The Constitutional Court’s recent judgment in the long-running forex cartel case is an important development for foreign businesses whose conduct may affect South African markets.
Some commentary has described the judgment as finally settling when South Africa’s competition authorities may prosecute foreign companies for anti-competitive conduct taking place outside the country. That risks giving businesses a broader impression of the judgment than the Court itself intended.
Three distinctions are important.
First, the Constitutional Court did not finally decide the proper interpretation of section 3(1) of the Competition Act. Second, under the framework applicable in this case, jurisdiction over the foreign firm and jurisdiction over its offshore conduct were separate requirements and both had to be established. Third, the respondents that succeeded before the Competition Appeal Court (CAC) did not do so because the Competition Commission had failed to plead sufficient effects in South Africa. In many instances, the problem was whether enough had been pleaded to connect the particular bank to the alleged conspiracy.
These are not simply technical distinctions. They affect how foreign businesses should understand their potential exposure to South African competition law – and how much of that law the Constitutional Court has actually settled.
Section 3(1) remains open
Section 3(1) says that the Competition Act applies to economic activity taking place in South Africa, as well as economic activity having an effect in South Africa.
In an earlier judgment, known as CAC I, the Competition Appeal Court held that this provision did not remove the ordinary jurisdictional requirements applying to foreign firms.
The Competition Commission did not appeal that ruling. Instead, it reformulated its case in an attempt to comply with it.
When the matter eventually reached the Constitutional Court, the Commission sought to challenge the earlier approach. The Court held that it was too late to do so because the ruling had become binding between the parties.
Importantly, however, the Constitutional Court did not endorse the CAC’s interpretation as correct.
Judge Owen Rogers states expressly at paragraph 118 that the Court’s conclusion involved: “no expression of opinion by this Court as to whether the CAC’s interpretation of section 3(1) in CAC I is right.”
The Court described the issue as “hotly contested” and the Commission’s failure to appeal it as an “opportunity missed” to have an important issue finally resolved. It also made clear that the question may arise again in a future case.
So, while the CAC I framework governed this litigation, whether it is ultimately the correct interpretation of section 3(1) remains open.
A foreign firm had to satisfy two jurisdiction requirements
The judgment distinguishes between two separate jurisdictional questions.
The first is personal jurisdiction: Can the South African competition authorities exercise jurisdiction over this particular foreign company at all?
The second is subject-matter jurisdiction: Even if they can exercise jurisdiction over the company, does the offshore conduct complained of have a sufficient connection with South Africa because of its effects here?
Under the framework governing this case, both questions had to be answered in the Commission’s favour. They were not alternative routes.
At paragraph 121, the Court refers separately to personal jurisdiction under the “adequate connecting factors” test and subject-matter jurisdiction under the “qualified effects” test.
For a foreign firm with no South African presence (no personal jurisdiction), the Commission first needed an adequate connection between that firm and South Africa. It then separately had to establish that the alleged offshore conduct had the required effects in South Africa.
In simple terms, showing an effect in South Africa was not, by itself, enough to establish jurisdiction over the foreign company. And establishing jurisdiction over the company did not, by itself, establish jurisdiction over the offshore conduct.
Why did many of the banks succeed?
A further distinction concerns the difference between having jurisdiction over a company and having a sufficient case against that company.
The Commission alleged that numerous banks participated in a single overarching conspiracy to manipulate the USD/ZAR exchange rate. It therefore had to plead sufficient facts linking each individual bank to that alleged conspiracy.
The Constitutional Court explained that the Competition Appeal Court had, in places, used the phrase “subject matter jurisdiction” when it was really considering whether the Commission had pleaded enough to establish a case against a particular bank.
Judge Rogers makes this clear at paragraph 172: “In fact, in none of the instances where the CAC found for the respondents did it do so on the basis that the affidavit failed to plead qualified effects sufficiently.”
In other words, those respondents did not succeed because the Commission had failed to allege sufficient economic effects in South Africa (Subject matter Jurisdiction). In many instances, the difficulty was that it had not alleged enough to connect the particular bank to the wider conspiracy.
The different outcomes illustrate why the distinction matters.
Credit Suisse Securities (USA) was a purely foreign firm with no South African branch or presence. The Commission therefore needed another adequate connection between it and South Africa. Because the pleaded case did not sufficiently link it to the alleged conspiracy involving South African participants, the required basis for personal jurisdiction was not established.
JPMorgan Chase Bank was different. It had a Johannesburg branch, and its personal jurisdiction was no longer in issue before the Constitutional Court. The question was whether its alleged offshore conduct had the required effects in South Africa. The Court held that the Commission did not also have to show that the conduct was carried out through, or connected to, its Johannesburg branch.
Standard Bank was different again. As a South African bank, there was no difficulty with personal jurisdiction. Its problem was the case pleaded against it (subject matter Jurisdiction): the Commission had not alleged sufficient facts showing that Standard Bank itself participated in the alleged overarching conspiracy.
These examples show why the issues should not be collapsed into a single question of “jurisdiction”.
What, then, has been settled?
The forex judgment provides important guidance on cross-border competition enforcement.
Under the framework applicable in this litigation, personal jurisdiction and subject-matter jurisdiction were separate requirements and both had to be satisfied. Those questions must also be kept separate from whether the Commission has pleaded sufficient facts against the particular company concerned.
But the judgment does not finally decide the broader reach of section 3(1) of the Competition Act.
On that question, the Constitutional Court expressly declined to express a view and left the door open for another case.
The law is therefore clearer after the forex judgment, but the final word on the Competition Act’s reach over foreign firms has not yet been written.
Stephany Torres is a competition law attorney at Primerio. Her practice focuses on South African and cross-border competition and antitrust matters, including investigations, litigation, and regulatory strategy.
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies.
