People’s Bank responds to blacklisting by Chinese Embassy

The payment for the organic fertilizer consignment shipped by Qingdao Seawin Biotech Group Co. Ltd. was halted due to an interim injunction issued by the court, the People’s Bank in Sri Lanka said today, in response to the move by the Embassy of China in Colombo to blacklist the state-owned financial institution.

Action pertaining to the payments will accordingly be taken based on the future court decisions, the People’s Bank stated further.

The response came after the People’s Bank was blacklisted by the Economic and Commercial Office of the Chinese Embassy.

The move was attributed to the failure of People’s Bank to make the payment in compliance with the Letter of Credit and the contracts.

In a statement, the Chinese Embassy stressed the People’s Bank of Sri Lanka has recently witnessed a vicious event of Letter of Credit default, causing huge losses to the Chinese enterprises in international trade with Sri Lanka.

“The Office solemnly reminds all Chinese enterprises to strengthen risk control and avoid accepting L/C issued by People’s Bank of Sri Lanka in international trade with Sri Lanka” the embassy said.

As per the terms of the contracts, the payment for the controversial organic fertilizer shipment was slated to be made through a Letter of Credit established via the People’s Bank.

However, in September, the National Plant Quarantine Service (NPQS), which tested the fertilizer samples sent by the Qingdao Seawin Biotech Group Co., Ltd., revealed the detection of the microorganism called ‘Erwinia’. Several days later, Sri Lanka decided to suspend the importation of organic fertilizer from Seawin Biotech.

Later, the Ceylon Fertilizer Company (CFC) obtained two interim orders from the Colombo Commercial High Court against the Seawin Biotech, its local agent and the state-run People’s Bank, preventing the payment to the Chinese firm on Letter of Credit.

The CFC first obtained a court order on October 26 against the Chinese firm in question, preventing the People’s Bank from making any payment under a Letter of Credit opened in favour of the Chinese company.

(Source: Ada Derana)