South Africa’s Constitutional Court clarifies key procedural principles in forex cartel litigation

The Constitutional Court recently delivered its much-anticipated judgment in the Competition Commission’s case concerning the alleged forex cartel. The litigation attracted considerable attention because it involves allegations against a large number of domestic and international banks and concerns alleged collusive conduct in the trading of the South African Rand. However, the broader significance of the judgment lies in the guidance it provides on several important procedural aspects of competition law enforcement, including pleading standards, jurisdiction, joinder and the concept of a single overarching conspiracy (SOC).

Importantly, the Court did not decide whether the alleged cartel conduct occurred, but rather determined which procedural and jurisdictional issues must be resolved before the Commission’s case can proceed. The judgment has several practical implications for competition law enforcement and for firms under investigation by the Commission, some of which are discussed below. 

Referral affidavits must disclose the Commission’s case with sufficient particularity

The Court emphasised that the referral affidavit in Competition Tribunal proceedings must disclose the material facts on which the Commission relies and give respondents a clear understanding of the case they must meet. The Court reaffirmed that a referral affidavit is not akin to a conventional pleading that may be progressively supplemented as the case develops. Rather, the Commission must crystallise its case before referral and set out the material factual basis for the alleged contravention at that stage.

The Court confirmed that although the Tribunal Rules do not explicitly provide for exceptions, exceptions may be raised in Tribunal proceedings. In assessing an exception, however, the Tribunal must generally assume that the facts pleaded by the Commission are true and determine whether those facts, if ultimately proved, could support the relief sought. The Court accepted that referral affidavits are frequently deposed to by Commission investigators who may not have personal knowledge of all the relevant facts and may therefore contain hearsay. That, in itself, does not render a referral defective.

At the same time, the Court cautioned against an overly rigid approach to exception proceedings. Competition cases are often complex, fact intensive and may run for many weeks or even months. In that context, considerations of fairness may justify the Tribunal having regard, in limited circumstances, to additional facts outside the four corners of the referral affidavit. This is particularly so given that respondents may incur substantial costs defending lengthy proceedings, while the Tribunal’s ability to award costs against the Commission remains limited. The judgment therefore reinforces both the need for properly particularised referrals and the Tribunal’s procedural flexibility in dealing with preliminary challenges.

Foreign firms must still be sufficiently connected to South Africa

The Court confirmed that the Commission could not reopen an earlier Competition Appeal Court ruling on the interpretation of section 3(1) of the Competition Act. That ruling required the Commission, when pursuing foreign respondents, to establish both personal jurisdiction (by showing adequate connecting factors tying the suit to the Tribunal) and subject-matter jurisdiction (by satisfying the qualified effects test), rather than relying on section 3(1) alone as an all-encompassing jurisdictional provision.

Because the Commission had not appealed that ruling, and the case had proceeded on the basis that it was binding, the Court declined to revisit it. The practical consequence is that foreign firms are not beyond the reach of South African competition law, but the Commission must plead facts establishing personal jurisdiction through adequate connecting factors tying the suit to the Tribunal, and subject-matter jurisdiction by showing that the anti-competitive conduct had qualified effects in South Africa. It is not enough to allege that the conduct involved the Rand or formed part of a broader international arrangement.

Additional respondents may be joined without a fresh complaint being initiated

The Court also clarified the Commission’s ability to add further respondents to a complaint after an investigation has commenced.

The Court reaffirmed the principle established in Pickfords that a complaint initiation is directed at an alleged prohibited practice rather than at particular firms. As a result, the fact that a firm was not specifically identified at the time a complaint was initiated does not necessarily prevent that firm from being added later if the Commission’s investigation subsequently identifies it as a participant in the same conduct.

Importantly, the Court held that neither the Competition Act nor the earlier Competition Appeal Court judgment prevented the Commission from seeking to join additional respondents after the matter had already been referred to the Tribunal.

The Court further held that a fresh complaint initiation is generally not required where the newly joined firm is alleged to have participated in the same conduct that has already been investigated. Requiring a new initiation and a separate investigation in such circumstances would place undue emphasis on procedural formality and could create opportunities for prescription challenges based solely on the timing of the firm’s identification.

The Court nevertheless noted that the Commission cannot add respondents unilaterally. Once a matter has been referred, the Tribunal retains control over its own proceedings and must determine whether joinder is appropriate.

Prescription and the three-year time-bar

The judgment also confirms an important point on the limitation period under section 67(1) of the Competition Act, which bars referrals in respect of prohibited practices that ceased more than three years before the complaint was initiated. The Court held that the relevant trigger date for calculating the three-year period is the date of the original complaint initiation – not the date on which a particular firm was identified or joined to the proceedings. For firms currently under investigation, this underscores the importance of reviewing the timeline of the Commission’s complaint initiation when considering potential time-bar defences.

Costs exposure for respondents

It is also worth noting the Court’s observation that the Tribunal does not have the power to order the Commission to pay a respondent’s costs if the Commission’s case fails against that respondent. This distinguishes competition proceedings from ordinary civil litigation and means that respondents may bear significant irrecoverable costs even where they successfully defend themselves. This consideration may inform strategic decisions about whether and how to oppose Commission proceedings at an early stage.

Important guidance on the SOC theory

The Court also considered the Commission’s reliance on a SOC theory, which was central to its case against a number of the respondent banks.

At a high level, the SOC theory allows a competition authority to allege that what may appear to be separate instances of conduct between different firms in fact form part of a broader, coordinated anti-competitive scheme pursued by multiple participants. To establish such a conspiracy, it is generally necessary to show a common anti-competitive objective, participation by the relevant firms in advancing that objective and knowledge of the wider scheme.

The Commission argued that the Competition Appeal Court had adopted an unduly restrictive approach when assessing whether the referral affidavit sufficiently alleged participation by certain banks in the SOC. The Court rejected most of those criticisms. In doing so, it emphasised that firms cannot be implicated in a wider conspiracy merely because they operate in the same market, trade the same products, use the same communication channels or are connected to participants who are alleged to have engaged in collusive conduct.

The judgment underscores that there must be factual allegations supporting a reasonable inference that a particular firm knowingly and intentionally contributed to the common objective of the alleged conspiracy. Conduct that is consistent with bilateral coordination or isolated interactions will not, without more, necessarily establish participation in a broader market-wide conspiracy.

The Court also rejected the Commission’s argument that the Competition Appeal Court had imposed inappropriate jurisdictional requirements when dealing with the SOC allegations. The Court confirmed that where the Commission seeks to rely on an alleged conspiracy to establish jurisdiction over foreign firms, it must plead facts connecting those firms to a conspiracy that includes South African participants and is alleged to have affected South Africa. Simply alleging conduct involving the rand is not sufficient.

The Court also confirmed that participation in SOC does not automatically make a firm liable for all conduct undertaken by every other participant. It drew a distinction between two requirements: first, a firm must have made an intentional contribution to the objectives of a known conspiracy (mere awareness is not sufficient); second, the extent of a firm’s liability for the conduct of other conspirators depends on what the firm knew, or could reasonably have foreseen, about the wider conduct of other participants. A firm cannot be held liable for conduct by co-conspirators that it did not know about and could not reasonably have anticipated.

Attribution of trader conduct to employers

The judgment also addresses the question of when a trader’s conduct can be attributed to their employer. Drawing on European case law, the Court confirmed that a firm cannot be implicated in a conspiracy merely because it employed a trader who had previously participated in collusive conduct for another employer. There must be evidence that the trader engaged in actual anti-competitive conduct after joining the new employer.

Practical outcome of the judgment

In practical terms, the Court’s application of the procedural principles resulted in a mixed outcome. The Commission’s appeal succeeded in respect of JPMorgan Chase Bank N.A. and Standard Americas Incorporated, meaning those banks remain subject to the ongoing proceedings. However, Credit Suisse Securities (USA) LLC succeeded in its appeal, resulting in the dismissal of the Commission’s application to join it.

The Commission’s appeal against the remaining banks that had succeeded before the Competition Appeal Court was dismissed, meaning those banks (including ANZ, Nomura, Macquarie, Commerzbank, HBUS, SBSA, Nedbank and others) are no longer respondents in the proceedings. 

BNP Paribas’ application for leave to appeal was refused with costs.

Rudolph Labuschagne is a partner based in Cape Town who specialises in all aspects of competition law and regulation, with a particular focus on competition litigation. Nazeera Mia is a Knowledge and Learning Lawyer in Cape Town and a member of the firm’s Competition Practice. Lerato Nthathakane, an Associate Designate at Bowmans, also contributed to this article.