Political stability vital for an International Financial Centre

Two things vital for the creation of an International Commercial court is the usage of English Law that has to be looked into first. Most international financial centres such as New York, Bombay, Hong Kong, Singapore and Sydney function on English Law and the other important aspect is the political stability of a country essential for establishing a financial centre which Sri Lanka lacks although still desires of hosting an International Financial Centre, according to a top expert.

“We do not have political stability as witnessed recently where two Prime Ministers were appointed causing much confusion,” said Prof. M. Sornarajah of the Faculty of Law of the National University of Singapore at the Senathi Rajah Memorial Trust lecture held at the BMICH Colombo recently. The topic that he dealt was on “International Financial Centres and Specialised Legal Regimes: Is Sri Lanka Ready”

He said by the usage of Common Law there will be a pool of Common Law precedents that can be applied into innovative financial transactions. The three new financial centres in Dubai, Abu Dhabi and Kazakhstan make use of the English Law despite the fact that two states are Arab states and the other was a former Russian state. Under Section 3 of the Civil Law Ordinance of Sri Lanka, English Law would apply to commercial transactions except in some circumstances.

Referring to international financial centres, he said the first such centres began in Amsterdam and in London during the period when both cities belonged to Empires. Both were port cities and cities where much of the trade took place. New York was the other financial centre owing to the growth of industries and due to a large market that existed in the country. There was a flow of money from Europe to New York and London as a result of the influx of refugees arriving at these cities, mostly Jewish bankers bringing in large amounts of money. However both London and New York are now losing that claim today. “They were cities of culture, and cities of tolerance where people wanted to enter and live in, was an important facet of financial centres.”

International financial centres in Asia too were established as outposts of these Empires where Britain established financial centres in Bombay, Kolkata and in Hong Kong, the largest financial centre owing to China’s growing wealth despite political tensions between them. Referring to Singapore, he said although it was not associated with Empires as the former Prime Minister of Singapore used to say that it was mud infested swamp at a time when Colombo was an elegant tree lined city. The mud infested swamp of Singapore had grown into a major financial centre in the world owing to a charismatic leader, the late Lee Kuan Yew who provided legal and financial services in Singapore.