Compensation regulation comes into effect; month to file claims
The total amount sought for compensation also has to be based on calculations that are acceptable to the state.
By
Mohamed Muzayyin Nazim
The President's Office has formulated and published a new set of regulations for resolving disputes arising out of agreements between the government and the private parties. As per the policy published on Monday, a month has been given to file compensation claims.
The government formed a settlement committee to negotiate out of court settlements with private parties whose agreements had been terminated by previous governments, and compensation was given to various companies in huge amounts:
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Criticism grew and the settlement committee was later dissolved
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The Anti-Corruption Commission (ACC) prepared a paper alleging that such compensations were made without ethical and effective rules
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After examining the paper, the Parliament's Public Accounts Committee constituted a report and suggested to the government to make special rules for compensation.
The President's Office issued a gazette notification on Monday publishing the new regulations and cited that the parliament had recommended such a regulation. The purpose of the policy is:
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Compensation for business opportunities that have been lost due to the government's illegal and unauthorised act of targeting particular people
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In the event of financial loss, such loss should be dealt with fairly and openly and the estimated financial burden that the state will have to bear when the matter goes to court should be reduced and a set of rules should be put in place for out-of-court settlement.
Under the policy, issues arising out of the government's handling of agreements between 7 August 2008 and 28 November 2022, will be looked into. This rule applies to:
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Contract termination
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Non-compliance
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Breach of contract
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Non-issuance of official permission or cancellation of permission
Among reported cases, the policy says that cases that have not been resolved for 3 years by filing before a court or a state agency during the given period (7 August 2008 and 28 November 2022) will be accepted. Those who have not filed the complaint anywhere in any manner shall file a new complaint as per the regulations within the next 30 days, the announcement said.
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A proposal to resolve such issues should be submitted to the ministry or agency that prepared the original agreement
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The issue of business permits has to be referred to the economic ministry
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A complaint after the expiry of the deadline for filing a complaint can be accepted only if the ministry or agency believes that the reason for late filing is beyond the control of the petitioner.
Committee to advise on compensation claims
According to the policy, a special committee should be set up by the President's Office to advise the corresponding ministry or agency to resolve the issue. The seven-member committee will consist of a person appointed by the President's Office and six persons from six ministries:
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Finance ministry
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Planning ministry
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Economic ministry
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Tourism ministry
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Fisheries ministry
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Environment ministry
Involving technical advice from experts to assist in the committee's work and for further study of the problem is at the committee’s liberty.
A filed case will first be studied by the ministry or agency that receives the complaint. After that, details and documents of the case, including the timeline of the case, have to be sent to the advisory committee. The committee will recommend if an out-of-court settlement could be made. The committee also has the right to study the case further, obtain the necessary information and communicate with the complainant.
The policy further states:
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All complaints to a ministry or agency should be examined and sent to the committee within 90 days from the date of implementation of the policy
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After implementation of the policy, 60 days are allowed to study the cases filed
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The Advisory Committee should refer each issue to the Economic Council of the Cabinet; it has the power to direct it not to accept or reconsider the decision.
Out-of-court settlement
There are five instances where the committee can decide that the issue could be resolved out of court:
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Non-refutable disclosure that the agreement had been terminated in contravention of the procedures laid down
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The committee concludes after examination of the matter that the agreement was unfairly terminated and targeted at a particular group of people
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If there is a case of non-issuance of permission issued by the government to achieve the objective of the agreement or cancellation of an already issued permission, it may be noted that the concerned ministry or agency acted in violation of the relevant laws, regulations, policies, procedures or general practice in such cases.
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In an instance where the amount of compensation that is decided in a court verdict could exceed the changes agreed upon by both parties in resolving the dispute under the policy
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If the agency involved in the case or the ministry where the case was filed decides that the state would most benefit in resolving the case out of courts
There are three ways to solve the problem in the policy:
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Deciding to renew the agreement
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Issuing an official permit or renewing a permission
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Compensation
According to the policy, the government should give priority to deciding on the case by allowing other possible concessions and incentives to the extent permitted by law while awarding compensation. The total amount sought for compensation also has to be based on calculations that are acceptable to the state.
In addition:
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The amount to be paid as compensation can be released only after the plaintiff has paid all amounts due to the state or if there is an agreement on how to repay a loan, after clearing accruing amounts on the basis of that agreement.
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In the cases investigated under this policy, the committee should look into the complaints about government employees who have been found to have acted on their own or neglected the state guidelines and recommend appropriate legal action against such persons.
Accounting for losses; State to take on debt burden
Based on the provisions in the policy, the compensation has to be calculated by a person licensed by the Institute of Chartered Accountants.
Some key points to refer to when calculating losses:
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If an advance amount (including advance payment, lease acquisition cost and advance rent) is involved, then the "cost of financing" of that amount must be calculated by the interest rates at the time of the incident in the country's banks; the highest interest rate is 11% per annum.
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The investment made to achieve the objective of the agreement may be included as compensation in cases where efforts are made to restore the situation at the time of cancellation of the agreement, to bring back to that level, or to restore a stalled business to the position at the time of the agreement’s closure.
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If a business has been stopped by a government action, the loans taken by financial institutions to run or develop the business at the time of its closure may also include interest for the period from the date of stopping of the business to the date of signing of the settlement agreement, and if there is a penalty imposed during that period.
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If a loan has been taken by a financial institution to achieve the objective of the agreement at the time of cancellation of the agreement, the amount of interest and penalty shall be included during the period from the date of cancellation of the agreement to the renewal of the agreement.
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In the event of cancellation of an agreement awarded to a state-funded project, the cost incurred by the state for the project may be included as compensation.
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When compensation is released in cases where the state-funded contract for a project cannot be restored, the maximum amount can be released to the applicant up to the total amount or contract value of the project.
The date of implementation of the new policy is from the date it is gazetted.
