Sri Lanka has decided to pay $6.7 million in compensation to the Chinese fertilizer firm after the latter initiated an arbitration proceeding against Colombo which had earlier rejected its fertilizer consignment of 20,000 metric tonnes, citing quality issues. The latest move from Colombo aims to end the controversy that spanned over a month and strained the ties between the two countries.  

In November, the Sri Lankan government rejected a consignment of organic fertilizer from the Chinese fertilizer producer Qingdao Seawin Biotech Group Co Ltd, citing quality issues—a claim the firm disputed and demanded third-party tests.

Later a court order in Sri Lanka barred the government from paying the firm, prompting the Chinese Embassy to take coercive measures. The firm also initiated arbitration proceedings. 

This week, following the advice from the Attorney General’s office, the government decided to pay $6.7 million to the Chinese firm. Agriculture Minister Mahindananda Aluthgamage said the company had been instructed to re-produce the fertilizer stock in accordance with the standards of the Sri Lanka Standards Institution, reported Colombopage. 

Earlier the stock of fertilizer was rejected after the tests confirmed that it contained hazardous bacteria on two occasions and denied entry to the ship carrying the 20,000 metric tons of rejected organic fertilizer.

The whole controversy strained ties between Beijing and Colombo, with the Chinese Embassy blacklisting a state-owned Sri Lankan bank for defaulting on payment. Chinese businesses were also instructed not to accept letters of credit issued from the bank. (SAM)