As Sri Lanka’s Economy Grows, Commercial Disputes Heat Up
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As Sri Lanka’s Economy Grows, Commercial Disputes Heat Up

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Despite decades of internal conflict, Sri Lanka now boasts high-income growth and a notable reduction in human development index shortfall, according to the just-released 2013 Human Development Report entitled, “The Rise of the South: Human Progress in a Diverse World.” Sri Lanka’s economy expanded last quarter faster than analysts estimated. Since the end of Sri Lanka’s 26-year civil war in 2009, the government has clearly been focusing on expansion, with new investments in infrastructure and the private sector that are helping to spur growth and contributing to an increase in disposable income and rising consumerism. While this growth is largely positive, there has also been a significant rise in the number of commercial and financial disputes between citizens and institutions as a result.

For most Sri Lankans, resolving disputes through the nation’s beleaguered formal courts is not an option. Despite efforts to improve efficiency, courts are weighed down by excessive case loads and limited capacity, and high litigation costs make access to courts prohibitive for most. For decades, community mediation boards – made up of non-political, volunteer mediators who facilitate voluntary settlement of minor disputes – have helped to fill this void. [Watch a slideshow about community mediation in Sri Lanka.] Since then, mediation boards have played an important role in providing recourse for citizens to settle their disputes through a system that is affordable, rapid, and effective. There are currently 309 mediation boards operating across the country with new mediation boards being established in the Northern Province, specifically in the districts of Kilinochchi, Mulaitivu, and Mannar, which were severely affected by the war. Over the past two decades, the boards have mediated over 2 million disputes and approximately 60 percent of them have been successfully resolved.

But the end of the war and a growing economy have brought about a drastic change in nature of the disputes that are being brought before mediation boards. The banking sector is proactively lending more with an increase in agriculture and production related loans; insurance companies are doing more business with individuals and small companies; the IT market is buzzing with youth rapidly moving to smart phones to access high speed data; and small businesses are expanding and new ones are being set up especially in the war-affected north and eastern parts of the country. The global slowdown has dampened spirits somewhat, but has not put brakes to the growth in the country.

Commercial disputes constituted over half of the total disputes in 2012 with the highest number of referrals (43%) from financial institutions such as banks and commercial institutions. State and private banks, telecommunications service providers, insurance and leasing companies, electrical and home appliance retailers, and small business owners are increasingly turning to mediation boards to resolve disputes over non-repayment of loans taken for the purpose of cultivating cash crops including the purchase of seeds and fertilizers, construction and repair of homes, and expanding small businesses. Insurance-related disputes arise largely because the insurance policy is in English and clients do not fully comprehend the terms and conditions for payment of premiums. A large number of cases deal with non-payment of utility bills and telecommunication bills for smart phones.

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