The legal giants for both players 23 banks on one side and the commission on the other are due to argue about rand-rigging. But they havent got out of the starting blocks yet. (Delwyn Verasamy/M&G)
NEWS ANALYSIS
In a stuffy beige courtroom in Pretoria this week, some of the country’s top legal minds faced off in the battle between the Competition Commission and the 23 banks it has accused of rigging the rand.
The line-up of advocates was staggering and no doubt pricey. Wim Trengove, Frank Snyckers, Rafik Bhana, Arnold Subel, Kate Hofmeyr and Alfred Cockrell, were just a few big hitters who represented the banks, and the commission had the likes of Adila Hassim, Tembeka Ngcukaitobi and Dali Mpofu in its corner.
Phalanxes of attorneys accompanied them, jostling for space with the towers of legal files, officials and occasional members of the press. And yet the actual question of whether these banks and their employees are guilty of manipulating the rand was not dealt with.
The country’s litigation superstars were gathered instead to argue the many exception applications — or the preliminary objections the banks have raised — against the commission’s referral of the case to the Competition Tribunal. To put it another way, this is the skirmish to decide the terrain on which the war will be fought. If the tribunal agrees with the banks, this could scupper the commission’s case.
There is a lot at stake. Worldwide, major banks, including some of the ones cited in this case, have collectively been fined billions of dollars for similar cases of rigging foreign exchange and benchmark interest rates. Typically they have settled rather than face open court.
In South Africa, the preliminary leg of this case is being played out in an economy reeling from corporate corruption scandals, which have included major state-owned enterprises and private sector firms. It makes sense that some of the biggest local banks, such as Investec and Standard Bank, will dig in their heels to avoid being lumped, in the public’s eye at least, with the likes of Steinhoff and Eskom.
The banks put forward a number of often overlapping arguments about why the tribunal should dismiss the matter. These include that the commission’s case is so vague that they do not know how to plead, and that, in the case of the foreign banks, the tribunal has no jurisdiction over them. Related to the question of jurisdiction is the question of whether the banks’ actions had an effect in South Africa and affected the economic wellbeing of its people.
Some of the foreign banks, such JP Morgan, are also fighting “bilateral skirmishes”, as Mpofu put it. It is arguing that references to proceedings in the United States, where JP Morgan Chase & Co signed plea agreements with the authorities and admitted guilt in a similar foreign exchange-rigging plot, be struck out of the commission’s referral.
Although the investigation into the banks began in 2015 and the case was referred to the tribunal in February last year, the process has been dogged by delays. The banks blame the commission and the commission has had to supplement its referral documents three times along the way. Investec has gone so far as to ask the tribunal to issue a declaratory order, stating that the commission’s prosecution of the matter has been “vexatious and unreasonable”.
But the commission’s divisional manager of the cartels division, Makgale Mohlala, told the Mail & Guardian that “these exceptions are really a way of blocking the case being heard on merits”.
In a further supplementary affidavit, made in December, the commission details specific trades that it argues are a manifestation of the “overarching agreement … and/or a collusive practice” between the banks.
Trengove, acting for Investec, said, however, that the commission had not given enough “particularity” to show that there was an overarching agreement between the banks, or evidence of a concerted practice by the banks, a position many of the banks echoed.
But Mpofu scoffed that this amounted to “faking ignorance”.
Ngcukaitobi said the commission had clearly outlined how the banks’ traders, by establishing and joining electronic chat rooms on certain trading platforms, immediately had knowledge of competing traders’ positions and past and future trades, as well as access to sensitive information about other traders’ customers. This included who they were and what positions they might hold in the market.
“There is … no sensible objection to the lack of specificity in relation to how this agreement came into being,” Ngcukaitobi said.
Foreign banks also argued that the tribunal had no jurisdiction over them because several of them had no branches or representative offices in South Africa.
They also questioned whether it could be proved that their traders’ actions affected the rand.
John Campbell, acting for BNP Paribas, argued that the rand was heavily traded globally, and was used as a surrogate for trade in resources in the same way that the Canadian or Australian dollars were.
“It seems … by no means obvious that could have any economic effect within South Africa,” he said.
But Hassim argued that the extra-territorial power of the tribunal and its right to hold international banks to account was unambiguous. The tribunal was required
to give full effect to the purpose of the Competition Act, she said, especially in a matter involving “allegations of international collusive conduct and conspiracy taking place over online communications platforms”.
Whether the banks’ actions had an effect on South Africans that could be considered “direct, substantive and foreseeable” — which is a test that is applied in international competition law — was not required by the Act, she argued.
And this question of the interpretation of the law could not be decided when considering exception applications, she said. Instead the appropriate place to decide this is when the merits of the case are heard.
With this much legal muscle fighting for each side, and the complexity of the case, the tribunal has an enormous task ahead of it. It is not clear who will win but what is clear is that there is a long, expensive battle ahead and many more days in airless courtrooms before South Africans have an answer.