Court throws out rand manipulation case against three South African banks

The Competition Appeal Court has dismissed charges against Standard Bank, FirstRand, Nedbank, and most foreign banks accused of conspiring to manipulate the rand’s value.

In a ruling handed down on Monday, it threw out the Competition Commission’s case against 23 of 28 banks, saying that the anti-monopoly watchdog did not provide sufficient evidence to prove a “single overall conspiracy”.

The Competition Commission’s case against JPMorgan Chase, BNP Paribas, HSBC, and Credit Suisse remains intact. Their traders pleaded guilty to charges brought by the US Department of Justice in 2015.

Investec did not join the application brought by the other banks to have the charges thrown out for lack of evidence, allowing the Commission to also bring it to trial before the Competition Tribunal.

The Competition Appeal Court lambasted the Commission’s weak case, emphasising that it was granted a final opportunity in 2020 to reconfigure the referral affidavit.

This was after its first effort was “lamentably inadequate” to prosecute a cartel case, judges Davis, Nuku, and Nkosi stated.

Among the inadequacies of its case was that the Commission had joined holding companies to the case in a referral affidavit instead of the actual registered banking entities.

In dismissing the case against FirstRand, the judges said the Commission consistently demonstrated an inability to distinguish between information that is in the public domain, like a Reuters or Bloomberg screen, and information that could only be the product of some form of nefarious cartel activity.

This was “a fundamental problem with this submission and which percolates itself throughout the referral affidavit.”

The Commission also chose an overly ambitious type of case to prosecute, the judges stated.

“On the Commission’s own version, it was required to show a common anti-competitive objective, that is an overall plan in which all of the respondent banks participated to pursue a common economic objective,” the judges ruled.

“It was required to show that each firm had made an intentional contribution by its own conduct to the common objectives pursued by all of the participants to the [single overall conspiracy].

“An occasional participation in a chatroom or unspecified conduct which is tenuously inferred as being part of the overall conspiracy is insufficient to meet these jurisdictional requirements,” the ruling stated.

It also called into question whether the activity in the chatroom could’ve influenced the exchange rate much or at all.

The largest single transaction in the Competition Competition’s case was $25 million — where the daily foreign exchange on the rand spot markets amounted to approximately $26.28 billion, with $6.6 billion daily on the outright forwards market.

“It may well be that the effect that various trades documented by the Commission had on the Rand was so insignificant as to have had no material effect thereon,” said Davis, Nkosi, and Nuku.

“But that is a matter which is better dealt with at trial where the respondent banks, which have a case to answer, can provide evidence to gainsay the case made by out by the Commission.”

There was no costs order.

“This is a case in which the Commission ought not to be mulcted with costs in that it was prosecuting allegations of cartel conduct in bona fide fulfilment of its mandate in the public interest,” the ruling stated.

Standard Bank welcomed the ruling.

“The Competition Appeal Court… accepted the bank’s incontrovertible evidence over a period of seven years that it had not been party to an international conspiracy to manipulate trading in the USD/ZAR currency pair,” it said in a statement.

“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, and our Constitutional obligation to ensure that our country improves the quality of life of all citizens.”

Standard Bank noted that in its ruling, the Competition Appeal Court concluded that the case against Standard Bank “does not get out of the legal starting blocks”.

“Standard Bank remains committed to supporting the work of regulators, including the Competition Commission,” it added.

“Standard Bank reiterates its belief in and respect for South Africa’s institutions generally and its well-functioning and sound judicial system.”