Prima’s claim against Lanka rejected

A panel of Singapore based Arbitrators, on December 9, last year, rejected a claim by Prima Ceylon Limited, alleging that the government of Sri Lanka failed to honour an agreement to pay a subsidy, for selling flour at a reduced price.

The agreement had been entered into between Prima Ceylon Limited and the government of Sri Lanka in 2001. Prima had claimed Rs. 5.8 billion, for the failure of the government of Sri Lanka to honour the promise, to pay the subsidy due. The Arbitrators, rejected the claim for Rs. 5.8 billion, and awarded only Rs. 2.8 billion as subsidy due, which was admitted by the government of Sri Lanka.

The Prima Ceylon Limited, the claimant in this arbitration issue, made a second allegation to the effect that the government of Sri Lanka allowed Serendib flour Mills to be set up within the Port of Colombo and thereby discriminated against Prima Ceylon Ltd. They had claimed Rs. 5.5 billion as damages up to December 2007, and claimed continual damages thereafter, at the rate of Rs. 422 million.

The Arbitrators, rejected this second claim, for damages, in excess of Rs. Six billion. But awarded damages to be assessed in the near future.

The claimant, Prima Ceylon Limited, made a third allegation against the government stating that the government dumped wheat flour imported from other countries into the market.

The Prima claimed a sum of Rs. 2.5 billion, as compensation. The claim for Rs. 2.5 billion was rejected and only approximately Rs. 180 million was permitted. However, this was not with the agreement of Sri Lanka.

The tax exemptions, the Prima claimed were granted by the Arbitrators out of the total claim of Rs. 15.5 billion, Rs. 2.8 billion, was awarded as admitted by the government of Sri Lanka.

The arbitrators, also held that imposing price controls would amount to a violation of the agreement.

A further sum of Rs. 1.1 billion was allowed as a refund of the taxes charged by the government, from Prima.

The government of Sri Lanka is the respondent party in this arbitration issue where Prima Ceylon Limited was the claimant. Senior State Counsel Viraj Dayaratne, appeared with Senior State Counsel Arjuna Obeysekera and State Counsel, Mohan Gopallawa, for the government of Sri Lanka.

Senior Counsel, Michael Khoo, appeared with Josephine Low and Ong Lee Woei for Prima Ceylon Limited. The Arbitration Tribunal comprised, Sir Anthony Evans (Chairman), Justice of Singapore G. P. Selvam and Justice Priyantha Perera of Sri Lanka.

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