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Part-EPF-owned company ordered to pay Rs. 1.3 billion as damages to Italian firm
A Singapore-based arbitration tribunal has ordered SinoLanka Hotels and Spa (Pvt) Ltd–a subsidiary of Canwill Holdings (Pvt) Ltd of which the shareholders are Sri Lanka Insurance Corporation, Litro Gas Lanka Ltd and the Employees’ Provident Fund–to pay Euros 7.432 million (Rs 1.3 billion) in damages to an Italian company for the 2015 termination of an interior decoration contract for Grand Hyatt, Colombo.
The failure of SinoLanka to comply with the arbitration order has now resulted in Interna Contract Spa, the Italian company, petitioning the Colombo High Court for relief. Last week, the Court issued notice on SinoLanka, pursuant to the company failing to satisfy the arbitral award.
The dispute between Interna and Sinolanka is consequent to the termination of a contract for the interior works package of the Grand Hyatt Colombo. The dispute was referred to arbitration in Singapore. Interna has petitioned the High Court to enforce the unanimous arbitral award in its favour against Sinolanka. The award which it says, in damages and costs, amounts to more than Rs 1.5 billion.
The matter will be called on February 5, 2018, for notice returnable. The Sunday Times obtained copies of the arbitral award and related documents from Court. Interna Contract Spa is a subsidiary of the Interna Group, an Italian industrial concern specialising in interior work for hotels, cruise ships, boutiques, offices and high-end residential units.
Interna, by an expression of interest in June 2013, informed SinoLanka of its intention to participate in a tender for the supply of interior works for the Hyatt Regency, Colombo. After it completed the ‘mock up room’ stage of the project, SinoLanka in July 2014 invited Interna to participate in the tender for ‘construction, supply, installation, completion and remedying defects of interior works package’ for the Grand Hyatt, Colombo.
In September 2014, Interna submitted an offer. After a final round of negotiations in October that year, Interna sent its final offer to SinoLanka whose representatives visited its head office in Italy for a due diligence assessment. SinoLanka accepted Interna’s offer in December 2014 and the following month, the latter confirmed that it will proceed with execution of works as instructed.
The contract was signed on January 7, 2015 (the day before the presidential election in Sri Lanka). Interna had already started work such as pursuing and finalising financial agreements to put on place bonds and lines of credit, insurance for the project, interviewing and employing additional personnel, preparing safety documentation, elaborating the preliminary work programme, reporting, researching and sampling architectural finishes.
But in March 2015, SinoLanka sought to “wrongfully terminate” the agreement, purportedly due to a breach of contract by Interna. Despite the Italian firm’s efforts to affirm the contract and demand performance thereof on several occasions, SinoLanka continued to “act in continuous repudiation of the contract”.
The dispute resolution mechanism in terms of the contract is stated as: “All disputes arising out of or in connection with the Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The venue shall be Singapore and the proceedings shall be in English”.
In a Request for Arbitration dated August 2015, Interna submitted the disputes that had arisen to be finally determined by arbitration in accordance with the relevant clause. The proceedings were conducted under the Rules of Arbitration of the International Chamber of Commerce (ICC).
The arbitral tribunal comprised Andre Yeap (Interna’s nominee), Upul Jayasuriya (SinoLanka’s nominee) and Vinayak Pradhan appointed as President by the ICC Court. The place of arbitration was fixed as Singapore. The process continued from August 2015 (when Interna submitted its Statement of Claim) till May 2017, when the tribunal declared the proceedings closed.
The award was made on September 29, 2017. The tribunal ordered and directed SinoLanka damages amounting to Euros 7,432,062.79 with simple interest thereon at the rate of two percent per annum from August 14, 2015, to the date of full payment; and costs amounting to US$ 483,500 (Rs 73.8mn) and Euros 516,597.17 (Rs 92.8m), both with simple interest at the rate of two percent per annum from the date of the award to the date of full payment.
Attorneys for Interna have sought payment from SinoLanka by way of a letter of demand sent in October. But no payment has been received. Interna has requested the Court to issue notice of its application to the respondent; to make order to file, recognise and enforce the arbitral court’s award; to enter judgment and decree in terms of the award; and costs.
The Petitioner, Interna, was represented by Counsel Avindra Rodrigo and Kasuni Jayaweera instructed by M/s F J & G De Saram.