Banks to respond to Competition Commission's appeal in alleged rand fixing case
Advocate Tembeka Ngcukaitobi, representing the Competition Commission,asked the Constitutional Court to rule that it has jurisdiction over international banks implicated in the alleged rand fixing saga.
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Local and international banks will present their arguments in the appeal case before the Constitutional Court on Wednesday in relation to allegations that they colluded in conspiring to manipulate the rand against the US dollar.
The appeal has been brought by the Competition Commission. The commission is appealing the majority of the findings of the Competition Appeal Court (CAC), especially the fact that the CAC found that the commission did not have jurisdiction over the majority of the international banks.
On Tuesday, Advocate Tembeka Ngcukaitobi, acting on behalf of the Competition Commission, argued that there is enough evidence to establish a prima facie case that the banks were involved in the manipulation of the rand.
The commission is appealing the majority of the findings of the CAC, especially the fact that the CAC found that the commission did not have jurisdiction over the majority of the international banks.
An important issue which served before the court is the extent of the commission’s jurisdiction over the foreign banks alleged to have participated in a single overarching conspiracy (SOC).
It is alleged that these banks, together with local banks which include Standard Bank, Nedbank and First Rand Bank, have conspired to manipulate the exchange rate in respect of the US dollar and the rand.
The commission argues that its terms permit enforcement action even against banks with no presence or business in South Africa (a peregrinus). Ngcukaitobi argued that the effects of the alleged rand fixing were felt within the Republic.
In arguing jurisdiction, he said the court must consider the presumption against extraterritoriality, which cautions against reading legislation as applying beyond the borders of South Africa unless clearly stated.
The court must also consider the common law requirement that both personal and subject matter jurisdiction must be established where a respondent is a peregrinus. Ngcukaitobi argued that the Competition Act enables the commission to exercise its jurisdiction regarding economic activity across the borders.
He pointed out that South African consumers are affected by the alleged manipulation of the rand when they for instance purchase products which are being imported.
“Price manipulation has a permanent effect. It introduces a permanent structural price. A distortion affects the value of imported products,” he said.
Asked by one of the judges whether any order a South African court or tribunal issues against a foreign bank could be enforced on them, Ngcukaitobi said most of the institutions the commission is claiming are, on the face of it, involved in the conspiracy to price fixing, have a presence in South Africa. According to him there are also remedies to enforce compliance.
In asking the court to overturn the finding by the CAC that the majority of the banks do not have a case to answer to, Ngcukaitobi argued that they were all aware, or should have reasonably been aware, that their agents colluded in chatrooms to manipulate the rand/dollar exchange.
Ngcukaitobi further argued that the alleged collusion regarding the price fixing affected South Africa directly, thus those implicated, should face justice here as South Africa is the only country taking the matter further.
He said it is often straight forward to prosecute firms accused of cartel conduct, as the conduct is usually clear. But cartels have evolved over the years, they are now bigger and transnational.
“This case is a classic example of a transnational cartel…They targeted our sovereignty - our rand - driven by profit. We are the only ones who have an interest in prosecuting them,” Ngcukaitobi argued.
The case is set down until Friday.