Sri Lanka’s top court dismisses case against Chinese industrial zone deal

Court Decision

Sri Lanka’s Supreme Court on Friday dismissed a case against letting a Chinese company lease land in southern Sri Lanka, a lawyer said, potentially ending a six-month delay in finalizing the deal, part of China’s plans for a modern-day “Silk Road” across Asia.

The deal is expected to bring Sri Lanka more than $6 billion over five years, which would help Colombo tackle a growing debt crisis. But the deal has drawn strong opposition and led to violent protests by thousands of local people who have their land taken from them for the project.

The court threw out the case filed by opposition legislator Vasudeva Nanayakkara against cabinet ministers and others involved in the project including the Chinese company.

Nanayakkara said letting the Chinese lease a 15,000-acre plot to develop an industrial zone near the Chinese-built port in Hambantota was an “unlawful decision”.

“The Supreme Court said there was no infringement as filed and dismissed the case,” Anusha Perusinghe, Nanayakkara’s lawyer told Reuters.

China is in the final round of talks to take an 80 percent stake in the industrial zone on a 99-year lease, as part of its “One Belt, One Road” initiative.

But sources close to its embassy in Colombo have said China was concerned over the case, which has delayed the formal signing of an agreement on the lease since early January.

After signing an agreement on the port deal in December, state-run China Merchants Port Holdings (0144.HK) had been expected to pay $1.12 billion for the stake. It has not yet paid, however, due to the delay in finalizing the deal.

China has already spent almost $2 billion on Hambantota, mostly on the port close to the busy East-West shipping route and on a new airport. It plans to spend much more.

The port deal was amended to address security and ownership concerns raised by the local Sri Lanka Ports Authority, after being delayed due to protests by trade unions, landowners and political opposition led by former president Mahinda Rajapaksa and some current coalition government ministers.

In January, hundreds of protesters refused to vacate their land and clashed with police at the opening of the industrial zone – the first violent opposition to Chinese investment in Sri Lanka.

When President Maithripala Sirisena unseated Rajapaksa in 2015 he froze all Chinese investments, alleging unfair dealings by his predecessor. He eventually negotiated a new deal with China including the Hambantota project and other plans for industrial zones.