Govt. decides to redraft MoU

By Frederica Jansz

The government is now looking at redrafting and renegotiating the terms and conditions of the new Memorandum of Understanding (MoU) signed with Emirates Airlines on June 2 this year, following concerns by many that the new MoU is more detrimental than what was signed with Emirates in 1998. 

Following our expose last week on the MoU signed by Treasury Secretary Charitha Ratwatte on behalf of the government and Sheikh Ahmed bin Saheed Al Maktoum on behalf of Emirates Airlines, Prime Minister Ranil Wickremesinghe has decided that the MoU will have to be amended in consultation with Attorney General K. C. Kamalasabayson.

On Thursday, August 7, Aviation Minister Tilak Marapone, UNF Chairman Malik Samarawickrema and Head of Corporate Communications, SriLankan Airlines, Chandana de Silva met at the Minister's residence with other officials from the AG's Department. The purpose of the meeting was to discuss what the new draft should contain. 

Earlier, on Tuesday, August 5, the Economic Policy Committee of the cabinet met. Premier Ranil Wickremesinghe is chairman of this committee. He presided together with Aviation Minister Tilak Marapone, Finance Minister K. N. Choksy, Enterprise Development, Industrial Policy and Investment Promotion Minister Prof. G. L. Peiris, Economic

Reform, Science and Technology Minister Milinda Moragoda, Deputy Finance  Minister Bandula Gunewardena, Commerce and Consumer Affairs Minister Ravi Karunanayake, Attorney General K. C. Kamalasabayson, UNP Chairman Malik Samarawickrema, Treasury Secretary Charitha Ratwatte, Industries Ministry Secretary Ranjith Fernando, Justice Ministry Secretary Dhara Wijeytilleke, BOI Chairman Arjunna Mahendran and Advisor to the Policy Development and Implementation Minister, Jim Robertson.

Focus of discussion

The MoU with Emirates Airline's was the main focus of discussion and both Marapone and Malik Samarawickrema attempted to explain what had happened trying to justify the agreement and maintain that they had indeed secured the best possible deal for the country. Ratwatte maintained a tight lip.

Attorney General K. C. Kamalasabayson however stood firm and reiterated his position that the agreement was very bad in law. Kamalasabayson asserted that the various clauses relating to an open skies policy, ground handling, catering and indemnity clauses for the directors on the board of SriLankan Airlines were not in the best interest of the country or the aviation industry. Apart from this the AG also pointed out that the MoU had effectively taken away the powers of parliament, the judicial courts and the Commission to Investigate Allegations of Bribery and Corruption by granting indemnity to the expatriate directors on the board of SriLankan Airlines.

Marapone had responded by saying they had no other option but to decide on these terms and conditions and that they were reached after extensive discussions with Emirates. The Premier had reiterated that his government had attempted to bring in Singapore Airlines and Virgin Airlines but neither had responded with any substantive interest. Hence, he had asserted, the government was stuck with Hobson's choice and had little or no bargaining power over Emirates.

The AG however had asserted that the new MoU is not an agreement that can have any legality when certain directors on the board of SriLankan Airlines had been made unaccountable to parliament, the courts and the Bribery Commission. Marapone had continued to argue asking why the clauses in the MoU were not legally binding.

Kamalasabayson explaining said that the obligations of the investor (Emirates) and the undertakings of the Government of Sri Lanka (GOSL) were established by the various agreements entered into by the GOSL, investor and the company in March 1998. All these agreements and undertakings received the approval of the cabinet of ministers prior to execution. Accordingly, any subsequent agreements thereon should also receive the approval of the cabinet of ministers as pointed out by Chairman, SriLankan Airlines, Daya Pelpola.

The AG added that the shareholders agreement was a tripartite agreement between the company, GOSL and Emirates. The side letter of 31.03.2002 is between the company and Airport and Aviation Services Sri Lanka Ltd. (AASL). The concessions mentioned in the MoU are granted to the company. For instance, AASL had appointed the company to be the sole ground-handling agent at Bandaranaike International Airport (BIA); AASL had appointed the company to be the exclusive provider of airline catering at BIA. Therefore, the AG asserted that any decision, which affects the concessions given to the company, should be reached in an agreement to which the company is also a party.

Malik Samarawickrema had then responded saying, "we negotiated for ground-handling and catering to be released from the present monopoly enjoyed by SriLankan Airlines." Samarawickrema being no lawyer would have expected the agreements reached to have been properly legally worded having consulted the Attorney General but this, both Ratwatte and Marapone had not obviously done.

Kamalasabayson responded, "this maybe what you negotiated but in the MoU it is not what you have got. And you have not succeeded in releasing ground-handling and catering from the monopoly presently enjoyed by SriLankan Airlines and Emirates." Marapone had said, "that was certainly not our intention..." "But this is exactly what you have achieved," the AG had stated.

Amazingly, Marapone and the Premier's other four members on the negotiating team apparently had no insight into legalities evolving around previous agreements with regard to ground handling and catering, that despite the new MoU it is practically impossible to alter the UL/EK monopoly. At least, not in the manner that it has been done in the fresh MoU. More importantly, is the loss of Rs. 100 million per year, according to Chairman, AASL, Hemasiri Fernando to AASL that will result out of any decisions taken on the present MoU.

Fernando, in a letter to the Secretary, Ministry of Transport, Highways and Civil Aviation on June 9, 2003, says, the current status of the notarially executed agreement conferring airline catering franchise rights and lease of the present kitchens to SriLankan Catering (SLC)is valid up to November 30, 2010 and is in force.

Although the exclusive rights are relinquished with effect from July 31, 2003, in the new MoU, SLC Fernando asserts, will continue to enjoy such exclusivity until such time another airline caterer is introduced. Furthermore, it will take a considerable time period to establish a second airline caterer to set up a flight kitchen.

Monopolistic situation

More importantly, Fernando reiterates the fact that as a result of this clause in the MoU, SLC might now refuse to pay the franchise fee which currently is Rs. 4.3 million per month, but will still continue to enjoy the monopolistic situation until a second caterer is introduced.

It must be noted here once more that since SriLankan Airlines and Emirates represent approximately 73% of the total flight movements at BIA, the market share for a second caterer will only be for approximately 27%.

All this, Marapone  and  Ratwatte for some strange reason did not apparently take note of when finalising the MoU with Emirates Airlines.

Meanwhile, focusing on the commercial aspects of the MoU, Commerce Minister Ravi Karunanayake had said, "this MoU is far worse than the 1998 shareholders agreement. We have lost out on cargo, ramp handling, and checking." Marapone interrupted to vehemently issue a denial saying, "No, that is not the case."

Karunanayake shot back: "Fine, then you quantify the advantages of this MoU and explain the factual position to the Prime Minister. Unfortunately the team that renegotiated with Emirates did not have a single individual with airline experience on it - this is the sad outcome. What you should have looked at  is the Rs. 1 billion loss  due to the sale of SITA shares, over invoicing of computers, the terrific discrimination to local employees at SriLankan Airlines with regard to salary anomalies as against the salaries enjoyed by the expatriate staff at SriLankan, the non implementation of the Emirates Business Plan for SriLankan. These are the issues you should have sought to correct in your negotiations." Marapone merely responded saying, "that was not our mandate."

Finally the Economic Policy Committee (EPC) meeting concluded with the Premier instructing the negotiating team to meet with the AG and try and amend the MoU in a manner that would be beneficial to Sri Lanka and the country's furtherance of economic policies. The negotiating team consisted of Treasury Secretary Charitha Ratwatte, Aviation Minister Tilak Marapone, UNF Chairman Malik Samarawickrema, Chairman Civil Aviation Authority, Shibly Aziz and Advisor to the Prime Minister, R. Paskaralingam. Following our expose last Sunday, Tilak Marapone was quoted by other newspapers early in the week as having said that he as Aviation Minister takes full responsibility for the new MoU and that Treasury Secretary Charitha Ratwatte cannot be held accountable.

Facts twisted

In a letter to The Sunday Leader dated August 6, 2003, Marapone has not refuted a single position taken by this newspaper with regard to the MoU, but only states in his letter that it is incorrect to say this MoU was signed secretly or without necessary approval. He reiterates that the outcome of negotiations incorporated as an MoU were discussed and approved at the Cabinet Sub Committee on Economic Affairs prior to signature by the parties.

Marapone in his letter to The Sunday Leader appears to be under the delusion that the previous MoU was signed between the GOSL and the government of the UAE. We can only hope that Marapone is aware that Sheikh Ahmed bin Saheed Al Maktoum - both in 1998 and this year - signed these agreements only in his capacity as Chairman, Emirates Airlines. The agreements have nothing whatsoever to do with the government of the UAE. Somewhere, somehow, Marapone has got his facts in a twist. (See box for full text of letter)

Meantime, other newspaper reports quoted Marapone referring to a meeting of the EPC on May 6, 2003, where he claims the new MoU was discussed and approved. According to one set of minutes when the EPC  met on May 6, 2003, (before this MoU was signed) only two cabinet papers from the day's agenda were presented for approval and discussion to the cabinet the following day. One was a memorandum dated March 31, 2003, by the Enterprise Development, Industrial Policy and Investment Promotion Minister, Prof. G. L. Peiris on "Designer course for the apparel industry - placements for industry personnel."

The second was a cabinet paper dated March 20, 2003, by the Ports Development and Shipping Minister, Rauf Hakeem, for the supply of 6000 meal packets to the value of Rs. 180,000 for two days to the Colombo Nawam Perahera held on February 15 and 16, 2003. However, a second set of minutes for the same meeting on May 6, does maintain that the Highways, Transport, Aviation and Defence Ministry has confirmed a draft MoU in addition to the original shareholders agreement of 1998 and that this should be incorporated. These were the part of minutes on issues not referred to cabinet.

Never placed before cabinet

This then is the item of reference by which Marapone is now seeking to justify that this had the approval of the EPC. Assuming that the MoU was indeed discussed at the EPC meeting of May 6, we have proof however that the matter was never placed before the cabinet of ministers.

Instead, other items on the agenda of the EPC that day like for example the privatisation of the cluster bus companies and the Katunayake expressway project were subsequently placed before the cabinet but not the MoU between the government and Emirates Airlines. What is absolutely ludicrous is that a matter of supplying 6000 meal packets to the Nawam Perahera was an issue for discussion and approved by the EPC and referred to cabinet on May  6 but not the already drafted MoU between the Sri Lankan government and Emirates which was in effect amending a previous cabinet decision.

Even when the cabinet of ministers met on Wednesday, May 7 - a day after the meeting of the EPC  - the new MoU was not taken up for discussion. A copy of the minutes of the cabinet meeting of May 7 in the possession of The Sunday Leader bears testimony to this fact. At best, Charitha Ratwatte and Tilak Marapone should be held responsible for  negligence for having put pen to paper and sealed this MoU without cabinet approval or consulting with the Attorney General of this country.

Soon after this storm broke last week, Ratwatte had confided to associates when asked why he signed the document without having first sought approval from the AG, saying,  "I thought the Aviation Ministry had already got the AG's sanction." Interestingly Ministers Choksy, Moragoda and Peiris who were reportedly present on May 6 at the EPC had also told colleagues they cannot remember the MoU being discussed. At best then, it was not given the due consideration it required given the seriousness of the issue. After all, it could not have  otherwise  escaped the attention of all these ministers.

That Ratwatte was irresponsible to the point of not having checked if indeed this was so before attesting his signature to the MoU on behalf of the government, only proves what shoddy work he is indeed capable of. Tilak Marapone also cannot be let off the hook. Marapone in his capacity as Aviation Minister - nearly two years into office - is yet to prove his mettle in this department and so far has only confirmed to this nation his terrific incompetence in manning a portfolio that is crucial to the economic development of this country.

Secret deal

The Sunday Leader last week referred to the new MoU as being a secret deal because we have indisputable proof that neither Tilak Marapone nor Charitha Ratwatte made any attempt to ensure that the cabinet of ministers saw this MoU before it was signed.

Apart from all this of course is the fact that not even the Attorney General was consulted, nor was the Finance Minister of this country, K. N. Choksy! If that is not a secret deal we would like to ask Marapone to clarify to this newspaper once more what in his estimation he considers to be secret. Surely, a few chosen individuals in government seeing a draft of this MoU before it was signed, in no way makes it transparent? Especially given the din the UNP created when the previous regime entered into this agreement.

At least President Chandrika Kumaratunga placed the 1998 shareholders agreement before her cabinet of ministers before it was signed with Emirates. On the other hand, it is to Premier Wickrem- esinghe's credit that even at this late hour he has the courage to admit that indeed a mistake with very serious repercussions has been committed and that damage control is vital.

Kumaratunga in contrast threw caution to the winds, and bullied her ministers into submission and accepting the agreement she negotiated with Sheikh Ahmed bin Saheed Al Maktoum.

Meanwhile, The Sunday Leader reliably learns that one member of the Premier's handpicked team to renegotiate the 1998 agreement with Emirates, former attorney general Shibly Aziz has told friends and colleagues in Hulftsdorp that he had only been a part of the government negotiating team in June and July, 2002. Thereafter, he says he opted out of the negotiations on the basis that as Chairman, Civil Aviation there would be a conflict of interest if he continued to participate.

Aziz was making his explanations following incredulity expressed by senior colleagues of the judiciary that as a former attorney general he was unable to prevent the signing of a document that is essentially bad in law.

Aziz maintains he was never shown even a draft of the MoU before it was signed, but saw the document only two weeks ago, when the Aviation Ministry had sent him a copy of the final document - more than a month after it had been signed by Ratwatte and the Sheikh on June 2. Aziz has confided to associates that he was surprised that at no stage was any individual with airline experience included on the government team of negotiators as this was a vital component to secure the best possible deal for the country.

Meanwhile, last Monday, August 4, the UNP's Working Committee met. The topic of discussion was the expose in The Sunday Leader the previous day on the new MoU between the government and Emirates. The first to bring up the issue was former MP for Kegalle, Mano Wijeyratne. Referring to The Sunday Leader article he had said this was a matter of grave concern. He reiterated that since the renegotiations with Emirates had been conducted on behalf of the government by two former attorneys general - one of whom is today a minister, one former chairman of the UNP namely, Charitha Ratwatte and the party's present Chairman Malik Samarawickrema, "some sort of explanation is called for."

Bad case made worse

Parliamentary Affairs Minister, A. H. M. Azwer spoke next. He said, "I was one of the first to say that the 1998 shareholders agreement with Emirates was a sell-out for this country. What has happened now is that a bad case has been made worse. We have to explain and say this is the problem that we inherited. A binding agreement that was almost totally dependent on Dubai. Even ticketing has been taken there - why cannot it be done here? We must get to the bottom of this."

Commerce Minister, Ravi Karunanayake then said: "If Azwer was the first, then I was the second to oppose the 1998 agreement with Emirates Airlines saying that it was the biggest stink effected by the previous government. I do not want to discuss details at this forum. But if what the newspaper has said is correct, then it is very clear that we have given out more and got nothing in return. The Prime Minister must get all the files and look into this. Otherwise we will be subjected to unwanted attacks."

Prime Minister Ranil Wickremesinghe had responded saying, "I wish to clarify that it was not a secret deal. Yes, it is true that when the UNP was in the opposition we made a big issue out of this. We have managed to amend the original 1998 agreement but practical realities prevented us from achieving better results. I appointed a team to go into this to see how it could be sorted out. This, Tilak will explain."

Tilak Marapone then said, "The Prime Minister wanted the 1998 shareholders agreement between the government and Emirates renegotiated. It is not Charitha Ratwatte's fault. I take full responsibility. After a lot of negotiations, we arrived at this agreement. The agreement was coming to an end. They wanted to know how to go forward. We met on several occasions, at one meeting they asked us to take it back for one dollar. We were speechless. We discussed it among ourselves, went back and decided it should be re-negotiated in the best interests of Sri Lanka."

Marapone then went onto explain some of the clauses in the MoU with regard to the open skies policy, catering and ground handling.

Labour Minister Mahinda Samarasinghe then stood up and asked, "Why did you not get the AG's opinion before signing this document?" Marapone responded, "We did not ask for it. Some bureaucrat in the Ministry did so."

Wickremesinghe meanwhile had then tried to explain that present Chairman, SriLankan Airlines, Daya Pelpola together with Director, Chanaka de Silva had come to him and said they preferred to take over the entire management of SriLankan Airlines and run it themselves. Wickremesinghe told the Working Committee, "I didn't think they had the capacity to do it." Foreign Minister, Tyronne Fernando had then asked, "why was Choksy not kept informed of this document?" The Premier had then asked Minister Choksy, "Is it that you were misquoted by the newspaper?" Choksy, a man of integrity, had refrained from replying. Daya Pelpola had then said that both Emirates and SriLankan Airlines "are getting hammered" as a result of the new MoU.

Rohitha Bogollagama had finally chipped in saying, "in view of all that has happened, it must be explained to the people." The coup de grace to the government's bungling of this issue of course is if Sheikh Ahmed bin Saheed Al Maktoum will now agree to signing an MoU that will differ from that which he signed on June 2, 2003. After all, the Sheikh did secure the best deal possible both for Emirates and SriLankan on this occasion. It is not he who messed up - big time - Minister Marapone and Charitha Ratwatte, both men of legal learning who missed the wood from the trees.

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