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Opinion


Paying stamp duty

By Kandiah Neelakandan
I refer to the article titled “S.C. Decision on financial institutions” appeared in The Nation’s Legal page on February 25, 2007 on the basis of the judgment quoted. The Article concluded as follows:-
“The Supreme Court also held that the obligation to pay stamp duty, in terms of section 24(f), was on the maker of the document.
“Banks, leasing companies and finance companies would need to be mindful whether the documentation they intend to produce as evidence in court is properly stamped. If they have not been stamped, the deficiency could be cured by payment of the stamp duty and a penalty not exceeding three times the duty before their production in court. For instance, if the stamp duty is Rs. 100,000/- the penalty may be levied up to Rs.300,000/-
“This prohibitive cost may also require financial institutions to indulge in an exercise in cost benefit analysis before proceeding to litigation.”
In the case of Ceylease Financial Services Limited –vs- L. Anjalee Siriyalatha and another, in SC CHC (Appeal) No. 48/2004, S.C. (HC) L.A. No. 16/2004, H.C. (Civil) 45/2002(1), the honourable Supreme Court of Sri Lanka has correctly decided an issue that arose in respect of stamping of a guarantee and indemnity dated December 19, 1996. Before I deal with that judgment, I wish to highlight the following facts dealt with in that judgment:-
Learned Counsel for the Defendants in that case had objected to the said guarantee and indemnity dated December 19, 1996 being accepted in evidence on the basis that the said guarantee and indemnity had not been properly stamped.
The law and the relevant regulations applicable to stamp duty on the guarantee and indemnity on the relevant date was the Stamp Duty Act No. 43 of 1982 and the Regulations made under the Stamp Duty Act and published in the Gazette Extraordinary No. 224/3 dated December 20, 1982 as amended by the Gazette Extraordinary No. 948/15 of November 6, 1996 (the said regulations).
Item No. 7 of the said regulations read as follows:-
Bond, pledge, bill of sale or mortgage for any definite and certain sum of money affecting any property other than any aircraft registered under the Air Navigation Act (Chapter 365) –
Where such bond, pledge, bill of sale or mortgage is for a sum of money not exceeding Rs. 25,000 –For every Rs. 1,000 or part thereof
In any other case
For every Rs. 1,000 or part thereof...
Bond or mortgage whereby any sum of money is hypothecated as security for the due performance of any act or acts or for fulfilling any obligation under any contract or otherwise or indemnifying any person in respect of any damage, loss or expenses, other than a bond referred to in paragraph
For every Rs. 1,000 or part thereof...
Bond entered into by an exporter with the Director General of Customs as security under a contract in relation to the Manufacture-in--Bond Scheme.”
The Honourable Supreme Court has in the said appeal decided by its judgment dated December 11, 2006, delivered by Shirani A. Bandaranayake, J (with N.G. Amaratunga, J and Saleem Marsoof, J agreeing) inter alia as follows:-
“Item No. 7, of the Gazette Extraordinary, which was referred to earlier deals with ‘bond, pledge, bill of sale or mortgage’. It is apparent that a bond, which is an instrument under seal, whereby one person binds himself to another for the payment of a specified sum of money either immediately or at a fixed future date (Halsbury’s :Laws of England, Vol.12, pg. 556-557, para 1385) could include a Guarantee Bond and/or an Indemnity Bond. As stated earlier it would be necessary to disregard the nomenclature and will have to look into the substance of the bond itself, to find out its identity. Thus considering all the facts and circumstances, it is apparent that, on an examination of the nomenclature of the Guarantee and Indemnity in question, it is undoubtedly in law a bond, which would come within Item No 7 of Gazette Extraordinary No. 224/3 dated 20.12.1982 As amended by Gazette Extraordinary No. 948/15 dated 06.11.1996.”
Stamp Duty payable to the Central Government on various instruments was abolished by Part II of the Financial Act No. 11 of 2002 which came into force on May 1, 2002. Section 15 of the Financial Act No. 11 of 2002 provides as follows:-
“15. No stamp duty shall be imposed or paid under the Stamp Duty Act No. 43 of 1982 (hereinafter in this Part referred to as the ‘principal enactment’) on any instrument executed or any document presented or filed on or after the date on which the provisions of this Part shall come into force.
With that abolition the said Regulations (published in the Gazette Extraordinary No. 224/3 dated December 20, 1982 as amended by Gazette Extraordinary No. 948/15 dated November 6, 1996 referred to above) ceased to have effect.
It must be borne in mind that the decision of the Supreme Court made on December 11, 2006 was in respect of a requirement of stamping of the said Guarantee and Indemnity on December 19, 1986 on which date the said regulations were in force.
The Stamp Duty payable on instruments to the Central Government were re-introduced by the provisions of Stamp Duty (Special Provisions) Act No. 12 of 2006 and the Stamp Duty is now payable to the Central Government on certain specified instruments as prescribed in the Gazette Extraordinary No. 1465/19 dated October 5, 2006. The categories of instruments which are liable for Stamp Duty are set out in the said Gazette, Those are the following:-
Affidavit
Policy of insurance
Warrant to Act as a Notary Public
Licence issued authorising the holder to carry on any trade, business, profession or vocation…
Any claim demand or request presented for the payment of any sum of money…
Any share certificate…
Any mortgage of any definite and certain sum of money affecting any property…
Any promissory note
Any instrument relating to lease or hire of property…
Any receipt or discharge…
Considering all these categories of instruments I am of the view that neither guarantee nor indemnity falls within any category specified in that Gazette. I wish to specifically point out that the word ‘bond’ does not appear in any of the categories in the said regulations which are the current regulations.
It was because of the word ‘bond’ appearing in the regulations which were then in force on December 19, 1996 that the Supreme Court has in the said Appeal correctly decided on December 11, 2006 that Stamp Duty was then payable on a guarantee and indemnity.
It is a well-settled rule of law that every charge upon the subject must be imposed by clear and unambiguous language. A statute imposing a tax upon the subject should always receive a strict interpretation and should not be allowed to operate as a charge unless the words are plain and unambiguous. The party who seeks to bring an instrument within the Stamp Act must show clearly that it falls within it, and no intendment can be made in favour of the liability.
I might add that under the Provincial Council Financial Statutes in seven provinces (All the provinces excluding the Northern and Eastern Provinces) and the regulations made there under, it is possible to impose Stamp Duty on certain instruments (e.g. transfers, gifts) but not on a Bond, Guarantee or Indemnity.
Therefore, as pointed out above, the current laws and regulations do not include a guarantee or an indemnity within any category of instruments which are now liable to be stamped. Therefore, there is no Stamp Duty now payable in Sri Lanka on a Guarantee on an indemnity.
The writer, an Attorney-at-Law, is a Partner of the Law Firm of Murugesu & Neelakandan

***

Ethics code to go global

Judge C.G.Weeramantry, former Vice President of the International Court of Justice, has returned to Sri Lanka after chairing the UN Conference of Chief Justices and Ministries of Justice in Vienna recently, aimed at establishing a world wide Code of Principles of Judicial Ethics.
The idea was mooted seven years ago among a group of Chief Justices from different parts of the world chaired by Judge Weeramantry. The group is known as the Judicial Integrity Group and the Rapporteur of the group is Justice Michael Kirby of the High Court of Australia.
The original proposals were reduced to draft form and subjected to analysis and scrutiny at various international meetings of Chief Justices, held at Vienna, The Hague, Bangalore and other centres.
One of the objectives was to bridge the gap between the major legal systems, particularly the Common Law and the Civil Law legal systems in which the judge functions according to a different traditional background.
In the Common Law system, the judge is the supreme authority on the law in his or her court and the decisions of judges of the superior courts make law. In the Civil Law systems, the highest legal authorities were traditionally not the judges but the jurist and the judge occupied a lower profile.
The group of Chief Justices sought out the principles common to all systems and agreed on a draft at Bangalore. This came to be known as the Bangalore Principles and the Bangalore Principles have been gaining recognition over the years.
They have now been adopted in several countries and several others have modelled their Judicial Code on the Bangalore Code. The American Bar Association has referred to them and the judges of the European Union have considered them with favour. Various UN agencies have also signified their approval of the Code. The United Nations Economic and Social Council (ECOSOC) has, by Resolution No. 23 of 2006, pointed out that the Judicial Integrity Group has conducted extensive consultations with the judiciaries of more than 80 countries. It has invited Member States to encourage their judiciaries to use the Bangalore principles in developing their rules for professional and ethical conduct of their judiciaries.
This conference was convened by the United Nations Office on Drugs and Crime (UNODC).
Among those participating were representatives of the American Bar Association, judges from the House of Lords, European judiciaries, African, Asian and South American judiciaries. There were also representatives of the Council of Europe and ministry officials from several countries.
Judge Weeramantry presided and it was resolved to spread knowledge and application of the Code on a world wide basis.
Judge Weeramantry also proposed that there should be an International Judicial Academy as a centre of excellence for the training of judges and the training of the trainers and this proposal was unanimously carried.
A detailed commentary on each principle of the Code was prepared by a team headed by Dr. Nihal Jayawickrema. This commentary was considered in detail and adopted with minor amendments. The Principles of the Code, along with the commentary now provide a comprehensive guide to judicial conduct worldwide and could become the standard point of reference internationally in this field.

***

Genocide tried

Excerpts of the Statement to the Press by H.E. Judge Rosalyn Higgins by President of the International Court of Justice issued on February 26, 2007
This is the first legal case in which allegations of genocide have been made by one State against another. The International Court of Justice has been acutely sensitive to the responsibilities that have fallen on it. The Court, as it always does, has meticulously applied the law to each and every one of the issues before it. These judicial considerations have led, in the event, to mixed findings so far as the Parties are concerned. That does not mean, of course, that the Court has been seeking a political compromise, still less any predetermined outcome.
I begin with two particular comments:
First, although the hearings in this case were on the merits, Serbia and Montenegro had advanced contentions to the effect that, even though the Court had, in an earlier Judgment, found it did have jurisdiction to hear the substance of this case, more recent events relating to changes in Serbia and Montenegro’s status called this into question. The Court found that the earlier Judgment in favour of its jurisdiction still stood: it was res judicata. When we say this decision constitutes res judicata, we mean that it is final and binding on the parties. The International Court of Justice can take account of new developments, but only through a formal request for revision. In fact, such a request had been made previously by the Respondent, and rejected by the Court in a Judgment of February 3, 2003.
Second, a short time after the close of the oral hearings in May 2006, Montenegro declared its independence based on the results of a referendum. This raised the question of who is now the Respondent party in the case. The Court has answered by saying that at the date of this Judgment, Serbia was the only respondent. However, the Court notes that any responsibility for past events involved at the relevant time the composite State of Serbia and Montenegro. Bear this explanation in mind when you hear me refer to ‘the Respondent.’
As you are aware, the jurisdiction of the International Court of Justice is based on consent. In this case, the Court’s jurisdiction is solely based on Article IX of the Genocide Convention. This means that the Court has no authority to rule on alleged breaches of obligations under international law other than genocide, as defined by the Genocide Convention. This is important to understand because in this case we were confronted with substantial evidence of events in Bosnia and Herzegovina that may amount to war crimes or crimes against humanity but we had no jurisdiction to make findings in that regard. We have been concerned only with genocide and, I may add, genocide in the legal sense of that term, not in the broad use of that term that is sometimes made.
In this case, it was not enough for the Applicant to show that, for example, deliberate unlawful killings of Bosnian Muslims occurred. Something more was required, proof that the killings were committed with the intent to destroy the group to which the victims belonged.
Given the exceptional gravity of the crime of genocide, the Court required that the allegations be proved by evidence that is ‘fully conclusive.’ We made our own determinations of fact based on the evidence before us, but we also greatly benefited from the findings of fact that had been made by the International Criminal Tribunal for the former Yugoslavia (ICTY) when it was dealing with accused individuals.
The Court has found it conclusively established that massive killings and acts causing serious bodily or mental harm were perpetrated in specific areas and in detention camps throughout Bosnia and Herzegovina. We also found that there was deliberate infliction of terrible conditions of life. In many cases, Bosnian Muslims were the victims of these acts. However, with one exception which I shall return to, the evidence did not show that these terrible acts were accompanied by the specific intent to destroy the group that is required for proof of genocide.
However, there was an important exception to these findings. The Court found that there was conclusive evidence that killings and acts causing serious bodily or mental harm targeting the Bosnian Muslims took place in Srebrenica in July 1995. These acts were directed by the Main Staff of the VRS (the army of the Republika Srpska) who possessed the specific intent required for genocide.
Having determined that genocide was committed at Srebrenica, the next step was for the Court to decide whether the Respondent was legally responsible for the acts of the VRS. If the VRS was an organ of Serbia and Montenegro (as that country was then called), then according to law, the Respondent would be responsible for the VRS’ actions. In the light of the information available to it, the Court has found that it was not established that the massacres at Srebrenica were committed by organs of the Respondent. It has also not been established that those massacres were committed on the instructions, or under the direction of the Respondent, nor that the Respondent exercised effective control over the operations in the course of which those massacres were perpetrated. This is the test in international law.
It is not so easy to grasp the distinction in law between complicity in genocide and the breach of the duty to prevent genocide. Let me try to explain in a few words. They may not have had knowledge of the specific intent to commit genocide, but it must have been clear that there was a serious risk of genocide in Srebrenica. This factor is important because it activates the obligation to prevent genocide, which is enshrined in Article I of the Genocide Convention.
The Court has found that the Respondent could, and should, have acted to prevent the genocide, but did not. It therefore violated the obligation in the Genocide Convention to prevent genocide.
Article VI of the Genocide Convention requires that persons charged with genocide or any other acts enumerated in Article III shall be tried by a competent tribunal of the State in the territory of which the act was committed, or by an international penal tribunal. In this case, the genocide occurred in Srebrenica, which is outside the Respondent’s territory. Therefore, the Respondent cannot be held responsible for not having tried before its national courts those accused of having participated in the Srebrenica genocide. The relevant question, then, is whether the Respondent fulfilled its obligation to co-operate with the ICTY by arresting and handing over to the Tribunal any persons accused of genocide as a result of the Srebrenica genocide and finding themselves on its territory.
The Court has found that the Respondent failed in its duty to co-operate fully with the ICTY and therefore has violated the obligation to punish genocide.
As the Court has not found the Respondent itself committed, or was responsible for, the genocide at Srebrenica, the issue of massive reparations for that does not arise. So far as the violation of the obligation to prevent genocide, the Court has found as the Applicant in fact suggested that a declaration of the Court is itself the appropriate satisfaction. As to the breach of its obligation to punish genocide, the Court has determined that this is a continuing breach. We have therefore made a declaration that Serbia shall immediately take effective steps to ensure full compliance with this obligation and to transfer individuals accused of genocide for trial by the ICTY, and to co-operate fully with that Tribunal.