Regulatory & Policy News
View all(69)⚖️ Sri Lanka Enacts Landmark Civil and Commercial Mediation Law
The Parliament of Sri Lanka unanimously passed the Mediation (Civil and Commercial Disputes) Bill on 11 June 2026. Introduced by Justice Minister Harshana Nanayakkara, the new law establishes a disciplined, globally recognized framework for alternative dispute resolution (ADR), aiming to ease massive gridlocks in the judiciary. • Overall Backlog & Economic Impact: Sri Lanka’s formal courts face a staggering backlog of over 1.1 million pending cases. Chronic judicial delays directly disrupt the local business climate, contract enforcement, and foreign direct investment. • Core Framework & Legal Validity: The law recognizes voluntary mediation for high-value disputes based on international best practices from the UN Mediation Convention (Singapore Convention). Signatures on mediated settlement agreements are now legally valid and enforceable as a court decree, bypassing traditional litigation. • Operational Guarantees: Ensures total confidentiality, arbitrator neutrality, and party autonomy. Court judges hold discretionary power to refer civil disputes to private mediators without coercing final outcomes. • Strict Category Exemptions: A total of 11 action categories—including marriage termination, nullity declarations, child adoptions, and land partition—cannot be conclusively settled outside of standard court decrees. • Institutional Growth: The local private sector led drafting efforts alongside the International ADR Center (IADRC). Professional training is scaling rapidly, with 125 District Judges and a growing network of lawyers completing certified mediation and non-adversarial advocacy programs.
PDPA Enforcement Nears: LFC Sector Urged to Fast-Track Compliance 📈
• Overall Context: The Personal Data Protection Act (PDPA) No. 09 of 2022 is moving closer to full operation as the Data Protection Authority of Sri Lanka expands its team and prepares to gazette incoming regulations. Financial institutions are urged to take proactive steps now to avoid penalties. • Regulatory & Governance Scope: • Sri Lanka's enforcement model focuses on a mandatory inquiry process, allowing firms to correct non-compliant behavior before penalties under Section 38 apply. • Section 39 lists internal compliance systems as explicit mitigating factors for penalty calculations. • Section 38(6) extends corporate liability directly to company directors and officers for willful blindness or institutional negligence. • Sri Lanka aims to join the Global Privacy Assembly within the next year to align with international cross-border cooperation standards. • Sector & Operational Breakdowns: • Finance & Banking: Financial institutions can process data without explicit consent under legal obligations (e.g., Customer Due Diligence or filing Suspicious Transaction Reports under the Financial Transactions Reporting Act) or legitimate interests. • Consent is strictly mandatory for marketing communications and must be requested separately from general terms. • Highlighting the scale of compliance, a data mapping exercise by Hatton National Bank (HNB) mapped data flows across ~100 distinct departments and roughly 1,500 separate business processes. • Public Sector: Unlike India's digital-only law, Sri Lanka's PDPA covers both digital and physical structured data, significantly increasing compliance complexity for state departments (e.g., Motor Traffic, Immigration, and Land Registries) which currently lag behind the private sector. • Key Technical Risks: Emerging challenges include managing consent during cloud migrations and governance risks from AI platforms, where personal data might be fed into large language models for unintended purposes.
📈 Stricter US Traceability Rules Lift Compliance Burden on Sri Lankan Apparel
The US Customs and Border Protection (CBP) has issued strict new guidance under the Uyghur Forced Labour Prevention Act (UFLPA). This requires comprehensive raw-material-to-product documentation for entering the US market, impacting local exporters. • New Compliance Demands: Simple supplier declarations are no longer sufficient. Importers must track the entire supply chain—including cotton origin, yarn production, fabric manufacturing, and garment assembly—using commercial records like purchase orders, production data, and potentially isotopic testing. • Dual Trade Pressures: This development arrives alongside a separate USTR proposal to place Sri Lanka under a higher 12.5% duty regime following a Section 301 investigation into forced labour import policies. • Macro Context & Impact: • Apparel & textiles is Sri Lanka’s top export earner, accounting for nearly 40% of merchandise earnings and bringing in over US$ 4 Bn annually. • The US is Sri Lanka's largest single market (22% of total merchandise exports). • April 2026 exports to the US fell 3.15% YoY to US$ 196.37 Mn, while cumulative Jan-Apr 2026 exports dipped 2.09% YoY to US$ 945.76 Mn. Market access to Sri Lanka's primary export destination will now heavily rely on local manufacturers' ability to maintain meticulous, verifiable end-to-end supply chain transparency.
✈️ Sri Lanka to Chair Asia-Pacific Aviation Security Body Following Cabinet Approval
Sri Lanka is set to assume a major regional leadership role after the Cabinet of Ministers approved hosting two key Asia-Pacific aviation security summits later this month. • Leadership & Role: Sri Lanka will take over the chairmanship of the CASP-AP Steering Committee for the 2026-2027 term, placing the nation at the center of regional aviation security policymaking. • The Summits: The country will host the 21st Steering Committee Meeting of the Cooperative Aviation Security Program–Asia Pacific (CASP-AP) on June 23-24, followed by the 14th Regional Aviation Security Coordination Forum (RASCF) for Asia and the Pacific on June 25-26. • Participation: The events will bring together approximately 80 delegates, including government representatives, security experts, and international organizations from 41 countries. • Strategic Impact: The forums will focus on regional strategies, technical cooperation, emerging threats, and future security frameworks. The initiative is expected to strengthen regional partnerships and enhance Sri Lanka's profile as a strategic aviation hub in the Indian Ocean.
📈 COPF Approves CBSL Data & Export Conversion Rules; Raises Debt Data Concerns
The Committee on Public Finance (COPF) has approved new rules under the Central Bank of Sri Lanka (CBSL) Act, while flagging critical data gaps in public debt and tourism reporting. Key Approvals & Regulatory Shifts • Data Collection: Approved rules granting designated CBSL officials the authority to collect specific statistics from external parties to aid monetary policy formulation, complete with data privacy safeguards. • Export Proceeds: Approved the "Repatriation of Export Proceeds Rules No. 2 of 2026." Exporters must now convert remaining foreign balances into rupees by the 10th day of the following month, significantly shortening the previous 3-month window. Economic Concerns Raised • Debt Disclosure Gaps: COPF raised concerns over missing government debt statistics following the transition to the Public Debt Management Office (PDMO), urging CBSL to preserve public access to this data. • Tourism Estimates: The committee questioned the accuracy of tourism earnings data, noting that diverse visitor payment channels complicate collection. Better survey methodologies were demanded. • Market Confidence: CBSL cited exchange rate volatility and forex liquidity shortages for the tighter export conversion rules, while COPF cautioned it could harm market confidence. CBSL assured it is a temporary stabilization measure. _Note: Based on official parliamentary briefings._
💵 SL Restricts Import Advance Payments for Unregistered Importers
The Minister of Finance, Planning and Economic Development has implemented stricter regulations under the Imports and Exports (Control) Act, effective today (June 19, 2026), to enhance the oversight of foreign exchange outflows. • New Restrictions: Commercial banks are now strictly prohibited from processing advance payments for imports unless the importer is officially registered as an "eligible importer for effecting Advance Payment" with the Sri Lanka Customs Department. • Monitoring Mechanism: To improve oversight on outward remittances, banks must assign a unique number to every transaction and immediately report data to Sri Lanka Customs. • Data Requirements: Reports must include the importer's Taxpayer Identification Number (TIN), beneficiary account details, payment terms, and a detailed description of the goods. • Implementation: Operating under Regulations No. 06 of 2026, the Controller General will issue strict operational instructions to commercial banks and customs to enforce compliance immediately.
📈 Speaker Endorses Landmark Rescue, Rehabilitation and Insolvency Bill into Law
The Rescue, Rehabilitation and Insolvency (Corporate and Personal) Bill has officially become law following the endorsement by Speaker Dr. Jagath Wickramaratne, coming into force as Act No. 12 of 2026. • Key Legislative Changes: The new Act introduces comprehensive procedures for personal insolvency and debt restructuring while repealing the outdated Insolvency Ordinance (Chapter 97). It also amends the Companies Act No. 7 of 2007, the Inland Revenue Act No. 24 of 2017, and the Mediation Boards Act No. 72 of 1988. • Corporate & Economic Impact: The framework addresses corporate governance, receivership, and cross-border insolvency. This is designed to enhance predictability and boost investor confidence within the Sri Lankan credit market. It provides a structured mechanism to rehabilitate distressed but fundamentally viable companies, supporting business continuity and employment stability. • Personal Debt Relief: For individuals, the Act establishes clear provisions for debt protection, moratoria, and debt restructuring, ensuring the protection of a debtor’s reasonable income and essential assets to facilitate a fresh start for honest individual debtors. • Timeline: The Bill was first read on 17 March 2026, debated and passed on 6 May 2026, and officially enacted this week.
SEC Steps up Enforcements with Record Rs. 200Mn+ Recoveries in 2025 📈
The Securities and Exchange Commission of Sri Lanka (SEC) significantly boosted its regulatory actions in 2025 under the SEC Act No. 19 of 2021, focusing heavily on deterring market abuse and boosting investor confidence. • Overall Figures: Total disclosed enforcement recoveries surpassed Rs. 207.4 Mn through settlements, administrative penalties, and compounding payments. • Record Settlement: Slapped a historic Rs. 188.1 Mn settlement agreement—the largest ever under the Act—on an investor for false trading and market-rigging offences. • Sector & Corporate Fines: • Two licensed corporate finance advisers were penalized Rs. 5 Mn each for rule violations. • A listed public company was fined Rs. 6 Mn for regulatory breaches. • An individual paid Rs. 3.3 Mn to compound a trading rule violation. • Insider Dealing: Reached a settlement with two individuals for insider dealing, though the final monetary value remains undisclosed. • Investigation Case Load: The SEC handled 48 cases in 2025 (including 26 carried forward), down from 62 cases in 2024. Of these, 10 were new inquiries, and 7 concluded directly in enforcement actions.
📈 SEC Drives SOE Listings Amid 2025 Capital Market Reforms
The Securities and Exchange Commission of Sri Lanka (SEC) intensified efforts in 2025 to list State-Owned Enterprises (SOEs) on the Colombo Stock Exchange (CSE) to enhance governance, transparency, and market-based funding while reducing Treasury reliance. • Overall Economy & Market: Sri Lanka's economy expanded by 5% in 2025, supported by improved macroeconomic stability, stronger foreign reserves, and a sovereign rating upgrade marking an exit from default. • Capital Market Reforms: Capital-raising on the CSE grew strongly in 2025. This was further pushed by a CBSL directive requiring banks to reduce single borrower exposures by January 2026, prompting large corporates to pivot toward equity and debt market alternatives. • Key Product & Sector Highlights: • Sustainable Finance: 9 Green, Blue, Social, Sustainable, and Sustainability-Linked Bond issuances raised approximately Rs. 54 Bn in 2025, accounting for 40% of total corporate debt capital raised. Cumulatively, 11 such issuances have raised Rs. 82.35 Bn. • Product Diversification: Introduced frameworks for Perpetual, Infrastructure, and High-Yield Bonds, Sukuk, stock borrowing and lending, and Regulated Short Selling. • Infrastructure: Established the Central Counterparty (CCP) framework via CSE Clear Ltd. to enhance settlement security and align post-trade infrastructure with global standards. _Note: Summary based on details released in the SEC 2025 Annual Report._
📜 Sri Lanka Customs to Launch Overhauled Fee Framework from July 1
Finance Minister Anura Kumara Dissanayake has gazetted a comprehensive new Customs fee and operational framework effective July 1, 2026, replacing outdated regulations spanning from 1948 to 2013. • New Revenue Distribution: Establishes a multi-account fund where 10% of service charges, 50% of examination fees, and 20% of ICT fees will go directly to the Consolidated Fund, with the balance funding approved remuneration and operations. • Export Cargo & Bulk Changes (YoY vs 2013): • Full Container Load (FCL): Fixed at Rs. 600 for the first container and Rs. 100 for each additional (up from a flat Rs. 550 per container). • Less than Container Load (LCL) (>Rs. 20,000): Rs. 400 per CusDec (up from Rs. 300). • Non-containerised bulk cargo (>Rs. 20,000): Rs. 100 per metric ton (up from Rs. 20). • Inward & Port Charges: Processing inward CusDecs will cost Rs. 3,200 per single container and Rs. 2,400 per motor vehicle. Seaport charges include Rs. 100 per TEU for containerised cargo, Rs. 20 per TEU for transhipments, and Rs. 6,000 per voyage for passenger vessels. • ICT & Digital Services: Upgrades the 2013 ASYCUDA monthly flat fee (Rs. 8,000) to a tiered structure: Rs. 16,000 for BOI users, Rs. 5,000 for manifest/remittance reporting, and Rs. 2,000 for Customs House Agents. • Licensing & Compliance: Annual fees for Inland Clearance Depots are set at Rs. 1 Mn. Shipping agents must maintain a Rs. 1 Mn bond and a Rs. 250,000 deposit for early vessel operations, with penalties up to Rs. 100,000 for timeline violations.
⚖️ CA Overturns RTI Order on EPF Bond Disclosures
• Legal Decision: The Court of Appeal (CA) set aside a 2018 Right to Information (RTI) Commission order that directed the Central Bank of Sri Lanka (CBSL) to disclose detailed Employees’ Provident Fund (EPF) Government securities transaction data from 2015 to 2017. • Reason for Exemption: The Court ruled that disclosing specific data—including purchase dates, coupon rates, yields, and counterparties—would reveal the EPF's investment strategies and bidding patterns. This falls under the Section 5(1)(d) exemption of the RTI Act for commercially sensitive information. • Market Impact & Context: The EPF manages assets exceeding Rs. 3 Trillion and serves ~2.8 million active members. It is a massive institutional investor, accounting for roughly 50% of the Treasury Bond market. The CA accepted that exposing bidding behaviors could allow other market participants to outbid the Fund, adversely affecting financial returns for its millions of members. • Alternative Transparency: The Court noted that the EPF Act already ensures transparency via annual investment statements, alongside oversight by the Auditor General and Parliament.
📈 IRCSL Hosts Landmark OECD-ADBI Roundtable to Boost Insurance Sector
The Insurance Regulatory Commission of Sri Lanka (IRCSL) successfully hosted the OECD-ADBI Roundtable on Insurance and Retirement Savings in Asia on June 2–3, 2026, in Colombo, coinciding with the Commission's Silver Jubilee. • Global Participation: The event attracted ~75 international delegates from 26 countries, including regional policymakers, insurance and pension regulators, and industry leaders. • Key National Targets: IRCSL highlighted its strategic vision to increase insurance penetration in Sri Lanka to 3% of GDP by 2035 through targeted regulatory reforms, innovation, and enhanced public trust. • Sector Breakdown & Key Discussions: • Climate & Catastrophic Risks: Addressed innovative approaches to manage escalating weather-related hazards (e.g., cyclones, floods) and leveraging capital markets via insurance-linked securities (catastrophe bonds) to expand risk-bearing capacity. • Pensions & Longevity: Discussed expanding asset-backed pension systems to combat Asia's rapidly ageing demographics and the need for reliable lifetime income products. • Digitalization & Trust: Explored balancing data-driven product personalization with consumer data privacy, while strengthening financial consumer protection frameworks to build public confidence. • Capital Markets: Examined the regulatory balance between local and foreign investments by pension funds to support domestic capital market development without breaching fiduciary duties. The successful event positions Sri Lanka as a growing regional hub for policy dialogue and underscores its commitment to long-term financial resilience and structural economic stability. _(Based on provisional event data)_