Loans not valid! We don’t have to pay! – Ranil Wicremasinghe

Ranil Wickremesinghe.(File Photo: IANS)

Opposition and UNP leader Ranil Wickremesinghe in this exclusive article to the Sunday Times says the Attorney General has deliberately misled the Government to pass the Appropriation Bill, disregarding a Supreme Court determination that stresses Parliamentary control over public finance. Claiming the passage of the Bill was a blatant violation of the Constitution, constitutional rule, and Latimer House Commonwealth values, he says that as a result, all loans the Government seeks to obtain in terms of the Appropriation Act are legally invalid and a future government is not obliged to repay them.

By Ranil Wickremesinghe (2013)

The Latimer House Declaration is not a single paragraph relating to judicial discipline. It is a comprehensive statement on the relationship between the three branches of government, on which, the fundamental values of the Commonwealth are built.

Unlike SAARC, BIMSTEC, or IOR-ARC, the Commonwealth is a value-based organisation. Therefore every member-country is under obligation to uphold these values and principles (contained in the Port of Spain Declaration and declared as Commonwealth’s core priorities at the Perth CHOGM). The Commonwealth Ministerial Action Group (CMAG) is empowered to go into the serious violation of these values.

The present constitutional crisis in the country has arisen because of the Rajapaksa regime’s absolute contempt for the fundamental values relating to human rights, democracy, constitutionality and good governance. In fact, his government holds a ‘Commonwealth’ record for serious violations of these values that bind us together as decent, law-abiding governments: two violations in one month. What I set out in “President Rajapaksa: The Prisoner of Latimer House” is the second violation.

The first violation took place on December 8, 2012, in relation to the Appropriation Bill 2012, which authorises for the Government’s expenditure for 2013. This was the refusal of Parliament to adhere to the determination of the Supreme Court (made under Article 123 of the Constitution), holding Clause 2.1(b) of the Appropriation Bill to be unconstitutional because it violates Article 148 – Parliamentary Control over Finance. The determination specified an amendment to Clause 2.1(b) to ensure its conformity with the Constitution. Completely disregarding this, Parliament enacted the Bill as law without incorporating the proposed amendment but with the Government’s own amendment.

The determination of the Supreme Court on the Appropriation Bill is a significant judicial decision based on both the Public Trust Doctrine and as well as the Principle of Parliamentary Control over Finance.

The 1978 Constitution, incorporating immutable republican principles of representative democracy (vesting the sovereignty in the people and providing for its exercise both by the people directly and indirectly through the three branches of government), enabled the Public Trust Doctrine to be introduced to Sri Lanka’s jurisprudence. Justice Mark Fernando, one of the drafters of the Constitution, enumerated this principle in De Silva vs. Atukorala. He stated, “Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely – that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended.”

The legal basis of the Public Trust Doctrine was further expounded by Shiranee Thilakawardane, J, in Medis vs. Kumaratunga, better known as the Water’s Edge case.

“The principle that those charged with upholding the Constitution – be it a Police Officer of the lowest rank or the President – are to do so in a way that does not ‘violate the Doctrine of Public Trust’ by state action/inaction is a basic tenet of the Constitution which upholds the legitimacy of Government and the Sovereignty of the people.

The ‘Public Trust Doctrine’ is based on the concept that the powers held by organs of government are, in fact, powers that originate with the people, and are entrusted to the Legislature, the Executive and the Judiciary only as a means of exercising governance and with the sole objective that such powers will be exercised in good faith for the benefit of the people of Sri Lanka. Public power is not for personal gain or favour, but always to be used to optimise the benefit of the people. To do otherwise would be to betray the trust reposed by the people within whom, in terms of the Constitution, the sovereignty reposes. Power exercised contrary to the Public Trust Doctrine would be an abuse of such power and in contravention of the Rule of Law.”

The Supreme Court extended this doctrine to the control of finance by Parliament in the Supreme Court determination on the Appropriation Bill 2008. Chief Justice Sarath Silva, in delivering the judgment stated:

“Since such control is exercised by Parliament in trust for the people, we are of the opinion that the process should be transparent and in the public domain, so that people who remain sovereign are informed as to the manner control is exercised. It follows that any Act of Parliament concerning public finance should be premised on a disclosure of the basis of such enactment so as to be transparent in its implications. And, an Act lacking in such transparency or being an alienation of control by Parliament would be inconsistent with Article 148 of the Constitution.”

The Court observed that, “the Government is caught in a veritable ‘debt trap’ in which debt service payments for the current year are met by raising further debt in that year thereby increasing the debt service payments for the succeeding year.”

Furthermore, the Supreme Court pointed out that Parliament had failed to exercise full control over the handling of public finance by the Treasury resulting in an accumulation of public debt over the past leading to staggering debt service payments. The Supreme Court also ruled that the control of public finance (under Article 148) included the control of the sources of finance including the creation of any debt by the Republic. Thereby the debt of the Republic was also brought under the public trust doctrine. As a result of these two decisions, Parliament’s control over finance (including the creation of debt) has to be exercised in accordance with the inalienable sovereignty of the people under Article 3 and only for the benefit of the people. At the time, the Government did not challenge this determination in the Courts or in Parliament; it complied with the determination and amended the Bill.

Prior parliamentary review

The petitioner in the Appropriation Bill 2012 case challenged Clause 2.1(b) of the Bill. This clause made provision for the expenditure of the Government (for the period beginning January 1, 2013 and ending on December 31, 2013) to be met “(b) from the proceeds of loans which are hereby authorised to be raised whether in or outside Sri Lanka, for and on behalf of the Government, so however that the aggregate of such proceeds does not exceed rupees one thousand two hundred ninety five billion.”
The petitioner challenged this clause on the grounds that it did not include a prior review of the terms and conditions of the loan and was therefore a violation of Article 148.
Shiranee Thilakawardane J, delivering the determination of the Court in the Appropriation Bill 2012 stated, “that the use of the term “hereby authorised” appears to be limited only to prescribing a ceiling of Rs. 1295 billion for the raising of loans, and does not contemplate Parliamentary supervision, scrutiny or control of either the terms of the loans, the interest payable or the period of repayment. We find therefore that clause 2.1(b) constitutes an abdication of the power of control by Parliament over fiscal matters, especially the control over the source of the finances, which creates a debt of the Republic, as envisaged under the terms of Article 148 of the Constitution. such loans have not just the intra-generational but also the intergenerational impact and is contrary to the doctrine of public trust..”

Here the public trust doctrine was being applied to Parliament to ensure proper control of finance with the aim of preventing Sri Lanka’s debts skyrocketing – in all probability to the level of the Greek debt in time to come. The Supreme Court emphasised that Parliament’s control of finance is “enshrined in Article 148 of the Constitution, which mandates that all ‘public finance’, including the control of the ‘spring’ or source of the finance passes through and only through the ‘eye’ of Parliament, which is expected. and to act in accord with the public trust doctrine …”

When the Appropriation Bill became law as the Appropriation Act 23 of 2012, it was with an amendment to Section 2.1(b). As noted before, this amendment, discounted the Supreme Court determination on the Bill. According to the Government’s amendment, “the details of such loans shall be incorporated in the Final Budget Position Report which is required to be tabled in Parliament under Section 13 of the Fiscal Management Responsibility Act 3 of 2003.”

When the 2012 case was heard, the Attorney General, had, on behalf of the Government contended that the reporting requirements on transparency were met by the provisions of the Financial Management (Responsibility) Act. However, Shiranee Thilakawardane J, speaking on behalf of the Court rejected this position and stated that, “upon careful perusal of reports submitted to this Court which have already been submitted under the Act, it does not appear that these reports provide adequate information Only if such adequate information is provided prior to obtaining these loans, would there be a comprehensive opportunity to Parliament to scrutinise and exercise full control over public finance.”

The Fiscal Management (Responsibility) Act was enacted on my initiative when I was the Prime Minister. The objective of the Act is for the Government to publish reports on its fiscal management enabling the House to examine whether the fiscal strategy of the Government was based on principles of responsible fiscal management. Under Section 14 of the Act, the “objectives of the Final Budget Position Report is to provide updated information of the Government’s fiscal performance and to thereby enable the public to evaluate the Government’s fiscal performance as against its fiscal strategy as set out in its current statement.”

There is no provision for Parliamentary scrutiny of the terms of a loan prior to approval. According to Section 13 of this Act, the Final Budget Position Report for a given financial year is to be released not later than five months after the end of the financial year. Thus, the amendment will only enter the value of loans (not their specific details), after they have been formally executed. It therefore fails the criteria set out by Shiranee Thilakawardane J, of providing Parliament adequate information prior to obtaining the loans, to enable an informed decision whether to approve the loans on the terms proposed.

When this amendment to Clause 2.1 (b) was proposed by the Government at the Committee Stage in Parliament (presided over by the Speaker), a point of order was raised by the Chief Opposition Whip John Ameratunga. He stated:

“Sir may I say that on examination of the proposed Amendment submitted by the Government, it is clear that it does not meet the conditions laid down in the Supreme Court Order. We have a duty by this House to meet the conditions laid down in that Determination by the Supreme Court on the Appropriation Bill.”

Minister Sarath Amunugama answering on behalf of the Government stated, “We have consulted the Attorney General and he suggests that these two Amendments are in order.” The Speaker who is the Chairman of the whole House stated, ‘තීන්දුවේ ව්‍යාකූලභාවයක් තිබුණු නිසා නීතිපතිතුමාගෙන් කරුණු විමසුවා. එතුමාගේ උපදෙස් අනුව මේක විශේෂ බහුතර ඡන්දයෙන් සම්මත කරගන්න පුළුවන් කියලා කියා තිබෙනවා.‘  (The Attorney General was consulted since the determination was confusing. According to his advice this can be approved with a special majority).

On the contrary, the determination is very clear. It reiterated the law in accordance with the three previous judicial decisions. Accordingly Clause 2.1(b) of the Bill clearly violated Article 148 when read together with Articles 4(a) and Article 3 and had to be approved with a special majority under Article 84 of the Constitution. This article requires a two-thirds of the whole number of Members including those not present, as well as approval by the people at a Referendum. However this did not happen.
There are other issues, arising from the point of order raised by John Ameratunga, MP and the reply given by the Chairman of the Committee. Firstly, who decided that the determination was confusing (“jHdl+,Ndjhla ;snqKq ksid”) when it was crystal clear to those of us in the Opposition. In fact, when the Supreme Court determination was read out in Parliament by the Speaker, the Opposition asked for a copy of the draft amendment. The request was disregarded. Furthermore, at no time did the Government or the Speaker mention that there was confusion regarding the determination.

Dual approach

On the other hand, when a question surfaced in respect to the Supreme Court determination on the Divinaguma Bill, the Speaker consulted the party leaders; he did not consult the Attorney General who was a party to the case. Thereafter the Speaker delivered his opinion. Why was this precedent not followed? Quite the reverse; the Speaker consulted the Attorney General, a party to the case, bypassing the Opposition. Minister Sarath Amunugama unilaterally stated that the Government consulted the Attorney General. Why did the Minister and the Speaker consult the Attorney General without keeping the rest of the House informed?

Secondly, Minister Amunugama said that Attorney General, “had the benefit of looking at the order of the Supreme Court. He has studied it, interpreted it and given us the decision in writing. Sir, when this bill is put to you for final signature, you will also be guided by the opinion of the Attorney General as in the case of all bills. So, we must now proceed on the assurance by Government that the Attorney General has said that it is not inconsistent with the Constitution.”

This led to another question as articulated by D M Swaminathan, MP, who asked the Chairman to “clarify to the House under what circumstances can the Attorney General overrule a decision made by the Supreme Court of this country? In what circumstances, can he interpret it? He cannot interpret it. The order has been made by the Supreme Court and what right has the Attorney General got to interpret that? The Attorney General has no right to interpret an order given by the Supreme Court.”

In fact it is the Speaker, presiding over the House (and not the Committee) who can deliver a ruling to the House. The procedure then is for the Chairman to suspend the sittings of the Committee, resume the chair as the Speaker, listen to the parties and then give a ruling. This procedure was not followed for obvious reasons. Therefore there is no valid ruling that the determination is confusing. The only ‘confusing’ issue that could have arisen in that instance was, whether a special majority required under Article 84 should be explicitly stated in the determination or whether it can be implied from the determination. Going by the Speaker’s ruling on the Divinaguma Bill this is an interpretation of the Constitution, which again falls within the sphere of the Supreme Court.

AG’s advisory role questioned

Thirdly, the Attorney General is estopped from advising Parliament that the amendment could be passed with a mere two-thirds majority of the House since he too agreed to the Public Trust Doctrine being applied to this case. During the hearing of the Appropriation Bill 2012, the petitioner and the Attorney General both agreed, “that the inalienable sovereignty of the people must be exercised by Parliament under the doctrine of public trust in terms of Article 4(a) of the Constitution. In particular, due and proper fiscal accountability must be viewed as the bedrock of good governance by any Government, and must at all times be balanced and viewed through the lens of intra and intergenerational responsibility and equity. A violation of the Public Trust Doctrine is a violation of the inalienable sovereignty of the people”.
The Attorney General’s advice, if given as claimed, then amounts to contempt of court.

The Attorney General of the United Kingdom Dominic Grieve in a speech to the BPP Law School on the ‘Role of the Attorney General’ said “as Chief Legal Advisor to the Crown, I advise government departments on how policy can be achieved in a lawful and proper way However that does not detract from the fact that in carrying out the function of legal adviser to the Government, the Attorney General’s role is to support and protect the rule of law. I think that the role of the Attorney General as the Government’s Chief Legal Adviser was neatly summed up by a former Attorney General, Lord Mayhew of Twysden who said: ‘the Attorney General has a duty to ensure that the Queen’s ministers who act in her name, or purport to act in her name, do act lawfully because it is his duty to help to secure the rule of law, the principal requirement of which is that the government itself acts lawfully’.”

Regrettably, our Attorney General has failed to maintain the high standards of his Office. Furthermore, the Attorney General has also deliberately misled the House.
Minister Sarath Amunugama stated that the Speaker was guided by the opinion of the Attorney General as in the case of all Bills. But there is no such provision in the Constitution. While the Attorney General has a duty under Article 77 (2) to communicate his opinion to the Speaker in regard to an amendment proposed to a Bill, he cannot overrule the Supreme Court. His is not a judicial power and is not comparable to the Supreme Court’s powers under Article 123 in determining whether any provision of a Bill is inconsistent with the Constitution. He can perform this duty only at the stage when the Bill is put to Parliament for acceptance.

A Bill has four stages. The first reading is the announcement. The second reading is when the principles of the Bill are debated. If the second reading is approved the Bill goes into Committee Stage. Further amendments to the Bill can be proposed at the Committee stage. If accepted, the amendments are incorporated into the Bill. Thereafter the report of the Committee (with the Bill as amended) is presented to the House. Then the Bill is put to vote at the third reading. It is only when a Bill is amended and ready for acceptance by Parliament at the third reading, that the Attorney General can give his opinion to the Speaker. There is no legal provision for the Attorney General to advise the Government and the Speaker as and when consulted.

Furthermore, the Attorney General’s opinion given to the Speaker at the third reading must also be made available to the House. The House has to approve the Bill after being informed of the opinion of the Attorney General. The Speaker is only the representative of the House. Despite repeated requests, the Speaker did not read out the opinion. This is a dangerous precedent where the Speaker does not comply with his duty to the House.

There was a State Counsel representing the Attorney General in the Public Official’s Box that day. He had conveyed to Hon. Swaminathan when questioned that he did not have the Attorney General’s opinion. I informed the Chairman of this curious situation where the State Counsel representing the Attorney General did not have the Attorney General’s opinion under terms of Article 77(2); while Minister Amunugama averred that the opinion was in writing. Under these circumstances, there was no opinion given by the Attorney General under Article 77(2) in respect to the amendment to Clause 2.1(b). Therefore, the certificate issued in terms of Article 79 stating that the Bill has been duly passed is not valid.

Loans have no legal validity

As a result, any loans raised under Section 2.1(b) of this Act are not valid. The United States Supreme Court in Norton vs. Shelby stated that an “unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is in legal contemplation as inoperative as though it had never been passed.” When it comes to repayment Parliament is not required to honour such debts.

In fact, the next Parliament will not be legally bound by any obligation to respect the loan agreements with other nations, international organisations, and commercial institutions made under Section 2.1(b) of this Act, as they are not legally binding.

The Government of President Rajapaksa has surreptitiously tried to bypass the determination of the Supreme Court (which requires prior approval of Parliament for all loans). It has thereby paved the way to finance exceedingly high-cost development projects, which provide massive kickbacks. The staggering debt so incurred will have to be paid back by the next two generations. Fortunately, our Constitution does not allow the inalienable sovereignty of the people to be subordinated to the financial markets and the insatiable greed of racketeers. As pointed out, these loans, if incurred, will be invalid and we are not obliged to repay them. In this, the 1978 Constitution is based on the primacy of politics over the primacy of the markets.

Furthermore, this unconstitutional and illegal act of the Government and Parliament brings Sri Lanka into conflict with the Commonwealth core priorities. It has now been agreed that the Secretary General of the Commonwealth will inquire into the persistent violation of Commonwealth values by the GoSL before referring the matter to the CMAG.

The GoSL has already stated that the Secretary General was excerising his good office role in having consultations with the Government of Sri Lanka and the diplomatic community. External Affairs Minister G L Peiris has stated that he requested the Secretary General to exhaust his good office role before including Sri Lanka in the Agenda of CMAG. Thus the inquiry by the Secretary General will not be confined to the removal of Chief Justice Shirani Bandaranayake.

It will include the serious threat to constitutional rule triggered by Parliament in enacting Section 2.1)(b) of the Appropriation Act 23 of 2012. Section 2.1(b) nullifies the Public Trust Doctrine. Section 2.1(b) seeks to imprison the next two generations in a debtors prison run by the financial markets. We are protected from this impending disaster thanks to the very safeguards of the Public Trust Doctrine, the Constitution and the Core priorities of the Commonwealth.

  • Sunday, February 24, 2013

(The writer is Leader of the Opposition and the United National Party)