In a statement published on his website on Wednesday, Shuttleworth announced the legal victory and said the returned funds would be placed into a trust to help fund litigation at a constitutional level.
“I will commit the funds returned to me today by the SCA [Supreme Court of Appeal] to a trust run by veteran and retired constitutional scholars, judges and lawyers, that will selectively fund cases on behalf of those unable to do so themselves, where the counterparty is the state,” Shuttleworth said.
R250-million is what Mark Shuttleworth was forced to pay the South African Reserve Bank as a 10% “exit levy” when he tried to move his money out of the country.
Following a judgement handed down by the Pretoria high court, which refused to order the Reserve Bank to repay Shuttleworth, he took the case to the Supreme Court of Appeal. This court on Wednesday upheld his appeal and set aside the order of the high court, and ordered the Reserve Bank to pay the damages with interest.
Shuttleworth, a South-African born entrepreneur and IT billionaire who is well-known for travelling into space as a tourist, made his fortune through Thawte Consulting, a general internet consultancy that shot to international prominence by assisting businesses throughout the world to engage in secure transactions over the web.
According to a judgment summary released by the supreme court, Shuttleworth sold the company for $575-million in 1999 and in 2001 emigrated to the Isle of Man, a British Crown dependency and a tax-efficient jurisdiction. On his emigration, South Africa’s Exchange Control Regulations (promulgated in terms of the Currency and Exchanges Act 9 of 1933) had the effect of blocking the expatriation of his assets from South Africa. The value of the blocked loan accounts was R4.2-billion.
To move his money, Shuttleworth was forced to pay more than R250-million in levies. He did so under protest to release the blocked assets, but contended that many facets of the current exchange regime were unconstitutional. Shuttleworth subsequently launched an application in the Pretoria high court seeking repayment of that sum as well as “fairly wide-ranging orders” to the effect that various provisions of South Africa’s exchange control regime were unconstitutional and invalid.
Levy ‘inconsistent’ with Constitution
“The high court refused to order the repayment sought but did strike down certain provisions of the Currency and Exchanges Act and the Exchange Control Regulations,” the judgment summary said. “Shuttleworth appeals against the refusal by the high court to order repayment and the Reserve Bank, the minister and the president cross appeal against the various orders of invalidity.”
The supreme court found that the imposition of the 10% levy was inconsistent with sections 75 and 77 of the Constitution and invalid, and it was ultra vires in that it was beyond the legal power of the treasury to impose such conditions on the export of capital from South Africa. It therefore set aside the decision of the Reserve Bank to impose the 10% levy.
But the Reserve Bank, finance minister and president won in a cross appeal as the supreme court held that there was no basis for the various declarations of invalidity by the high court.
Case could continue
Although grateful for the ruling, Shuttleworth said the legal challenge may continue: “We are now considering the continuation of the case in the Constitutional Court, to challenge exchange control on constitutional grounds and ensure that the benefits of today’s ruling accrue to all South Africans.”
Shuttleworth said exchange controls benefit banks, but stifle the economy making products more expensive and causing the most vulnerable to suffer. “It is more expensive to work across South African borders than almost anywhere else on Earth, purely because the framework of exchange controls creates a cartel of banks authorized to act as the agents of the Reserve Bank in currency matters,” he said. “We all pay a very high price for that cartel, and derive no real benefit in currency stability or security for that cost.”
The entrepreneur said the case has a strong personal element for him, because it is exchange controls that make it impossible for him to pursue the work he is most interested in from within South Africa and that forced him to emigrate years ago.
“I pursue this case in the hope that the next generation of South Africans who want to build small but global operations will be able to do so without leaving the country. In our modern, connected world, and our modern connected country, that is the right outcome for all South Africans.”
“The mandate of this trust will extend beyond South African borders, to address constitutional rights for African citizens at large, on the grounds that our future in South Africa is in every way part of that great continent.”