Insights

The framework introduces three tiers of disclosure obligation, phased across a 24-month implementation window. Tier One — applicable immediately to entities with a market capitalisation above LKR 10 billion — requires narrative disclosure of material climate-related risks and opportunities within the annual report. Tier Two, effective from Q3 2026, introduces quantitative emissions reporting. Tier Three, applicable from early 2027, mandates third-party assurance of key ESG metrics.

Critically, the framework does not define 'material' in a manner consistent with existing securities law materiality standards. Boards and their advisors must therefore develop an independent assessment framework for determining which ESG matters rise to the threshold of disclosure — and document that assessment process rigorously.

The penalties for non-disclosure or materially misleading ESG statements sit within the Securities & Exchange Commission Act's general misrepresentation provisions, meaning that directors face personal exposure as well as civil liability for the entity. This is a significant elevation of individual risk compared to prior voluntary reporting regimes.

Our recommendation is that listed entities begin with a gap analysis of current reporting against the Tier One requirements, commission a board-level ESG materiality assessment, and appoint a senior ESG reporting officer with direct access to the audit committee. The documentation trail from this process will be critical if the Commission commences an inquiry.

For deal teams, the implications are both strategic and practical. At the strategic level, regulatory risk must be assessed at the earliest stage of deal structuring — not as an afterthought once commercial terms have been agreed. Transactions that would have cleared review three years ago are now being subjected to extended Phase 2 reviews or, in a small number of sectors, blocked entirely.

The sequencing of regulatory filings across multiple jurisdictions has emerged as one of the most technically demanding aspects of cross-border deal execution. In some instances, filing in a less interventionist jurisdiction first can create useful precedent for subsequent filings. In others, a premature filing can trigger a review that derails parallel negotiations. Each transaction requires an individual assessment.

Sector-specific considerations add further complexity. Transactions involving telecommunications, financial services, critical infrastructure, and data-intensive businesses now face layered review — competition, foreign investment, and sector regulatory approvals must each be obtained, and the timelines for each are rarely aligned.

Our practical recommendation for deal teams is to commission a regulatory timeline analysis as part of the initial deal assessment — not during due diligence. Understanding the critical path through regulatory approvals should inform both the longstop date in the transaction documents and the pre-signing engagement strategy with regulators.

In the domain of copyright, the core question is stark: can a work generated autonomously by an AI system attract copyright protection, and if so, who owns it? The established position in most common law jurisdictions — that copyright requires human authorship — means that AI-generated works may fall into the public domain at the moment of their creation. For companies that have made significant investments in AI-generated content libraries, this is a material commercial risk.

Patent law presents a related but distinct challenge. The Court of Appeal in England has confirmed that an AI system cannot be named as an inventor on a patent application. The practical consequence is that innovations generated through AI-assisted processes must demonstrate a legally sufficient level of human inventive contribution to attract patent protection. Documenting that contribution — and structuring AI-assisted R&D processes to maximise it — is now an essential part of IP strategy for technology-intensive businesses.

The Sri Lankan position remains largely unsettled. The Intellectual Property Act does not contemplate AI-generated works, and there is no binding judicial guidance on the question. Businesses operating in IP-intensive sectors should not assume that domestic law will follow international trends — and should structure their IP ownership arrangements on the most conservative available basis.

Our advice to technology companies, creative agencies, and AI developers is to audit current contractual arrangements governing AI output ownership, implement clear documentation protocols for AI-assisted creative and inventive processes, and engage with IP strategy counsel before committing to commercialisation structures that depend on IP protection for AI-generated assets.

The core issue is jurisdictional and evidential. An employer's duty of care under Sri Lankan employment law extends to the safety of the working environment. For office-based work, this duty is relatively well-defined and its requirements — risk assessments, ergonomic standards, emergency procedures — are established. For remote work, the employer cannot conduct the same quality of assessment, and the employee's home environment may present risks entirely outside the employer's knowledge or control.

A related concern is the boundary between working time and personal time for remote workers. Where an employee is injured during a period that is ambiguous — was it a working hour or a break? — the employer's liability exposure depends on how clearly the employment contract and working time policy define the parameters of the working day.

Employers should, as a minimum, issue a remote work policy that defines approved working locations, establishes a self-assessment process for home workstation standards, sets clear working hour boundaries, and requires notification of any home circumstances that could affect workplace safety. This policy should be integrated into the employment contract rather than standing as a standalone document.

Unlike conventional asset-backed lending, renewable energy project finance relies heavily on the cashflow generated by long-term power purchase agreements (PPAs) and the regulatory licences that permit the project to operate. The security package must therefore capture these contractual and regulatory rights effectively — and the legal analysis of how to achieve this under Sri Lankan law is less developed than in more established project finance markets.

Land rights present a particular complexity. Renewable energy projects often involve leasehold or licence interests in land rather than freehold ownership, and the security value of such interests depends critically on the terms of the underlying land arrangement. Financiers should require a detailed land rights analysis as a condition of credit approval, covering not only the title position but the enforceability of the financier's security interest on default.

Regulatory licence risk — the risk that a project's operating licence could be suspended, revoked, or made subject to conditions — is a credit consideration that is sometimes underweighted in project assessments. A thorough regulatory due diligence exercise, including direct engagement with the regulatory authority on its enforcement posture, is an important component of a properly structured transaction.

The choice of arbitration seat — the legal 'home' of the arbitration — determines which national courts will supervise the proceedings, which national law will govern the procedure (to the extent not agreed by the parties), and in which jurisdiction any setting-aside application must be brought. Singapore and Hong Kong remain the preferred seats for Asia-Pacific commercial arbitrations, each offering sophisticated, arbitration-friendly judiciaries and established practitioner communities.

The choice of institutional rules — ICC, SIAC, LCIA, or others — governs the administrative process for the arbitration: how the tribunal is constituted, how preliminary applications are managed, what case management tools are available, and what the fee structure will be. SIAC has grown substantially in market share for APAC transactions over the past decade and offers a competitive combination of procedural efficiency and cost management.

For contracts with Sri Lankan counterparties or Sri Lankan law as the governing law, there are specific enforcement considerations that affect the optimal choice of seat. Awards made in a SIAC arbitration seated in Singapore are enforceable in Sri Lanka under the New York Convention. The enforceability of awards from other jurisdictions requires individual analysis.

Our recommendation is that arbitration clauses be reviewed by specialist counsel at the contract negotiation stage — not delegated to the dispute resolution team after a dispute arises. The investment of a few hours of specialist time at the outset can avoid years of jurisdictional argument in the event of a dispute.