Political and economic crisis drives Sri Lanka to buy time from US court for bond lawsuit

  Clifford Chance, hired to restructure Sri Lanka’s debt, has written to a district court in New York asking for an extension of time to respond to a lawsuit by Hamilton Reserve Bank because of the country’s intensified political and economic situation. Hamilton which represents the interests of a group of bond holders is suing Sri Lanka for defaulting on the payment of maturing international sovereign bonds. The UK based law firm wrote to Judge Denise L. Cote on the 26th of July requesting a 30- day extension to reply to the complaint lodged by Hamilton and for an adjournment of the initial pretrial conference set for August 26th. In addition to citing the ongoing political and economic situation the firm also mentioned the changes at the highest level of government as reasons for the request. ‘The situation has intensified in recent weeks’, the letter said. ‘The former president resigned on or about 14 July and the new and current President Ranil Wickremesinghe was elected on July 20, 2022. Over the past week a new prime minister has been appointed and there have continued to be changes in the Cabinet’. Sri Lanka’s government has changed three times in the past three months. On 9th of May, former Prime Minister Mahinda Rajapaksa stepped down amid strong allegations that he had a hand in the violence that was unleashed on civilians on that day. It led to changes in the Cabinet of Ministers and the appointment of Ranil Wickremesinghe as prime minister. Earlier this month, Wickremesinghe was appointed acting president after former President Gotabaya Rajapaksa was ousted by protesters and fled the country. It triggered another round of resignations from the Cabinet. Last week, Wickremesinghe was elected President by parliament. He resigned from his premier post and a new prime minister was appointed with a new Cabinet. In June this year, Hamilton started litigation against Sri Lanka for the non-payment of the bonds. One of the claims is for defaulting on 238 million in principal and interest on the bonds. The bank also asked for a declaratory judgement and a pari passu injunction.