Nine banks are in the Competition Tribunal’s crosshairs as, in a crucial ruling, the body ruled on Thursday that it had the jurisdiction to hear the so-called “Forex Cartel case”, in which foreign and local banks (respondents) were implicated in alleged collusion to manipulate the rand-dollar exchange rate.
The nine banks added are local banks (Nedbank Group; Nedbank Ltd; FirstRand; FirstRand Bank) as well as international banks (HSBC Bank USA, National Association; Merrill Lynch Pierce Fenner and Smith; Bank of America; Credit Suisse Securities (USA) and Standard Americas).
If the banks are found guilty, the Tribunal has the right to levy a fine of up to 10% of in-country annual turnover. This as local banks’ turnover amounts to billions of rand.
The financial scandal came to light in 2013, involving 28 banks from multiple jurisdictions in Europe, South Africa, Australia and the US, which were accused of rigging the rand-dollar market between 2007 and 2013 to manipulate exchange rates on the forex market for their own financial gain.
The Tribunal said in a statement on Thursday: “The respondents are accused of engaging in conduct considered the most egregious in competition law. Furthermore, the alleged conduct relates to fixing and manipulating the rand/dollar exchange rate, which has a central and crucial role in the South African economy.”
The ruling forms part of a Tribunal order issued on Thursday, in which it has dismissed a second round of exception, objection, dismissal and strike out applications brought by various banks, in response to the Competition Commission’s updated charge sheet.
The Tribunal granted the commission’s applications to join a further nine banks as respondents in the main matter.
The Competition Commission maintains that the manipulation impacted on the exchange rate of the rand which, in turn, affected various parts of the local economy, including imports and exports; foreign direct investment; public and private debt, company balance sheets, with the attendant implications for the price of goods and services; and financial assets.
Various banks alleged to be part of the cartel conduct had raised objections/opposition to the commission’s updated complaint referral on the grounds of, among others, lack of jurisdiction of the South African competition authorities, time bar, no valid initiation by the commission and insufficiency of pleaded facts by the commission to support its case.
However, the ruling by the Tribunal found it had jurisdiction to hear the matter. It categorised the banks into various groups relating to its ability to exercise jurisdiction over them: “incola” (local banks); “local peregrini” (foreign banks with a presence in South Africa); and “pure peregrini” (foreign banks without a presence in South Africa).
“The Tribunal has ultimately concluded that it does have jurisdiction: “…the referral establishes adequate connecting factors to enable us to exercise both subject-matter and personal jurisdiction over all peregrini respondents,” it said.
In addition to its ruling that it had jurisdiction to hear the matter, the Tribunal ordered that all of the banks must respond to the referral by filing their answering affidavits (in the main matter dealing with the merits of the case) within 40 business days of the Tribunal’s order.
If the commission wishes to file replying affidavits, it must do so within 20 business days of the banks’ answering affidavits.
BUSINESS REPORT