The Competition Commission referred a complaint to the Tribunal on 15 February 2017 against 28 local and international banks alleging price fixing and market division contravening section 4(1)b(i) and (ii) of the Competition Act. The basis of the complaint, resulting in 8 years of litigation, was the allegation that the banks colluded and conspired with each other to manipulate the foreign exchange rate in respect of the United States Dollar and the Rand to their own benefit, through among other things, extensive communication between traders on their bids and offers.

Following appeals by several of the banks and a cross appeal by the Commission, a decision was taken by the Competition Appeal Court (“CAC”) on 28 February 2020, the effect of which was to give the Commission a ‘final opportunity’ to file a new affidavit to substitute and replace the affidavit before the Tribunal in 2017.

A major issue which confronted the various courts and Tribunal was jurisdiction to hear the complaint in that a number of the respondent banks alleged that they were peregrini; that is firms that were neither domiciled nor carried on business in South Africa. The distinction was then made, between “pure” peregrini; that is those respondent banks which were neither domiciled nor carried on business in the Republic and “local” peregrini being banks with some presence in South Africa by way of a local branch or a representative office in South Africa. In addition, there were arguments with regard to subject matter jurisdiction. The Commission was asked to provide evidence as to how the conduct of any of the traders employed by the respondent banks were linked to an effect within the Republic sufficient to justify subject matter jurisdiction under section 3(1) of the Act.

It was also required that the Commission had to link the banks to a single overall conspiracy which it would show that all of the named banks were participants. The CAC developed the concept of personal jurisdiction beyond the strictures of the existing common law position; that is beyond the requirements of a local presence in South Africa, or a party prepared to consent to jurisdiction. It found that, in an appropriate case, personal jurisdiction could be extended if there was a case in which peregrini were part of a conspiracy in which they participated with South African banks directly such that peregrini banks could be considered to be participants in the cartel.

The Commission attempted to do this in the current matter. It argued:

• “The general and consistent terms of the conspiracy were: the respondents’ traders would participate, actively and passively, in frequent and regular communication and contact with one or more traders employed by or representing competing banks when engaging in trading the USD/ZAR currency pair”, including participating on certain bank chat rooms.
• “The conspiracy had a direct or immediate and substantial effect in the Republic and it was foreseeable that the impugned conduct would or had the potential to have such an effect. The common manner in which the effects of the impugned conduct are felt is buyers of ZAR pay artificially inflated prices for buying the currency and sell at artificially reduced prices when selling the currency.”

The CAC held, after much consideration of the evidence, in the case of the “pure peregrini’, both personal jurisdiction and subject matter jurisdiction requirements had to be established in order for the referral to meet the requisite legal standards. It held that this was an onerous requirement and the references to occasional participation in a chatroom without any additional evidence and where there was no link to any South African bank was inadequate to meet these requirements. Therefore, according to the CAC there was not enough evidence provided by the Commission to show the requisite personal jurisdiction in the case of ANZL, Nomura, Commerz Bank , MaQuarie, HSBC Bank US.

A few other banks named as parties to the matter were holding companies of the relevant banks. These holding companies were not registered as a bank, and not authorized to trade in foreign currency. Accordingly, Nedbank Group, FirstRand Limited, and Credit Suisse Group were incorrectly joined in the affidavit.

In the case of the incolae and local peregrini, only subject matter jurisdiction was required. In the case of JP Morgan Chase, NA, which established a branch in South Africa, the background was that an employee of the US group, JP Morgan Chase and Co, was convicted in the US District Court of New York for conspiring to fix prices and rig business in Central and Eastern European, Middle Eastern and African currencies. These employees did not, however, work for the SA branch and the court held the Commission had failed to prove jurisdiction. However, it held the US based JP Morgan Chase and Co has a case to answer.

The CAC therefore dismissed the inclusion of 23 of the 28 commercial banks implicated in the Commission’s case. Only five commercial banks will now proceed – JPMorgan Chase and Co, HSBC, BNP Paribas, and Credit Suisse. Investec did not appeal the current matter so it will be the sole South African bank to defend against the Commission’s case. Other local banks (and holding companies) have in the preceding cases, or the current matter, had their cases dismissed due to lack of evidence or have applied for leniency.

Tel: +27 31 507 5371  email: rishal.bipraj@gb.co.za