Jurisdiction of the Commercial High Court

The term ‘Commercial High Court’(hereafter referred to as the CHC) is a colloquial term developed by the legal practitioners to refer to a specific High Court which was created in the year 1996 specifically for the purpose of hearing matters that could be prima facie covered under the umbrella of commercial matters. This particular CHC was established according to Article 154P of the Constitution of the country under the statute High Court of the Provinces (Special Provisions) Act No.10 of 1996.

Section 2 of this statute empowered the High Court established for a province under this statute, to exercise civil jurisdiction in the matters by Order published in the Gazette and today this includes the following actions;

  • All the actions where the cause of action has arisen out of a commercial transaction (including the cause of action relating to banking, the export or merchandise, services, affreightment, insurance, mercantile agency, mercantile usages, or the construction of any mercantile document) in which the debt, damage or demand is for a sum exceeding five million rupees or such other amount as may be fixed by the Minister from time to time by Notification published in the Gazette, other than an action instituted under the Debt Recovery (Special Provisions) Act No.2 of 1990,
  • Applications made under the Companies Act No. 7 of 2007 and
  • All proceedings under the Intellectual Property Act No.36 of 2003

This position was elaborated in the Indian case of Fazlehussein v. Yusufally 10, AIR 1995 Bombay which has decided that the “jurisdictional objection ought to be decided first.

According to the principal statute, so far a CHC has been created in the Western Province and it is located in Colombo. However, this statute was not utilised for the creation of CHC in the other 8 provinces in the country. Therefore, matters in the other provinces which relate to the jurisdiction of the CHC shall be heard and determined at the relevant Court. Further it should be noted that the Minister may from time to time vary the amount of the commercial transaction which may be in the form of a debt, damage or demand and currently it is limited to a minimum of Rs. 5 Million, for which there are current proposal to increase this threshold amount due to the overcrowding effect at the CHC.

If the parties to the case intend to raise an objection with regard to the jurisdiction of the court, according to Section 39 of the Judicature Act, it is incumbent on any party who objects to jurisdiction to do so at the very first opportunity. Therefore, the general rule is that the issue of jurisdiction must be determined at the first instance prior to going into the merits of the case because the issue of jurisdiction is a threshold issue as any court cannot hear a case, for which it has no jurisdiction.

It would be open for the Court to receive evidence for deciding jurisdictional fact even for deciding the preliminary issue. if the jurisdiction of the Court depends upon the proof of a fact and the question as to the existence or otherwise of that fact is canvassed, the parties may lead evidence in support of their respective cases before the preliminary issue as to jurisdiction of the Court is decided’. Further, according to section 142D of the Civil Procedure Code, as amended by Act No.08 of 2017, during the pre-trial hearing the Judge conducting the pre-trial hearing have to ascertain any issues raised by the parties regarding the jurisdiction of the CHC. Therefore, establishing the jurisdiction of the CHC prior to proceeding with hearing the case, is a crucial matter in the procedure before the CHC, just as it is before any other Court of law in Sri Lanka.

Considering the jurisdiction of the CHC, despite it being specified in the statute, there are many objections taken up by the legal practitioners with regard to the exercise of its’ jurisdiction as follows;

  • Cause of action has not arisen out of  commercial transaction in which the debt, damage or demand is for a sum exceeding Rupees 5 Million
  • Application and proceedings are not to be filed under the Companies Act
  • Proceedings for a matter are not required to be taken under the Intellectual Property Act
  • Arbitration or mediation  clause in an Agreement between the parties ousting the jurisdiction of the CHC
  • Foreign jurisdictional clause ousting the jurisdiction of the CHC based on an Agreement between the parties.
  • Jurisdiction has been conferred by a statute on a particular Court (e.g. Debt Recovery (Special Provisions) Act)

From the objections listed above, one of the most controversial objections taken up today is the objection on the ground that an arbitration or mediation clause in an Agreement between the parties would oust the jurisdiction of the CHC. Therefore, it brings the question whether such a clause in an Agreement would be sufficient to oust the jurisdiction conferred on the CHC. It has become a common practice in Sri Lanka today to insert an arbitration clause for the purposes of dispute resolution in commercial agreements between the parties. These arbitration clauses are introduced to prevent the technical procedures of the court and to enable the parties to resolve the disputes in a speedy and economical manner. Under the Arbitration Act No.11 of 1995, Section 5 provides that “where a party to an arbitration agreement institutes legal proceedings in a court against another party to such agreement in respect of a matter agreed to be submitted for arbitration under such agreement, the Court shall have no jurisdiction to hear and determine such matter if the other party objects to the court exercising jurisdiction in respect of such matter”. Accordingly, the CHC would have no jurisdiction over such matters and disputes which have been agreed between the parties to be submitted for arbitration according to the arbitration clause. Therefore, the Court has jurisdiction over matters and issues, over which there is no such Agreement arising or existing based on an arbitration clause, as held in the case of W.Piyaratna vs. National Insurance Corporation Ltd. (unreported) decided on 31.10.2013 at the Court of Appeal.

Section 5 of the Arbitration Act No.11 of 1995 was followed in the cases of Elgitread Lanka (Pvt) Ltd. vs. Bino Tyres (Pvt) Ltd. (unreported) S.C. (Appeal) No.106/08 and Munasinghege Don Eranga Indrajith vs. George Steuart Finance Limited (unreported) S.C.(L.A.) 42/2013 decided 24.1.2014 where the parties have agreed to submit any dispute for arbitration and the Defendant objected against the High Court exercising jurisdiction. It was held in these cases that the High Court has no jurisdiction to hear and determine these action as there were arbitration clauses in the Agreements and the Defendants have not consented and were objecting to the Court exercising jurisdiction in these matters.

It should be noted that Section 13 of the Arbitration Act No.11 of 1995 empowers the arbitral tribunal to make interim measures of protection to secure or protect the claims which form the subject matter of the dispute between the parties which was referred to the arbitral tribunal. These interim measures could be enforced through the High Court and the exercise of jurisdiction of the High Court in the enforcement of interim measures, shall not be considered as incompatible with section 5 of the said Act, according to section 13(2) and section 13(3) of the Act.

However, in urgent interim relief requirements, it was seen in the case of Baksons Textile Industries Limited vs. Hybro Industries Limited (unreported) C.A. No. 51/97 of 28.04.1997 that “as far as arbitration clause is concerned, there is no doubt that the arbitration act provides for settlement of disputes by arbitration where the agreement sets out so. It has been contended that the petitioner has already referred the dispute to arbitration and also that the arbitration act provides for an interim order to be made. However, it is my considered view that until such time a final order resolving any dispute or an interim order is made by the arbitrator, a party is entitled to come before the District Court and obtain interim relief to maintain the status quo”.

Further, in the case of Elgitread Lanka (Private) Limited vs. Bino Tyres (Private) Limited it was held that “…a careful reading of section 5 of the Arbitration Act would reveal that it merely provides that ‘the Court shall have no jurisdiction to hear and determine such matter’, but it does not take away the power of court in appropriate circumstances of making other orders supportive of or incidental to the arbitral process, such as for the constitution of the arbitral tribunal or for providing such interim measures as may be necessary to protect or secure the claim which forms the subject matter of the arbitration agreement.”

Therefore, it can be seen that the CHC could exercise powers in issuing appropriate orders in the form of injunctive relief that are supportive of or incidental to the arbitral process pending the constitution of an arbitral tribunal and/or an interim relief is either granted or refused by the Arbitral Tribunal that may be necessary to protect or secure the claim which forms the subject matter of the arbitration agreement.

This position has been recently strengthened by the CHC judgements in the cases of Rajapaksa Mudiyanselage Maduritha Bandara Rajapakse vs. Kolon Global Corporation (unreported) HC/Civil/395/2017/MR, decided on 22.01.2018 and Construction Managers and Planners (Pvt) Limited, Regent Property Developers Lanka (Pvt) Limited (unreported), HC/Civil/205/2018/MR decided on 02.05.2018.

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