Business law

Contents
P1 Explain different sources of law and law that organizations must comply with.....................................2
P2 Explain the role of government in law making and how statutory and common law is applied in the
justice court.................................................................................................................................................3
P3 Using specific examples illustrate how company, employment and contract law has a potential impact
upon business..............................................................................................................................................4
P5 provide justifications for the use of appropriate legal solutions comment on justification for the use
of appropriate solutions?..........................................................................................................................15
P6 Recommend legal solutions based upon a different country’s legal system or different legal frame
work..........................................................................................................................................................19
M1 Evaluate the effectiveness of the legal system in terms of recent reforms and developments..........20
P1 & p2 Evaluate the effectiveness of the legal system in srilanka with reference to history of legal
system in srilanka and recent developments........................................................................................20
M2 Different and analyse the potential impacts of regulations, legislation and standards.......................34
P3 Compare and contrast the potential impact of company law and labour law in business affairs.....34
M3 Assess the positive and negative impacts of legal solutions to business problems.............................38
P4 & p5 discuss the positive and negative impacts of legal solution to business problems in the
application of company law and labour law..........................................................................................38
M4 Compare and contrast the effectiveness of these recommendations.................................................40
P6 compare and contrast the effectiveness of these recommendations with the discussion of merits
and demerits of the recommended system...........................................................................................40
D1 Provide a coherent and critical evaluation of the legal system and law, with evidence drawn from a
range of different relevant examples to support judgements...................................................................42
P1 & p2 evaluate the legal system and law, with evidence drawn from a range of different relevant
examples...............................................................................................................................................42
P3 Company law and labour laws are not important one in the running of business. Do u agree?
Discuss with evidence draw from a range of different relevant examples to support judgments.........46
D2 Critically review and evaluate the use of appropriate legal solutions in comparison with alternative
legal advice................................................................................................................................................49
P4 and p5 saman advised to ratha that company law and labour law are useless and it is waste of time
in the application of company law and labour law. Do u agree? Discuss..............................................49
P6 critically review and evaluate the use of appropriate legal solutions in compilation with alternative
legal advice and give a proper solution as to which one is so important with the discussion of
illustrations for your better selection....................................................................................................51

HUMAITH 1
 Business law

P1 Explain different sources of law and law that

organizations must comply with
1. Explain the meaning of law based upon the opinion of jurists.
2. Define the meaning of law based on commercial perspective.
3. Explain the sources of law
4. Comment on the functions and purpose of law

GROUP ASSIGNMENT

HUMAITH 2
 Business law

P2 Explain the role of government in law making and how

statutory and common law is applied in the justice court.
1. Explain the role of government of Sri Lanka in law making.
2. Explain the present judicial structure in Sri Lanka with the jurisdiction
of courts

GROUP ASSIGNMENT

HUMAITH 3
 Business law

P3 Using specific examples illustrate how company,

employment and contract law has a potential impact upon
business.
1. Discuss the important elements of company law that has potential
impact upon business?
I. Legality
In the financial aspects writing, a firm is regularly portrayed as a 'nexus of agreements'. As
normally utilized, this depiction is equivocal. It is frequently summoned essentially to stress that
a large portion of the essential connections inside a firm—including, in specific, those among
the association's proprietors, directors, and workers—are basically authoritative in character,
and thus in light of assent, instead of including some frame of additional authoritative charge
and-control specialist. This is a critical knowledge, however it does not recognize firms from
different systems of authoritative connections. It is maybe more exact to portray a firm as a
'nexus for contracts', as in a firm serves, generally, as the normal counterparty in various
contracts with providers, representatives, and clients, organizing the activities of these various
people through exercise of its legally binding rights.10 The first and most essential commitment
of corporate law, as of different types of hierarchical law, is to allow a firm to serve this part by
allowing the firm to fill in as a solitary contracting party that is unmistakable from the different
people who claim or deal with the firm. In this manner, it improves the capacity of these people
to connect together in joint activities.
II. Limited risk
The corporate frame viably forces a default term in contracts between a firm and its loan bosses
whereby the lenders are restricted to making claims against resources that are held for the sake
of ('possessed by') firm itself, and have no claim against resources that the company's investors
hold in their own names. This administer of 'constrained obligation' has not, truly, dependably
been related with the corporate frame. Some vital corporate wards long made boundless
investor obligation for corporate obligations the representing principle. By the by, today
constrained liabilities have turned into an almost general element of the corporate shape. This
development shows emphatically the estimation of constrained obligation as a contracting
apparatus and financing gadget.
III. Delegated administration with a board structure
Standard authoritative documents for big business association contrast in their allotment of
control rights, including the expert to tie the firm to contracts (examined over), the expert to
practice the forces conceded to the firm by its agreements, and the specialist to coordinate the
utilizations made of benefits claimed by the firm. As a default run, the general organization
frame awards capacity to a lion's share of accomplices to deal with the firm in the customary
course of business; more central choices require unanimity. Both parts of this allotment are
unworkable for business organizations with various and continually evolving proprietors. Thusly,
corporate law regularly vests main specialist over corporate undertakings in a top managerial
staff or comparable board of trustee’s organ that is intermittently chosen, solely or essentially,
by the association's investors. More in particular, business enterprises are recognized by an

HUMAITH 4
 Business law

administration structure in which everything except the most basic choices are assigned to a top
managerial staff that has four essential highlights.

2. Discuss the important elements of labour law that has potential

impact upon business?

Labor law

 Body of rulings pertaining to working people and their organizations, including trade
unions and employee unions, enforced by government agencies. There are two
categories of labor laws; collective and individual. Collective labor law involves
relationships between the union, the employer and the employee. Individual labor law
involves concerns for employees' rights in the workplace. Labor laws first became
standard during the Industrial Revolution. Also called employment law.

1. Individual employment relationships:

 The building, refitting and termination of employment relations and the resultant
understanding forms one branch of labor law.
 Also, certain aspects like transfer, promotion, compensation and dismissal procedures
are involved in this element.
 As the law advanced, implicit terms and legal matters such as dismissal procedures,
minimum wages, work conditions, termination of employment limited the freedom of
contract
 Rightfully, the individual contract of employment plays a more important role in civil-law
countries than in common-law countries.

2. Employment:
 The main priority of this subject was upon the reduction or prevention of enormous
unemployment rather than on a long-term employment policy that promotes economic
growth and stability.
 Legislation has deep-rooted the necessary frame work for catering employment
services that include vocational training, recruitment, placement, apprenticeship and for
predicting the need of man power and availability.
 Factors such as employment and occupational equality, exemption from forced labor
and unemployment benefits are regarded as part of the subject matter.

3. Wages and remuneration

 Legal requirements regarding the methods and forms of wages and wage payment
deals, notification of wage conditions, proper valuation and limitation of payments,
regularity in wage payments etc. are covered under this subject.

HUMAITH 5
 Business law

 The nominal law of wages and remuneration envelopes factors such as:
 The protection of wages against illegal understanding
 Methods and forms of payment
 Fringe benefits
 Determination of wages and minimum wage arrangements
 Judicial supplies and composite agreements for deciding wages may consider elements
such as elimination of sex and race differentials, skill distinction, wage guarantees and
the relationship of wages to productivity

4. Work Conditions:
 This element deals with the conditions for work such as rest periods, hours, vacations,
special provisions in regard to the employment of women, prohibition of child labor and
effective regulation of young people in employment.
 Legal assurance of equal employment and pay, coupled with provision of facilities with
family responsibilities and adequate maternity protection, are also included.

5. Trade unions and industrial relationships:

 This category includes complex legal relationships such as
 Rights and obligations of employer organizations and trade unions
 Legal status
 Collective agreements and bargaining,
 Representation of employees at enterprise and plant level
 Prevention and settlement of various labor disputes
 The way it integrates collective bargaining and freedom of association with economic
growth and stability remains the most difficult and challenging problem of labor law.

6. Health, safety and welfare:

 Occupational health and accident preventive regulations, services and special
regulations for hazardous occupations (dock work, mining, and construction) are
included in this particular element.
 Major developments include increased concern with the wide use of chemicals and
welfare facilities related to employment, recreation and transport facilities

7. The administration of labor laws:

 This feature of labor law involves the functioning and organization of administrative
authorities such as labor inspection services, labor departments, etc.

HUMAITH 6
 Business law

 It also encompasses industrial disputes between management and labor, and the
operation of labor courts and bodies for settlement of hardships that arise from
agreements or contracts.

8. Social security:
 This category ranges from employers obligation for occupational accidents to
comprehensive schemes.
 The schemes render income security in case of employment injury, sickness, maternity,
survivors’ benefits and medical care.
 Social security found increasing acceptance with varying degrees of application in
varied stages of economic development.

9. Special provisions for particular occupational or other groups:

 Labor law includes many specific provisions for occupational or other groups that
appear as parts of special legislation.
 These provisions are important and common in transportation (maritime transport),
mining, agriculture and other commercial occupations. The main tendency of labor law
is to strengthen the constitutional relations and legal requirements at the expense of
rights created by individual employment relationships.

HUMAITH 7
 Business law

P4 suggest appropriate legal solutions for a range of

business problems
E.g. termination of contract, rescue from insolvency and
liquidation

1. Discuss the appropriate legal solutions under labour law in the case
of termination of employment?
What is 'Termination of Employment?'
 Termination of employment refers to the end of an employee’s contract with a company.
An employee may be terminated from a job of his/her own free will or following a
decision made by the employer.
 An employee who is not actively working due to an illness, leave of absence, or
temporary layoff is still considered employed if his or her relationship with the employer
has not been terminated formally with a notice of termination.
 The legislation governing termination of employment contractsis comprehensive
 An employee benefits from statutory protection against being dismissed unfairly and
being made redundant
 This protection may mean that the employee is entitled to compensation, or to pursue a
claim against their employer in the Employment Tribunal

Termination of employment contract

 This can happen in a number of ways

1. The employer dismisses, either with or without notice
2. A fixed term contract expires and is not renewed
3. The employee terminate
4. The employee alleges constructive dismissal

Termination of contract

 Termination of contract is considered to be lawful when a legitimate reason exists to end

the contract before performance has been completed. Some of the more common
reasons for termination of contract may include:

1. Impossibility of Performance: Fulfilling contract terms is called “performance”. Some

situations may make performance of contract terms impossible. For example, in a
contract for a musical concert, the contract may sometimes be terminated if the
performer becomes incapacitated.

HUMAITH 8
 Business law

2. Instances of Mistake, Fraud, or Misrepresentation: If the contract was formed under

conditions involving mistake, misrepresentation, or fraud, the contract may be
terminated, since it was not formed according to sound contract principles.

3. Breach of Contract: In a contract, both parties usually have duties to fulfill. If one party
fails to perform their duties, the contract may be terminated, and the non-breaching party
may be able to recover losses caused by the breach.

4. According to a Prior Agreement: Termination of contract may occur if the parties had
previously formed an agreement regarding contract termination. For example, the
contract itself may have contained a provision stating the conditions under which it may
be terminated. Such a provision is known as a “termination clause”, and is enforceable if
both parties agree to the termination terms.

 As we know, this rule is quite different from the current economic environment in the
closed economy in 1971. This law applies to a wide range of coverage and non-
employment regulatory conclusions in the private sector. While the first planned to lay off
or sack all employees due to corporate restructuring or closure, unregulated situations
are currently not incompetent in the staff, as there is no employee due to ill health. In the
absence of written authorization to sack the workers' employee, the Commissioner's
approval of the moral decision must be obtained. Under this Act, the dictates the right to
refuse or deny the permission to stop services in "non-regulatory" circumstances. Once
again, this opens the possibility of imposing an employer to an employee. The Labor
Commissioner, who runs a maximum of 48 monthly salaries, has now announced the
budget as the world's third largest repayment formula! This proves that our country's
social and economic policies are not consistent. It accepts a poor country's economic
policy with the growing social policy of the country.

 It is appropriate to compare our competing reform pay packages with us in the global
market. Bangladesh has provided a thorough service every 30 days a year. India is
paying 15 days every year. For every completed festival in Indonesia and Indonesia, 20
days are paid, while paying a monthly wage every year, at most 5 months

 The World Bank's 2009 "Turing Business" report requires that Sri Lanka is one of the top
5 highest paying countries in terms of recurrence compensation.

 The specific amendments supported by the EFC to the Act envisaged the following:

 Where an employer has employed a worker for a period of not less than twelve months
continuously, and notwithstanding anything to the contrary in the Termination of
Employment of Workmen (Special Provisions) Act No.45 of 1971 as amended, he may
terminate the employment of such worker for any reason, other than on disciplinary
grounds, subject to his making the following payments:

HUMAITH 9
 Business law

1. Gratuity payable under the Payment of Gratuity act No.12 of 1983; and
2. One month’s wages/salary or written notice of one month; and
3. Two weeks wages/salary for each year of service; and
4. Two weeks wages/salary for each year of service left up to the age of 55 years

 If the worker, who is working with the defect of raw materials or the control of the
factors, cannot provide employment to its workers or any of its sections, it is
necessary to pay the relevant workers' wages to demonstrate the truth to the
Commissioner.

 By specifying the written method to the employer, it is supported by a confession

and the Commissioner will give priority and will issue his judgment within seven
days of receiving the application. The Commissioner only wants to reject an
application for reasons given in writing, and he believes that the application will
be inappropriate without the wages in the circumstances of the case. A boss and
commissioner who follows the same procedure should be extended.

 It is also submitted that employees over 60 years of age, probationers,

employees found incompetent and/or unable to discharge their duties due to ill
health, be excluded from coverage under this Act. They will yet, under the
Industrial Disputes Act, have recourse to the Labour Tribunal in a situation of
dismissal

HUMAITH 10
 Business law

2. Discuss the appropriate legal solutions under company law in order

to rescue the company from insolvency from insolvency and
liquidation.

Insolvency
 Insolvency is a term for when an individual or organization can no longer meet its
financial obligations with its lender or lenders as debts become due. Before an insolvent
company or person gets involved in insolvency proceedings, it will likely be involved in
informal arrangements with creditors, such as making alternative payment
arrangements. Insolvency can arise from poor cash management, a reduction in cash
inflow forecasts or from an increase in expenses.
The Insolvency Test

 Known in bookkeeping as the acid test or quick ratio, there are two simple tests to
assess whether your company is insolvent.
1. The Balance Sheet Test
 Do your company’s debts outweigh its assets? That’ the essential question posed by the
balance sheet test. Simply list down all of your company’s assets in one column, and the
contingent and prospective liabilities in another. If the value of the assets is lower than
the liabilities, you are insolvent.
2. The Cash-flow Test
 Can your company pay its bills on time? This test accurately maps the amount of
working capital you have available at any given time, comparing forecasted sales with
payments that are due.
Insolvency Proceedings

 Insolvency Proceedings are the collective term for all of the official legal mechanisms of
the Insolvency Regime, which include winding up, liquidation, company administration,
receivership and, for individuals, bankruptcy.
Insolvency Practitioner

 Often, but not always, accountants or solicitors, an IP is someone who is authorized to

act on behalf of insolvent companies, or individuals. You can read our full article here on
insolvency practitioners
Key Points for Directors of Insolvent Companies:
1. Avoid increasing the company’s debts once you are aware that the company is
insolvent.
2. You cannot simply pay off personal guarantees through the sale of assets to reduce
your personal debts whilst neglecting the creditors as this can cause more
complications for you.
3. You cannot transfer assets to a newly formed company as there could be potential
serious implications to you personally.
HUMAITH 11
 Business law

4. Employees are regarded as preferential creditors and in any event would be covered
under the Government scheme if the company does not have funds to pay them.
5. HMRC are responsible for more forced liquidations than any other creditor out there, so
if your company owes tax – have a chat with us to see how we can best manage the
situation.
6. Whilst shareholders own the company, the directors run the company and they have
responsibilities such as health and safety, ensuring accounts are filed, tax is paid and so
on.
7. A limited company is also a completely separate entity in its own right and has its own
rules and regulations and as a director you act as an officer of the company. This is very
important to understand as your responsibilities are to ensure the company’s interests
are at the heart when making decisions. This changes when a company becomes
insolvent as you must place the creditors’ interests at the heart of your decision making.
Failing to do so or making the wrong decision can create serious financial penalties so
it’s important to understand what insolvency is

Insolvency Law

 The key legislation is the Insolvency Act 1986, and the Insolvency Rules 1986. The
Company Directors Disqualification Act 1986, the Employment Rights Act 1996 Part XII,
the Insolvency Regulation (EC) 1346/2000.

Factors Leading to Insolvency

 A company’s hiring of inadequate accounting or human resources management may

contribute to insolvency. For example, the accounting manager may improperly create
and/or follow the company’s budget, resulting in overspending. Expenses add up quickly
when too much money is flowing out and not enough is coming into the business.

 Rising vendor costs may contribute to insolvency. When a business has to pay
increased prices for goods and services contributing to their offerings, the company
passes along the cost to the consumer. Rather than pay the increased cost, many
consumers take their business elsewhere so they pay less for a product or service.
Losing clients results in losing income for paying the company’s creditors.

 Lawsuits from customers or business associates may lead a company to insolvency.

The business may end up paying large amounts of money in damages and be unable to
continue operations. When operations cease, so does the company’s income. Lack of
income results in unpaid bills and creditors requesting money owed to them.

 Some companies become insolvent because their offerings do not evolve to fit
consumers’ changing needs. When consumers begin doing business with other
HUMAITH 12
 Business law

companies offering larger selections of products and services, the company loses profits
if it does not adapt to the marketplace. Expenses exceed income and bills remain
unpaid.

1. Negotiating With Creditors

 Business owners may contact creditors directly and restructure debts into more
manageable installments. Creditors are typically amenable to this approach because
they understand cash flow issues arise with businesses and they want repayment.
2. Business Debt Restructuring
 If a business owner plans on restructuring the company’s debt, he assembles a
realistic plan showing how he can reduce company overhead and continue carrying
out business operations. The owner creates a proposal detailing how the debt may
be restructured using the cost reduction or other plans for support. The proposal
shows creditors how the business may produce enough cash flow for profitable
operations while paying its debts.

Liquidation
 Unlike a CVA or administration, company liquidation as a terminal process which
means the company will cease to exist. During a liquidation, the IP is appointed to
realize the company’s assets and distribute the proceeds to creditors. There are two
forms of liquidation
The three kinds of liquidation

 While liquidation might seem generally straightforward, there are in fact three
different circumstances under which a company can be sent into liquidation. For
each of the types of liquidation outlined below, there is a specific process that must
be followed:

1. Members’ voluntary liquidation

 In some cases, the business owner might choose to discontinue the company for a
variety of reasons. In this case, members’ voluntary liquidation means that the
business is in fact still able to make its payments on time, but it is the choice of the
business owner or partners to wind-up.
2. Creditors’ voluntary liquidation
 This occurs when the director of a company realizes that the business is not able to
pay off its debts and can begin the process of liquidation after conducting a vote with
the shareholders. If the majority of shareholders (75% or more) vote to liquidate, then
the process can start.
3. Compulsory liquidation

HUMAITH 13
 Business law

 In this situation, the company is completely unable to make payments to its debts
and the director applies direct to the court to request that the liquidation process is
implemented.

A Company Voluntary Arrangement Could Rescue the Business

 The good news is if we are contacted early enough then we can often rescue the
business if not the company though this is sometimes possible. A lot will depend on
the petitioner and their objectives as they may by this stage have malicious intent. If
the intent is to get the best return they can a lot may ‘boil down’ to whether the
company has assets or not and the return to the creditor.

 So, prior to the issue we may be able to agree a company voluntary arrangement if a
payment proposal is not acceptable (see above). The company voluntary
arrangement differs as it is legally binding on the creditor and company owing the
debt.

 If there are assets in the company and or sizeable contracts due and the company
needs more time it may be a pre-pack administration may be more appropriate. In
effect the winding up petition can be stopped whilst a proposal by the administrator is
assessed and presented to the creditors. So if the company has a large contract due
in six months but HMRC want their money now this could be an ideal solution. If for
whatever reason the company cannot be rescued then the compulsory liquidation
may go ahead or a creditors’ voluntary liquidation may be agreed.

 Once we are contacted we will act immediately to assess the situation and contact
the creditor on your behalf where required to start to take the pressure away. We will
also provide a rescue plan outlining in clear terms what you need to do if you want to
continue trading in way or another.

HUMAITH 14
 Business law

P5 provide justifications for the use of appropriate legal

solutions comment on justification for the use of appropriate
solutions?
Company Law

1. Winding up by courts

 A company may have been hurt by the courts for a reason, which is determined to be
resolved through a special resolution; It will not start business within a year; One year it
stops its business; It's not directors; Its loans could not be paid
 The law states that a company cannot afford loans in certain circumstances. Firstly, the
debtor who pays for the payment required to pay a debt of more than fifty thousand
rupees, neglects securing or binding. Under this quota, a notification is referred to as a
statue request, to work in the company's registration office. If there is a good suspicion in
history, the twist does not arise.
 Any other procedure in any execution or judgment shall be deemed impossible for a
company to pay its debts if fully or partially satisfied if any court order or order is issued
to the lender. A lender can prove to the satisfaction of the court that a firm cannot afford
a loan on the above statues. The court must take up the above circumstances and future
responsibilities. If a company fails to pay its debts, the court must take into account the
account and future responsibilities in determining it. When debts are debated, the court
must determine whether there are items in the case based on the evidence
 If the court does not do so is unfair and unfair, it regulates a twist. The failure of the
company's molecular or key object is a party to determine whether tweaking is unfair and
equal. However, evidence of the sale of a part of the business is not the cause of the
substratum failure. Nevertheless, areas that are not reported to be able to follow the
business of the companies by its traders or its original products are the main used
circumstances. When a company has been proven to be a fraudulent purpose, a winding
order can be made on fair and equitable basis.

2. Voluntary winding up
 The law provides for companies to be wound up voluntarily, without the intervention of
court. These extrajudicial procedures permit creditors and contributories to manage the
process of bringing the affairs of a company to an end, without the intervention of the
courts. There are two types of voluntary winding up. The first is a shareholders’ voluntary
winding up ,which is available where the company is solvent, and will proceed on a
certification by the directors that the company is solvent and able to pay its debts. The

HUMAITH 15
 Business law

second type is a creditors’ winding up, where the company is, or will be insolvent and
unable to pay its debts in full.
 A company may be voluntarily wound up in any one of several circumstances. A
voluntary winding up may be commenced if the articles provide for a particular duration
or an event upon which dissolution must take place, and the company resolves by an
ordinary resolution in general meeting to do so. The shareholders also have a general
right to windup a company by resolving to do so by special resolution. A company may
also resolve by special resolution that it cannot continue business because of its
liabilities and that its therefore advisable for the company to be wound up.
 If the liquidator believes that the company will be unable to pay its debts in full within the
period declared in the declaration of solvency, he must immediately summon a creditors’
meeting and lay a statement of the company’s assets and liabilities before them .the
proceeding will then transform into a creditors’ voluntary winding up, attracting the
provisions of sections 340 and 341. However, the liquidator need not summon the
creditors’ specified in section 340, at the end of the first year after the commencement of
the winding up, if the meeting at which the creditors were informed of the company’s
inability to pay its debts took place within three months of the end of that year

3. Winding up subject to supervision of courts

 If a company has made a decision to volunteer a truce, the court must be
compulsory to put an end to a command, but must be subject to court
supervision. The Court may, by lawsuit, the Contributions and Freedom of
Others, may impose the terms and conditions for application to the courts.
Subject to the supervision of the court, the siege is deemed to be frozen by the
court for the purpose of Section 275 and 276 of the Act. The court may appoint
an additional employee after the court has ordered the supervision of the
supervision. The limits are the same forces, duties, and a volunteer winding up
like a liquidator.
 If a disciplinary arrangement is made to the court's supervision, the court may
disband the powers of the court without the permission of the court or the
intervention of the court without voluntary contradictions, including any
restrictions imposed by the court. However, he cannot meet the borrower's
meeting if there are no powers or group specified in Section 292 (1) (d) and (b) of
the Act without the approval of the court or the inspectors.
 A cover school for the supervision of the court is not stimulated by the court for
the purpose of the rules in the English charts. However, it will be considered as a
directive for the court to curb all other objectives. Furthermore, if the volunteer
inspectors are overseeing the Committee, subject to all the provisions of section
300, subject to the supervision of the Court, by the Court, 1), if its function is
exempt from the provisions of the Act.

Conclusion
 Company law attempts to provide a very transparent and easy method for any
complexity or any complexity or accelerate with a simpler algorithm to complete a
company in mind in all respects associated with the company in any manner

HUMAITH 16
 Business law

Labour law
 Worker who works under the employee's employment for 45th of 1971
 The end of the Employment Workers (Special Provisions) Act, No. 45 of 1971 and the
closed economy in 1971 is completely different from the current economic environment.
The law is widely attracted to the private sector and applies to "unregulated"
unemployment. In the circumstances where the employee has not given written consent
to the end of his services, the Commissioner must obtain approval for a moral decision.
 In addition to the imposition of disciplinary proceedings, the aim was to restrict
employers 'rights in indefinite employment in the private sector to lay off workers'
employees.
 The strike leaves the employee's job. Employee can be placed within the area of work / it
may be in the hands of the employer. There are laws governing this decision

I. Industrial Disputes Act (IDA)

II. Termination of Employment of Workmen (special provisions) Act (TEWA]

 The law had been in operation for almost 3 decades and earning the employee
admiration and employer wrath generating a polarized situation of employees wanting its
retention and the employers its repeal.
 It is pertinent to examine the provisions of this legislation with a view to ascertain
whether its repeal or amendment is necessary in the light of the socio economic policy
changes with an open economic system
Covered employee
 The law applies only the scheduled employees section 2[1] states that ‘No employer
shall terminate the scheduled employment of any workman without -
I. The prior consent in writing of the workman; or
II. The prior written approval of the Commissioner.
 A schedule is given at the end of the act; originally it was a long list. This schedule was
amended by the act no4 of 1976. According to this schedule the following employees are
covered;-
 All employees covered by any wags board established under the wages boards
ordinance. The coverage has been extended even to those excluded from the provision
of such order
 All employees covered by the shop and office employees act
 Every factory within the meaning of the factories ordinance
 Exempted employees

HUMAITH 17
 Business law

1. Employees working under employers with less than 15 employees, it been stated in the
section 3[a] as ‘to an employer by whom less than fifteen workmen on an average have
been Employed during the period of six months preceding the month in which the
Employer seeks to terminate the employment of a workman’
2. Employees with less than 180 days section 3[b] ‘to the termination of employment of any
workman who has been employed by An employer for a period of less than one hundred
and eighty days inclusive of

I. Every day of absence on any ground approved by the employer;

II. Every day of absence due to any injury to the workman caused by an Accident arising
out of, and in the course of his employment;
III. Every day of absence due to anthrax or any occupational disease specified In Schedule
of the Workman’s Compensation Ordinance (Chapter139);
IV. Every day on which the employer fails to provide work for the workman;
V. Every day of absence due to a lockout, or strike that is not illegal, if such Days do not in
the aggregate exceed thirty days; and
VI. Every holiday or day of absence from work to which a workman is entitled, by or under,
the provisions of any written law

3. Any workmen whose services are terminated in accordance with a collective agreement
and where the retiring age is specifically mentioned in the contract [as amended by act
4/1976]
4. Government as the employer
5. Local government service as employer
6. Any local authority as employer
7. To any public cooperation in its capacity as employer [as amended by act 4/1976]
industry or business
8. to termination of employment of any workmen who has been employed by an employer
in constitution of the provision of any law for the time being in force
9. Any cooperative society as the employer

 The provision in part IV of the ID act [retrenchment procedure] shall not apply any
workmen covered by this act. [Section 4]. Accordingly said part in the ID act applies
only those employees who are not covered by his act.
 The employees become developed due to the closure of a business were also
brought under the provision of the act by section 6 A [1] introduced by amending
ACT NO.4/ 1976. Any termination made contrary to the provisions of this act in the
situation of a closure of business the commissioner has the authority toured payment
of compensation.
 In disciplinary termination the reason to be given within two days [new section 2{5}]
introduced by section 2 of the emending act no 51 of 1988
 1976 amended widened the scope of termination by the words ‘whether temporarily
or permanently and termination sequel to closure’
 No employer shall terminate the schedule employment of any workman without
a. The prior consent in writing of the workman
b. The prior written approval of the commissioner

HUMAITH 18
 Business law

P6 Recommend legal solutions based upon a different

country’s legal system or different legal frame work.
1. Do you agree with the above statement?
2. Recommend legal solutions based upon a different country’s legal
system or different legal frame work

CRA

HUMAITH 19
 Business law

HUMAITH 20
 Business law

M1 Evaluate the effectiveness of the legal system in terms of

recent reforms and developments
P1 & p2 Evaluate the effectiveness of the legal system in srilanka with
reference to history of legal system in srilanka and recent developments
 Sri Lanka, formally known as Ceylon, is a multi-ethnic and multi-religion island nation in
the Indian Ocean, near the southern coast of India. The distance between the south-
eastern tip of India and north-western Sri Lanka is only about 40 miles. Sri Lanka’s total
land area is 25,330 square miles, roughly the size of West Virginia, and it a population of
a little more than 20 million. Due to major civil conflict that has affected Sri Lanka for
more than two decades, no census was conducted in certain parts of the country during
the last two decades or more. Thus, all demographic figures include relevant estimates
for certain areas in the country.
 The ethnic and religious diversity of the nation, and also its colonial history, have a direct
bearing on aspects of the legal system of Sri Lanka.
 The country’s largest ethnic group is the Sinhalese whose native tongue is the Sinhala
language. The Sinhalese form about 74% of the population. The majority of the
Sinhalese are Buddhists, with a Christian minority.
 The next largest ethnic group is composed of the Tamils who form 18% of the
population, and their native tongue is the Tamil language. The majority of the Tamils are
Hindus, with a Christian minority.
 The majority of the Christians among both the Sinhalese and the Tamils are Roman
Catholics.
 The descendants of Indian tea-estate workers, brought in by the British from Southern
India from the nineteenth century to the 1930s, form a distinct group. Their native
language also is Tamil and they also are referred to as up-country Tamils. The majority
of up-country Tamils are Hindus, and they still form a mainstay of the tea industry
employees. The 18% figure for the percentage of Tamils in Sri Lanka includes the up-
country Tamils.
 The third largest ethnic group is composed of Muslims, mainly descendants of Arab
traders, and Malays, mainly descendants of South-East Asians who arrived in Sri Lanka
during Dutch rule of the country. For a significant segment of the Muslims, Tamil is the
main language. The Muslims, excluding the Malays, constitute about 7% of the
population.
 The other ethnic group is composed of Burghers who are descendants of Dutch and
Portuguese settlers, and are mostly Christian. Largely due to the strongly nationalist
politics that began in the 1950s, a significant segment of the Burghers immigrated to
Australia. Due to this emigration, and also due to Burghers marrying Sinhalese and
Tamils, the Burghers now are a relatively small community in Sri Lanka. English is the
first language for the Burghers.
 The Burghers, Malays, and the Veddhas, who are the descendants of the original
inhabitants of Sri Lanka, form about 1% of the population. (All ethnic-composition figures
are from the "New York Times Almanac" 2008).

HUMAITH 21
 Business law

Colonial History and the Law

 European control of what is now Sri Lanka began a few years after 1505 when
inclement weather drove a Portuguese fleet of ships, commanded by Lourenco de
Almeida, into what is now the Colombo harbour. Colombo, now the capital of Sri Lanka,
is on the west coast of Sri Lanka.
 Almeida, who also realized the strategic value of the island-nation in the context of trade
routes, established cordial relations with the King in Kotte. Over a few years the
Portuguese, capitalizing on the divisions within the Kotte kingdom, gradually gained
control of much of the country’s coastal regions. Kotte, situated in a suburb of Colombo,
is now the legislative capital of Sri Lanka.
 The Portuguese did not introduce their laws in the coastal regions they controlled. They
did, however, establish the Roman Catholic faith as the strongest Christian faith in the
country. The Portuguese were ousted by the Dutch during the 1600s.
 With the Dutch gaining control of Sri Lanka, primarily in the coastal regions, Roman-
Dutch law gained a presence in the country. This “Roman-Dutch law has withstood
many a tide of legal and political change to remain as the foundation of Sri Lanka’s
general and common law.” 1
 The Dutch judicial system was well organized. Three major courts of justice were
established: one each in Colombo (west), Galle (south), and Jaffna (north). A circuit
court, the Land Raad, presided over by a dissava, sat in various districts. Local chiefs
sat in on cases involving local customs. Thus the customary and personal laws that
existed in the West, South and North of the country also were administered in the
courts, unless these were in sharp discord with Dutch jurisprudence.
 The customary and personal laws are based on ancient customs of the Sinhalese and
Tamils whose ancestors hailed from specific regions in the country, as well as the
customs of the Muslims.
 In the 18th century, Roman-Dutch law was increasingly used in the south-west and the
south. As a consequence, private property (land) rights spread rapidly in these areas,
and property transfers were subject to Roman-Dutch law.
 The Dutch also made efforts to codify the customary law of the different ethnic groups.
Codifying Sinhala customary law, however, posed difficulties because of regional
diversity and associated issues. Partly as a consequence of this problem, Roman-Dutch
law increasingly applied to the Sinhalese in the coastal areas, especially to those
Sinhalese who were Christians.
 The Thesawalamai, the laws and customs of the Tamils of the Northern Jaffna province,
was codified in 1707.
 A code of Muslim law was applied with the consent of Muslim elders.
 The British ousted the Dutch from Sri Lanka in 1796, and adopted a unitary
administrative and judicial system for the entire country. A decision by the British to
continue enforcing the existing laws, and consequent developments, led to Roman-
Dutch law gaining a firm presence in the entire country. As the Sri Lankan legal
academic Anton Cooray states:
 “The surrender of the Dutch possessions in Sri Lanka in the twilight years of the
Eighteenth Century was a blessing in disguise for the future of Roman-Dutch law (in Sri
Lanka).” 2

HUMAITH 22
 Business law

 In 1815, when the Kandyan Kingdom in central Ceylon fell to the British, for the first time
in history, the entire country of Ceylon came under the rule of a foreign power. At this
point, the application of Roman-Dutch law was extended to the whole country: “The
British administration, which undertook to continue to apply existing laws, extended the
application of Roman-Dutch law beyond the Dutch controlled coastal areas when, in
1815, British sovereignty extended to the whole of Sri Lanka.”
 The British established a modern system of judicial and civil administration. They
respected the prevailing laws, namely the Roman-Dutch laws, and the customary laws
that applied to the different ethnic groups.
 British rule lasted through 1948, when Sri Lanka gained its independence.

Legal Constructs

 Under British rule, the Charter of Justice of 1801 ensured the continuation of the laws
that were in force at that time. These applicable laws were all of the following: Roman-
Dutch principles brought into force by the Dutch, the Kandyan Law that applied to the
Kandyan provinces, the Thesawalamai Law (also spelt as ‘Tesawalamai’) that applied to
the Jaffna Tamils in the Jaffna province, the Muslim Law that applied to the Muslims,
and a limited body of Buddhist and Hindu Law applicable mainly to Buddhist and Hindu
religious property and customs.
 This conglomeration of different laws led to British judges encountering some difficulty in
ascertaining applicable laws, especially where Roman-Dutch law principles were
expected to be followed. As a consequence, on many occasions British judges
introduced principles of English law on the basis that there existed ambiguity on the
applicability of Roman-Dutch law. The lack of judicial precedents, and the un-codified
nature of the laws, provided an excuse for judges to avoid applying Roman-Dutch law
principles.
 As a consequence, a body of English law principles was in force along with Roman-
Dutch law, in addition to indigenous laws such as Kandyan Law and Thesawalamai.
 Roman-Dutch Law now generally applies in Sri Lanka when statutes and indigenous
laws do not regulate the issue in question. Roman-Dutch Law represents in Sri Lanka an
inherited legal tradition. It has co-existed with several systems of indigenous laws, and
the English common law, creating a “distinct legal culture that is described today as a
‘mixed’ civil and common law system.
 Thus “Roman-Dutch law is often described in Anglo-American legal terminology as the
‘common law’ of Sri Lanka … A system of law that applies in Sri Lanka when statutes
and indigenous laws do not regulate any matter.
 In fact, when the British themselves declared Roman-Dutch law as the common law of
Ceylon, Roman-Dutch law assumed even greater importance under the British than it
had enjoyed under Dutch rule of Ceylon.
 Today, Roman-Dutch law exists only in Sri Lanka and South Africa.

HUMAITH 23
 Business law

 Kandyan Law applies to ethnic Sinhalese whose can trace their lineage back to the
Kandyan provinces during the period of the Kandyan monarchy in central Sri Lanka. The
Kandyan monarchy ceased to exist with the British takeover of central Sri Lanka in 1815.
 Kandyan Law does not apply to all Sinhalese who are now resident in the Kandyan
provinces; however, Kandyan Law does apply to Kandyan Sinhalese who now do not
reside in the Kandyan provinces in central Sri Lanka. Kandyan Law that remains
applicable to Kandyan Sinhalese in present day Sri Lanka relates to marriage, divorce,
and interstate succession.
 Kandyan Sinhalese have the option of choosing to marry under the Marriage and
Divorce (Kandyan) Act, or the General Marriage Ordinance. Kandyan Sinhalese who
choose to marry under the Kandyan Act will be governed by Kandyan law in matters
relating to marriage, divorce and interstate succession by virtue of the Kandyan Law
Ordinance, as well as the Kandyan Matrimonial and Inheritance Ordinance.
 Kandyan laws on adoption are also applicable to those who marry under Kandyan Law.
The General Law applies in other related issues such as alimony and child custody.
 Kandyan Sinhalese who choose to marry under the General Marriage Ordinance are
governed by Roman-Dutch Law in matters relating to marriage, divorce, and interstate
succession.
 The relevant laws on this topic are mostly in the Kandyan Declaration and Amendment
Ordinance, and the Kandyan Marriages and Divorce Act.

Theswalamai Law is based on ancient customs of Jaffna Tamils in Sri Lanka. It applies
to Tamil inhabitants of the Jaffna Peninsula in Northern Sri Lanka. This customary and
personal law also applies to numerous Jaffna Tamils who no longer live in the Jaffna
Peninsula.
 It is a commonly held belief among many in Sri Lanka that Thesawalamai applies only to
Jaffna Tamils who reside in the Jaffna peninsula. The Supreme Court of Sri Lanka,
however, ruled in a 1988 case, “Sivagnanalingam v. Suntheralingam6 that
Thesawalamai is a personal law that applies to Jaffna Tamils wherever they live in the
country, and that it applies also to their movable and immovable property, wherever it is
situated in the country. The Supreme Court, overturning decisions of the lower courts,
held that Thesawalamai would not apply to Jaffna Tamils only if there is “unequivocal
evidence of abandonment of…inhabitancy in Jaffna.”
 This Supreme Court ruling suggests that a Jaffna Tamil could live for decades in another
part of the country and not lose “Jaffna inhabitancy” if he or she, for instance, continues
to own property in the Jaffna Peninsula, or even visits Jaffna on a somewhat regular
basis. The ruling also indicates that each case must depend on its own facts.
 The only Thesawalamai laws that are now applicable to Jaffna Tamils relate to property
and interstate succession resulting from marriage.
 Thesawalamai, which was codified by the Dutch in 1706, gained legal validity when the
British enacted the Thesawalamai Regulation No. 18 of 1806. Other relevant laws are
Ordinance No. 5 of 1869, the Matrimonial Rights and Inheritance Ordinance of 1911,
amended by Ordinance No. 58 of 1947, The Thesawalamai Ordinance and
Thesawalamai Pre-Emption Ordinance, and the Jaffna Matrimonial Rights and
Inheritance Ordinance No.1 of 1911.

HUMAITH 24
 Business law

 In Family Law related issues, the Muslim Special Laws apply to all Muslims in Sri Lanka.
When a Muslim marries another Muslim, the bride and the groom do not have the option
of getting married under the General Law, unlike in the case of Kandyan Sinhalese.
Marriage, divorce and other related issues involving Muslims are governed by the
Marriage and Divorce (Muslim) Act, no.13 of 1951, and any subsequent amendments.
 Issues related to interstate succession and donations, involving Muslims, are dealt with
under the Muslim Interstate Succession Ordinance No.10 of 1931, and any subsequent
amendments.
 There is awareness now that these personal and customary laws based on ancient
customs discriminate against women. As the Supreme Court pointed out in
Sivagnanalingam v. Suntheralingam, under Thesawalamai “the surviving spouse is not
(automatically) an heir of the deceased’s estate.” The spouse, however, has preferential
claim under certain circumstances.
 Also, under Muslim personal laws, for instance, “Although section 25 (1) (b) of the
Muslim Marriage and Divorce Act states that the consent of the bride is essential to a
marriage, in reality her presence is not required when the marriage contract is concluded
between the father or guardian of the bride, and the groom. The consent of the bride is
irrelevant to the conclusion of the marriage contract.
 The efforts needed to revise these personal laws based on ancient customs, in order to
remove any bias against the rights of women, are now hindered by the debate over
minority rights in Sri Lanka:
 Given the context of a war [the current ethnic conflict in Sri Lanka], whose roots
belong to ethnic tensions, it is unlikely that we would see in the next few years
Amendments to the personal laws which would result in positive change for [women’s
rights]. This is because the concept of women’s right to equality has been continuously
subordinated in Sri Lanka to the major debate on minority rights.
 It should be pointed out, however, that these types of personal laws notwithstanding,
only a minority of women to whom these laws are applicable suffer undue discrimination.
In 1960, Sri Lanka elected the world’s first woman Prime Minister, Sirimavo
Bandaranaike. Bandaranaike’s daughter, Chandrika Bandaranaike Kumaratunga, was
elected President twice (under a different Constitution). Kumaratunga served as
President from 1994 to 2005.
 An authority on Sri Lankan law, H.W.Tambiah, touches on the rich and complex nature
of Sri Lankan law:
 In Sri Lanka, there are five systems of private law. The Roman-Dutch law, as
modified by statutes, and interpreted by the courts, is the general law of the land.
English common law applies to commercial contracts and commercial property and has
been tacitly accepted in many matters. English law was also introduced by statute and
as such forms the statutory law of the land. The Thesawalamai is both a personal and
local law…. Similarly, Kandyan Law applies to the Kandyan Sinhalese, and the Muslim
laws, to the Muslims, in [matters relating to] marriage, divorce, [alimony] and inheritance.
 Private law governs issues between individuals. It consists of the law of persons,
property, obligations, and delicts or torts. 9

HUMAITH 25
 Business law

The Structure of the Courts System

 The court-structure consists of a Supreme Court, a Court of Appeal, High Courts,

Municipal Courts, and Primary Courts. Additionally, there are numerous tribunals, etc.
 In cases involving criminal law, a Magistrate’s Court or a High Court is the only court
with primary jurisdiction; the respective legal domains of each are provided in the Code
of Criminal Procedure.
 The preponderant majority of criminal law cases are initiated at a Magistrate’s Court.
These cases may be initiated by any police officer, or public servant, with a written or
oral complaint to the magistrate (see section on Magistrate’s Court).
 Murder trials and various offenses against the State originate in a High Court (see
section on High Courts).
 Original jurisdiction over most civil matters lies with the relevant District Court (see
section on District Courts).
 Until 1972, The Judicial Committee of the Privy Council in Britain was the final court of
appeal for Sri Lanka. The right of appeal to the Privy Council “was abolished…as there
were concerns that any attempt to discard the existing Constitution in 1972 might be
adjudged unconstitutional.
 At that time, “Parliamentarians constituted themselves as members of what was termed
the ‘Constituent Assembly’ to draft and adopt a new Constitution,” 11 which became
effective on May 22, 1972. It has been suggested that the concerns of minority
communities in Sri Lanka were not adequately considered in the drafting of that
Constitution.
 On Aug 31, 1978, another Constitution replaced the 1972 Constitution. Under this
Constitution, for the first time in Sri Lanka an Executive President, elected by the entire
country, became the leader of the country. Under the earlier Constitution, the
government was headed by a Prime Minister, who, as a Member of Parliament, would
have been elected by just one electorate in the country.
 As a consequence of major civil strife that erupted in 1983, now efforts are being made
to replace the 1978 Constitution with a new Constitution in order to grant greater political
autonomy to the different regions in the country. These efforts, at present, seem stalled
in an All Party Conference constituted by the current President, Mahinda Rajapakse.
Furthermore, not all political parties in the country agreed to participate in the
Conference.
 There are also other courts such as the Kathi Courts that handle matrimonial disputes
among Muslims, and numerous tribunals (see section on Other Courts).

I. The Supreme Court

 The Supreme Court is the highest and final court of record, and exercises final civil and
criminal appellate jurisdiction.
 Litigants who do not agree with a decision of the original court, be it civil, criminal, or
Court of Appeal, may take the case before the Supreme Court, with permission from the
Court of Appeal, or special permission from the Supreme Court. The Supreme Court,
however, will only agree to consider cases involving a substantial legal issue.
 The Supreme Court is composed of a Chief Justice and not less than six, and not more
than ten, other judges

HUMAITH 26
 Business law

 Cases that fall under the several jurisdictions of the Supreme Court are exercised,
subject to provisions in the Constitution, by a bench of at least three judges of the
Supreme Court. Thus different cases may be heard at the same time by several judges
of the Supreme Court sitting apart.
 The Constitution provides the Chief Justice with the authority to increase the number of
Supreme Court judges hearing a particular case to five or more judges. This increase in
the number of judges hearing a Supreme Court case would transpire especially if the
issue under consideration is one of general and public importance.
 Appeals of decisions of a High Court Trial at Bar are heard by a Bench of five or more
Supreme Court judges.
 The Supreme Court is entrusted with certain exclusive jurisdictions. Subject to
provisions in the Constitution, the Supreme Court exercises jurisdiction over
constitutional matters and fundamental rights issues.
 Also, the Supreme Court exercises sole and exclusive jurisdiction over questions
concerning the constitutionality of a parliamentary bill or a particular provision in the bill,
subject to certain constitutional requirements. The Supreme Court has the exclusive
jurisdiction to hear and determine issues relating to the interpretation of the Constitution.
 The Supreme Court also has the sole and exclusive jurisdiction to hear and determine
issues relating to the infringement of fundamental rights by Executive or Administrative
action. These fundamental rights include freedom of thought, conscience and religion;
freedom from torture; right to equality; freedom from arbitrary arrest, detention and
punishment; prohibition of retroactive penal legislation; and freedom of speech,
assembly, association and movement.
 The Constitution provides for temporary restrictions on fundamental rights if national
security issues are involved.
 The Supreme Court also exercises consultative jurisdiction. If the President of the
Republic deems that a question of law or fact that has arisen is of such a nature and of
such public importance, the President may refer the question directly to the Supreme
Court for an opinion.
 The consultative jurisdiction also extends to any concerns expressed by any Member of
Parliament regarding the ability of the President to effectively discharge his or her
duties. These concerns, in the first instance, would be addressed in writing to the
Speaker of the House of Representatives by the member or members of Parliament.
These concerns would be that the President is permanently incapable of discharging
the functions of the office due to mental or physical frailty, or that the President is guilty
of intentional violation of the Constitution, treason, bribery, misconduct or corruption
involving the abuse of the powers of the Office of President, or any offense under any
law involving moral turpitude.
 When the Speaker, subject to specific requirements in the Constitution, refers the
allegations to the Supreme Court, the Court is required to report its findings to the
Speaker within two months. During the Supreme Court’s determination of the issue, the
President can appear before the Court to present his or her case, or the President may
be represented by an attorney-at-law. The Supreme Court then reports its
determination, and the reasons for its determination, to the Parliament.
 This determination and opinion of the Supreme Court should be by at least five judges
of the Supreme Court, including the Chief Justice, except for in the event of the Chief
Justice’s recusal. The Chief Justice’s recusal will result in another judge of the Supreme
Court taking the Chief Justice’s place.
 Based on the Report from the Supreme Court, the Parliament may vote to remove a
President from office, subject to specific requirements in the Constitution.
HUMAITH 27
 Business law

 The Supreme Court also exercises jurisdiction over legal issues related to the election
of a President of the country, and legal issues surrounding a referendum. The
Constitution stipulates that the foregoing two issues have to be determined by a bench
of at least five Supreme Court judges, including the Chief Justice, unless the Chief
Justice appoints another Supreme Court judge in his or her place.
 Legal issues surrounding any breach of privileges of Parliament by any person also fall
under the purview of the Supreme Court.
 Supreme Court cases are published in the Sri Lanka Law Reports. As of October 2008,
Supreme Court cases from 1878 through 2005 are accessible online. See the section
on Cases, Bills and Acts.
 Judges of the Supreme Court and Court of Appeals (next section) are appointed by the
President of the Republic, subject to provisions in Article 41C of the Constitution. Article
41C was introduced by the 17th Amendment to the Constitution which became effective
on October 3, 2001.
 The 17th Amendment stipulates that the President’s selection and appointment of a
Supreme Court judge requires the approval of the Constitutional Council, which is
composed of the Prime Minister, the Speaker of the Parliament, the Leader of the
Opposition in Parliament, a nominee of the President, five persons appointed by the
President who were nominated by both the Prime Minister and the Leader of the
Opposition, and one person selected by the majority of Members of Parliament
belonging to political parties or independent groups not affiliated with the political parties
or groups of the Prime Minister or Leader of the Opposition.
 The Constitutional Council’s approval is not required if the appointment is for a period of
less than 14 days.
 An order of the President of the Republic is required to remove from office a Supreme
Court judge, including the Chief Justice. The President’s order for removal of a judge is
preceded by the President addressing the Parliament on the relevant issues
surrounding the “proved misbehaviour, or incapacity,” that necessitates the removal of
the judge from office. The removal of a Supreme Court judge requires the support of a
majority of the Members of Parliament, including those members not present in
Parliament at the time of the vote.
 The Speaker of the Parliament will agree to the President’s address to Parliament if not
less than one-third of the Members of Parliament sign a notice of the resolution in
support of the President’s address to Parliament. The notice of the resolution will
provide the full particulars of the alleged “misbehaviour,” or the incapacity of the judge
to carry out the functions of a Supreme Court judge.
 The Parliament, by law or by Standing Orders, provides for all matters relating to the
presidential address to Parliament, including the procedure for passing the resolution,
information on the investigation, proof of the alleged “misbehaviour” or incapacity of the
judge, and the right of the judge to appear before Parliament and be heard in person or
through a representative.
 The age of retirement for Supreme Court judges is 65 years.

II. Court of Appeal

 The Court of Appeal is the first appellate court for decisions of all original courts and
certain Tribunals.

HUMAITH 28
 Business law

 The Court of Appeal is composed of the President of the Court, and not less than six,
and not more than eleven other judges. Many cases at the Court of Appeal are presided
over by a single judge.

 The Court of Appeal hears appeals against judgments of the High Courts. It exercises
appellate jurisdiction for the correction of errors in fact or in law at a High Court, or any
Court of first instance, or Tribunal, or other Institution. In addition to the jurisdiction to
affirm, reverse, correct, or modify a judgment, the Court of Appeal may give directions
to a Court of first instance, Tribunal, or other Institution, or order a new trial, or order
additional hearings as the Court of Appeal deems appropriate.
 “Even when there is no right of appeal from a particular court or tribunal, [the Court of
Appeal] can exercise [its] powers of ‘revision’ and quash the original court’s or tribunal’s
order [based on] an error of law apparent [in] the record.” 12 The Court of Appeal, if
appropriate, also has the authority to issue a ‘stay order’ and suspend proceedings in a
lower court until the revision application is heard and determined.
 The Court of Appeal also has the authority to receive and admit new evidence
additional, or supplementary, to evidence already recorded in a court of first instance.
 Appeals of judgments, sentences and orders at a High Court Trial at Bar are forwarded
directly to the Supreme Court by virtue of the Code of Criminal Procedure (Amendment)
Act, No.21 of 1988.
 The Court of Appeal, in exercising its power to examine and reverse a judgment of any
court of first instance, has the authority to examine any record of any court of first
instance.
 The Court of Appeal also exercises the power to grant and issue, as provided by law,
writs of certiorari, prohibition, procedento, mandamus, and quo warranto.
 The Court exercises jurisdiction to grant writs of habeas corpus in order to bring before
the Court a person who has to be dealt with according to the law, or to bring before the
Court a person illegally or improperly detained in public or private custody.
 The Court of Appeal grants injunctions, and also exercises the jurisdiction to try
petitions challenging the election of a Member of Parliament.
 The Court of Appeal sits in Colombo, the Capital city. The Chief Justice may direct that
particular sittings of the Court be held in another judicial zone or district.
 Appeals against judgments, sentences and orders of the High Court (other than
judgments, sentences and orders delivered at a Trial-at-Bar), are heard by at least two
judges of the Court of Appeal.
 Parliamentary election petitions are heard by the President of the Court of Appeal, or by
a judge of the Court of Appeal nominated by the President of this Court, or by more
judges of the Court of Appeal nominated by the President of this Court, of whom the
President of the Court may be one.
 Other issues before the Court may be heard by a single judge of the Court of Appeal.
 If the Court hearing a case consists of two judges and they fail to agree on a decision,
the issue is reviewed by three judges of the Court of Appeal.

HUMAITH 29
 Business law

 Court of Appeal cases are now published in Sri Lanka Law Reports. As of October
2008, Court of Appeal cases from 1809 through 2005 are accessible online. See section
on Cases, Bills, and Acts.
 The appointment of Court of Appeal judges requires the same procedure as that for the
appointment of Supreme Court judges (see earlier section on the Supreme Court). The
age of retirement for Court of Appeal judges, however, is 63, as opposed to 65 for
Supreme Court judges.
 The removal from office of a Court of Appeal judge requires the same procedure as that
for the removal of a Supreme Court judge, with the President of the Republic
addressing Parliament and a majority of the Members of Parliament, including those not
present in Parliament, supporting the removal (See the three paragraphs preceding the
final sentence in the Supreme Court section.)

III. High Courts

 Trials at a High Court are conducted by the State (Sri Lanka), through the Attorney-
General’s Department. The Attorney-General’s Department prosecutes on behalf of the
State.
 Murder trials and various offenses against the State are tried at the High Court; other
criminal offenses are tried at a Magistrate’s Court.
 While some High Court trials will have a jury, some trials will not have a jury. The types
of cases that require a jury are provided in the Second Schedule of the Judicature Act
No.2 of 1978. Also, the Attorney-General has the authority to determine whether a case
that does not fall into a category provided in the Second Schedule of the Judicature Act
No.2 of 1978 should nonetheless have a jury.
 The Penal Code stipulates the types of cases argued in a High Court: “The Penal Code
defines most of the criminal offenses known to our law. And the Code of Criminal
Procedure Act. No: 15 of 1979 sets out which of these offenses [can be tried] by each
court [High Court and Magistrate’s Court].
 The High Court is composed of not less than ten and not more than forty judges. This
Court sits in 16 provinces in the country (16 High Courts).
 The High Court of each province exercises:
a) Original jurisdiction over prosecution of offenses committed within a particular province.
b) Admiralty jurisdiction, which is usually exercised in Colombo, the capital city.
c) Commercial jurisdiction, which is vested by the High Court of the Provinces (Special
Provisions) Act, No. 10 of 1996.
d) Jurisdiction to hear cases involving attempts to influence the outcome of a decision
made, or an order issued, by the Judicial Service Commission. This jurisdiction is vested
by Article 111 L (2) of the Constitution
e) Applications for the return of, or access to, a child, under the Hague Convention, is
handled by the High Court of the Western Province (Civil Aspects of International Child
Abduction Act, No:10 of 2001
f) Appellate jurisdiction over convictions, sentences, and orders imposed by the
Magistrate’s Courts and Primary Courts within the province.
g) Writ jurisdiction in respect to powers exercised under any law or statutes enacted by the
Provincial Council of that particular province, with regard to an issue delineated in the
Provincial Council List.
h) Appeals of decisions reached by Labour Tribunals, Agrarian Tribunals, and Small
Claims Courts.

HUMAITH 30
 Business law

 The Provincial High Court sits in the following cities: Colombo, Kalutara, Galle, Matara,
Batticaloa, Jaffna, Chi law, Negombo, Gampaha, Kegalle, Kurunegala, Kandy,
Avissawella, Ratnapura, Badulla, and Anuradhapura.

 Judges of the High Court are appointed by the President of the Republic on the
recommendation of the Judicial Service Commission, and in consultation with the
Attorney-General. The President of the Republic, acting on the advice of the Judicial
Service Commission, exercises authority in disciplinary matters concerning the High
Court judges. The President may terminate the service of a High Court judge on the
advice of the Judicial Service Commission.
 The Judicial Service Commission (JSC) was established by the enactment of Article
111D of the Constitution, incorporated by the 17th Amendment, which became effective
on October 3, 2001. The JSC is composed of the Chief Justice (as Chairman) and two
other judges of the Supreme Court appointed by the President of the Republic.
 The age of retirement for High Court judges is 61.

IV. District Courts

 District Courts are the Courts of first instance for civil cases. District Courts have
jurisdiction over all civil cases not expressly assigned to the Primary Court or a
Magistrate’s Court.
 Sri Lanka has 54 judicial districts. Every District Court is a court of record and is vested
with unlimited original jurisdiction in all civil, revenue, trust, insolvency and testamentary
matters, other than issues that are assigned to any other court by law.
 Certain specific civil issues handled by the District Courts include:
a) Cases related to ownership of land.
b) Action by landlords to eject tenants.
c) Action to recover debts of more than Rs.1,500
d) Action in connection with trademark and patent rights, and infringement of
copyright laws. Claims for compensation of more than Rs. 1, 500 for injuries
caused by negligence
e) Divorce cases (Formerly, divorce cases were handled by the now defunct Family
Courts).
 Commercial disputes that are more than three million rupees in monetary value fall
within the purview of the High Court in Colombo, the administrative capital, in
accordance with the High Court of the Provinces (Special Provisions), Act No. 10 of
1996.
 There is a standard form of plaint for each type of action, and if necessary, there may be
variations to the form
 The normal procedure is for the filing of a plaint by the plaintiff. The plaint is argued
before a District Court judge, and if the judge is satisfied that all matters are in order, an
order may be issued to serve summons, along with a copy of the plaint, on the
defendant(s). Usually, the plaintiff, or the plaintiff’s attorney, must ensure that the Court’s
fiscal officer serves the summons, with a copy of the plaint, to the defendant.

HUMAITH 31
 Business law

 The defendant appears in court on the summons returnable date. The defendant, or his
or her lawyer, is provided with a date by which an answer to the plaint is required.
 Further pleadings may be filed, especially if the defendant files a counter-claim, a claim
in reconvention. The counter-claim, if any, must relate to the issue brought before the
District Court by the plaintiff. The plaintiff may then file a replication in response to the
defendant’s claim in reconvention.
 The above procedure is the normal procedure at the District Court. There is also a
Summary Procedure for the District Court provided in Chapter 53 of the Civil Procedure
Code.
 Judges of the District Courts are appointed by the Judicial Service Commission (See
section on High Courts for information on the JSC). The JSC has the power to dismiss
and maintain disciplinary control over the District Court judges.
 The retirement age for District Court judges, generally, is 60 years.

V. Magistrate’s Courts
 The Magistrate’s Courts are established under the Judicature Act, No.2 of 1978.
 Each Judicial division has one Magistrate’s Court, and there are 74 judicial divisions in
Sri Lanka.
 Each Magistrate’s Court is vested with original jurisdiction over criminal offenses (other
than offenses committed after indictment in the High Court.)
 In cases involving criminal law, the Magistrate’s Courts and the High Court are the only
Courts with primary jurisdiction. The respective domains of these Courts are detailed in
the Code of Criminal Procedure.
 Appeals from these courts of first instance may be made to the Court of Appeal and,
under certain circumstances, to the Supreme Court, which exercises final appellate
jurisdiction.
 The vast majority of the nation’s criminal cases are tried at the Magistrate’s Courts level,
which forms the lowest level of the judicial system.
 Cases may be initiated at a Magistrate’s Court by any police officer or by anyone else
making an oral or written complaint to the Magistrate. The Magistrate is empowered to
make an initial investigation of the complaint, and to determine whether his or her Court
has proper jurisdiction over the matter, whether the matter should be tried by the High
Court, or whether the matter should be dismissed.
 If it is determined that the Magistrate’s Court has the proper jurisdiction over the matter,
the prosecution may be conducted by the complainant (plaintiff), or by an officer of the
Government, including the Attorney-General, the Solicitor-General, a state counsel, or
any officer of any national or local government office.
 At the trial, the accused has the right to call and cross-examine witnesses.
 Trials are conducted without a jury, and the verdict and sentence are given by the
Magistrate.
 Any party in a case who is in disagreement with a judgment has the right to appeal the
judgment, on any point of law or fact, at the Court of Appeal.
 If the police decide not to institute criminal proceedings in a Magistrate’s Court, the
complainant has the option of filing a private plaint, and the complainant may retain an
attorney for this purpose.

HUMAITH 32
 Business law

 As indicated earlier, while murder trials and various offenses against the State (Sri
Lanka) are tried in a High Court, other criminal offenses are tried in a Magistrate’s
Court. The Penal Code defines which court, a Magistrate’s Court or a High Court, has
the necessary jurisdiction (Code of Criminal Procedure Act No.15 of 1979).
 If a new offense is codified by law, for instance the Prevention of Terrorism Act, the
relevant statute will indicate the manner of trial.

 The Magistrate’s Courts are ordinarily empowered to impose the following sentences: A
fine of up to Rs. (rupees) 1,500.00, and/or two years of rigorous or simple
imprisonment, unless special provisions vest the Magistrate’s Courts with the power to
impose higher penalties.
 Magistrates are appointed by the Judicial Service Commission (JSC), and the
Commission exercises disciplinary oversight over the judges, including the power of
dismissal (See section on High Courts for information on the Judicial Service
Commission).
 The retirement age for Magistrate’s Court judges, generally, is 60 years.

VI. Primary Courts

 Each Primary Court is vested with the following jurisdictions:
A. Original civil jurisdiction over cases involving debt, damages, demands, or claims that do
not exceed Rs. 1,500.
B. Enforcement of by-laws by local authorities and disputes relating to recovery of revenue
by these local authorities.
C. Exclusive criminal jurisdiction over cases relating to offenses “prescribed” by regulation
by the Justice Minister.
D. Offenses in violation of the provisions of any Parliamentary Act, or subsidiary legislation,
that is related to jurisdiction vested in the Primary Courts.
 The Primary Courts are established under the Judicature Act, No.2 of 1978.
 There are seven Primary Courts: One each in Anamaduwa, Angunukolapelessa, Kandy,
Mallakam, Pilessa, Wellawaya and Wennappuwa.
 In all other divisions, the Magistrate’s Court exercises the jurisdiction of the Primary
Courts.
 Requests for revision of orders made by a Primary Court are handled by the High Court
in that province.
 All Primary Court judges are appointed by the Judicial Service Commission (JSC), which
is also vested with the power of dismissal of the Primary Court judges (See section on
“High Courts” for information on the JSC).
 Generally, the retirement age for Primary Court judges is 60.

VII. Other Courts and Tribunals

HUMAITH 33
 Business law

 The other courts include the Kathi Court, the special tribunal that adjudicates on
matrimonial matters relating to Muslims. Buddhist ecclesiastical matters that fall under
the purview of the Buddhist Temporalities Ordinance of 1931 are heard by the ordinary
courts. Disciplinary matters pertaining to Buddhist clergy are handled by religious
councils which are under the authority of the Buddhist priests themselves.
 There are numerous administrative tribunals, such as the Inland Revenue Board of
Appeal, The Workmen’s Compensation Tribunals, Labor Tribunals, the Board of Appeal
under the Factories Ordinance, Tribunals under Agricultural Productivity Law, Labor
Tribunals under the Wages Board Ordinance, etc.
 Most decisions of these tribunals can be appealed at the Court of Appeal; when
regarding a substantial question of law, the decision of the Court of Appeal may be
taken up at the Supreme Court.

Case Law

 The principle of stare decisis is adhered to in Sri Lanka. Supreme Court decisions are
binding on all other courts. A decision of the Court of Appeal is binding on the courts of
first instance, if the decision is not in conflict with a decision of the Supreme Court.
Since 1978, when a new Constitution became effective in Sri Lanka, decisions of the
Supreme Court before 1978, and the decisions of the Privy Council when this Council in
the U.K. was the final Court of Appeal for Sri Lanka, are technically no longer binding.
But the earlier case law may still serve as “guidance,” and the word “guidance” suggests
that the earlier case law is much closer to binding evidence than to persuasive
evidence.
 Sri Lanka’s laws passed before 1978 remain valid through Article 168 of the 1978
Constitution.

Cases, Acts, and Bills

 Supreme Court and Court of Appeal cases now are published in the Sri Lanka Law
Reports. As of October 2008, Supreme Court cases from 1878 through 2005, and Court
of Appeal cases from 1809 through 2005 are accessible online here. Access this link
and then scroll down to the Asia section and select the Sri Lanka link. There also is a
link at this site for Sri Lanka legislation. The legislation-link, however, may not download
quickly.
 Acts and Bills of Parliament, when available for publication, are published in the Extra
Gazette. The Acts and Bills links are at the top left corner of this site. Usually, it takes a
while for the Acts, Bills, Forms, Gazette, and News links to appear on the top left corner.
After accessing the Acts or Bills link, select the “E” link for English. The “S” link is for the
Sinhala language version, and the “T” link is for the Tamil language version.

Major Codifications

 The major codifications are:

1. The Civil Code.

HUMAITH 34
 Business law

2. The Code of Civil Procedure: Civil Procedure Code. Act 79 of 1988. Amended by
Acts 9 of 1991 and 34 of 2000.
3. Commercial Code.
4. Criminal Code: Penal Code. Chapter 25. Amended by Penal Code (amendment) Act
of 1995.
5. Code of Criminal Procedure: Code of Criminal Procedure Act. Chapter 26, Law 15 of
1979. Amended by no. 39 of 1982 (The 1979 Act repealed earlier codifications.)
 A comprehensive listing of codes and legislation of Sri Lanka is in the “Sri Lanka”
section of Foreign Law: Current Sources of Codes and Legislation in Jurisdictions of the
World, edited by Thomas H. Reynolds and Arturo A. Flores. This publication is listed in
the Bibliography section of this article.

M2 Different and analyse the potential impacts of regulations,

legislation and standards.
P3 Compare and contrast the potential impact of company law and labour
law in business affairs

Company law

 Legislation under which the formation, registration or incorporation, governance, and

dissolution of a firm is administered and controlled.

Labour law

 Labour law (also known as labour law or employment law) mediates the relationship
between workers, employing entities, trade unions and the government. Collective
labour law relates to the tripartite relationship between employee, employer and union.

 Business laws refer to the law that applies to business entities, such as partnership and
corporations. Business law regulates the business and bound it to follow the existing
policies of business world. This is relationship between businessman (corporations or all
over the world) and the country that everything will go no under the rule and regulation.
Business law governs the transaction between businesses. Business law includes
business formation, litigation, contract, mergers and acquisitions, commercial leasing,
and consumer protection. This law deals with primary with the definition of rights and
responsibilities, overlapping issues. The Uniform Commercial Code (UCC) is the
primary governing authority for commercial transactions. (Ross law Texas
Attorney1998).

HUMAITH 35
 Business law

 Business laws, there are some essentials, contract employment law, Environmental law,
insurance and liability, When consider into labor law Workforce organization is among
the most difficult tasks for business owners, from the hiring process and wage issues to
workplace safety, discrimination and the termination of employees. Employment law
covers all rights and obligations within the employer-employee relationship -- between
employers and current workers, job applicants, or former employees. Because of the
difficulty of employment relationships and the wide range of situations that can occur
employment law involves legal issues as diverse as discrimination, wrongful
termination, wages and taxation, and workplace safety. Bennie, W.(1994) Many of these
issues are governed by applicable federal and state law. But, where the employment
relationship is based on a valid contract entered into by the employer and the employee,
state contract law alone may dictate the rights and duties of the parties. Basically
employment law explores the safety of working people in an organization as well as
explains responsibilities of workers

 The impact of company law is in my view, twofold:

1) As a regulation on wealth creation and

2) A pricing mechanism for investors.

 As a regulation, company law creates a separate legal entity which takes on a life of its
own. It can own assets, owe obligations and raise money independently through debt,
equity or a hybrid of both. There are rules around each of these things, embodied in
what we call “company law”. These rules organize the company’s creation of wealth
through capital requirements and corporate governance. The age old debate in
company law is generally whether wealth should be maximized for shareholders or for
stakeholders (i.e. employees, the environment and general corporate social
responsibility). Business analysis takes these issues into account. Your decision to
invest in a heavily stakeholder friendly company is wildly different to investing in a
shareholder focused company.
 As a pricing mechanism, company law rules and the negotiations between directors and
shareholders around those rules is a pricing mechanism. If for example, I am a
prospective shareholder. I will want to know that the shares I buy, give me favorable
rights to influence the wealth creation in the company. So, I price this in and compare it
with other companies that I may want to invest in. This is connected to the above, but it
excludes the statutory rules around company law (i.e. capital requirements and
corporate governance) and emphasizes the purely legal matters such as the value of
shareholder’s agreements and bargains they strike with directors in the management of
the company

HUMAITH 36
 Business law

Wage Issues

 Employers who neglect to pay workers appropriate wages may risk violating compliance
with their states. Along with ensuring that employees receive a fair wage for every hour
they work, many businesses are required to pay a higher price for overtime hours.
Failure to adhere to all wage-compliance laws can result in audits and fees among other
consequences for the business in question.

Hiring

 No one expects companies to hire every person they interview. However, asking
inappropriate questions, engaging in inappropriate conduct and discrimination during a
job interview can leave companies vulnerable to many negative consequences. For
example, candidates who are asked how old they are may opt to sue for age
discrimination in the event that they don’t get the job.
 Following all hiring-compliance guidelines is the best way to avoid unpleasant legal
action in the future.
 Example: Businesses that are found to have discriminated against an applicant’s
protected class (e.g. religion, national origin, sex, etc.) can expect to pay up to $300,000
in compensatory and punitive damages, depending on the size of the offending
company.

Hiring Employees Under 18

 If your business employs minors, federal regulations govern the age at which they can
be hired and the lowest minimum wage you can offer. When it comes to underage hiring,
regulations govern all jobs, with substantial differences between agricultural and non-
agricultural jobs, and violations can cost business thousands of dollars in fines.

Workplace Safety

 As a business owner, you have a responsibility to ensure the safety of everyone you
employ. Not only does failing to meet safety guidelines expose you to lawsuits by
employees who were injured on the job, but it may also result in crippling fines from the
Occupational Safety and Health Administration.
 It’s also critical to ensure that your company has thorough workers’ compensation
coverage to remedy workplace injuries and insulate yourself from lawsuits. Workers’
compensation is required in every state except Texas, and it covers all medical costs
and a percentage of lost wages. Failure to provide workers’ compensation can result in
steep fines and/or stop work orders. For a simple and effective way to set up your
workers’ compensation program, check out QuickBooks Workers’ Comp Payment
Service.

Licensing

 For many businesses, staying compliant requires holding various business licenses and
permits. For example, a restaurant that sells alcohol must possess a license from the
Alcohol and Tobacco Tax and Trade Bureau in addition to a current health permit.

HUMAITH 37
 Business law

Labour Law Posters

 All U.S. businesses are required to display current federal and state labor law posters in
a conspicuous area visible to all workers. Federal and state labor law is constantly
changing, and your posters must reflect the most recent changes at all times.
 For a service that automatically creates and ships both federal and state compliance
posters for a one-time fee, see QuickBooks Poster Compliance Service.

Protect Your Business from Non-Compliance Claims

 Compliance requirements can be complex, and business owners may not always be fully
educated about the latest rules and regulations. If you’re concerned about your
company’s compliance status, consider hiring a human resources expert to protect your
business’ legal and financial standing. After all, when it comes to non-compliance issues,
ignorance of the law is no defence

HUMAITH 38
 Business law

M3 Assess the positive and negative impacts of legal

solutions to business problems.
P4 & p5 discuss the positive and negative impacts of legal solution to
business problems in the application of company law and labour law
 An organization is shaped when a declaration of Incorporation is issued by the suitable
government specialist. an authentication of consolidation is issued when the sacred
records of the organization, together with statutory frame have been documented and a
filling expense has been paid For the situation of Unlimited organization must express
the individuals with which organization propose to be enlisted and if the organization has
an offer capital, the measure of offer capital with which the organization propose to be
enrolled. Organization may raise capital

Capital

 Capital is the financial assets or the financial value of assets used in businesses. It
includes cash or other assets introduced into a business by the owners. It also
represents the amassed wealth of a business, represented by its assets less liabilities. 

The ways in which a company may raise capital

 Investment companies and angel investors - This is the hardest to secure. It involves
pitching a business plan to investors and securing their interests. It involves some level
of PR and marketing. 
 Crowd funding – this involves asking a large number of persons for a small amount of
money. This is usually done if a business was unsuccessful in attaining a bank loan. 
 Banks and traditional lenders – small business loans from banks can offer great terms
and interest rates. Of course this depends on the type of collateral you can offer up.
 Yourself – Only in very rare instances can a start-up happen with a founder investing $0
of his or her own money
 Family and friends – this is usually shied away. However, you should present your pitch
professionally and treat your family members like the real investors they are.

The effect of the Employers liability Act on a company

 The Act holds employers accountable for the actions of their employees. This remains
the case even if the employer had no intention to cause the harm and played no physical
role in the harm. This is because firstly, employees work under the direction of their
employers and secondly employers are considered to have deeper pockets. 

HUMAITH 39
 Business law

Liquidation

 Liquidation is the “winding up of a firm by selling off its free (un-pledged) assets to
convert them into cash to pay the firm's unsecured creditors”

The process which is employed in order to repay creditors when a company is liquidated

 A liquidator is appointed, either by the company shareholders passing a resolution

(voluntary liquidation) or by the Court making an order (compulsory liquidation).
 The liquidator collects the assets of the company (including uncalled capital; that is,
amounts unpaid on shares) and pays the creditors in order of priority.
 The liquidator distributes any surplus funds to the shareholders.
 The company is then formally dissolved.

Business rescue

 “Business rescue, as defined by the Companies Act 2008, aims to facilitate the
rehabilitation of a company that is "financially distressed" by providing for: the temporary
supervision of the company and management of its affairs, business and property by a
business rescue practitioner, a temporary moratorium ("stay") on the rights of claimants
against the company or in respect of property in its possession and the development
and implementation (if approved) of a business rescue plan to rescue the company by
restructuring its business, property, debt, affairs, other liabilities and equity,”

HUMAITH 40
 Business law

M4 Compare and contrast the effectiveness of these

recommendations.
P6 compare and contrast the effectiveness of these recommendations with
the discussion of merits and demerits of the recommended system
 The English law is based on a common legal system. Because it is historically
historically developed, there are various legal systems that govern different parts of the
British islands, each representing the influence of specific invaders (such as Norxes in
North England). Gradually, the general laws and procedures for each of these places
appeared, and were imposed by the monarchy representatives throughout the country.
The emergence of enthusiastic decency, which ultimately led to the theory of bonding
pioneer. The English legal system is a general legal system that adapts to adult social
needs of adults.
 Public legal systems (which have a balance between legislation created by the
legislature and the judiciary) can be compared to civil legal systems, which dominate
much of Europe. Civil legal systems are traditionally affected by its Napoleonic tradition
by the French Civil Code. The main source of law in civil legal systems is constitution or
civil code. Other laws are formed from this. While the English legal system is not the
only common legal system in the world, it is a unique form of English public law, as it is
historically developed in a certain way.
 It has confirmed the English public law system. This is the main reason for the historical
start of the common law. This means that a good idea of how the courts advance their
particular case or circumstances, is based on previous comparative events.
Confirmation is the fundamental principle of the rule of law, and the general law helps.
Unlike a coding system created in summary, the common law is based on all the
problems that can be addressed with the microscopic and real situations. There is less
credibility in the general law on theory and logic than just the law or code. These cases
help to be identical to the conditions they find themselves.
 The main advantage of the general legal system in the most severe civil systems is its
relative flexibility. For the above reasons, judges can create lawsuits (and do) on a case
that may be appropriate to reflect the changing needs of society and to change the
socio-political norms and values. Parliament is a quicker (and easy) to judge a judgment
in a larger case to amend legislation in a particular area than draft, debate and
execution of the relevant legislation. Some critics (specifically Hayek) are the size of this
flexibility for general justice (that is, judges created) to change the law as the main
source of the law until the parliament has come from. Strong and strong (and correct)
laws are resistant to the forces of social developments, not less strong or wrong, but
rather he analyzes a right-wing market force, rather than his views. This reflects the
reaction of the benefits of the common law.

HUMAITH 41
 Business law

 However, there are many disadvantages in the general legal system. The most
important of these is the clear amount of legal structure that the organization creates.
There are many thousands of cases, many long statements. These rates should be
studied in detail in order to get the correct rate divide. A major criticism of public legal
systems will be difficult to detect and extract relevant policies due to material size. Even
more criticisms are based on bonding pioneers, even if the judges refuse to accept it,
the predecessor must follow. This theory differs on a weak basis, in order to make use
of priority or barriers to retaining similar cases, usually. It is said to lead to a highly
unpredictable extent based on unfair and often artificial differences.
 The common law, as it has been identified, is based on a case-by-case basis, and it has
an advantage over the changing circumstances, and its policy benefits on more serious
civil law systems are found. This is an inherent evil; however, the public law is based on
the fact that it does not provide a comprehensive legal code. Here is a comparative
eligibility of the comprehensive civil code of creation of the whole law involved in
specific issues here.
 A significant difference between the general legal system and the civil system is the
outcome of the new law. Justifying the lawlessness of the law is justified. However,
changes to the law made by lawsuits apply to the facts of the current cases, which apply
again and again. This was a problem in the controversial issue of SW v United Kingdom
(1995), where the European Court of Justice accused two defendants of raping their
spouses before human rights abuses. Under Article 7, their rights have been denied a
criminal law. However, the court dismissed this, but said there was no violation, and the
improvements could be clearly highlighted.
 This reflects the fundamental differences between common legal systems and civil law
systems that are on the continent of Europe, which are generally greatly affected by the
Napoleon French civil code.

HUMAITH 42
 Business law

D1 Provide a coherent and critical evaluation of the legal

system and law, with evidence drawn from a range of
different relevant examples to support judgements.
P1 & p2 evaluate the legal system and law, with evidence drawn from a
range of different relevant examples

Legal system - Legal system refers to a procedure or process for interpreting and enforcing the
law. It elaborates the rights and responsibilities in a variety of ways. Three major legal systems
of the world consist of civil law, common law and religious law
Law- The law is a system of rules that a society or government develops in order to deal with
crime, business agreements, and social relationships. You can also use the law to refer to the
people who work in this system.

Function of the law

 The concept of the functions of law is of major importance. It is needed to explain the
nature of law, to explain disciplines associated with law, to correctly interpret and apply
law, to pinpoint the interaction of law with social norms and institutions, to determine
which general principles to which the law should conform or deviate, and to explain the
law within the context of normative philosophy. This chapter aims to contribute to the
elaboration of the comprehensive reasoned scheme of the functions of the law. In it, the
questions of the social functions of law are distinguished from the question of classifying
legal norms into distinct normative types. The four primary functions of law – preventing
undesirable behavior and securing desirable behavior which is performed in criminal law
and torts; providing facilities for private arrangements between individuals, which is
found in private law, criminal, and tort law; provisions of services and the redistribution of
goods found in legal systems; and settling unregulated disputes found in courts and
tribunals – are discussed in the chapter. It also tackles the secondary and indirect
functions of the law. The secondary functions of the law include the determination of
procedures for changing the law and the regulation of the operation of law-applying
organs. The chapter concludes with the discussion of H.L.A. Hart's classification of law.

 The purpose of law as well as what exactly deems something lawful does have its
contrasting reasoning's since each may vary depending on the region you reside within.
In general law serves five main functions: it cultivates and ensures the existence of
adequate order, provides resolutions to conflicts, provides a safe haven for individuals
and their assets, maintains the structured operation of the civilization, and protects civil
liberties as set forth in each nation's constitution.

HUMAITH 43
 Business law

Law and politics

 This book deals with the interdisciplinary connections of the study of law and politics. It
discusses jurisprudence and the philosophy of law, constitutional law, politics and
theory, judicial politics, and law and society. The book reviews three prominent traditions
in the empirical analysis of law and politics and, indeed, politics more broadly: judicial
behavior, strategic action, and historical institutionalism. It also focuses on questions of
law and courts in a global context and on how law constitutes and orders political and
social relationships. Moreover, the book: examines how courts, politics, and society have
intersected in the United States; reviews several recent interdisciplinary movements in
the study of law and politics and how they intersect with and are of interest to political
science; and offers personal perspectives on how the study of law and politics has
developed over the past generation, and where it might be headed in the next.
 Law is one of the central products of politics and the prize over which many political
struggles are waged. The early American jurist James Wilson observed that law is the
“great sinew of government” (Wilson 1896, 1, 314). It is the principal instrument by which
the government exerts its will on society, and as such it might be thought to lie (at least
indirectly) close to the heart of the study of politics. But law is also the means by which
the government organizes itself. It is law in this second mode, sometimes called public
law that has attracted independent attention. Here law is not only the product of politics
but also constitutive of politics.
 The study of law and politics is a varied and multidisciplinary enterprise. From its starting
point in political science of studying constitutional and administrative law, the field soon
added courts, lawyers, and related legal actors to its purview. And the substantive scope
of the field is broader now than it has ever been. Although the US Supreme Court has
always been the center of gravity within the field in American political science, the
politics of law and courts in the international arena (p. 242) and in other countries is
receiving growing attention, and thriving communities of scholars continue to explore
other aspects of law and courts beyond constitutional courts and peak appellate
tribunals. The interdisciplinary connections of the study of law and politics have varied
over time; but, like the discipline of political science, the field of law and courts has
readily borrowed concepts and methods from other disciplines. Active scholarly
communities concerned with various aspects of law and politics in various disciplines
make this a particularly good time for cross-disciplinary conversations among those in
political science, and those in the humanities, the other social sciences, and the law
schools.
 With increasing diversity comes specialization, and there is always the danger that
specialist scholars who are broadly concerned with law and politics will nonetheless find
themselves sitting at Gabriel Almond’s (1990) “separate tables,” having separate
conversations and missing some of the productive cross-fertilization that can take place
across the field as a whole. The range of scholars working in the field do not always talk
effectively to one another. The field is fragmented along various cross-cutting fissures,
including substantive area of interest, particular research question, and favored
methodology. Too often, we have forgone productive exchanges across those
boundaries as scholars focused on their own close-knit intellectual communities and
ignored, or viewed with wary skepticism, the efforts of those working on related issues
but on the other side of one of these divides.

HUMAITH 44
 Business law

 Our starting point, however, is with the study of law and politics, or the political analysis
of law and courts. Law, as an autonomous field of study as taught in schools of law, is
centrally concerned with the substance of law and the practices of legal professionals.
For the professional craft of law, the politics of law can often be bracketed. For scholars
concerned with law and politics, it is the professional craft of law that is bracketed. We
need not deny that legal reasoning and skill are real and matter in the determination and
application of the law and in the actions of legal institutions. But the starting point for the
study of law and politics is that politics is also important and that considerable analytical
and empirical leverage over our understanding of law and legal institutions can be
gained by placing politics in the foreground
Natural Law

 The natural-law school of thought emphasizes that law should be based on a universal
moral order. Natural law was “discovered” by humans through the use of reason and by
choosing between that which is good and that which is evil. Here is the definition of
natural law according to the Cambridge Dictionary of Philosophy: “Natural law, also
called the law of nature in moral and political philosophy, is an objective norm or set of
objective norms governing human behavior, similar to the positive laws of a human ruler,
but binding on all people alike and usually understood as involving a superhuman
legislator. “Cambridge Dictionary of Philosophy, s.v. “natural law.”
 Both the US Constitution and the United Nations (UN) Charter have an affinity for the
natural-law outlook, as it emphasizes certain objective norms and rights of individuals
and nations. The US Declaration of Independence embodies a natural-law philosophy.
The following short extract should provide some sense of the deep beliefs in natural law
held by those who signed the document.
 The natural-law school has been very influential in American legal thinking. The idea that
certain rights, for example, are “unalienable” (as expressed in the Declaration of
Independence and in the writings of John Locke) is consistent with this view of the law.
Individuals may have “God-given” or “natural” rights that government cannot legitimately
take away. Government only by consent of the governed is a natural outgrowth of this
view.
 Civil disobedience—in the tradition of Henry Thoreau, Mahatma Gandhi, or Martin Luther
King Jr.—becomes a matter of morality over “unnatural” law. For example, in his “Letter
from Birmingham Jail,” Martin Luther King Jr. claims that obeying an unjust law is not
moral and that deliberately disobeying an unjust law is in fact a moral act that expresses
“the highest respect for law”: “An individual who breaks a law that conscience tells him is
unjust, and who willingly accepts the penalty of imprisonment in order to arouse the
conscience of the community over its injustice, is in reality expressing the highest
respect for law.…One who breaks an unjust law must do so openly, lovingly, and with a
willingness to accept the penalty. “Martin Luther King Jr., “Letter from Birmingham Jail.”
 Legal positivists, on the other hand, would say that we cannot know with real confidence
what “natural” law or “universal” law is. In studying law, we can most effectively learn by
just looking at what the written law says, or by examining how it has been applied. In
response, natural-law thinkers would argue that if we care about justice, every law and
every legal system must be held accountable to some higher standard, however hard
that may be to define.

HUMAITH 45
 Business law

 It is easier to know what the law “is” than what the law “should be.” Equal employment
laws, for example, have specific statutes, rules, and decisions about racial
discrimination. There are always difficult issues of interpretation and decision, which is
why courts will resolve differing views. But how can we know the more fundamental
“ought” or “should” of human equality? For example, how do we know that “all men are
created equal” (from the Declaration of Independence)? Setting aside for the moment
questions about the equality of women, or that of slaves, who were not counted as men
with equal rights at the time of the declaration—can the statement be empirically proven,
or is it simply a matter of a priori knowledge? (A priori means “existing in the mind prior
to and independent of experience.”) Or is the statement about equality a matter of faith
or belief, not really provable either scientifically or rationally? The dialogue between
natural-law theorists and more empirically oriented theories of “what law is” will raise
similar questions. In this book, we will focus mostly on the law as it is, but not without
also raising questions about what it could or should be.

HUMAITH 46
 Business law

P3 Company law and labour laws are not important one in the running of
business. Do u agree? Discuss with evidence draw from a range of
different relevant examples to support judgments

 Labour and Employment Laws structure the workplace, define what those responsible
are for employees and employers, and in some cases there are boundary rules for giving
both sides the direction needed to resolve the workplace conflict. These laws are
important because industries are able to increase their efficiency and work on
productivity and profitability, to solve sustainable energy and problems
Employer's Obligations

 Without the labour and employment laws, many small business owners should be
unaware of their obligations and obligations as employers. The Equal Rights Act of
1964, Title VII of the Civil Rights Act of 1964 and Americans with Disabilities of 1990
have to adhere to fair employment practices in retaining, recruiting, training and staffing.
Reasonable employment practices include equal employment opportunities without
regard to disability, national origin, race or sexuality. The importance of labor and
employment laws cannot be less. They form the design for employers in the construction
of recruitment and selection processes, as well as the way their human resource
departments operate in retaining and developing staff.

Workplace Structure

 Labor and employment laws give structure to organizations and guidance to small
business owners who otherwise might not be inclined to adhere to laws, such as the Fair
Labor Standards Act. The FLSA mandates minimum wage and overtime laws for
salaried and hourly, non-exempt and exempt workers. It also provides guidance for
employers on recordkeeping measures, requiring that businesses maintain employees'
pay records for two years in some instances related to wages and up to three years for
wage information when a collective bargaining agreement is in force.

Collective Activity

 Labor laws, such as the National Labor Relations Act, are important because they give
peace to both the unions and non-workers. To protect the rights of employees, the NLRA
must work with its allies - to cope with their concerns about wages, benefits and working
conditions. In addition, the law requires employers and labor unions to collaborate on
collective agreements to work together. For some union workers, collective bargaining
deals represent job security, which creates the importance of labor laws such as the
NLRA, which is essential for the peace of mind of the employees.

HUMAITH 47
 Business law

Integrity

 Some labor laws protect company honesty; they are useful to develop business policies
and work ethic. For example, the Labor Safety and Health Act of 1970 and the Whistle-
blower Laws in the Environmental Protection Act are responsible for protecting the
identity of workers and small business owners that engage in public policy, laws, social
or ethical violations. They are important because some organizations need this system
to remind owners that they should be good corporate citizens

 The biggest business of a company is the impact of its operations on individuals, other
industries, society, environment and consequently, the economy and public interest. To
consider the possibility of the environment, its own company is affected and actively
expanding its network of network networks. Similarly, a large corporation can operate
nuclear facilities, manufactured, better practices, waste management, and long-term
future nuclear supplies. A large company can serve a substantial number of workers in a
local community. This may be the largest buyer of a particular product or product,
making the producers dependent on the bulk of their output (Two leading srilanka
grocery chain corporate committees, Cargills and keels). A large corporation (or
corporate group) is only a few consumers of a particular consumer product or service,
and as a result millions of consumers (from business to business) may be potential
customers. Dialog, Etisalat and now the smallest but growing mobile phone network
service providers like Airtel (which is three, this is the first 3G network in Sri Lanka).
Other providers of mobile phone services for consumers such as Virgin Media have the
right to use networks managed by these four companies.
 Such firms are not the only ones who choose to trade with the company's shareholders
or the company (usually for other companies or businesses). The process of decision
making by major corporations can significantly affect the livelihood of a large number of
people working for local community, company, consumer intent and trustworthiness.
Some companies are affected or interested in an organization, sometimes referred to as
'shareholders'.
 Corporations are also utilized for all types of business organizations around the world.
Although its legal jurisdictions differ from jurisdiction, the most important aspect of a
company is limited liability. Shareholders are entitled to participate in profits, contribution
and / or share value, but are not liable for personal liability for the company's debts.
 Most well-known industries are companies like Microsoft Corporation, Coca-Cola
Company and Toyota Motor Corporation. Some companies are commercially and
business names between their names, and such characters are popular on Google.

Corporation

 A corporation is a legal entity that is separate and distinct from its owners. Corporations
enjoy most of the rights and responsibilities that an individual possesses; that is, a
corporation has the right to enter into contracts, loan and borrow money, sue and be
sued, hire employees, own assets and pay taxes. It is often referred to as a "legal
person."

HUMAITH 48
 Business law

Creation of a Corporation

 A corporation is created when it is incorporated by a group of shareholders who have

ownership of the corporation, represented by their holding of common stock, in order to
pursue a common objective. A corporation's objectives can be for profit or not, as is the
case with charities. However, the vast majority of corporations are set up with the goal of
providing a return for its shareholders. Shareholders, as owners of a percentage of the
corporation, are only responsible for the payment of their shares to the company's
treasury upon issuance.
 A corporation can have a single shareholder or several. In the case of publicly traded
corporations, there are often thousands of shareholders.
 Corporations are created and regulated under corporate laws in their jurisdictions of
residence. In the United States, the most common type of corporation is known as a "C
Corporation."
Day-to-day Operations of a Corporation

 Partners typically receive a vote for one vote, each year choosing executive directors
appointed by the company's first daily activities.
 The responsibility of fulfilling the business plan of the Board of Directors is to take all
necessary steps. While the members of the group are not usually responsible for the
company's debts, they are obliged to have a duty to the company, and if they disregard
this obligation, they will be entitled to personal liabilities. There are some tax laws for
personal liabilities of the Board of Directors.

Liquidation of a Corporation

 When the corporation has reached its objectives, its legal life can be terminated using a
process called liquidation or winding up. Essentially, a liquidator is appointed, the
corporation's assets are sold, the creditors are paid, and any remaining assets are given
to the shareholders.
 The liquidation process can be voluntary or involuntary. If it is involuntary, it is usually
triggered by the creditors of an insolvent corporation and may lead to bankruptcy of the
corporation.

HUMAITH 49
 Business law

D2 Critically review and evaluate the use of appropriate legal

solutions in comparison with alternative legal advice.
P4 and p5 saman advised to ratha that company law and labour law are
useless and it is waste of time in the application of company law and labour
law. Do u agree? Discuss

 Nope, Company law and labor law it’s an important things in a business
 Labor laws clarify and codify business owners' obligations to their employees. The labor
movement has a long history of lobbying for laws that protect worker's rights, improve
worker safety, prevent child labor and increase workers' bargaining power relative to
their employers. While labor laws might seem like a bureaucratic hassle for your
business, these laws help keep your employees safe, healthy and happy, and satisfied
employees tend to be more productive.

1. Proper Classification
 Independent contractors -- people who work for themselves and who control the time
and method of their work -- are not covered by most labor laws, and employers do not
have to pay payroll taxes on independent contractors. The Fair Labor Standards Act
prevents employers from improperly classifying employees as independent contractors
in an attempt to save money. This prohibition ensures that employees are not
overburdened with taxes, that employers pay into worker's compensation insurance
where required and that employees are eligible for minimum wage.
 If you're not sure whether your employees are independent contractors, examine the
nature of their work. If you can control how, when and where they do their work, they're
probably employees. But if you hire someone to complete a specific task and that person
works on their own schedule, he may be an independent contractor.

2. Child Protection
 The federal Fair Labor Standards Act prohibits employment of children under the age of
14, unless they work in a parent's business. The law also regulates the hours children
between 14 and 16 can work and prohibits dangerous occupations for all children under
18. The documentation requirements of the FLSA can help you avoid inadvertently
running afoul of child labor laws.

3. Fair Wages
 The FLSA establishes a federal minimum wage -- $7.25 an hour as of 2013. Employers
cannot pay their employees less than this hourly wage, but employees under 20 can be
paid the youth minimum wage of $4.25 per hour during their first 90 days of employment.
The federal minimum wage can provide you guidance about how to pay your employees;
even employees who make more than minimum wage often use minimum wage as a
guideline for fair pay.

HUMAITH 50
 Business law

4. Employee Protections
 Several labor laws offer protections that guard against unfair treatment and unsafe
working conditions. Your business, for example, must take reasonable safety
precautions. If you work in certain hazardous industries, such as construction or coal
mining, you'll be subject to additional regulations and oversight to ensure your
employees remain safe. The Department of Labor's Whistleblower Protection Program
prohibits employers from retaliating against employees who report workplace safety
problems and other legal violations, and also bars employers from terminating
employees who sue them or file complaints with government agencies.

5. Reasonable Hours
 Prior to the FLSA, employers could force employees to work extended hours with little
compensation. The FLSA, however, mandates that most employees who work in excess
of 40 hours in a given work week are compensated at time-and-a-half. Employers must
also keep records of employee hours and have a reliable way of tracking when and how
long employees work. This statutory requirement can make it much easier to manage
employee scheduling and to avoid breaking the FLSA.

6. Discrimination Prevention
 Discrimination laws are primarily products of the Civil Rights Act of 1964. While these
laws aren't overseen by the U.S. Department of Labor, they do affect your relationships
with your employees. Your business can't discriminate based on sex, age, religion,
disability, race or ethnicity, and can't pay members of protected groups different salaries
or hourly wages.

7. Value Recognition
 Labor laws, similar to any other laws, reflect the dominant values of the society in which
people create them. For example, antidiscrimination laws are based on the underlying
belief of human equality, while child labor laws reflect the belief that children should not
work under certain conditions and may not have the mental capacity to understand the
contracts and tasks which many jobs require. Compliance with labor laws is important
because it indirectly preserves these underlying concepts, thereby stabilizing the overall
value system of the society. Periods of change in labor laws reflect less stable social
norms and a shift in dominant belief systems

HUMAITH 51
 Business law

P6 critically review and evaluate the use of appropriate legal solutions in

compilation with alternative legal advice and give a proper solution as to
which one is so important with the discussion of illustrations for your better
selection.

Alternative Dispute Resolution

 Alternative Dispute Resolution (ADR) is the procedure for settling disputes without
litigation, such as arbitration, mediation, or negotiation. ADR procedures are usually less
costly and more expeditious. They are increasingly being utilized in disputes that would
otherwise result in litigation, including high-profile labor disputes, divorce actions, and
personal injury claims.
 One of the primary reasons parties may prefer ADR proceedings is that, unlike
adversarial litigation, ADR procedures are often collaborative and allow the parties to
understand each other's positions. ADR also allows the parties to come up with more
creative solutions that a court may not be legally allowed to impose.

Importance of ADR
 Save a lot of time
 Save a lot of money
 Put the parties in Control
 Focus on the issues
 Flexible and creative
 Preserve relationships
 Produce good results
 Reduce stress
 Keep private dispute private
 More flexible remedies that court
 Satisfaction

Advantages
1. More flexibility. In the case of arbitration, the parties have far more flexibility to select what
procedural and discovery rules will apply to their dispute (they can choose to apply relevant
industry standards, domestic law, the law of a foreign country, etc.).

2. Select your own Arbitrator or Mediator. The parties can often select the arbitrator or mediator
that will hear their case, typically selecting someone with expertise in the substantive field
involved in the dispute. The arbitrator (or panel members) need not even be an attorney. In this
way the focus can be on the substantive issues involved rather than on technical procedural
rules. In normal litigation, the parties cannot select the judge, and the judge and/or jury may
often need expert witnesses to explain extremely complex issues. The greater the expertise of
the arbitrator, the less time that needs to be spent bringing him up to speed.

3. A jury is not involved. Juries are unpredictable and often damage awards are based solely on
whether they like the parties or are upset at one party because of some piece of evidence such
as a photo that inflames the passion of the jury. Juries have awarded claimants damages that
HUMAITH 52
 Business law

are well above what they would have received through alternative dispute resolution; and they
have also done the opposite.

4. Expenses are reduced. Attorneys and expert witnesses are very expensive. Litigating a case
can easily run into the tens of thousands of dollars. Alternative dispute resolution offers the
benefit of getting the issue resolved quicker than would occur at trial – and that means less fees
incurred by all parties.

5. ADR is speedy. Trials are lengthy, and in many states and counties it could take years to
have a case heard by a judge or jury. Appeals can then last months or years after that. In a
matter of hours, an arbitrator often can often hear a case that otherwise may take a week in
court to try with live witnesses. With arbitration, the evidence can be submitted by documents
rather than by testimony presented through witnesses. ADR can be scheduled by the parties
and the panelist as soon as they are all able to meet together.

6. The results can be kept confidential. The parties can agree that information disclosed during
negotiations or arbitration hearings cannot be used later even if litigation ensues. The final
outcome can also be made private if the parties so stipulate and agree. On the other hand, most
trials and related proceedings are open to the public and the press.

7. Party participation. ADR permits more participation by the litigants. ADR allows the parties
the opportunity to tell their side of the story and have more control over the outcome than
normal trials overseen by a judge. Many parties desire the opportunity to speak their piece and
tell their side of the story in their own words rather than just through counsel.

8. Fosters cooperation. ADR allows the parties to work together with the neutral arbitrator or
mediator to resolve the dispute and come to a mutually acceptable remedy.

9. Less stress. ADR is often less stressful than expensive and lengthy litigation. Most people
have reported a high degree of satisfaction with ADR.

10. Conclusion. Because of these advantages, many parties choose ADR (either mediation or
arbitration) to resolve disputes instead of filing or even proceeding with a lawsuit after it has
been filed. It is not uncommon after a lawsuit has been filed for the court to refer the dispute to a
neutral before the lawsuit becomes too costly. ADR has also been used to resolve disputes
even after trial, while an appeal is pending.

11. Sample subject matters. Some examples of disputes that can be settled by ADR include but
are not limited to:
 Business disputes- contracts, partnerships, ownership
 Property / Land use disputes- property transfers, boundaries, easements
 Family disputes- divorce, property, custody, visitation, support issues
 Consumer / Collection disputes- repairs, services, warranties, debts, loans
 Employment disputes- employment contracts, terminations, non-compete
 Landlord/tenant disputes- evictions, rent, repairs, security deposits
 Neighbourhood disputes / Relational disputes or other civil or personal conflicts
 Personal Injury disputes / Insurance disputes- accidents, coverage, liability issues

HUMAITH 53
 Business law

Disadvantages of ADR:

1. There is no guaranteed resolution. With the exception of arbitration, alternative dispute

resolution processes do not always lead to a resolution. That means it is possible that you could
invest the time and money in trying to resolve the dispute out-of-court and still end up having to
proceed with litigation and trial before a judge or jury. However, you will certainly better
understand the other side’s position!

2. Arbitration decisions are final. With very few exceptions, the decision of a neutral arbitrator
cannot be appealed, with fraud being an obvious exception. Additionally, some states will not
enforce decisions of arbitrators that are patently unfair, a high standard to meet. Another ground
for setting aside an award is if the arbitrator’s decision exceeded the scope of the arbitration
clause or agreement. Some arbitration clauses are broad, others are narrowly limited to specific
disputes. Decisions of a court, on the other hand, usually can be appealed to an appellate court
for a variety of legal grounds and for numerous alleged procedural errors.

3. Limits on Arbitration Awards. Arbitrators can only resolve disputes that involve money. They
cannot issue orders compelling one party to do something, or refrain from doing something (also
known as injunctions). For example, Arbitrators generally cannot change title to real property. Of
course this is subject to the specific language of the arbitration clause.

4. Discovery limitations. Some of the procedural safeguards designed to protect parties in court
may not be present in ADR, such as the liberal discovery rules used in U.S. courts, which make
it relatively easy to obtain evidence from the other party in a lawsuit.

5. Fee for the Neutral. The neutral mediator or arbitrator charges a fee for his or her services.
Depending on the arbitrator or mediator selected, the fees can be substantial (of course the
parties typically agree to divide the fees between themselves). Depending on the contract
language and state law, a prevailing party can be awarded fees and costs. A judge on the other
hand, charges no fees for his services.

6. May have no choice. Often the contract in dispute contains a broadly worded mandatory
arbitration clause. Many lease agreements and employment contracts, for example, contain
mandatory arbitration provisions, as do operating agreements and other types of business
contracts. Unless both parties waive arbitration, most states will compel arbitration at the
request of any party.

7. Non-binding arbitration. Sometimes the court may order nonbinding or Judicial Arbitration.
This means that if a party is not satisfied with the decision of the arbitrator, they can file a
request for trial with the court within a specified time period after the arbitration award.
Depending on the process ordered, if that party does not receive a more favorable result at trial,
they may have to pay a penalty or fees to the other side.
HUMAITH 54
 Business law

8. Warning. The parties pursing ADR must be careful not to let a Statute of Limitation run while
a dispute is in any ADR process. Once the statute expires, judicial remedies may no longer be
available.

History of Alternative dispute in Sri Lanka

 The alternative dispute resolution (ADR) mechanisms in Sri Lanka have been embraced
and accepted by disputants in Sri Lanka as ways to avoid litigation.
 Accordingly, initiatives have been taken towards institutionalizing conciliation, mediation
and arbitration. In Sri Lanka, both mediation and arbitration mechanisms have been
statutorily recognized under the Mediation Boards Act 72 of 1998 (MBA) and Arbitration
Act 11 of 1995 (Arbitration Act) respectively. This recognition has now allowed the
parties to enter into contracts, such as commercial contracts including clauses
stipulating that any dispute arising out of such contract should be settled by less
conventional and more efficient mechanisms such as mediation and arbitration. Whilst
mediation and conciliation are more settlement-oriented ADR mechanisms, arbitration is
an effective and expeditious method of ADR capable of producing legally enforceable
awards. In terms of the Arbitration Act, if a party to an arbitration agreement institutes
legal proceedings in court against another party to such agreement, the court will have
no jurisdiction to hear and determine such matters if the other party objects to the court
exercising such jurisdiction. However, parties can mutually agree to resolve disputes by
way of litigation, despite having such a clause in the contract. Under the Arbitration Act,
the parties are free to determine the procedure of arbitration and the appointments of
arbitrators. Where the arbitration agreement is silent on such matters, the Act provides
for the same. Sri Lanka, as a signatory to the New York Convention on the recognition of
foreign arbitral awards, enacted the Arbitration Act among other things to give effect to
the New York Convention. Accordingly, the Arbitration Act provides for the enforcement
of both foreign (defined in the Act to mean an arbitration conducted outside Sri Lanka)
and local (arbitrations conducted in Sri Lanka) arbitral awards. A party to an arbitration
award made in Sri Lanka may apply to the CHC within 60 days of the receipt of the
award, to have it set aside on the limited grounds set out in the Arbitration Act. Such
grounds include incapacity of a party, the award being contrary to public policy, and the
award dealing with a subject matter outside the scope of the arbitration agreement. A
party who obtains an arbitration award (foreign or local) who wishes to have it enforced
in Sri Lanka should make an application. to the CHC, within one year of the expiry of 14
days of making the award. Where the court sees no cause to refuse recognition and
enforcement of the arbitral award under the Arbitration Act, the court will enter a
judgment accordingly. After the judgment is entered, the decree will be entered. An
appeal may be lodged to the Supreme Court only on questions of law and with the prior
leave of the Supreme Court. The parties may also agree in writing to exclude any such
right to appeal, thereby making the judgment of the CHC enforcing the arbitral award
final between the parties. The recognition and enforcement of a foreign arbitral award
under the Arbitration Act may be refused on certain limited grounds including: where a
party to the arbitration agreement was under some incapacity; the agreement is not valid
under the law to which the parties have subjected it; the party against whom the award is
HUMAITH 55
 Business law

invoked was not given proper notice of the appointment of an arbitrator or of the arbitral
proceeding or was otherwise unable to present his case; the award deals with a dispute
not contemplated by or not falling within the terms of the submission to arbitration; or,
recognition or enforcement of the award is contrary to the public policy of Sri Lanka. It
has been held that the court has limited jurisdiction to grant interim relief. This may be
sought, ex parte, to a party to an arbitration agreement pending the constitution of the
arbitral panel, where such party proves to the satisfaction of the court that they would
suffer irreparable and irremediable loss if the other party were not restrained until the
tribunal is constituted and appropriate application is made to the tribunal. Former chief
justice of Sri Lanka, in his court ruling in Ceylon Petroleum v Ocean Spirit Maritime, set
an important precedent both in relation to arbitration and maritime law. A dispute
between the parties arose in relation to a carriage of goods by sea contract, where the
respondent alleged a short payment of freight in respect of the goods shipped to the
appellant. In addition to the charter party, the parties entered into a separate arbitration
agreement. However, the appellant refused to participate in the arbitration proceedings
on the basis that it was not bound by the arbitration agreement as the main contract of
the charter party was defective. The court, having had recourse to the doctrine of
reparability, arrived at the conclusion that the arbitration agreement in any event
survived the main contract, irrespective of whether the main contract was defective or
not. Moreover, considering the evidence produced before the court, it was held that even
though the contract was not signed, it created rights and liabilities on the respective
parties as the attendant circumstances inferred the intentions of the parties to be bound
by such terms. It further established that grounds to set aside an arbitral award under
the Arbitration Act, should be operative at the time of enforcement of the award. In Sri
Lanka, there is no system of sealed court records. Therefore, the disputants (particularly
multinational companies) may opt for arbitration as the most preferable method to
maintain the confidentiality of the proceedings. In recent years, several arbitration
centers, such as the Sri Lanka National Arbitration Centre, ICLP and Colombo
International Arbitration Centre have emerged in Sri Lanka to facilitate and
accommodate arbitration tribunals. Where both parties reside within the boundaries of
the country, in order to minimize costs, it is best to choose a center which is located in
Sri Lanka. The Institute for the Development of Commercial Law and Practice (ICLP
Arbitration Centre) is one of the most effective arbitration centers in the country. ICLP
has the full range of facilities, including conference, multimedia, recording, transcribing,
and catering facilities. A list of qualified arbitrators who have registered with ICLP is
available, who are at all times subject to the rules of the ICLP Code of Ethics. The
government of Sri Lanka also recently set up an arbitration center, providing all
necessary facilities, to attract international arbitrations. However, South East Asia's
Singapore International Arbitration Centre (SIAC) has over the years emerged as the
premier arbitration center in the region. Foreign corporations, especially Fortune 500
companies and other multinational giants, often opt for SIAC for their arbitration
agreements with local entities, including the government of Sri Lanka (such as in
Citibank v Sri Lanka). Not only does SIAC have a comprehensive set of rules to conduct
arbitrations, but the center arguably provides the best facilities to conduct international
arbitrations in the region. (Gunasekara, n.d.)

HUMAITH 56
 Business law

Arbitrations and Mediations of ADR in Sri Lanka

 The value of the adjudicator process as a meaningful method of resolving disputes is

under serious challenge. Consecutive Governments through their Ministers of Justice
have attempted to introduce reforms to improve the systems. Substantive laws have
been looked at and amended, procedural laws have been reformed, the legal culture has
been examined, court infrastructure has been improved, increased financial provision
has been voted, cadres have been enhanced, additional courts have been established,
training has been given but nothing seems to have made an appreciable impact. We still
continue to have a laws delays problem which gives policy maker’s serious cause for
concern and which creates within our people a deep seated desire to keep out of courts.
The challenge to improve the system then, is a serious one. Sri Lanka however is not
alone in facing this challenge. The disenchantment with the adjudicator process is an
almost global phenomenon which has inspired a universal search for improved and more
meaningful methods.
 In attempting to improve the system what is required is not a mere quantity control effort
aimed at avoiding a case load explosion. What is required is also an attempt to improve
the quality of justice. This would essentially mean an avoidance of the stress of litigation,
a reduction of expense, the elimination of delays, greater accessibility, better awareness.
1 Secretary, Ministry of Justice

 Of what is happening and an appreciation of why it must happen, greater confidence in

the system and the process and finally an acceptance of the end result as being just.
 In recent times there has been some focus on improving the system by channelling
disputes to non-adjudication forums for resolution through alternative methods. The
current widespread interest in looking at alternative methods of resolving disputes is
because of its perceived potential to overcome some of the iniquities of the traditional
(adjudicator) system. In many advanced jurisdictions the Alternative Dispute Resolution
(ADR) movement is fast gaining headway as the better way or has already done so.
However, even ADR’s greatest proponents will concede that the adjudicator process still
has its value for the resolution of certain categories of cases and issues. We have gone
full cycle then. It will be recalled that amicable dispute resolution has been very much a
part of, not only traditional Sri Lankan culture but also of the Asian culture. In our country
it was the western rulers that introduced a formal structured court system which
dispensed justice based on adversarial procedures. Today, the autochthonous methods
are no longer visible. What we have are institutionalized methods which has been
greatly influenced by western developments. In fact, what has happened today is that,
non-adversarial dispute resolution methods have been turned into highly professional
systems.
 In Sri Lanka too, several initiatives have been taken towards institutionalizing ADR
processes through the introduction of Conciliation, Mediation and Arbitration. Recent
initiatives have focused on the use of Mediation for the resolution of community disputes,
employment disputes and commercial disputes. However, there is very little public
awareness of the availability of these mechanisms and services and their usage is thus

HUMAITH 57
 Business law

limited. This article seeks to focus on some of these initiatives and the key features of
the ADR concepts.

What is ADR?

 It is important to focus on what ADR means and what it is that provokes excitement as
an efficient alternative. ADR or ‘Alternative Dispute Resolution’ is basically a reference to
all the ‘other’ processes that are available for the resolution of disputes other than the
adjudicator or litigation process. The basic feature of adjudication/litigation is that it is
‘adversarial” in nature. Alternatives do not necessarily follow the adversarial principles.
They are more ‘settlement’ oriented. And it is this feature that makes it valuable as a
more acceptable process and it is also this feature that forms the basis for its greatest
critics. In the final analysis it is the level of ‘user satisfaction’ that will determine its
acceptance as an effective process and not any of the academic analysis based on what
should be sought and achieved by those who access the administration of justice
processes.
 Among the many ADR processes are Arbitration, Mediation, Conciliation and Negotiation
to name but a few that are known in this country.
Sri Lanka’s initiatives

 Sri Lanka’s most recent initiatives have been in relation to Arbitration and Mediation.
 Arbitration has been statutory recognized for some time in this country. The latest
enactment on the subject is the Arbitration Act, No. 11 of 1995 which provides for a
regime which recognizes party autonomy devoid of court intervention other than in a few
and exceptional circumstances. The enactment of the Arbitration Act was a response to
the need for expeditious resolution of commercial disputes. Six years later, it is now
argued by users that Arbitration has not been successful in eliminating the weaknesses
of the adversarial process. It is argued that it has the potential to be as expensive, as
time consuming and as disappointing, to the user.
 In 1998, the Mediation Boards Act No. 72 of 1998 was passed by Parliament. The Act
provides for the legal framework for institutionalizing Mediation Boards, which are
empowered to resolve by the process of mediation, all disputes referred to it by disputing
parties as well as in certain instances, by courts. A large number of the disputes handled
by 1 the Boards relate to community disputes. However, Banks have increasingly been
referring issues regarding debts as well.
 Mediators are appointed by the five member Mediation Boards Commission chaired by a
retired Judge of a Superior Court. They are selected from among members of the
community on the basis of proven aptitude. Aptitude is assessed through training
courses which impart the skills and techniques of mediation. The training courses are
conducted by Trainers in the official cadre of the Ministry of Justice which Ministry is
responsible for the implementation of the Act. These Trainers follow periodic refresher
courses designed to improve their skills. There is great emphasis placed by the Ministry
on the training of Mediator Trainers and Mediators.
 Currently, there are 5,868 Mediators functioning in 242 Mediation Boards in the island.
The total number of disputes in respect of which mediation has been attempted from the
inception (in April 1990) to September, 2001 is 895,532. Of these 545,727 are reported
HUMAITH 58
 Business law

to have been successfully settled. The settlement rate as at September 2001 is 59.1%2.
While it cannot be stated with certainty that successful settlements have resulted in
weaning these issues away from courts of law it can certainly be said that these
settlements have very definitely contributed to the creation of an environment of peace in
the community.
2 Source of all statistics relating to Mediation Boards – Mediation Boards Commission.

 The Human Rights Commission of Sri Lanka Act, No21 of 1996 provides for the
resolution of issues that come before the Commission, through conciliation and
mediation. In 1996 when the Bill was being drafted, it was intended that mediation and
conciliation be used in the resolution of the types of concerns that would come before
the Commission. Although the Commission did commence the training of volunteers with
a view to providing mediation services in respect of issues brought before the
Commission, this does not appear to have been pursued with any seriousness
thereafter.
 The Labor legislation of Sri Lanka also provides for the resolution of labor disputes by
reference to Arbitration, Conciliation and out of court settlement mechanisms’. There is
however an acute need to enhance the efficacy of these mechanisms by focused
training of Arbitrators and Conciliators and the simplification of settlement procedures.
The Act and Regulations made thereunder specify the scope and ambit of the powers of
an Arbitral Tribunal, and the applicable procedure. An important requirement of labor
arbitration is that the Award must be one which appears to the Tribunal to be just and
equitable.
 Mr. Franklyn Amerasinghe, former Secretary General of the Employers Federation of
Ceylon had this to say about settlement methods, “It is now accepted that conciliation
and compulsory arbitration have not proved effective in the resolution of industrial
disputes in Sri Lanka. Conciliation is done by officers who have hardly any knowledge of
the process of conciliation or adequate training in the labor law itself and voluntary
arbitration is seen as a successful method only as long as the
3 Industrial Disputes Act, No. 43 as amended. 4 “Dispute Settlement – Employers ‘perspective”-
Paper presented by Franklyn Amerasinghe at the Tripartite seminar in Dispute Settlement.
Labor settlements and Industrial Courts. Colombo, August, 1997. 17

 Relationship between the Unions, the employer and the workers is underpinned by a
sense of mutual trust and confidence
4 Compulsory arbitration it is said, is regrettably characterized by excessive legalism and the
conceptual distinction between arbitration and adjudication is often blurred in that our arbitral
process operates as a confrontational exercise in far too many cases5.

 In 1999, concerns that there was a greater need for more stable relationships in the
manager/worker environment inspired the initiatives which resulted in the formation of
the Employment Mediation Services Centre (EMSC). The Employers Federation of
Ceylon gave leadership to a project which was funded by The Asia Foundation. The
project which at that time appeared somewhat ambitious given the inherent suspicions in
the relationships between employers and workers in disagreement situations, has
however had a smooth transition from a mere idea based on a concept to a full blown

HUMAITH 59
 Business law

Association with a mission. The EMSC which was formally established on January 26th,
2001 has 84 members and functions as a private Mediation Centre comprising a
membership of Employers, Workers and others. The Center has its own Constitution and
functions with its Board of Management which includes an equal number of Employers
and Workers6. The bipartisan nature of the Boards composition and the membership of
the Association gives an assurance that neither category has an undue advantage. The
Center has trained persons who are available to serve as Mediators when disputes are
referred to it. There is also a panel of Trainers who
5 “The approach to Labor Adjudication in Sri Lanka” – paper presented by J.F.A. Sosa at the
Tripartite seminar in Dispute Settlement. Labor settlements and Industrial Courts. Colombo.
August. 1997.
6 The EMSC is located at 385/J3. Old Kotte Road, Rajagiriya (Tel. 867966: e-mail
thamalis@anpfed.lk)

 Have been trained to impart training to prospective Mediators and also conduct training
in the interest based Mediation/Negotiation methods. Many training courses have been
conducted by these persons at Enterprise level, on request.
 Any employment dispute may be referred to the Center which has formulated its own
Rules in terms of which mediation sessions are conducted. Key features of the process
are that it assures complete confidentiality and is purely voluntary in nature.
 The concept of Mediation has also been institutionalized through the Commercial
Mediation Centre of Sri Lanka Act, No. 44 of 2000. The Commercial Mediation Centre of
Sri Lanka (CMCSL) established thereunder was launched on September 12th, 2000 and
is statutory mandated to promote the wider acceptance of mediation and conciliation for
the resolution and settlement of commercial disputes
 This ADR initiative was taken at the request of the private sector community which
expressed a dire need for a more expeditious and efficient dispute resolution mechanism
in relation to commercial matters. Underlying this need which comes six years after the
enactment of the Arbitration Act No. 11 of 1995, on which much hope was placed at the
time as the most ideal alternative to litigation, one senses now, a desire to veer away not
only from courts but also arbitration with an urgency which highlights the need for
speedy resolution of disputes. The establishment of this Centre was a response to that
need which calls for both efficacy, value and speed. Although the passage of the Law
was initiated by government, the intention is that the effort should be ‘owned’
 By the private sector. This thinking is reflected in the composition of the Board of
Management which comprises representatives of the four Chambers of Commerce
7 and one nominee of the Minister of Justice. The CMCSL8 too has 34 trained Mediators
accredited to the Centre who are available to function as Mediators in respect of commercial
disputes referred to the Centre.

Mediation

HUMAITH 60
 Business law

 Mediation as we know it today, is a non-litigating process which is managed by a neutral

third party intervening called a Mediator. The process is structured systematically and is
disciplined. While there are key principles and key elements which define the concept,
there are no rigid rules except those which are adopted by the disputing parties. The
Mediator manages the structured process in such a way that the disputing parties are
empowered through that process to identify the real issues and search for solutions.
Finally the disputants take their own decisions regarding the outcome and enforcement
is by the will of the parties. There are some distinguishing characteristics of Mediation.
Firstly, it is a forward looking process which does not seek to determine guilt, innocence,
right or wrong and thereby negates a focus on the past. Rather, it has a future focus and
seeks to evolve solutions for future conduct. Secondly, it focusses on commonalities and
mutuality as between disputing parties rather than emphasizing differences. And finally,
in the Interest Based Mediation approach, the process does not at any stage permit the
assumption of positions by parties. What is encouraged is the identification of interests
and needs.
 The Ceylon Chamber of Commerce, the National Chamber of Commerce. Federation of
Chambers of Commerce and Industry of Sri Lanka and the Ceylon National Chamber of
industries.
8 The CMCSL is located at the Ceylon Chamber of Commerce Building, 50 Navam Mawatha,
Col. 2 (Tel. 421745

 The EMSC and the CMCSL follow the Interest Based Mediation approach. While in a
position based approach, parties determine the issues of the conflict, they assume a
position, they become emotionally attached to their position and engage in finding
evidence to support that stand, all of which adds up to being confrontational or
adversarial, in the interest based approach the focus is on identifying interests by taking
the parties to the beginning of the conflict, evaluating information as opposed to
perceptions, assumptions and conclusions based upon them, and in indulging in a
creative search for solutions, together.
Benefits of Mediation

 Mediation has the potential not only to resolve disputes but also to avoid them. This, in
my view, is the most important benefit that Mediation offers to the maintenance of a
stable society and a sound economic environment. Resolution of community,
commercial and employment disputes through Mediation enables disputing parties not
only to find their own solutions to the problems but also to continue relationships that
would have otherwise been scarred and ruined through an adversarial approach.
Resorting to Mediation does not have any adverse effects in terms of losing the right to
pursue other processes because, if Mediation does fail, parties would still have the right
to pursue other processes. The relevant laws recognize that the prescriptive period does
not run while parties are engaged in Mediation9. Accessibility to Mediation services is
assured and the process is easily initiated. Mediation is inexpensive.
 Mediation research indicates that reasons for high satisfaction with Mediation include the
facts that the process enables parties to address and deal with issues that they
themselves have identified as important
9 Section 17 of the Mediation Boards Act No. 72 of 1998
HUMAITH 61
 Business law

 Allows them to present their views fully and gives them a sense of being heard 84%
believed that they had saved costs in summary, it seeks to eliminate all the weaknesses
of the adversarial process which cause us to look for alternatives.
 10 The Singapore Mediation Centre is a company incorporated under the Companies
Act (Cap 50J of Singapore. It is a not-for-profit entity funded in part by the Singapore
Government through the Ministry of Law of Singapore.
 1 i Results of survey conducted in December 1999 based on 500 responses of users
between January 1998 to August 1999. For full report of the study see Boulle and the,
2000.
How do the Commercial Mediation Centre and the Employment Mediation Services
Centre function?
Rules of the Centre:

 Both the Commercial Mediation Centre of Sri Lanka (CMCS) and the Employment
Mediation Services Centre (EMSC) have formulated Rules in terms of which Mediations
are conducted by each Centre. These Rules provide for the procedure to be observed in
conducting mediations, the fees to be levied, and the code of conduct for Mediators. The
procedure is simple and easy accessibility is assured. Fees are payable according to
specified rates and are extremely reasonable.
Accessing the Centre:

 An application for Mediation can be initiated by any one party to the dispute or by all the
disputing parties. The Application is in a simple format and requires only that the names
and contact details of the parties be given along with a brief summary of the subject
matter in dispute. If there is no agreement between the parties that Mediation be
resorted to, the Center will talk to the reluctant party with a view to obtaining consent to
pursue Mediation. Where all the parties agree to pursue Mediation. an Agreement to
Mediate is entered into, by which the parties agree to abide by the Rules of the Centre
and such other Rules as may be mutually agreed upon by them in the conduct of the
Mediation.
Rules applicable to the conduct of Mediations:

 The Rules in terms of which Mediations are conducted and to which the parties
subscribe prior to the commencement of the mediation process, provide for some basic
norms. Confidentiality with regard to what goes on in the Mediation sessions is of the
essence. Thus, parties are mandated to maintain complete confidentiality with regard to
all matters that are discussed during the Mediation sessions and are prohibited from
revealing
 Such information in litigation, arbitration or other dispute resolution 1 process. This is an
important feature of the Mediation process and is perhaps a feature which inspires
confidence in the process.
 Parties are required to attend the sessions in person and no legal representation is
permitted. The sessions are private.

HUMAITH 62
 Business law

 Parties are required to disclose fully and honestly ail matters which are relevant and
which will aid the speedy resolution of the dispute. In this manner, the core issues and
concerns which form the basis of the dispute can be surfaced and dealt with. Non-
disclosure of material facts will only result in either an unsuccessful Mediation or a
settlement which will not deal fully with relevant issues. There is then the potential of a
further dispute arising at a subsequent time.
 The Mediator may at times opt to have sessions with just one party at a time. However a
majority of the sessions are those at which both parties will be required to be present
together.
 Where expert advice on technical aspects of the issues are necessary, the Mediator
may, with the concurrence of the parties, call in expert assistance.

The Mediator:

 The Rules of the CMCSL provides for the appointment of one Mediator for a dispute.
The Rules of the EMSC provide for the appointment of one to three Mediators. The
Mediator is essentially a non-partisan third party intervenient. No person who has an
interest in the subject matter of the dispute or of its end result can serve as a Mediator.
This is an important Rule which is strictly complied with.
 Mediators are required to maintain complete confidentiality in respect of all matters
coming to their knowledge during the mediation process from any source whatsoever.
Mediators cannot be compelled by any of
 The parties to divulge such matters to any authority whatsoever. This precludes parties
from seeking to make use of Mediators as witnesses to any fact at any other dispute
resolution process.
 The role of the Mediator is to help parties resolve their concerns by taking them through
the process which will focus on the key elements discussed above. The Mediator does
not decide for the parties or sit in judgment over the issues that surface. The Mediator is
however the master of and controls, the process.
Conclusion

 Mediation as an effective alternative will succeed if the new Centers provide services
that will be valued. Much depends on the quality of the skill and competence of the
persons who will function as Mediators. Given the litigious nature of our people, it will be
a while before confidence in alternative methods is established. In particular, the
attention of the commercial community and those in management and labor will be
focused on the progress made by the Centers.

Alternative Dispute Resolution in UK

 Disputes in England and Wales are usually adjudicated after an adversarial process,
either by a judge or by an arbitrator. Litigation is governed by wide-ranging and detailed
rules which can make it a complex, time-consuming and expensive process. Very often
arbitration is conducted on a similar basis and so suffers similar drawbacks.

HUMAITH 63
 Business law

 Alternative Dispute Resolution (ADR) embraces a range of options, falling between

litigation and arbitration on the one hand and negotiation on the other, for the effective
resolution of disputes.
 These options include:
1. Mediation
2. Expert determination
3. Adjudication
4. Early neutral evaluation.
 Mediation is by far the most frequently used option. In this note, we give an overview of
mediation and the other main types of ADR.
ADR support

 The importance of ADR has been recognized by the European Commission, which
enacted the Mediation Directive1. The Directive aims to facilitate access to ADR and to
promote the amicable settlement of disputes by encouraging the use of mediation and
by ensuring a balanced relationship between mediation and judicial proceedings. The
Directive came into force on 13 June 2008 and applies to all EU member states apart
from Denmark, which has opted out. In England and Wales, the Directive has been
implemented to apply to most civil and commercial cross-border mediations, but not to
domestic mediations. The UK Government is also a keen advocate of ADR, as illustrated
by the inclusion in the Civil Procedure Rules 1998 (the CPR) of a number of measures
designed to encourage ADR. The CPR require parties, at various stages before and
during litigation, to consider whether ADR might be appropriate as a means of settling
their dispute. If they decide it would be beneficial to try ADR, the court will usually stay
the proceedings while they do so.
 The Government has also pledged to use ADR in all suitable cases involving
government departments. In addition, in Lord Justice Jackson's 2010 final report on civil
litigation costs2, an entire chapter was dedicated to the benefits of ADR. Whilst Lord
Justice Jackson concluded that parties should not be compelled to mediate, he urged
courts to take whatever steps they could to encourage mediation. He also recommended
that parties who had unreasonably refused to mediate should be penalised in costs. The
use of ADR, and in particular mediation, as a dispute resolution process has been given
a boost in recent years by a number of cases in which the courts have sanctioned
greater use of ADR. In some of those cases, parties who, in the court's view, have
unreasonably refused to mediate, have been penalized in costs after trial, regardless of
whether they have been successful or unsuccessful overall. However, a landmark
decision of the Court of Appeal in 2004 clarified that, whilst the court should actively
encourage parties to refer their disputes to some form of ADR, it cannot compel them to
do so3. Compulsion would achieve nothing except to increase the costs incurred by the
parties, delay the determination of the dispute and damage the perceived effectiveness
of the ADR process. However, the Court said that parties who refuse to attempt ADR, or
who only agree to it late in the proceedings, should be prepared to justify their position.
Furthermore, if a judge takes the view that a case is suitable for ADR, he is not obliged
to accept at face value the expressed opposition of the parties. Rather, he should
explore the reasons for any resistance to ADR. A party's reasons for not attempting ADR
could form a defense to a potential adverse costs order.

HUMAITH 64
 Business law

 Case law has established that a party who has unreasonably refused to attempt ADR
may face costs sanctions at the end of litigation, and this is now reflected in the CPR
(Practice Direction – Pre-action Conduct and Protocols). Whether a party has acted
unreasonably will depend on the circumstances of each case. However, factors which
may be relevant include: (a) the nature of the dispute; (b) the merits of the case; (c) the
extent to which other settlement methods have been attempted; (d) whether the costs of
ADR would be disproportionately high; (e) whether any delay in setting up the ADR
would have been prejudicial; and (f) whether the ADR had a reasonable prospect of
success

Main features of ADR

1. It is a consensual process
 The Court of Appeal decision in Halsey (see above) has restored the traditional view that
ADR is consensual, in that parties must normally agree to refer their disputes to some
form of ADR. The court cannot compel them to do so, although it can, as explained
above, penalize them in costs if they refuse unreasonably to try ADR.
2. Its 'without prejudice' nature
 ADR is conducted in privacy and on a "without prejudice" basis. The result of a reference
to most types of ADR only becomes binding on the parties once they have reached an
enforceable agreement. Until then, either party can withdraw from the ADR process and
start or continue proceedings before a court or an arbitral panel. If the reference to ADR
does not result in a settlement and litigation or arbitration then starts or continues,
neither party may use or refer to anything that arose during the ADR process.
3. It can produce commercial solutions
 ADR allows parties to seek solutions which are not available through litigation or
arbitration and which can accommodate their commercial needs and interests. By way of
example, a claim. For money due could be settled by a discount on future services,
which might preserve, or even enhance, a business relationship.
4. It is flexible
 The form of procedure can be tailored to suit the needs of the parties. ADR may occur
either before the start or during the course of litigation or arbitration proceedings. The
parties are free to agree whether those proceedings should continue or be stayed during
the ADR process.
5. It is inexpensive and quick
 Compared with litigation, ADR is inexpensive, particularly if it leads to the resolution of a
dispute at an early stage. It is also quick to set up and implement; in many cases, for
example, mediation takes no more than a day.
6. Mediation
 A mediator can assist the parties by establishing a private and constructive environment
for negotiation, managing and facilitating discussion, smoothing out personal conflicts,
assisting in the process of information gathering and risk assessment, identifying
creative options and helping to devise and implement strategies designed to overcome
obstacles which might arise during the negotiations. To achieve his or her objective a
mediator will continually seek the views of the parties, sometimes on a joint and
sometimes on an individual basis, and will engage in shuttle diplomacy where
HUMAITH 65
 Business law

necessary. However, a mediator has no power to make any decision or to impose his or
her view on the parties, who will always retain their right to have the dispute determined
by the courts if it cannot be resolved by mediation. The biggest hurdle to the use of
mediation is very often persuading all of the parties to a dispute to agree to participate.
In the absence of a clause in a contract requiring disputes to be resolved by ADR, the
involvement of an independent ADR body can assist in convincing an unwilling party to
participate.
 Once parties agree to mediation, the usual preparations involve:
I. Agreeing the time, place and length of the mediation;
II. Identifying and nominating the mediator;
III. Preparing and sending to the mediator and the other parties a brief summary of each
Side’s case and the main supporting documents;
IV. Identifying who will be the parties' representatives at the mediation
 These should be individuals with full authority to settle. The parties' solicitors can, and
usually do, attend and play a useful role in the mediation. However, the primary role is
that of the client's representative;
 Confirming that the mediation will be entirely confidential and without prejudice. The
mediation itself will usually involve:
 An opening joint session chaired by the mediator, at which each of the parties will briefly
summaries its case;
 private sessions between each of the parties and the mediator;
 further joint sessions if the mediator thinks they would be useful, as they might be if, for
example, points of detail need to be resolved;
 If agreement is reached, the drawing up and signing of a document setting out the terms
agreed. This can be incorporated into a court order or remain as a separate agreement
which can be enforced in the same way as any other contract. The enforceability of
settlement terms has been confirmed by the High Court. Where a settlement results from
mediation of a cross-border dispute to which the Mediation Directive applies, the
settlement can be enforced through a mediation settlement enforcement order.
Other types of ADR in UK
Conciliation

 Conciliation is very similar to mediation except that it usually has a statutory basis, with
conciliators appointed by an outside body rather than the parties, and during conciliation
the neutral third party actively helps the parties to settle the dispute, for example by
suggesting settlement options. Conciliation is commonly used in employment and family
disputes.
Early Neutral Evaluation

 The parties obtain from a neutral third party a non-binding opinion regarding the likely
outcome of the dispute if it were to proceed to trial. The intention is that this opinion will
enable the parties to negotiate an outcome, with or without the assistance of a third
party, or settle the dispute on the basis of the evaluation provided.
 The Commercial Court and the Technology and Construction Court have schemes
facilitating early neutral evaluation.

HUMAITH 66
 Business law

Judicial Appraisal

 Schemes are available whereby former judges and senior barristers can be asked to
give preliminary advice on their views of the legal position in a dispute following
representations from both parties. It is up to the parties to agree whether or not this
opinion is to be binding.
Expert Appraisal

 This involves the parties to a dispute jointly putting their case to an independent expert
for review. The expert can be legally or technically qualified. Once the expert has given
his views, the parties meet – usually at a senior level – to discuss the expert's opinion
and to try to settle the case.

Adjudication

 Adjudication is a well-established method of dispute resolution in the construction

industry
parties to certain construction contracts have a statutory right to refer disputes to
adjudication. An adjudicator (an independent third person) usually provides decisions on
any disputes that arise during the course of a contract. Typically, the decision of an
adjudicator is binding on an interim basis, until the parties either reach agreement or
refer the dispute to arbitration or litigation for final determination.
Med-Arb

 This is a hybrid process in which the parties initially submit their dispute to mediation on
the basis that, if no agreement is reached, they will refer the matter to arbitration. The
arbitrator may be the same person who has been acting as the mediator. This saves
costs because the arbitrator already knows the facts of the case. However, there is a risk
that, during the mediation, the parties will have given the arbitrator confidential
information relating to their case.
Mini-Trial or Executive Tribunal

 The parties present their case (in the form of time-limited submissions) to a panel
comprising senior executives (one from each party) with authority to settle, and an
independent chairperson. The panel then adjourns to discuss settlement of the issues,
with the chairperson normally acting as a mediator between the senior executives.
Unless the parties request, the chairperson does not make a binding determination,
although he or she may agree to provide an opinion on the merits of the case and its
likely outcome at trial.
Final Offer Arbitration

 The parties submit to a neutral third party an offer of the terms on which they are
prepared to settle. The neutral third party then chooses one of the parties' offers. Neither

HUMAITH 67
 Business law

party should make an unrealistic offer because that might result in the neutral choosing
the opponent's offer.

Dispute Review Board

 This typically involves the appointment of a board or panel at the start of a construction
project. The board usually comprises an independent member appointed by each party
and a chairperson (who may be an expert, depending on the nature of the dispute) who
is appointed by the other members. The board visits the site of the project a few times a
year, and deals with disputes by providing an interim binding decision. Board decisions
can be challenged through arbitration or litigation within a specified time limit. The use of
a DRB can help to prevent disputes. DRBs are often used for large scale construction
projects, for example construction of the Olympic Stadium.
ADR and Online Dispute Resolution (ODR) for consumer disputes

 Two recent pieces of EU legislation, the ADR Directive4 and the ODR Regulation5, aim
to increase the use of ADR for consumer disputes in the EU by giving shoppers a fast,
cheap and informal way to settle disputes with traders as an alternative to court
proceedings. Among other things, the Directive requires traders who are obliged to use
an ADR service to provide details of that service on its website and/or in its terms and
conditions of sale. The ODR Regulation requires the European Commission to create a
European ODR platform, which is an interactive website providing an out-of-court
system for settling disputes
Timing

 In some cases, parties need to "lock horns" before they can be persuaded of the
benefits of a negotiated settlement. However, it is usually much better to try to resolve a
dispute before starting proceedings and becoming entrenched in litigation. Indeed, the
CPR now require the parties to consider ADR before commencing proceedings, and at
various other stages during an action, and then to retain evidence of their having done
so6. In an increasing number of cases, parties are inserting clauses in contracts
requiring any disputes to be referred to some form of ADR before the commencement of
litigation or arbitration. This gives a party the opportunity to refer the dispute to ADR as
soon as it has arisen. The Commercial Court has enforced an agreement by the parties
to attempt to resolve their disputes through mediation and stayed litigation proceedings
which had already been commenced, to enable a mediation to take place. The inclusion
of an ADR clause in the contract in dispute will also help overcome the concern on the
part of some people that proposing ADR will be perceived by the opponent as a sign of
weakness. It should be stressed, however, that experience shows that any such concern
is almost always misplaced. (Cheffings, 2016)

Conclusion

HUMAITH 68
 Business law

 While there can be no guarantee that ADR will be successful, the experience of a
leading ADR organisation in the UK (the Centre for Effective Dispute Resolution
(CEDR)) is that over 85% of all mediations held under its auspices are successful,
saving very substantial costs. If you do become involved in a dispute you should give
serious consideration to whether or not it is suitable for some form of ADR and, if so, the
best moment to try to initiate an appropriate process. If you are involved in negotiating
contracts you should consider including an ADR clause. As noted above, the current
judicial climate appears to be leaning towards enforcement of such clauses, provided
they have been properly drafted.

Justification of ADR system both UK and Sri Lanka

 According law system in the world most of the countries are following English because
they are the people who ruled most of the countries in the world. Like that in order to find
the conclusion both UK and Sri Lanka ADR system UK’s ADR system is best one
because compare to Sri Lanka ADR system this is minor dispute resolving place it is
more flexible time consuming is very less but judgment is not good like UK system.
Because according the Sri Lankan system if there is not satisfied in ADR they have to
appeal on court otter wise they can do nothing. But in UK system they have divided ADR
system as cases they have more ADR system like court structure and their judgments
also mostly satisfied by the people more even most of cases are resolving under the
ADR in UK.
 Likewise, ADR works in UK and Sri Lanka above reasons UK ADR system is best one
rather than Sri Lankan ADR system.

HUMAITH 69
 Business law

Reference
https://albrightstoddard.com/advantages-disadvantages-adr/
https://www.law.cornell.edu/wex/alternative_dispute_resolution
https://www.google.lk/search?
q=company+law+and+labour+law+important+for+the+business&oq=company+law+and+l
abour+law+important+for+the+
+business&aqs=chrome..69i57.18396j0j7&sourceid=chrome&ie=UTF-8
http://www.dictionary.com/browse/law
http://www.princeton.edu/~kewhitt/lawandpolitics.htm
http://www.oxfordscholarship.com/view/10.1093/acprof:oso/9780198253457.001.0001/acprof-
9780198253457-chapter-9
https://plato.stanford.edu/entries/evidence-legal/
https://www.quora.com/What-are-the-merits-and-demerits-of-a-federal-state-and-a-unitary-state

HUMAITH 70