After more than a decade of legal wrangling, South Africa's biggest alleged foreign exchange manipulation case has moved a significant step closer to trial.
Image: ChatGPT
After more than a decade of legal wrangling, South Africa's biggest alleged foreign exchange manipulation case has taken a major turn — though not in the direction the Competition Commission had hoped.
The Constitutional Court handed down judgment on Tuesday in the long-running case against several global and local banks, finding against the Commission on most points while upholding its appeal in relation to only two respondents.
The judgment does not determine whether the banks manipulated the rand or contravened the Competition Act — that question now falls to the Competition Tribunal, but for a far smaller pool of banks than the Commission had hoped to take there.
As the court noted, the Commission's accusation was that the banks "colluded to manipulate the exchange rate between the United States Dollar (USD) and the South African Rand (ZAR)".
The Competition Commission alleges that traders at several South African and international banks colluded to manipulate the US dollar/rand exchange rate over a period spanning 2007 to at least September 2013.
According to the Commission, traders communicated through electronic chatrooms and other channels to coordinate trading activity, share confidential information about customer orders and planned trades, and influence the timing and pricing of foreign exchange transactions.
The alleged conduct, if proved, would amount to price fixing, market allocation and collusive trading prohibited by the Competition Act.
The banks implicated over the course of the investigation include some of the world's largest financial institutions, among them Bank of America, BNP Paribas, Citibank, Credit Suisse, HSBC, Investec, JPMorgan Chase, Standard Chartered Bank, Standard Bank and Nomura. The banks have denied wrongdoing and have challenged various aspects of the Commission's case.
The matter stems from a complaint initiated by the Competition Commission in April 2015, amended in 2016 and referred to the Competition Tribunal in February 2017.
Rather than immediately proceeding to a hearing on the allegations, the case became bogged down in years of litigation over procedural issues, including whether certain banks had been lawfully joined to the proceedings, whether the Commission needed to initiate fresh complaints before adding additional respondents and whether its referral affidavit contained sufficient detail for the banks to answer the allegations.
The dispute has already been before the Competition Tribunal twice and the Competition Appeal Court twice before reaching the Constitutional Court, which heard three related applications together.
Tuesday's judgment was largely unfavourable to the Commission. The order states that the Commission's appeal succeeded only in relation to the fourth respondent, JPMorgan Chase Bank, and the twenty-eighth respondent, Standard Americas Incorporated — overturning earlier Competition Appeal Court decisions that had favoured those two institutions. "Save as aforesaid, the Commission's appeal is dismissed," the order states.
Credit Suisse Securities (USA) LLC also succeeded in its own separate appeal, with the Constitutional Court setting aside the Tribunal's earlier decision to join it to the proceedings and replacing it with an order dismissing the Commission's application to join the bank altogether.
HSBC Bank plc's cross-appeal was dismissed, meaning that bank remains part of the proceedings.
In a third related matter, BNP Paribas had sought its own leave to appeal. The Constitutional Court refused that application with costs, including the costs of two counsel — meaning BNP Paribas also remains a respondent.
Although highly technical, Tuesday's judgment is significant because it shifts the focus of one of South Africa's biggest competition cases away from procedural disputes and closer to the substantive allegations — for whichever banks remain in the case.
In reaffirming how Competition Tribunal proceedings should be approached, the court said the tribunal "must conduct its proceedings with fairness and guard against elevating form over substance." It also reiterated that, when considering an exception, "the allegations in the impugned pleading must, moreover, be assumed to be true."
The matter now returns to the Competition Tribunal, where the substantive allegations against the remaining banks — including JPMorgan Chase Bank, Standard Americas Incorporated, HSBC Bank plc and BNP Paribas — can move closer to being tested.
The Tribunal will ultimately have to determine whether traders at those banks engaged in prohibited collusive conduct that manipulated the US dollar/rand exchange rate and, if so, whether they contravened the Competition Act. For the banks that succeeded in their appeals, including Credit Suisse, Tuesday's ruling brings an end to their part in nearly a decade of litigation.
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