC of India in Sri             been impressed by the friendly service and
        Lanka.                                            speed of work.”
            The firm is frequently consulted by global         Led by star partner Goonewardena, the
        legal stalwart Baker & McKenzie for advice        firm advised and prepared relevant documen-
        regarding the Sri Lankan legal framework for      tation for client Sri Lanka Telecom regarding
        the firm’s many international clients. The         an early redemption of a $100 million bond
        M&A practice is not without its own notable       quoted on the Singapore stock exchange.
        international clients, with the local team        Goonewardena was the lead on a banking
        recently providing Turner International           transaction for client ICICI Bank in
        Broadcasting, the owner of CNN, with advice       December 2009, advising on a $10 million
        regarding Sri Lanka legislation and regula-       facility granted to Commercial Bank.
        tions.                                                On      the    capital   markets       side,
                                                          Wikramanayake led a team advising                                                                                                                    2011 EDITION

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