UPDATE 2-Sri Lankan parliament votes to impeach chief justice
* Opposition lawmakers see constitutional crisis
* Bandaranayake was country's first female chief justice
* Supreme Court ruled impeachment process not legal
By Shihar Aneez and Ranga Sirilal
COLOMBO, Jan 11 (Reuters) - Sri Lanka faced a possible constitutional crisis on Friday after its parliament voted to impeach the chief justice, disregarding rulings from the Supreme Court that the process was illegal and threatened judicial independence.
The move has caused an outcry among opposition lawmakers, religious leaders and lawyers, prompted the United States and United Nations to voice concern for the integrity of justice in the South Asian state, and may alarm foreign investors.
Dominated by a coalition headed by President Mahinda Rajapaksa's party, parliament voted to impeach Shirani Bandaranayake, Sri Lanka's first female chief justice, with 155 of the legislature's 225 members in favour.
During a two-day debate, lawmakers ignored rulings by the Supreme Court and Court of Appeal against the impeachment, after a parliamentary panel found Bandaranayake guilty of financial irregularities and failure to declare assets.
Bandaranayake will be removed from the post after Rajapaksa declares the outcome of the impeachment in the parliament, the date of which has not been announced.
Lawyers Collective, a judiciary activist group, said in a statement that the appointment of a new chief justice would be unconstitutional as Bandaranayake's removal was against the law.
"This impeachment calls into question issues about the separation of powers in Sri Lanka and the impact of its absence on democratic institutions," the U.S. Embassy said in a statement.
Sri Lanka's Supreme Court ruled that parliament lacked the legal authority to investigate accusations of misconduct against the chief justice, while the Court of Appeal nullified the parliamentary panel findings.
Lawyers across Sri Lanka boycotted courts for a second day running on Friday in protest at the vote.
A black cloth was hung at the entrance of the Supreme Court building in Colombo, and some lawyers inside covered their mouths with black cloth or wore black headbands.
"There is already a constitutional crisis," S.L. Gunasekera, a senior lawyer and former ally of Rajapaksa, told Reuters.
"The government is totally intoxicated with power," Gunasekera added. "This (move) is to make the judiciary subservient, as are the police and the public service."
The clash between the government and judiciary has underlined the power wielded by Rajapaksa and his family in the island nation, where he has been president since 2005.
Relations between Rajapaksa and Bandaranayake soured after the chief justice ruled in September that a bill submitted by the president's younger brother, Basil Rajapaksa, proposing an 80 billion rupee ($614 million) development budget, must be approved by nine provincial councils.
The ruling party filed an impeachment motion on Nov. 6 and a month later a parliamentary panel appointed by Speaker Chamal Rajapaksa, the president's elder brother, found her guilty of three out of the five charges it probed.
Six opposition members walked out of the parliament on Thursday when the speaker rejected an opposition request to postpone the debate. They did not take part in Friday's vote.
"Sri Lanka's parliament and executive have effectively decapitated the country's judiciary in pursuit of short term political gain," the International Commission of Jurists said in a statement after the vote.
Political risk consultancy Eurasia Group said in a note published on Thursday that foreign investors' concerns about the rule of law in Sri Lanka had been heightened by the row, but that the domestic political costs for Rajapaksa were minimal.