Investec says it remains “ready and willing to present its case” when the merits of the South African Competition Commission’s “new referral affidavit” – filed four years ago – in the by-now infamous rand-fixing case is finally heard by the Competition Tribunal.
Earlier this week, the Competition Appeal Court (CAC) rejected the case against nearly all of the 28 banks accused of colluding to manipulate the rand in the New York foreign exchange market over a decade ago.
On Monday 8 January, the CAC dismissed the eight-year case by the Competition Commission against three major South African banks and the majority of foreign banks listed as respondents in the case. Only four foreign banks, whose traders admitted guilt in 2015 to charges from the US Department of Justice, remain implicated – BNP Paribas, JP Morgan Chase Bank, HSBC Bank PCC, and Credit Suisse Securities.
Standard Bank, FirstRand, and Nedbank, along with the other foreign banks, are now free of the charges.
Investec, which chose not to join the interlocutory application to the CAC to prevent the matter from going ahead due to a lack of evidence, is still part of the case.
A long, long road
As eloquently put by Judge Dennis Davis in the CAC ruling, the litigation relating to this complaint “has a long and torturous history”.
In 2017, the Commission referred a complaint to the South African Competition Tribunal for adjudication. Initially, the complaint was levelled against some 19 respondents for alleged collusive conduct when engaged in foreign exchange trading between 2007 and 2013. This number later grew to 28.
The Commission alleged that these banks colluded and conspired with each other to manipulate the foreign exchange rate with respect of the United States Dollar (USD) and the South African Rand (ZAR) to their own benefit.
According to court documents, the Commission emphasised “the existence of numerous engagements in chatrooms on the Bloomberg instant messaging platform whose participants were competing traders engaged in the USD/ZAR currency pair and the frequent presence of competing traders in the Bloomberg chatrooms”.
In June 2019, the Tribunal found that the Commission had failed to adequately make out its case. The Tribunal instructed the Commission to file a new referral affidavit, which it did in June 2020.
In its new referral, the Commission conceded that neither Investec, nor any other South African bank, had been implicated in the reported Bloomberg chat rooms that were set up by certain foreign exchange traders at the various implicated international banks.
Numerous banks (excluding Investec) filed interlocutory applications against the New Referral. These were argued before the Tribunal in November and December 2021.
An interlocutory judgment is given provisionally during the course of a legal action. It is used to provide a temporary or provisional decision on an issue.
In March last year, the Tribunal dismissed all of the interlocutory applications. The banks subsequently appealed the Tribunal’s rulings. Their appeals were heard by the Competition Appeal Court between 13 and 16 November later that year.
Last week Monday, the Competition Appeal Court dismissed the Competition Commission’s case against 23 of the banks on various grounds of exception, including lack of jurisdiction and the joining of certain banks too late in the referral process.
Local banks off the hook
In its ruling, the CAC concluded that the case against Standard Bank “does not get out of the legal starting blocks”.
Standard Bank welcomed the CAC’s decision, saying that “Standard Bank has always maintained that the Group is wholly committed to the rule of law, respects the important role of institutions, and upholds South Africa’s Constitutional democracy”.
FirstRand Bank was not cited as a respondent in the original complaint referral. When the Commission delivered its amended referral affidavit in June 2020, it included it as the twenty-seventh respondent and alleged that it also engaged in conduct prohibited in terms of s 4 (1) (b) of the Competition Act 89 of 1998 as a participant in the single overarching conspiracy.
Judge Davis’s ruling states that the Commission had no evidence that the bank had participated in any chats on the Bloomberg chatroom “at all” and that its case against FirstRand was based on “trading data on the Reuters platform”.
“It is regrettable that the Tribunal’s decision against FirstRand Bank was justified on hopelessly incorrect information,” said Judge Davis.
The court found that FirstRand as well as Nedbank, were incorrectly joined in the referral affidavit.
FirstRand told Moonstone that they had consistently been of the view that FirstRand had no case to answer.
“We are pleased that the Competition Appeal Court has confirmed that view,” said FirstRand.
Regarding other local banks named during the prolonged case, the Commission earlier stated that it would not impose penalties on Absa Bank, Barclays Capital, and Barclays Bank after these institutions pleaded for leniency.
Currency manipulation case to go ahead
In its decision, the CAC stated that the Commission could only present evidence supporting charges against four financial institutions – BNP Paribas, JP Morgan Chase Bank, HSBC Bank PCC, and Credit Suisse Securities.
“Sufficient facts were placed in the referral affidavit to justify the referral affidavit and the need for the matter to proceed to trial,” Judge Davis said.
The four banks were given 40 days within the order of the court to file their answering affidavits in response to the Commission’s claims of currency manipulation.
Among the respondents were Standard Chartered UK which settled for R42 million with the commission last year, and Citibank which reached a R69.5m settlement in 2017.
In response to the CAC’s ruling, the Commission said it was considering the judgment and consulting its legal team before deciding on the next course of action.
