Lawyers representing foreign banks accused of forex trading price-fixing by the Competition Commission have argued in the competition appeal court that the competition watchdog has no jurisdiction over their actions.
The two-and-a-half-year legal battle saw more than 60 lawyers and advocates pack out the largest courtroom in the Johannesburg high court on Thursday before a full three-judge bench led by judge Dennis Davis.
In 2017, the Competition Commission charged 17 banks, 10 of those are not licensed in SA, with price-fixing after traders in London and New York fixed the price of the rand in a few forex trades.
The case itself has no yet started as banks have been arguing for two years that the Competition Tribunal has no legal jurisdiction over the actions of foreign traders working for foreign banks abroad and charges should be dropped.
The Competition Act and other SA law give courts powers over local companies or people or foreigners whose crimes affect SA in a significant way.
A currency trade is usually worked out to four decimal points, and tens of thousands of trades of currency are made a day, meaning individual trades seldom affect currency values in a substantial way.
Local bank Absa has not been fined due to co-operation with the commission in the case, and Citibank has pleaded guilty and paid a R69m fine.
In July, the tribunal ruled in favour of the foreign banks with no presence in SA, saying they would not be subject to fines as the tribunal has no jurisdiction over them.
Banks included Bank of America Merrill Lynch, Nomura International, Credit Suisse, Commerzbank, Macquarie Bank, HSBC, Citibank, Barclays Capital, Barclays Bank, JPMorgan Chase & Co, JPMorgan Chase Bank, Standard Chartered Bank, Standard New York Securities, BNP Paribas and Australia and New Zealand Banking Group.
However, the tribunal ordered the Competition Commission to reinstate a single charge against the local banks asking it to show clear evidence of price-fixing. It agreed with local banks’ assertions that charges by commission were vague and unproven.
The tribunal said if the Competition Commission could show the foreign banks’ price-fixing had had substantial effects on the SA economy, the commission could re-charge the foreign banks.
Both the banks and Competition Commission appealed the tribunal’s ruling on Thursday.
Advocate for one of the foreign banks Stuart Loxton SC said the case was simple and the tribunal had no jurisdiction over foreign companies. “You either have jurisdiction or you don’t.”
Mick van der Nest SC representing JPMorgan Chase argued the law requires that foreigners can only be charged if their actions have “direct, foreseeable and substantial consequences” on SA.
Acting for the Competition Commission, senior council Tembeka Ngcukaitobi said it was naive for the law and the Competition Act to give courts powers based on countries’ borders as if it were the 70s. He said this law was divorced from reality of global economy and global trade.
Davis asked if the boundaries of territories were still applicable in law, given that modern economies were global in nature.
Davis also said on Thursday that he would ask the commission to show in its arguments that the traders’ price-fixing had the legally required substantial effect on the economy.
The case continues today.
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