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[2020] ZACAC 1
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Competition Commission v Bank of America Merrill Lynch International Limited and Others (175/CAC/Jul19) [2020] ZACAC 1; 2020 (4) SA 105 (CAC); [2020] 1 CPLR 26 (CAC) (28 February 2020)
THE
COMPETITION APPEAL COURT OF SOUTH AFRICA
HELD IN JOHANNESBURG
Reportable
CAC
CASE NO:
175/CAC/Jul19
In
the matter between
THE
COMPETITION COMMISSION
Appellant
in the cross appeal and respondent in the appeal
And
BANK
OF AMERICA MERRILL LYNCH INTERNATIONAL LIMITED
First
Respondent
BNP
PARIBAS
Second
Respondent
JP
MORGAN CHASE & CO
Third
Respondent
JP
MORGAN CHASE BANK N.A.
Fourth
Respondent
AUSTRALIA
AND NEW ZEALAND BANKING GROUP LIMITED
Fifth
Respondent
STANDARD
NEW YORK SECURITIES INC
Sixth
Respondent
INVESTEC
LIMITED
Seventh
Respondent
STANDARD
BANK OF SOUTH AFRICA LIMITED
Eight
Respondent
NOMURA
INTERNATIONAL PLC
Ninth
Respondent
STANDARD
CHARTERED BANK
Tenth
Respondent
CREDIT
SUISSE GROUP
Eleventh
Respondent
COMMERBANK
AG
Twelfth
Respondent
MACQUARIE
BANK LIMITED
Thirteenth
Respondent
HSBC
BANK PLC
Fourteenth
Respondent
CITIBANK
N.A
Fifteenth
Respondent
ABSA
BANK LIMITED
Sixteenth
Respondent
BARCLAYS
CAPITAL INC
Seventeenth
Respondent
BARCLAYS
BANK PLC
Eighteenth
Respondent
HSBC
BANK USA, NATIONAL ASSOCIATION INC
Nineteenth
Respondent
MERRILL
LYNCH PEIRCE FENNER AND SMITH INC
Twentieth
Respondent
BANK
OF AMERICA, NA
Twenty
first Respondent
INVESTEC
BANK LIMITED
Twenty
second Respondent
CREDIT
SUISSE SECURITIES (USA) LLC
Twenty
third Respondent
JUDGMENT: 28 February
2020
DAVIS
JP
[1]
‘
Since institutional
diversity inhibits the global integration of markets by raising
transaction costs across jurisdictional boundaries
a world that is
sufficiently responsive to democratic preferences will also be one
that falls short of globalisation’
. (Dani
Rodrik)
[2]
The rapid globalisation of markets has challenged the
ability of the nation state to pursue policies borne of indigenous
democratic
choice. Competition law is one such site of this
problem in that anti-competitive conduct can detrimentally effect the
national
economy in circumstances where the conduct takes place on
foreign soil or on the internet. In turn this raises a problem for
the
competition authorities of a nation state to enforce the relevant
national law.
[3]
This appeal concerns the vital question as to the scope
of the jurisdiction of the respondent (‘the Competition
Commission’)
in enforcing the vision of the Competition Act 89
of 1998 (‘the Act’) as formulated and passed by the
democratically
elected Parliament of this country. A
significant part of that vision is to be found in the preamble
to the Act:
‘
The
people of South Africa recognise:
That
apartheid and other discriminatory laws and practices of the past
resulted in excessive concentrations of ownership and control
within
the national economy, inadequate restraints against anti-competitive
trade practices, and unjust restrictions on full and
free
participation in the economy by all South Africans.
’
In
similar fashion s 2, the purpose clause, provides that the Act aims:
‘
(a)
to promote the efficiency, adaptability and development of the
economy;
(b)
to provide consumers with
competitive prices and product choices;
(c)
to promote employment and
advance the social and economic welfare of South Africans;
(d)
to expand opportunities
for South African participation in world markets and recognise the
role of foreign competition in the Republic;
(e)
to ensure that small and
medium-sized enterprises have an equitable opportunity to participate
in the economy; and
(f)
to promote a greater
spread of ownership, in particular to increase the ownership stakes
of historically disadvantaged persons.’
[4]
The Act was intended to have a broad reach in that s3
(1) provides ‘
this
Act applies to all economic activity within or having an effect
within the Republic except
…’
.
I shall deal presently with the relevant jurisprudence relating to
this section.
[5]
Central to the differences between the parties in the
present dispute are two considerations, being the presumption against
ex-territoriality
and the common law requirement that, before a South
African court can adjudicate upon a dispute in which a party happens
to be
a
peregrinus
,
both personal and subject matter jurisdiction must be present.
[6]
As I have
observed, these differences take place within the context of the
global economy of the twenty first century. Thus,
a pressing
problem confronting competition authorities globally concerns the
effect of new technologies which have resulted in
transnational, and
even global consequences. Multinational corporations are often more
powerful than nation states and can strategically
comport their
economic behaviour to avoid national regulation. As Professor Eleanor
Fox, a distinguished USA anti-trust scholar
has noted,
‘
in
this altered world market place the presumption against extra
territoriality for economic law in defense of markets is no longer
appropriate. We need to deal with the reason behind the
presumption to prevent clashes caused by one sovereign’s
unreasonable
intrusion on another sovereign’s legitimate
interest, and to tailor the law of restraint to the reason for it.
Since
general retreat and withdrawal from antitrust enforcement
against non-nationals and foreign based acts would deeply undermine
the
global and national competition systems, it is fitting to stress
modes for accommodation more than rules for retreat
.’
[1]
[7]
In summary, the question as to whether the Act in
general and s 3 (1) in particular rises to the challenge of the
global economy
lies at the heart of the present case and thus holds
major consequences for competition law enforcement in this country.
The
factual matrix
[8]
On 1 April 2015
the Competition Commission initiated a complaint against
various banks
[2]
for colluding
to fix prices and divide markets in respect of the rand –
dollar exchange rate, which acts it alleged, were
in contravention of
s 4 (1) (b) (i) and (ii) of the Act. On 15 February 2017 the
Competition Commission referred its complaint
to the Competition
Tribunal (‘Tribunal’) in terms of s 50 of the Act.
By 3 March 2015, most of the respondent
banks had either filed an
exception to the referral or sought further particulars from the
Competition Commission. On 10 March
2017 the Tribunal at a
pre-hearing set out a timetable which made provision for the
Competition Commission to file a supplementary
affidavit by no later
than 31 March 2017. Thereafter, the respondent banks were
provided with the opportunity to re-examine
their exception
applications. On 31 March 2017 the Competition Commission filed
its first supplementary affidavit addressing
the issue of
jurisdiction but did little to address a range of exceptions which
had been raised by the respondent banks.
On 7 April 2017 the
Competition Commission filed a second supplementary affidavit which
sought to rectify an omission contained
in the March affidavit.
[9]
On 23 June 2017 the Tribunal at a second pre-hearing
ordered that the Commission could provide further particulars with
regard to
issues raised in respect of the misjoinder and would
provide to certain respondent banks and, in particular, Investec
Limited and
Standard Chartered Bank, further particulars which they
had requested.
[10]
Thereafter, the
Competition Commission changed its approach. It did not provide
further information to Investec and Standard
Chartered Bank nor did
it provide further supplementary pleadings with regard to the
misjoinder point. Instead, it requested
that the Tribunal set
down the exceptions raised by Investec and Standard Bank to be heard
on a separate and expedited basis.
Prior thereto, the
Competition Commission also filed applications for default judgment
against six of the respondent banks
[3]
as none of these parties had filed an answer to the referral nor had
they filed formal exception applications.
[11]
However, on 24 August 2017, the Competition Commission
abandoned its application for default judgment but persisted with a
separate
application which was dismissed on 5 September 2017, in
which the Tribunal also ordered that all the exceptions were to be
heard
in a combined hearing in January 2018.
[12]
Two weeks before the respondent banks were due to file
their heads of argument, the Competition Commission filed a further
supplementary
affidavit. The covering email read: ‘
Kindly
take notice that the Competition Commission’s further
supplementary affidavit is served and filed of record evenly
herewith. Due to its size the attachment will be sent in nine
batches, this is batch 1 and 2.
’
[13]
In keeping with this unsatisfactory approach to the
litigation, the next morning the Competition Commission’s
representative
sent an email to all the parties stating ‘the
Commission withdraws the correspondence below and all attachments
forwarded.’
This was sadly not the end of its
vacillation. On 10 December 2017 the Competition Commission
submitted a letter in which
it indicated that it had decided to file
a supplementary affidavit and ‘provide additional particularity
to the initial referral
and dispose of a number of the vague and
embarrassing exceptions raised by the respondents. It does so
without any concession
that such further particularity is required or
necessary’.
[14]
On 20 December 2017 the Competition Commission submitted
a further supplementary affidavit which not only added to the claims
contained
in the February referral but also sought to join five new
parties being HSBC Bank USA (19
th
respondent), Merrill Lynch Pierce Fenner and Smith Inc. (20
th
respondent), Bank of America (21
st
respondent), Investec Bank Limited (22
nd
respondent) and Credit Suisse Securities (USA) LLC (23
rd
respondent). Pursuant thereto, the Tribunal issued a direction
postponing the hearing which was finally heard from 30 July
2018 to
03 August 2018. Judgment was delivered on 12 June 2019.
The
decision of the Tribunal
[15]
For the purposes of this appeal, the major issue decided
upon by the Tribunal concerned its jurisdiction to hear the
Competition
Commission’s complaint in that a number of the
respondent banks alleged that they were
peregrini
;
that is, firms that were neither domiciled nor carried on business in
South Africa. A distinction was made between “pure”
peregrini;
that is
those respondent banks which were neither domiciled nor carried on
business in the Republic and “local”
peregrini
being banks with some presence in the country. It is helpful to
examine the Tribunal’s decision by way of a separate analysis
of its treatment of local and pure peregrini.
The
local peregrini
[16]
Certain of the banks, which appeared before the
Tribunal, were termed local peregrini because of a presence in South
Africa.
Four banks had a local branch in South Africa and were
registered as authorised dealers in terms of the Banks Act 94 of
1990.
These were: BNP Paribas (2
nd
respondent), JP Morgan Chase Bank (4
th
respondent), Standard Chartered Bank (10
th
respondent) and HSBC Bank PLC (14
th
respondent). In the case of Credit Suisse Group (11
th
respondent) Commerzbank, (12
th
respondent) and the Bank of America, (the 21
st
respondent) the Competition Commission contended that they had
representative offices in South Africa.
[17]
The dispute before the Tribunal turned on the argument
presented by these banks that the mere existence of a local office
was insufficient
to meet the requirement that the bank carried on
business in South Africa. This argument was based on the
provisions of the
Banks Act which provides in terms of s 34 (1) that
‘an institution which had been established in a country other
than the
Republic’ which lawfully conducts in such other
country a business similar to the business of a bank (hereinafter in
a section
referred to as a foreign institution) may not establish a
representative office in the Republic without having previously
obtained
the written consent of the Registrar’. Section
34 (4) of the Banks Act provides that a representative office may not
conduct the business of a bank in South Africa.
[18]
For this reason, it was argued that, if these banks did
not conduct the business of a bank in South Africa, for the purposes
of
jurisdiction they could not be held to conduct business in the
country. The Tribunal held that there was nothing in the Banks Act
which prevented a representative office from carrying on business in
South Africa so long as it was not the business of a bank.
In
addition, the Banks Act made it clear that a representative office
constituted an office where the business of a foreign institution
was
promoted or assisted. For this reason, the Tribunal held that the
Commission had alleged sufficient facts to establish the
Tribunal’s
personal jurisdiction over all seven local peregrini.
[19]
Turning to subject matter jurisdiction, the Tribunal
held that none of the four affidavits, to which reference had been
made, provided
evidence as to how the conduct of any of the traders
employed by these banks was linked to an ‘effect within the
Republic’,
sufficient to justify subject matter jurisdiction in
terms of s 3 (1) of the Act. Accordingly, the Tribunal held
that it
was necessary for the Competition Commission to depose to
additional affidavits to sustain its case against the local
peregrini.
The
pure peregrini
[20]
So much for the local peregrini, the Tribunal’s
decision against which was not the subject matter of this appeal.
This
appeal is concerned with the question of jurisdiction of the
pure peregrini. The Tribunal noted that it was common cause
that there had been no submission by any of the pure peregrini to the
jurisdiction of the Tribunal nor had any of the property of
the pure
peregrini banks been attached. Accordingly, the Tribunal
considered whether there was some other basis for personal
jurisdiction to be asserted over these peregrini or whether personal
jurisdiction was in fact required in terms of the Act.
[21]
Although the Tribunal considered whether the
concept of “an adequate connection” between the pure
peregrini to
the jurisdiction of the Tribunal could be employed as a
basis for asserting personal jurisdiction, it held that none of the
factors
which had been set out to found “an adequate
connection” in
Multi-Links
Telecommunications Ltd v Africa Prepaid Service Nigeria Ltd and
others, Telkom SA Soc Ltd and another v Blue Label Telecoms
and
others
[2013] 4 All SA 346
(GNP) were present
on the facts which had been presented by the Competition Commission,
sufficient to justify connecting any of
the pure peregrini to South
African jurisdiction.
[22]
The Tribunal also found that s 3 (1) of the Act could
not be read to imply a repeal of the common law requirement for
personal jurisdiction.
For this reason, it accepted the
argument that “a traditional declaratory order – one that
has civil but penalty consequences
is not an order we can competently
give without personal jurisdiction over a peregrinus respondent.”
[23]
For reasons which were never clearly expressed, the
Tribunal went on to say “that does not mean we are barred from
issuing
any other form of declaratory order”; that is an order
made against the pure peregrini to the effect that the named firms
in
the order would have been found to have participated in conduct which
was held to be in contravention of s 4 (1) (b) of the
Act.
In recognition of the absence of personal jurisdiction over these
peregrini, the Tribunal held that this order
had to be limited in
effect, namely that it would have to exclude the provisions relating
to civil damages and penalties (ss 65
and 59 of the Act), from any
order it issued.
[24]
To return to the local peregrini, the Tribunal
considered whether in the case of these local peregrini subject
matter jurisdiction
had been established. The difficulty
confronting the Tribunal was, as indicated earlier, the Competition
Commission’s
case appeared to resemble a movable
jurisprudential feast. It began with the argument that there
was a single overarching
conspiracy involving all of the banks.
It then offered a second candidate, namely a multilateral collusive
agreement; that
is a series of conspiracies which are differentiated
firstly on the basis of the type of mechanism agreed upon to rig the
exchange
rate and then, in this case, a multilateral conspiracy,
which did not involve all of the banks. It then offered a
third
possibility; that is a bilateral conspiracy confined to a
specific type of agreement, namely between two banks.
[25]
After examining the four affidavits of the Competition
Commission, the Tribunal came to the following conclusion:
‘
If
the Commission clarifies its referral in the manner suggested in its
oral argument, with the addition of the particulars we require
in
these reasons, this will resolve most of the exceptions that relate
both to no cause of action or vague and embarrassing.
There
will now be a coherent case of what the conspiracy was, how it was
entered into, and how it ended; if it indeed has.
It will also
explain why the relationship between the firms is one of competitors
as distinct from one between buyer and seller.
In the order we
have indicated the minimum features that this supplementary affidavit
needs to have.’
[26]
For this reason, the order of the Tribunal provided
that, while the applications for the dismissal of the complaint
referral brought
by the pure peregrini were dismissed subject to a
declaratory order which would include the proviso that the relief
excluded the
operation of ss 59 and 65 of the Act, the application
for the dismissal of the complaint referral brought by the local
peregrini
was dismissed, subject to a qualification namely that the
Commission was required to filed a new referral affidavit to
substitute
for and replace all the complaint referral affidavits
within forty business days of the order being granted. The
relevant
part of this order reads thus:
‘
The
new referral affidavit must:
1.
In the case of the local
peregrini
respondents set out the facts the Commission relies to allege that it
was foreseeable that the impugned conduct would have direct
or
immediate, and substantial effect in the Republic;
2.
Confine the case to a
single overall conspiracy (SOC), provided, subject to 3.4.3 below,
that the Commission is not restricted from
alleging that his may be
founded on an agreement, arrangement or concerted practice;
3.
Indicate whether the same
facts are relied on for proof of the concerted practice or allege any
different facts if they are not;
4.
Allege whether its case
for and AOC relies on proof of an express agreement or arrangement or
whether this is an interference based
on facts; if the latter, allege
in general terms what those facts are;
5.
Provide each respondent
with a date, or period, in which they are alleged to have joined the
SOC or deemed to have joined the SOC;
6.
Provide the facts that
are relied on to prove that the particular respondent joined or had
joined the SOC;
7.
If the SOC has ceased
7.1
provide what dates the
SOC alleged to have ceased;
7.2
what facts are relied on
for establishing that the conduct had then ceased; and
7.3
whether all the
respondents remained participants in the SOC on that date; and, if
not, when the respective respondent/s exited.
8.
If the SOC is still
alleged to be ongoing;
8.1
what facts this is based
on; and
8.2
whether all the
respondents are still part of it; if not, when the respective
respondent/s exited;
8.3
in relation to the
relationship between the respondent banks and their respective
traders;
8.3.1
is it alleged that some
traders acted for more than one respondent at the same time? If so,
details should be provided;
8.3.2
if a trader ceased to act
for a respondent bank, did this end the respondents’
participation in the SOC or if not, on what
basis is it alleged that
the respondent’s participation continued?
8.3.3
Is it alleged that all
the traders named as participants in paragraph 40 the December
affidavit were so-called active participants
or were some so called
passive participants;’
[27]
As noted, this part of the order, insofar as it relates
to the local peregrini, was not subject to appeal before this Court.
It effectively meant that, were this court to find in favour of the
Competition Commission’s argument relating to personal
jurisdiction in the case of the pure peregrini, a similar order in
respect of subject matter jurisdiction that was granted against
the
local peregrini would have, at the very least, to be considered;
hence the attention given to this part of the Tribunal’s
order.
Joinder
[28]
As noted, the Competition Commission sought to join five
banks, none of whom had been respondents in the original February
referral.
The Tribunal accepted that in order for a joinder
order to be granted it had to be satisfied on four issues:
‘
(i)
whether we have jurisdiction over the respondent; (ii) whether the
complaint has been properly initiated against the respondent;
(iii)
that the complaint has not prescribed; and (iv) whether prima facie a
cause of action has been made out.
’
[29]
It then held that requirements (ii), (iii) and (iv)
could not be determined until the Tribunal had received the
Competition Commission’s
response by way of the further
particulars that it had ordered. For this reason, it deferred
the question of joinder, pending
the substitution of the further
particulars so ordered.
The
appeal and the cross appeal
[30]
The first, third, fourth, fifth, thirteenth, nineteenth,
twentieth and twenty third respondents lodged an appeal against parts
of
the Tribunal’s order; in particular the issuing of a
declaratory order against the pure peregrini banks, albeit that the
order was limited in effect. In essence, the pure peregrini
respondent banks argued that the Tribunal had already determined
that
it had no jurisdiction over pure peregrini and therefore did not
possess the power to issue the declaratory order that it
had
granted. Three of the banks, HSBC Bank USA (19
th
respondent, Merrill Lynch Pierce Fenner and Smith (20
th
respondent) and Credit Suisse Group AG (11
th
respondent) appealed against the Tribunal’s decision to defer
the determination of the Competition Commission’s joinder
application, pending the further particularity so ordered. Shortly,
thereafter, on 18 July 2019, the Competition Commission noted
a cross
appeal against the following findings of the Tribunal:
1.
that it had no personal jurisdiction over the
pure peregrini banks;
2.
that to establish jurisdiction over a
peregrinus
the requirements of both personal jurisdiction and subject matter
jurisdiction had to be met;
3.
the provisions of s 3 (1) of the Act could not be
read to broaden the established approach to jurisdiction in
competition matters;
that is extend those principles imposed by the
common law;
4.
s
3 (1) required the application of the “qualified effects”
test for the purposes of subject matter jurisdiction.
[31]
Thereafter, Standard New York Securities Inc. (6
th
respondent) applied to have its citation in the Competition
Commission’s notice of opposition to this appeal and cross
appeal
declared to be an irregular step and thus invalid. It sought
to have the cross appeal against it set aside. In essence, it did so
on the basis that it had never noted an appeal against the Tribunal’s
order. It was only when the Competition Commission
lodged its cross
appeal that it sought to appeal, inter alia, against the order
upholding the exceptions brought by the peregrini.
Standard New York
Securities Inc. argued that, as there was no appeal against the
dismissal of the complaint referral brought by
it nor was there any
appeal by Standard New York Securities Inc. against the declaratory
order of the Tribunal, it behoved the
Competition Commission to have
lodged an appeal against the decision of the Tribunal of 12 June 2019
in favour of Standard New
York Securities Inc.. This
could not be done by way of a cross appeal and, accordingly, the
Competition Commission
had initiated an irregular step, such that the
cross appeal against it stood to be dismissed.
[32]
JP Morgan Chase and Company, JP Morgan Chase Bank NA
(3
rd
and 4
th
respondents), Australian and New Zealand Banking Group Limited (the
5
th
respondent), Credit Suisse Securities (23
rd
respondent), the Bank of America Merrill Lynch International Limited
(1
st
respondent)
and Merrill Lynch Pierce Fenner and Smith (20
th
respondent) all filed both an appeal and a review against the
decision of the Tribunal.
[33]
In essence, the grounds for the review made similar
points to the grounds of appeal, namely that a declaratory order
against parties
over whom the Tribunal lacks jurisdiction is not
competent, in that the Tribunal has no powers in respect of a party
over which
it lacks jurisdiction. These parties contended that the
issue of the limited declaratory order was unfair, prejudicial and
unreasonable.
Further, the joinder of parties over which the
Tribunal lacks jurisdiction was equally a legally incompetent order.
[34]
For reasons that will become apparent, the merits of the
review were hardly traversed in oral argument in that, central to the
review
and to the core of the appeal, lay the determination of the
same question of the Tribunal’s jurisdiction to make
any
order over the pure peregrini banks.
The
conduct of the appeal
[35]
In keeping with the remarkably adaptable and flexible
basis upon which this case was argued from the outset of the
litigation, a
number of points fell by the wayside during oral
argument. As indicated, the review hardly enjoyed any mention, in
that it appeared
to be conceded, albeit implicitly by the banks, that
in the event that the Tribunal had jurisdiction, an order would not
be competent
for the review proceedings which would then be rendered
redundant. The Competition Commission, notwithstanding its initial
vigorous
opposition to the appeal brought by various respondent
banks, abandoned its defence of the order granted by the Tribunal on
the
basis that, as the Tribunal had found that it had no jurisdiction
to deal with the dispute, it followed that it had no power to
grant
any order. This was a wise concession, albeit one made at
the proverbial twelfth hour as counsel for some of
the respondent
banks were at pains to inform this Court. Apart from the debate
about joinder and the irregular step, the
core question concerning
jurisdiction took up the majority of the debate. It turned on
two fundamental issues, namely whether
the Act could apply
extraterritorially in the light of a presumption against
extraterritoriality, and whether there was a requirement
for personal
jurisdiction to be established prior to the assumption of any powers
possessed by the Tribunal. I shall deal
with these questions
separately.
The
presumption against extra territorial application
[36]
Section 3 (1) of the Act provides that the Act applies
to all economic activity within the Republic and economic activity
having
an effect within the Republic.
[37]
In
American Natural Soda
Corporation v Competition Commission
2003 (5)
SA 633
(CAC) this Court carefully examined the parameters of s 3 (1)
of the Act. Writing for a unanimous court, Malan AJA (as he
then was) exhaustively examined the implications of the section in
respect of its potential extraterritorial application.
He
noted:
‘
In
most cases the exercise of the functions of a State by legislation,
executive and enforcement action and judicial decrees is
limited to
the territory of the State. (However)… the extra territorial
application of domestic competition laws is one
of the ways to combat
International cartels’
. (para 16)
[38]
Malan AJA then went on to say that it is not disputed
that the Act possesses extra territorial application and ‘
it
is not disputed that a State may, in certain cases, extend
jurisdiction beyond its territorial borders’
.
(para 17) He then held:
‘
The
question is not whether the consequences of the conduct is criminal
or, for that matter anti-competitive, but whether the conduct
complained of has “direct and foreseeable” substantial
consequences within the regulating country. In other
words “the effects” in the present case must be such that
they fall within the regulatory framework of the Act whether
they are
uncompetitive or not
.’ (para 18)
[39]
In support of this concept of ‘effects’
reference was made to the seminal antitrust case of
United
States v Aluminium Company of America (‘ALCOA’)
148 F2d 419
(2d Cir, 1945) where Judge Learned Hand said:
‘
We
should not impute to Congress an intent to punish all whom its courts
catch, for conduct which has no consequences within the
United States
…
On
the other hand, it is settled law as “Limited” itself
agrees that any state may impose liabilities, even upon persons
not
within its allegiance, for conduct outside its borders that has
consequences within its borders which the state reprehends;
and these
liabilities other states will ordinarily recognise
.
’
[4]
(my emphasis)
[40]
In an opinion of the Advocate General of the European
Union of 25 May 1988 which was provided in the case of
Ahlstrom
v Commission
[1988] ECR 5193
, the
Advocate-General noted that there is no rule of international law
which is capable of being relied upon against the criterion
of the
direct, substantial and foreseeable effect nor does the concept of
international comity in view of its uncertain scope militate
against
those criteria either. (para 57)
[41]
This approach was
also followed in
F
Hoffmann-La Roche v Empagram SA
[2004] USSC 2381
;
542 US 155
where the United States Supreme Court held that
anti-competitive conspiracies abroad are not within the reach of the
Sherman Act
unless the
effect
in the United States of the conduct give rise to the particular
plaintiff’s Sherman Act claim’. In short, an
international cartel selling vitamin products into the United States
was liable for suit under the Sherman Act but only insofar
as US
consumers were concerned.
[5]
[42]
For the sake of completeness reference can also be made
to the opinion of Advocate General Wahl delivered on 20 October 2016
in
respect of
Intel Corporation Inc v European
Commission
(Case 413/14P) where the Advocate
General states:
‘
I could also
remark that public international law allows states to exercise
jurisdiction extra territorially in certain instances…
A
survey of the case-law of the Court reveals that the application of
EU law presupposes an adequate link to the EU territory.
That
way, the basic principle of territoriality under public international
law is observed. Still, it is not unusual for
a State or an
international organisation also to take into account, in the exercise
of its sovereignty, circumstances that occur
or have occurred outside
its territorial jurisdiction.
It
follows from the existing case-law of the Court that EU competition
law operates with a requirement that there be an adequate
link to the
EU territory, be it in the form of the presence of a subsidiary, or
to the implementation of anticompetitive conduct
within that
territory.
’
[43]
I shall return presently to the debate concerning the
nature of the test. Suffice it to say at this stage of the
judgment
that the overwhelming authority both domestic and
internationally is in favour of recognising the possible extra
territorial application
of competition legislation in domestic law;
of course depending on the facts so alleged. Accordingly,
there is no merit
in the argument that the presumption against
extraterritoriality always trumps wording such as that contained in s
3 (1) the text
of which is set out in this judgment, such that the
presumption overrides any possible application of extra-territorial
jurisdiction
of the competition authorities.
[44]
There was some argument by certain counsel for the
respondent banks that s 26 of the Act which provides that the
Tribunal has jurisdiction
throughout the Republic precluded it from
assuming jurisdiction in a matter where the conduct took place
outside of the Republic.
Not only would such an interpretation be at
war with the approach adopted by this Court in ANSAC (supra) to s 3
(1) of the Act,
but it is clear that the purpose of s 26 was to
ensure that the Tribunal was a body, the jurisdiction of which was
not confined
to its particular location but that it applied
throughout the country. The two sections namely the idea
of the Tribunal
as a national adjudicative body and the
interpretation of s 3 (1) as developed are thus not incompatible.
Personal
jurisdiction
[45]
The earlier arguments of some parties notwithstanding, a
number of counsel for the respondent banks correctly conceded that s
3
(1) of the Act dealt with subject matter jurisdiction. Their
argument was that s 3 (1) had not abolished the common law
requirement
of personal jurisdiction. To that submission
counsel for the Commission developed two alternative responses: one
that personal
jurisdiction had been expressly excluded by virtue of
the wording of s 3(1) and, alternatively, that this Court was
enjoined to
develop the common law regarding personal jurisdiction in
order to ensure that the competition authorities could assume
jurisdiction
over alleged extraterritorial conduct of the various
respondent banks. Under existing common law, the requirement of
personal
jurisdiction over a peregrinus which had not submitted to
the jurisdiction of a court or, in this case, the Tribunal, can only
be fulfilled where either the party has a physical presence in the
country or, if not, where there has been attachment of property
of a
peregrinus in order to assert jurisdiction. As long ago as 1911
in
Steytler NO v Fitzgerald
1911 AD 295
at 346, it was said that ‘a court can only be said
to have jurisdiction in a matter if it has the power not only to have
cognisance of a suit but also to give effect to its judgment.’
[46]
Much emphasis was placed by all the parties on the
judgment of Howie P in
BID Industrial Holding
(Pty) Ltd v Strang
2008 (3) SA 355
(SCA).
The appellant in this case had applied for an order for the arrest of
two respondents in order to found or confirm
the court’s
jurisdiction in respect of a proposed action against them for damages
in delict. The appellant was
a South African company
which had its registered office within the area of jurisdiction at
the relevant High Court, while the respondents
were citizens of
Australia, where they were both resident and domiciled. It
appeared that the appellant had not attached
an asset belonging to
the respondents, which had, at one stage, been capable of attachment
to found or confirm jurisdiction.
Notwithstanding the
appellant’s repeated request, the respondents had refused to
submit to the jurisdiction of the High Court.
[47]
The application of the appellant was resisted on two
grounds, being that no prima facie case on the merits of the proposed
claim
had been made out on the papers and that s 19 (1) (c) of the
Supreme Court Act 59 of 1959, which empowered an arrest, was
unconstitutional.
Howie P recognised
‘
the
court had jurisdiction over a matter if it has the power not only of
taking cognisance of a suit but also of giving effect to
its
judgment.’ (
para 24) The
learned judge of appeal went on to say:
‘
A
court has the power to take cognisance of the suit if the relevant
cause arises in its area of jurisdiction. The cause
arises there if it would have done so at common law. At common
law even if a jurisdictional cause (for example, contract
or delict
within the jurisdiction) was present if the defendant was a foreigner
there had to be arrest or attachment.
’
(para
25)
Howie
P then went on to say:
‘
We
are confined to the issue of arrest’s constitutionality and the
inevitable consequences if it is indeed unconstitutional
and the
alternative of attachment is not possible. In other words if
the common law is to be developed by abolishing jurisdictional
arrest, that development must necessarily involve practical
expedients for cases where jurisdiction is sought to be established
and there can be neither arrest nor attachment. One could, of course,
hold that if arrest or attachment were, for separate reasons,
no
longer possible, then a resident plaintiff would simply have no basis
for establishing jurisdiction in a case such as the present.
On
the other hand it is important, in my view, to remember that the
practice of arrest and attachment came about in order to aid
resident
plaintiffs who would otherwise have to sue abroad. There is no
reason why that rational should not still apply.
It represents,
in my view, a rational and legitimate governmental purpose
.’
(para 48)
[48]
In dealing with the argument regarding the
constitutionality of s 19 (1) (a) of the Supreme Court Act Howie P
said:
‘
I
nevertheless consider that jurisdiction in the present case will fall
within the terms of s 19 (1) (a) if the matter could be
said to
involve a ‘cause arising’ or be a matter of which the
court ‘may according to the law take cognisance’.
A ‘cause arising’ is not to be confused with a
cause of action, and to determine what a ‘cause arising’
is, as also to determine of what matter a court may take cognisance,
one is driven back to the common – law jurisdictional
principles. If those principles can be developed to accommodate
a situation like the present there will be conformity with
s 19 (1)
(a). Which is not to say that the common law must conform
to the legislation. It is rather the
converse. The
legislation in question has all along been concerned to reflect or
implement the common law. All
one is therefore looking to
ensure is that between the Act and the development sought to be
achieved there is harmony
.’ (para 54)
[49]
Of considerable significance to the present dispute is
the following passage:
‘
It
seems to me that, firstly, one has to apply reasonable and practical
expedients in moving away, where necessary, from historical
practices
that cannot achieve what they were intended to do. Secondly,
the responsibility for achieving effectiveness, absent
attachment is
essentially that of the parties and more specially the plaintiff.
Economic considerations will dictate whether
a South African judgment
has prospects of success for enforcement abroad and thus influence
the plaintiff in deciding whether to
attach or sue here or there
(leaving aside of course, other costs considerations) … In my
view it would suffice to empower
the court to take cognisance of the
suit if the defendant was served with the summons while in South
Africa and, in addition, there
were an
adequate
connection between the suit and the area of jurisdiction of the South
African court concerned from the point of view of
the appropriateness
and convenience of it being decided by that court
.
Appropriateness and convenience are elastic concepts which can be
developed case by case. Obviously the strongest
connection
would be provided by the cause of action arising within that
jurisdiction.’ (paras 55 and 56. (My emphasis)
[50]
The issue of personal jurisdiction was dealt with
further in
Multi-Links Telecommunications v
Africa Pre-Paid
2014 (3) SA 265
(GP).
In his judgment Fabricius J, after examining the decision in
Strang,
said:
‘
[i]t
seems to me that one must determine the forum most suitable for the
ends of justice, and because pursuit of the litigation
in that forum
is most likely to secure those ends. The appropriate or natural
forum is that with which the action has the
most real and substantial
connection. In that context then, the court would look at all
the connecting factors including
all background facts, convenience,
experts, the law governing the relevant transaction or action, the
place where the parties reside
or carry on business etc
’
.
(para 23)
[6]
[51]
What emerges from these two decisions are the following:
1.
there is a need to develop the common law of
personal jurisdiction when a court applies reasonable practical
expedients which dictate
moving away from historical practices which
cannot achieve that which was intended, given the context of a modern
economy;
2.
the responsibility for achieving effectiveness is
essentially that of the parties and particularly the plaintiff such
that economic
considerations will doubtless dictate whether a South
African judgment has prospects of successful enforcement abroad;
3.
in a
jurisdictional dispute, such as the present, courts should examine
whether the forum which is sought to be employed has a real
and
substantial connection with the action; and whether the relevant
connecting factors tie the action to the forum in question.
[7]
[52]
A series of submissions were made by counsel for the
various banks regarding the possible development of the common law.
These
included:
1.
Were the common law to be developed by this
court, the development could not be confined to competition matters
and would therefore
run the risk of a series of detrimental and
unpredictable polycentric consequences for all disputes rather than
merely competition
cases.
2.
There was still a need to “hail the party”
to court by way of proper service;
3.
Any development of the law would require
addressing the question of the doctrine of effectiveness. In
the present dispute
this doctrine dictated that the Commission’s
case on jurisdiction be dismissed
[53]
In my view, the challenge posed to this court is not
about a full blown development of the common law regarding personal
jurisdiction.
It turns essentially on whether the law
relating to personal jurisdiction can be rendered congruent with the
objectives of s 3
(1) of the Act and more generally with the overall
purposes of the Act, including the promotion of efficiency,
adaptability and
development of the economy and the provision to
consumers of competitive prices and product choices as set out in s 2
(a) and (b)
of the Act.
[54]
As indicated, the issue of subject matter jurisdiction
is addressed in s 3 which clearly envisaged that the Act applied to
all economic
activity that was located outside of South Africa but
where the conduct complained of had direct and foreseeable’
substantial
consequences in South Africa. (See
American
Natural Soda Corporation
(CAC),
supra
at para 18) Were the arguments of the
respondent banks to be correct, it would mean that egregiously
uncompetitive conduct
which had direct and foreseeable consequences
upon the economy of South Africa and the welfare of consumers would
fall outside
of the scope of the Act and thus of domestic
enforcement.
[55]
For this reason, there is a powerful argument grounded
in the normative framework of the Act which dictates against the
adoption
of the submissions raised by the respondent banks.
[56]
A failure to develop the common law so as to refuse to
consider the presence of adequate connecting factors between the
complaint
brought by the Competition Commission and the jurisdiction
of the Tribunal and thus the issues of appropriateness and
convenience
as sufficient to found personal jurisdiction would mean
that a central objective of the Act, namely the protection of the
South
African economy from egregious anti-competitive conduct would
be stymied. Expressed differently, on the assumption that the
Competition Commission could make an adequate showing that there was
an overarching conspiracy between the respondent banks to
fix the
rand / dollar exchange rate in contravention of ss 4 (1)(b)(i) and
(ii) of the Act, this would mean that the case brought
by the
Competition Commission would involve the participation of all of the
banks, that is local, local peregrini and pure peregrini
in an
activity which would contravene a central provision of the Act,
namely the prevention of cartel activity. Assuming that the
Competition Commission could make such a showing, this itself could
indicate that there were adequate connecting factors between
each of
the parties and the practice sought to be adjudicated upon by the
Tribunal.
[57]
This conclusion brings us back to the question of
subject matter jurisdiction. A failure to align the common law
regarding
personal jurisdiction with the Act, in particular the s 3
(1) of the Act, namely that the Act applies to all economic activity
having an effect within the Republic would render this central
provision which establishes the basis for subject matter jurisdiction
meaningless in numerous cases involving peregrini. These cases all
follow from the consequences of economic globalisation over
the past
three decades.
[58]
Expressed in the
terms employed by this Court to determine subject matter jurisdiction
in
American
Natural Soda Corporation
,
supra,
the conduct complained of has must have “direct and
foreseeably” substantial consequences within South Africa.
This would render the vindication of subject matter jurisdiction
almost nugatory, when viewed from the perspective of the South
African competition authorities. By contrast the
judgments in
Strang
and
Multilink
supra
foreshadowed the possibility of common law development, which only
strengthens this conclusion.
[8]
[59]
There was a debate with certain of the counsel for
respondent banks concerning the trigger for the development of the
common law.
Unlike the cautionary
dicta
of the Constitutional Court in
Everfresh
Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256
(CC) at paras 63-66 in the present case, the question
of the development of the common law was raised before the Tribunal
and considered
in its judgment. (See paras 40-44 of the
Tribunal’s judgment). In the present dispute, this Court,
on the basis
of the dicta in
Strang
and
Multilinks,
has
also taken into account the normative framework of the Act, the
widespread international consensus about the egregious nature
of
cartel activity and the changed context of the economic activity.
As an OECD paper of 1/12/2017 at para 9 observes:
‘
An
increasing number of jurisdictions rely on the domestic effects of
the relevant conduct as the jurisdictional trigger, known
as the
effects doctrine. Under this doctrine, jurisdictions can
legitimately take enforcement action against conduct that
is carried
out outside their territory by non-nationals as long as it is
unlawful under their domestic rules and produces effects
within their
territory.
While the effects doctrine can be understood as an extension of the
territoriality principle, it can result in the laws of
more than one
jurisdiction applying when a particular conduct effects more than one
territory. It also means that remedial
measures required to
cure the competitive harm may need to be enforced extra
territorially, against companies based and action
occurring within
another state
.’ (my emphasis)
Service
[60]
Turning to the argument about service, the Tribunal
rules do not appear to distinguish between service within the
Republic and service
abroad. While valid service under
the Tribunal rules can be affected by any means authorised by the
High Court, the
former rules appear to be more permissive than the
High Court rules and provide for service by fax and email.
Therefore,
it appears not to constitute an obstacle to the general
approach to service for the Commission to serve on any peregrinus
firm
without the need for a local domicilium, an approach which
clearly would deal with the problem of responding to conduct based
upon
an overarching conspiracy between
peregrini
and incolae, the overall effect of which is to breach s 4 (1) (b) of
the Act. Certainly, on the facts, all the parties
were
‘hailed’ to the Tribunal for the purposes of the present
litigation.
Enforcement
[61]
Regarding the question of enforcement, s 58 of the Act
provides the Tribunal with wide powers. It states ‘in
addition
to its other powers in terms of the Act, the Competition
Tribunal may make an appropriate order in relation to a prohibited
practice
including declaring conduct of a firm to be a prohibited
practice in terms of this Act for the purposes of s 65 (that is for
the
purpose of a civil action which follows upon the Tribunal’s
finding on the merits). There does not appear to be
any
obstacle for the Tribunal to issue a declaratory order of the kind
envisaged by the Tribunal, save that the Tribunal has to
be clothed
with the requisite jurisdiction in order to make this kind of
order. Unfortunately, the Tribunal did not
appear to
follow the logic of its own conclusion on jurisdiction. Once it
had determined that it did not have jurisdiction,
it had no legal
power to grant any order. However, once it is accepted that the
Tribunal does have jurisdiction then, given
the general consensus
that cartel activity is the most egregious form of anti-competitive
conduct (see Fox,
supra
at 990), a declaratory order issued by the Tribunal may well hold
significant consequences for a peregrinus which has been found
to
have participated in a cartel.
The
joinder question
[62]
In its decision, the Tribunal deferred a decision in
respect of the Competition Commission’s application to join the
nineteenth,
twentieth, twenty first and twenty third respondents,
pending compliance with the requirement that it file a new affidavit
to substitute
for and replace the complaint referral affidavits.
Two different approaches were adopted to this decision by the various
parties to this appeal.
[63]
In the case of the nineteenth, twentieth and twenty
first respondents, the approach adopted by their counsel was that the
order
granted by the Tribunal was clearly invalid, in that the
Tribunal itself had held that it had no jurisdiction to hear the
matter.
Counsel conceded that, if this Court was of the mind to order
that a new referral affidavit be filed by the Competition Commission
in respect of its alleged case against the pure peregrini in similar
fashion to the order contained in paragraph 3.4 of the order
relating
to local peregrini, then this decision could be deferred.
[64]
By contrast, counsel for the twenty third respondent
contended that an order should be granted by this Court dismissing
the Competition
Commission’s application to join the twenty
third respondent to the complaint referral. Given the
approach that
is to be adopted by this Court to the referral
affidavit, it is the latter argument that requires particular
attention. In
essence, counsel for the twenty third
respondent’s argument was that there had been no proper
complaint initiation against
his client. It was too late
to initiate a complaint at this stage and hence it followed that the
Tribunal had no jurisdiction
to determine the complaint referral
against it.
[65]
Notwithstanding copious references by counsel for the
twenty third respondent to the existing jurisprudence relating
to the
initiation of complaints all of which flowed from the decision
in
Woodlands Dairy (Pty) Ltd and another v
Competition Commission
2010 (6) SA 108
(SCA),
particularly at paras 12-20; 33-35, the case which is dispositive of
the argument of the twenty third respondent is that
of
Power
Construction (Western Cape) (Pty) Ltd and another v Competition
Commission
[2017] 2 CPLR 4589
(CAC). In
dealing with the judgment in
Woodlands,
this Court noted the contents of para 36 of the
Woodlands
judgment which reads thus:
‘
A
suspicion against some cannot be used as a springboard to investigate
all and sundry. This does not mean that the Commission
may not,
during the course of a properly initiated investigation, obtain
information about others or about other transgressions.
If it
does, it is fully entitled to use the information so obtained for
amending the complaint or the initiation of another complaint
and
fuller investigation
.’
[66]
To this, this Court held at para 33 of the
Power
Construction
judgment:
‘
[
I]f
an investigation by respondent [the Commission] takes place and
during the course of, or as a result thereof, it learns of further
parties which may have committed the prohibited practice, the
complaint, from which these firms were initially excluded, can be
amended to so include them, triggering further consequences as set
out in s 50 of the Act.
’
[67]
While it is correct that the judgment in
Power
Construction
makes it clear that it is
necessary for a complaint to be initiated against each firm that is
alleged to be a party to the cartel
before that complaint is referred
to the Tribunal, there is nothing in this judgment which deals with
the facts of this present
case; namely, in the event that this Court
does not disturb the relevant component of the Tribunal’s
order, namely that the
Commission has been granted permission to file
a new referral affidavit to substitute for and replace all the
complaint referral
affidavits so long as the complaint referral deals
with the individual parties and shows their connection to the alleged
overall
conspiracy to form a cartel. In short, the
existing jurisprudence presents no fatal obstacle to the granting of
a similar order against the pure peregrini and thus deferring the
joinder application until such time as that referral affidavit
has
been filed and can appropriately be considered.
[68]
I readily accept that the twenty third respondent is not
cited as a party in the April 2015 statement. I also accept that when
the
initiation statement was amended on 23 August 2016, the company
cited and against which the complaint was initiated was not the
twenty third respondent. In the event that a new referral
affidavit is required from the Commission, it would, at this stage
be premature to uphold the twenty third respondent’s
contention. If indeed the new referral affidavit passes legal
muster, insofar as the twenty third respondent is concerned, that is
a showing of sufficient connecting factors between the twenty
third
respondent and an adequately formulated complaint which contains the
requisite specificity. It would, therefore, be
premature at
this stage of the proceedings to make a final ruling in this regard,
the effect of which would be to allow a potential
participant to a
cartel to escape the consequences of its participation. Again,
it is necessary to emphasise that this judgment
in no way makes any
finding nor articulates any observation on the merits of the case
brought by the Competition Commission.
Irregular
Step
[69]
The sixth respondent sought to set aside the Competition
Commission’s cross-appeal against it for the following
reasons:
It argued that, as the Tribunal dismissed the
complaint referral brought by the Competition Commission against it,
there was no
basis for it to appeal against the order of the
Tribunal. By contrast, other respondents had formed a different
view and
noted appeals, within the prescribed time period, raising
objections to the Tribunals purported intention to exercise limited
jurisdiction
over the foreign peregrini, in the event that the
Competition Commission sought a declaratory order as foreshadowed in
paragraph
3.3.1 of its order.
[70]
On 18 July 2019 the Competition Commission noted a cross
appeal and it cited amongst others the sixth respondent,
notwithstanding
that the latter had not noted an appeal. In the cross
appeal, the Competition Commission sought to appeal, inter alia,
against
the order upholding the exceptions brought by the peregrini.
It contended that the Tribunal had erred in finding that it had
no
personal jurisdiction over the pure peregrini and took issue with
that finding that ‘
both
the common law requirements for subject matter and personal
jurisdiction must be established for the Tribunal to exercise
jurisdiction over the purer peregrini
.’
It further contended that it was an error for the Tribunal to
conclude that the provisions of s 3 (1) of the Act
could not be read
to permit a broader approach to personal jurisdiction than what is
set out in existing common law.
It further contended that
the Tribunal ought not to have rejected the Competition Commission’s
argument that the doctrine
of effectiveness was to be approached in a
more flexible manner. For these reasons, it sought
an order from this
Court upholding the cross appeal and an order
setting aside, inter alia, paragraph 1, that is the upholding of the
application
for dismissal of the complaint referral brought by the
pure peregrini and paragraph 3.3.1 that
‘
any
order for the declaratory relief against the pure peregrini must
include the proviso that such relief excludes the operation
of ss 59
and 65 of the Act
.’
[71]
Sixth respondent’s counsel submitted that it is
not competent for the Competition Commission to note what he referred
to as
‘a so called’ cross appeal in relation to the sixth
respondent in circumstances where the sixth respondent had not noted
an appeal against the order of the Tribunal. Accordingly, he
contended that the decision dismissing the complaint against
sixth
respondent had become final; in other words the Competition
Commission’s cross appeal was not truly a cross appeal
but was,
in his view, a belated attempt at an appeal outside of the time
limits prescribed for the noting of an appeal and, in
circumstances,
where no application for condonation had been made.
[72]
Counsel for the sixth respondent also noted that the
Competition Commission had been informed of sixth respondent’s
position
that it considered the cross appeal against it to be a
nullity within two business days of it being filed. The
Competition
Commission had elected to do nothing in response thereto,
even though it had ample time, for example, to bring an application
for
condonation in respect of the late filing of an appeal against
sixth respondent in order to address the latter’s complaint.
[73]
The core argument of sixth respondent was that while a
number of the pure peregrini respondents had filed notices of appeal
aimed
essentially at setting aside paragraph 3.3.1 of the order of
the Tribunal entitling the Competition Commission to seek an order
for declaratory relief against these peregrini, the Commission did
not elect to appeal against paragraph 1 of the order (upholding
the
application by the pure peregrini respondents to dismiss the
complaint) in the time period allowed for appeals. What
it did
was to note a cross appeal against that part of the order as well as
the order in which the Tribunal upheld, in part, certain
exceptions
raised by the local peregrini. The point of sixth respondent’s
argument was that the cross appeal was directed
at parties other than
itself. The Competition Commission, being an unsuccessful
litigant insofar as the holding of the exception
raised by the
foreign peregrini was concerned, did not visit an intention to appeal
when it allowed the date of the lodging of
the appeal to pass.
[74]
Sixth respondent contended that this cross appeal was
“simply an appeal which is conveniently tacked onto another
appeal”.
Goodrich v Botha and
others
1954 (2) SA 540
(A) at 544;
Itzikowitz
v Absa Bank
2016 (4) SA 432
(SCA) at para
25. If a cross appeal is no more than an appeal and the cross
appeal brought by the Competition Commission
was directed at
dismissing the order upholding the exceptions brought by the pure
peregrini in relation to the Tribunal’s
personal subject matter
jurisdiction, then, on the basis of the jurisprudence relating to
cross appeals as cited, the cross appeal
was no more than an appeal
which included as one of the respondents, the sixth respondent.
[75]
Significantly, in
General Council
of the Bar (GCB) v Jiba and others
[2019]
ZACC 23
the GCB had brought an application to strike from the role of
advocates Ms Jiba, Mr Mrwebi and Mr Mzinyathi. The High Court
struck the former two from the role of advocates and dismissed the
application against Mr Mzinyathi with costs. Ms Jiba and
Mr
Mrwebi then appealed against this order. Mr Mzinyathi did not file an
appeal because he had been granted an order in his favour.
However, the GCB filed a cross appeal in respect of the costs order
against the later. Neither in the SCA nor in the Constitutional
Court was this considered to be an incorrect procedure. The
following passage from the judgment of the Supreme Court of Appeal
in
Jiba and another v General Council of the Bar
of South Africa and another: Mrwebi v General Council of the Bar of
South Africa
2019 (1) SA 130
(SCA) at para 2
is instructive:
‘
This
appeal is against the order of the Gauteng Division, Pretoria (Legodi
and Hughes JJ), striking from the roll of advocates,
the names of
Jiba and Mrwebi with costs including the costs of two counsel, the
one paying the other to be absolved. The
application against
Mzinyathi was dismissed with costs to include the costs of two
counsel. Against the order of costs, the
GCB filed a
counter-appeal. The appeals are with the leave of the court
a
quo
. The three
applications were dealt with in one hearing and were therefore heard
together in this court as the factual and
legal background was
similar.’
[76]
This approach accords with the clear
dictum
of Ponnan JA in
Itzikowitz v Absa Bank supra
at para 25:
‘
Importantly,
Maize Board
drew no distinction between appeals and cross–appeals. A
cross-appeal, as Schreiner JA pointed out in
Goodrich
v Botha and others
1954 (2) SA 540
(A) at 544, is ‘simply an appeal which is
conveniently tacked on to another appeal’. And, in
general, the rules
applicable to appeals apply to cross-appeals.
Moreover, the considerations of principle and policy alluded to
above, that
militate against entertaining an appeal against the
dismissal of an exception, must no doubt apply with equal force to a
cross-appeal
against the dismissal of an exception.’
[77]
If a cross appeal is to be treated as an appeal, the
fact that the sixth respondent chose not to appeal against any
component of
the Tribunal’s order as opposed to other
respondents cannot be considered to be an obstacle to an appeal (even
if described
as a cross appeal) against a finding which was adverse
to the Competition Commission and in favour of the sixth respondent.
Conclusion
[78]
As Fox and Gerard:
EU Competition
Law: Cases, Texts and Context
(2017) at 33
write of cartels:
‘
They
are the classic example of anti-competitive agreements. Cartels
are a scourge on consumers. They rob consumers
of hundreds of
millions of euros each year, often for products that are necessities
of life.
’
[79]
Cartel activity is the most egregious form of
anti-competitive conduct. It is important again to emphasise
that, at this stage
of the litigation initiated by the Competition
Commission, the question of whether any of the respondent banks is
involved in cartel
activity is not before this Court and thus it has
nothing to say about the merits thereof. However the
battle between
the parties regarding jurisdiction has significant
implications for the fight against cartel activity in general.
In
a Round Table On the Extra Territorial Reach of Competition
Remedies conducted by the OECD (working party number three on
cooperation
and enforcement: OECD: DAF/COMP/WP3 (2017) (at para8) the
following passage reflects the challenges posed by the structure of
the
global economy to national competition authorities:
‘
The
growing interdependence of markets and economies and the fact that
business activities increasingly take place across borders
means that
the behaviour of market participants and the effects of this
behaviour is often not contained within the territory of
the country
where the behaviour takes place or of which the parties are
nationals. Thus, conduct occurring abroad by foreign parties
–
which in principle would satisfy neither the territoriality not the
nationality principles – have negative impact
for domestic
markets. Over the years jurisdictions have developed case law and
rules to assess in which case they can extend jurisdiction
extraterritorially and what is the appropriate nexus between domestic
harm and foreign conduct.
’
See
further the judgments in
Intel v Commission
(Case C – 413/14P (2017);
F. Hoffman –
Le Roche v Empagram
SA
[2004] USSC 2381
;
542 US 155)
[80]
The decision of this Court is based upon giving full
effect to the purpose of the Act, including its objective (s 2) and
the wide
scope envisaged for the Act as set out in s 3 (1) of the Act
which establishes subject matter jurisdiction. It is important to
emphasise that the Tribunal had already given the Competition
Commission a final opportunity to file a new referral affidavit to
substitute for and replace all of the complaint referral affidavits
insofar as the local peregrini are concerned. That part
of the
order is uncontested. It seems to be clearly within the
interests of justice to provide the Competition Commission
with a
similar opportunity to file a new referral affidavit in respect of
the pure peregrini respondents. This will provide the
Competition
Commission with a final opportunity to establish adequate connecting
factors between the respondent parties and the
jurisdiction of the
Tribunal to establish personal jurisdiction in addition to proving
the requirements of subject matter jurisdiction
on facts which may be
set out in the fresh referral affidavit.
[81]
In summary, this Court holds that there can be cases
where an agreement between or a concerted practice involving
peregrini and
which consist, for example, of direct or indirect
fixing of a purchase or selling price or any other trading condition,
reveal
that adequate connecting factors are established to justify a
finding of both subject matter and personal jurisdiction. As
the Competition Commission has been afforded a last opportunity to
file a legally coherent complaint against the local peregrini
banks,
it follows that it should be afforded a similar opportunity against
the foreign peregrini. At that point of the litigation
it will be
possible to make a sound and informed determination as to whether,
there are sufficiently adequate connecting factors
between the
foreign peregrini conduct and the suit brought by the Competition
Commission to justify the assumption of jurisdiction,
both personal
and subject matter. It is thus important to emphasise that, until a
final complaint within the time limits prescribed
in the order of
this Court is forthcoming, from the Competition Commission the
question of jurisdiction over the pure peregrini
in this case cannot
be determined.
Costs
As
the Competition Commission has been substantially successful it
should be granted a costs order in its favour.
[82]
For all of these reasons the following order is made:
1.
The appeal against paragraph 3 of the order of
the Competition Tribunal read in conjunction with paragraph 1 thereof
is upheld.
2.
The cross appeal against paragraph 1 of the order
of the Competition Tribunal is upheld.
3.
The order of the Competition Tribunal is
therefore set aside and replaced with the following:
3.1
The applications for the dismissal of the
complaint referral brought by the pure peregrini, Bank of America
Merrill Lynch International
Limited (1); JP Morgan Chase & Co
(3); Australia and New Zealand Bank Limited (5); Standard New York
Securities Inc (6); Nomura
International PLC (9), Macquarie Bank
Limited (13); HBC Bank USA, National Association (NA) (19); Merrill
Lynch Pierce Fenner and
Smith (20) and Credit Suisse Securities (USA)
LLC (23) are dismissed subject to the following.
3.1.1
The Commission must file a new referral affidavit
to substitute for and replace all the complaint referral affidavits.
This affidavit
must be filed within 40 business days of this order.
3.1.2
The respondents will only be required to file
their answers to the new referral affidavit. The answers must
be filed within
20 days of the service of the new referral affidavit.
3.2
The new referral affidavit applies to the parties
referred to in paragraph 1 of the substitute order. It must:
3.2.1
In the case of all the named respondents set out
the facts the Commission relies on to allege that it was foreseeable
that the impugned
conduct would have a direct or immediate, and
substantial effect in the Republic;
3.2.2
Confine the case to a single overall conspiracy
(SOC), provided, subject to 3.4.3 below, that the Commission is not
restricted from
alleging that this may be founded on an agreement,
arrangement or concerted practice;
3.2.3
Indicate whether the same facts are relied on for
proof of the concerted practice or allege any different fact if they
are not;
3.2.4
Allege whether its case for an SOC relies on
proof of an express agreement or arrangement or whether this is an
inference based
on facts, if the latter, allege in general terms what
those facts are;
3.2.5
Provide each respondent with a date, or period,
in which they are alleged to have joined the SOC or deemed to have
joined the SOC;
3.2.6
Provide the facts that are relied on to prove
that the particular respondent joined or had joined the SOC;
3.2.7
If the SOC ceased;
3.2.7.1
provide what dates the SOC is alleged to have
ceased;
3.2.7.2
what facts are relied on for establishing that
the conduct had then ceased; and
3.2.7.3
whether all the respondents remained participants
in the SOC on that date; and, if not, when the respective
respondent/s exited.
3.2.8
If the SOC is still alleged to be ongoing;
3.2.8.1
what facts this is based on; and
3.2.8.2
whether all the respondents are still part of it,
if not when the respective respondent/s exited;
3.2.8.3
in relation to the relationship between the
respondent bank and their respective traders;
3.2.8.3.1
is it alleged that some traders acted for more
than one respondent at the same time? If so, details should be
provided;
3.2.8.3.2
if a trader ceased to act for a respondents’
bank, did this end the respondents’ participation in the SOC or
if not,
on what basis is it alleged that the respondent’s
participation continued?
3.2.8.3.3
Is it alleged that all the traders named as
participants in paragraph 40 of the December affidavit were so-called
active participants
or were some so called passive participants.
3.3
The new referral affidavit must in addition:
3.3.1
in the case of all of the named respondents set
out the facts on which the Commission relies to allege that there are
adequate connecting
factors between the parties and the jurisdiction
of the Competition Tribunal; sufficient to establish personal
jurisdiction against
all named respondents
4.
In
respect of the application for joinder brought by the Competition
Commission on 12 January 2018 read with the supplementary affidavit
in December 2018.
4.1
Leave to join the twenty sixth respondent
(Investec Bank Limited) is granted.
4.2
Leave to join HB US (19); MLPFS (20); BANA (21)
and Credit Suisse Securities (23) is deferred for consideration
pending the Competition
Commission’s compliance with the
requirements of paragraph 3 of this order.
5.
In
respect of the application for a striking out brought by the third
and fourth respondents:
5.1
paragraph 145 to 152 and corresponding annexures
of the December supplementary affidavit if struck out should not be
included in
the amended referral submitted in terms of this order.
6.
The application by the sixth respondent to set
aside the Competition Commission’s cross appeal insofar as it
applies to the
sixth respondent is dismissed with costs, including
the costs of two counsel.
7.
The first to fifth respondents, ninth respondent,
eleventh to fourteenth respondents, nineteenth to twenty first
respondents and
the twenty third respondent are ordered to pay the
costs of the appeal and cross appeal, including the costs of two
counsel.
___________________________
DAVIS
JP
BOQWANA
JA and KATHREE-SETILOANE AJA concurred
[1]
Eleanor
Fox “
Extraterritorial
jurisdiction, antitrust and the European Union Intel case
”
2019 (43)
Fordham
International Law Journal
981
at 993
[2]
For
the purposes of this judgment the respondents (all of whom other
than the sixth respondent appealed the decision of the Competition
Tribunal of 12 June 2019) are appellants in the appeal and
respondents in the cross appeal will be referred to as the
respondent
banks.
[3]
Second
, third, fourth, fifth, ninth and tenth respondents
[4]
The
decision of the Competition Appeal Court in American Natural Soda
Ash Corporation, supra was taken on appeal to the Supreme
Court of
Appeal. See
American
Natural Soda Ash Corporation v Competition Commission
2005 (6) SA 158
(SCA). However the approach adopted by the CAC to s
3 (1) of the Act was not disturbed on appeal. See paras 24-29 of the
SCA
judgment.
[5]
The
jurisprudence which followed Empagram reveals the importance of the
facts of the particular dispute to the determination of
jurisdiction. In a subsequent decision
Motorola
Mobility LLC v AU Optronics Corp
(7
th
Cir. 26/11/201) the extent of the connection to the local
jurisdiction was emphasised. See also
Minchem
v Agrium Inc
(7
th
Cir 27/6/2012) where the following was said
‘
If
the prices of the components were indeed fixed, there would be an
effect on domestic U.S. commerce. And that effect would be
foreseeable (because the defendants knew that Motorola's foreign
subsidiaries intended to incorporate some of the panels into
products that Motorola would resell in the United States), could be
substantial, and might well be direct rather than “remote,”
the word we used in
Minn–Chem,
Inc. v. Agrium, Inc., supra
,
683 F.3d at 856–57, to denote effects that the statutory
requirement of directness excludes.
The
price fixers had, it is true, been selling the panels not in the
United States but abroad, to foreign companies (the Motorola
subsidiaries) that incorporated them into cell-phones that the
foreign companies then exported to the United States for resale
by
the parent company, Motorola. The effect of fixing the price of a
component on the price of the final product was therefore
less
direct than the conduct in Minn–Chem, where “foreign
sellers allegedly created a cartel, took steps outside
the United
States to drive the price up of a product that is wanted in the
United States, and then (after succeeding in doing
so) sold that
product to U.S. customers.” Id. at 860 (emphasis added). But
at the same time the facts of this case are
not equivalent to what
we said in Minn–Chem would definitely block liability under
the Sherman Act: the “situation
in which action in a foreign
country filters through many layers and finally causes a few ripples
in the United States.”
Id. In this case components were sold
by their manufacturers to the foreign subsidiaries, which
incorporated them into the finished
product and sold the finished
product to Motorola for resale in the United States. This doesn't
seem like “many layers,”
resulting in just “a few
ripples” in the United States cellphone market, though, as
we'll see, the ripple effect
probably was modest. We'll assume that
the requirement of a direct, substantial, and reasonably foreseeable
effect on domestic
commerce has been satisfied, as in
Minn–Chem
and
Lotes Co. v. Hon Hai Precision Industry Co
.,
753 F.3d
395
, 409–13 (2d Cir.2014).
What
trips up Motorola's suit is the statutory requirement that the
effect of anticompetitive conduct on domestic U.S. commerce
give
rise to an antitrust cause of action. 15 U.S.C. § 6a(2). The
conduct increased the cost to Motorola of the cellphones
that it
bought from its foreign subsidiaries, but the cartel-engendered
price increase in the components and in the price of
cellphones that
incorporated them occurred entirely in foreign commerce.
We
have both direct purchasers—Motorola's foreign
subsidiaries—from the price fixers, and two tiers of indirect
purchasers: Motorola, insofar as the foreign subsidiaries passed on
some or all of the increased cost of components to Motorola,
and
Motorola's cellphone customers, insofar as Motorola raised the
resale price of its cellphones in an
attempt.’
[6]
See
also
Holloway
and another v Padi Emea Limited
[2017] ZAGPJHC 381
[7]
The
question of reconciling the principle of personal jurisdiction with
the emergence of a global economy was highlighted in an
opinion by
Breyer J in J McIntyre Mach Ltd v NICASTRO
131 SCT 2780
(2011).
Although he declined to develop the law in NICASTRO, Breyer J
articulated the very problems confronting this Court
and the
possible need for change. See the helpful article by Robert
Pollack “Not of any particular State: J McIntyre
Machinery Ltd
v NICASTRO and non-specific purposeful availment”
2014 (89)
New York University Law Review 1088.
In his opinion Justice
Breyer warned against both the strict no jurisdiction rule and the
permissive absolute approach
based, as he put it, on reasonable
foreseeability that a product in a nationwide distribution system
might end up in every state
being sufficient to confer jurisdiction
in the state.
[8]
There
was a vigorous debate about whether our law should adopt a qualified
effects test. This issue was a subject
of controversy
within the European Union following the decision in
Intel
Corporation v European Commission ECLIE: EU
:
C 2017:632 where the Court of Justice said: ‘The qualified
effects test pursues the same objective as the implementation
test:
(namely preventing conduct which, while not adopted within the EU
has anti-competitive effects liable to have impact on
the EU
market’. para 45 The court then went on to say that this
test is justified under public international law
when ‘it is
foreseeable that the conduct in question will have an immediate and
substantial effect in the European Union.’
(para 49)
Professor Fox,
supra
,
throws doubt upon whether the Court of Justice did apply a test of
foreseeable, immediate and substantial effects in the EU
economic
area. As she notes at 992:
‘
There
seemed to have been no fact-finding to support a conclusion that
Intel’s agreements with Lenovo had foreseeable immediate
and
substantial effects in the EEA. The hidden holding of the case
is: where offshore conduct not directly implemented
in the EEA and
potentially although not immediately affecting the EEA is an
integral part of a strategy covered by the EU law.’
EU law
covers the conduct.’
Within
the context of South African law, there does not appear to be any
substantial reason as to why the approach adopted by
this court in
ANSAC should now be disturbed nor does a different test really
affect the approach which this court seeks to adopt.
To an
extent this approach to extraterritoriality was recently adopted by
Unterhalter J in
Achuko v Absa Bank Limited
[2019 JDR 1469
(GJ)] et paras 15-18:
’
Our
Courts have recognised that territoriality is the traditional basis
upon which jurisdiction is established, and that the
extra-territorial assumption of jurisdiction may interfere with the
sovereignty of other states. However, the territorial
principle of jurisdiction has a subjective and an objective aspect.
The subjective aspect recognises the power of the state
to enact
laws that govern conduct taking place within the territorial borders
of the state. The objective aspect of territorial
jurisdiction
recognises the power of the state to enact laws that concern conduct
taking place outside of the borders of the
state, the effects of
which take place within the borders of the state.
In
S v Basson
, the Constitutional Court accepted the general
proposition that our courts have declined to exercise jurisdiction
over persons
who commit crimes in other countries based upon a
presumption against the extraterritorial operation of the criminal
law.
However that presumption does not invariably hold, and
the Constitutional Court acknowledged that jurisdiction, in the
context
of the criminal law, may be assumed where there is a real
and substantial link between the offence and the country in which
the
courts seek to exercise jurisdiction. One way in which
that link may be established is where the harmful consequences of
an
offence committed in one country are felt in another.
The
objective aspect of territorial jurisdiction is not confined to the
criminal law. Justice Learned Hand put the matter
this way in
Alcoa
.
‘
Any
state may impose liabilities even upon persons not within its
allegiance, for conduct outside its border which has consequences
within its borders that the state reprehends.’
One
area of the law in which the effects doctrine holds sway is
competition law. Competition law, in many jurisdictions,
including our own, makes provision for the regulation of
anti-competitive conduct that takes place outside the territory of
the state but has an effect within it. While the United States has
shown the greatest propensity to apply the effects doctrine
to the
assumption of jurisdiction, as ever more commerce has international
dimensions, more jurisdictions have shown a willingness
to entertain
the doctrine. So too international crimes under multilateral
treaties permits of wide jurisdictional powers.’