Judicial Injunction Blocks Foreign Brokers from Operating in Sri Lanka

A permanent injunction has been issued by the District Judge of Colombo, Sandun Vithana, effectively forbidding illegitimate foreign entities not registered locally, and as  insurance brokers, from offering any insurance-related services in the country. The complainant in this case, Strategic  Insurance Brokers (SIB), sought an enjoining order against JB Boda & Co of Singapore to prevent it from holding itself out as an insurance broker. The matter of the enjoining order was taken up on 17th January.

Romesh de Silva PC and Chanaka de Silva PC, representing the complainant SIB, made submissions before the court, stating that the defendant company had been making bids for major tenders on insurance-related matters. The plaint filed states that the defendant had been awarded tenders illegitimately, including by state statutory bodies such as the National Insurance Trust Fund (NITF).

As a result of the aforementioned enjoining order and the recommendation of the Procurement Appeals Board against the procurement entity due to the irregular fraudulent award, the then Cabinet of Ministers reversed the decision and awarded the tender to IRCSL-registered insurance broker SIB, as SIB had made the most responsive bid.

The defendant company appealed the decision to the Civil Appellate High Court. The stay order obtained by the company was reinstated when the Civil Appellate High Court judgment dismissed JB Boda’s appeal against the interim orders. The Supreme Court did not grant leave to proceed with the appeal.

The District and High Court judgments effectively prevented fly-by-night foreign brokering companies from holding themselves out as brokers, thereby qualifying for local bids or being awarded state tenders.

The Civil Appellate High Court of Colombo has ruled against JB Boda, a Singapore-based brokering company, in what insurance industry observers view as a landmark judgment. JB Boda asserted in court that it was entitled to function as a broker in Sri Lanka despite not being duly registered as a brokering concern, as required by law.

The Civil Appellate High Court judge, Sampath B. Abeyakoon, ruled against the foreign broker, and the judgment effectively made operative the District Court’s interim injunction issued in 2018, preventing this company from functioning as a broker in the insurance industry in Sri Lanka. It effectively bars the Singapore-based concern from holding itself out as a broker or engaging in any broking activities in the insurance industry in this country, and consequently from participating in any bids for local tenders.

A similar concern has emerged regarding the recent awarding of a tender by the National Insurance Trust Fund (NITF) for reinsurance cover concerning strikes, riots, civil commotion, and terrorism. Strategic Insurance Brokers (Pvt.) Limited, a well-established insurance brokerage firm in Sri Lanka, has lodged a formal objection against this decision, highlighting serious legal and procedural violations.

According to the appeal, the communications presented to the Cabinet seem to lack vital information regarding the awardee Tysers’ eligibility and compliance with Sri Lankan law. There are indications that essential details may have been misrepresented or withheld from decision-makers, igniting suspicions of potential misconduct.

As this matter unfolds, all eyes will be on the Cabinet’s next steps and whether the government will prioritise compliance with local laws and support the domestic  insurance market, insurance industry sources said.

The judgment effectively confirms that every person who acts as a broker for reinsurance must register with the  Insurance Regulatory Commission of Sri Lanka under the terms of the relevant Act, be a member of a recognised Brokers Association, and be incorporated as a company under the Companies Act of Sri Lanka. The submissions of JB Boda, asserting that the above requirements are not necessary for foreign entities providing reinsurance-related brokering services, have not been accepted by the courts.