Rand-fixing case tests global reach of SA laws

IN AN increasingly globalised world, the actions of companies operating thousands of kilometres away can have an unlimited impact on South Africa’s economy, a reality now being tested in the Constitutional Court. 

This was the sentiment of senior lecturer in the Department of Mercantile and Labour Law at the University of the Western Cape (UWC) Tinashe Kondo, as the Concourt considers whether the Competition Act can be applied to foreign banks accused of manipulating the rand-dollar exchange rate.

The case concerning 28 banks accused of colluding to manipulate the rand-dollar exchange rate has been ongoing for several years. 

The Competition Commission approached the Constitutional Court for leave to appeal a January 2024 ruling by the Competition Appeal Court (CAC), which upheld the appeal of most of the respondent banks implicated in the case.

The apex court last week reserved judgment in the matter. 

The case, according to some legal experts, presents a critical opportunity for South Africa’s apex court to clarify the global reach of the Competition Act, a provision with far-reaching implications in an increasingly interconnected world.

“In a globalised world, the potential for the conduct of businesses halfway across the world to affect our economy is unlimited. The drafters of the Competition Act had the foresight to include such a provision. However, the extra-territorial application of the Competition Act has significant consequences and poses huge challenges in its implementation. As such, in my view, this is a great opportunity for the apex court to pronounce on the matter. Furthermore, the conduct alleged in the case had the capacity to cause significant harm to the economy, affecting not only businesses but the general public as well. 

“In my view, one of the main issues in this case is whether it raises constitutional issues or matters of general public importance so as to invoke the jurisdiction of the Constitutional Court through sections 62(4) and 63 of the Competition Act. There has been wide debate on whether the Constitutional Court can hear matters that are not of public importance or do not raise a constitutional issue. To this end, I take the view that while no constitutional issue is raised, this is a matter of great public importance. The Competition Act is one of the few pieces of legislation empowered to tackle economic power, and accordingly, the interpretation of its scope and application is a matter of great public importance,” said Kondo. 

Stellenbosch University Professor of Mercantile Law, Philip Sutherland, said there was roughly a 50/50 chance that the Constitutional Court could overturn parts of the CAC’s decision. 

“The manipulation was not necessarily done to weaken the rand, it could go both ways. The rand could also at times have been artificially strong. The foreign banks with no connection to SA cannot be fined even if the Constitutional Court finds that there is personal jurisdiction over them because they do not generate turnover in SA and fines cannot be higher than 10% of SA turnover of a firm. If a finding of contravention is made against firms, parties who suffered harm may be able to claim damages if they suffered loss, but I doubt whether such claims will arise. 

“It is probably important for the Commission to also have some SA banks as further respondents because it will be possible to fine them. The appeal in this context could make sense but the case of the Commission is particularly weak in these circumstances. The Competition Commission, for the most part, is an effective institution. This is a very difficult case,” Sutherland said.

Cape Times

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