/ 9 January 2024

Ruling leaves rand rigging case in ruins

South African Rands

The competition appeal court has found that there is not enough evidence to show that  South Africa’s biggest banks were part of an international conspiracy to manipulate the rand-dollar exchange rate.

The court’s ruling, handed down on Monday, also dismissed the Competition Commission’s case against almost all of the foreign banks attached to the watchdog’s eight-year litigation — leaving just five in its crosshairs.

The ruling leaves BNP Paribas, JP Morgan Chase, HSBC and Credit Suisse Securities, as well as Investec, open to prosecution. The latter bank opted not to participate in the appeal.

The ruling means that the cases against Standard Bank, Nedbank and FirstRand are dead in the water.

Certain other banks, including Citbank and Standard Chartered, have already agreed to settlements with the Competition Commission. 

The Standard Chartered settlement, which resulted in the UK-based bank agreeing to pay a R42.7 million fine, was announced last November and public outrage over the rand manipulation scandal, uncovered way back in 2015.

Monday’s ruling noted that the litigation relating to the case “has a long and torturous history”.

Chief among the Competition Commission’s stumbling blocks over the years has been its jurisdiction.

According to the competition appeal court, it is incumbent on the watchdog to confine its case to a single overall conspiracy in which it would show that all of the named banks were participants therein, as per a 2019 decision by the Competition Tribunal. This would allow the commision to contend that the tribunal had the necessary jurisdiction over all the banks.

The commission would also have to show that the accused foreign and local banks were participants in an overarching conspiracy designed to have a detrimental effect on the South African economy by virtue of their joint conduct.

In a 2020 affidavit to the tribunal, the commission’s conspiracy allegation relied on evidence that there was extensive communication between competing traders through chatrooms on the Bloomberg instant messaging platform. 

That year, the tribunal found that the commission set out sufficient alleged facts to make out a prima facie case for a single overall conspiracy between foreign and local banks. But, in appealing the 2020 order, the banks argued that there were insufficient facts to show this — and that certain of the respondent banks were improperly attached to the case.

The competition appeal court makes certain embarrassing findings in this regard, such as that the tribunal failed to take account the fact that a holding company and a subsidiary are distinct corporate entities. In the case of the Nedbank Group, the court notes that — as a holding company —  it was not a registered or authorised bank and did not trade in foreign currency.

The court’s ruling goes on to poke holes in the commission’s evidence of a single overall conspiracy.

In relation to FirstRand, for example, the ruling notes that the commission “accepts that it does not even know who the FirstRand Bank’s traders were and has no evidence that they had participated in any chats on the Bloomberg chatroom at all”.

On Standard Bank South Africa, the ruling points out that the commission alleges that the bank entered into the conspiracy on 1 January 2008. The court notes that this was a public holiday “but presumably on the commission’s case South African traders were still hard at work”.

Moreover: “The first evidence that the commission had of any contact between an employer of Standard Bank and a party allegedly employed by another respondent bank was more than four years later in 2012.”

The court described the allegations against Standard Bank as “skeletal” in nature, adding that the case “does not get out of the legal starting blocks”.