The economic and commercial office of the Chinese Embassy in Sri Lanka has blacklisted People's Bank of Sri Lanka (PBSL) over its failure to make a US$4.9 million payment under a letter of credit (L/C) to Qingdao Seawin Biotech (QSB).

But local bankers are unsure whether PBSL can be blacklisted by the economic and commercial office.

Dispute background

These are the latest developments in the dispute triggered when state-owned Ceylon Fertiliser Company (CFC) obtained a court order blocking the L/C from PBSL or any other payment to QSB for a cargo of fertiliser the Sri Lankan authorities believed to be contaminated by harmful bacteria.

The court order was obtained to prevent the cargo being unloaded (DC World News, 27 October 2021).

Claim and counterclaim

The economic and commercial office argues the cargo is in order and posted on Twitter that QSB won an open bid and signed contracts with CFC and, critically, that the cargo passed tests in China and by an unnamed international agency designated by CFC.

But the Sri Lankan president's office said earlier that the cargo's shipping documents did not conform to the tender specifications while Sri Lanka's National Plant Quarantine Services tested a sample of the fertiliser sent to them and confirmed the presence of organisms, including certain types of harmful bacteria.

Third part test refused

The economic and commercial office says the Sri Lankan side refused a third party test and therefore PBSL should be blacklisted.

Local bankers question whether this is a valid move because in their understanding the authority to blacklist banks is reserved for China's central bank.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.