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JOHANNESBURG - The judgement in the North Gauteng High Court on Friday that found that it was not required by law for members of the cabinet to mediate in disputes between banks and their clients brought into question the legality of the inter-ministerial committee (IMC) set up last year for such a purpose.

Former finance minister Pravin Gordhan had approached the court last year asking for a declaratory order confirming that he did not have the authority to intervene in relationships between banks and their clients, after the Gupta family asked him to intervene when a major South African bank closed their accounts, citing concerns of “reputational risks”.

Judge Aubrey Ledwaba, in dismissing the application by Gordhan, said there was no statute that empowered a member of the national executive, such as the minister, to intervene in a private bank-client dispute.

“It is not appropriate for a member of the national executive to draw the judiciary into the exercise of his executive functions as evidenced in this application. To grant the minister the declaratory relief would allow the judiciary to stray into the exercise of executive functions where the circumstances do not warrant this involvement,” the judgment read.

In April last year, the cabinet established the IMC to consider claims that certain banks and other financial institutions acted unilaterally and allegedly in collusion when they closed bank accounts and/or terminated contractual relationships with Oakbay Investments.

The IMC was chaired by Mineral Resources Minister Mosebenzi Zwane, with Gordhan and Labour Minister Mildred Oliphant as members.

Zwane later issued a statement calling on the president to consider establishing a judicial inquiry to consider the mandates of the Banking Tribunal and the banking ombudsman. This was because the evidence presented to the IMC indicated that all the actions taken by the banks and financial institutions were as a result of innuendo and potentially reckless media statements, and as a South African company, Oakbay had little recourse to the law.

President Jacob Zuma and the cabinet later distanced themselves from Zwane’s pronouncements and said there was no such cabinet decision.

Cas Coovadia, the managing director of the Banking Association of SA, said the judgment removed the apparent misconception that any member of the national executive, including the minister of finance, is obliged to intervene in commercial disputes.

“Basa remains concerned regarding the apparent motives of the ministers of labour and mineral resources to establish an alleged and, according to the judgment, “contrary to law” inter-ministerial committee to interfere in this matter.

Both ministers should be held to account in providing reasonable explanations of their apparent actions,” Coovadia said.

In its affidavit, supporting Gordhan’s court action, Standard Bank laid bare the government interference and appealed for protection against executive interference in the bank, detailing the extensive political pressure it came under from the ANC, cabinet ministers and Oakbay after it closed the company’s accounts.

Present at the meeting with the cabinet and the IMC were Zwane, Oliphant and Mzwanele Manyi, whom the bank said came wearing the cap of a ministerial adviser. While named in the IMC, Gordhan, according to Zwane, never attended its meetings.

Pierre de Vos, a constitutional law expert, said the work of the IMC was illegal from the outset. “The court found that it was so obviously illegal that it was not even going to pronounce on the matter,” De Vos said.

Family's conduct

Friday’s victory by the Guptas marked a second victory against Gordhan. The family and its conglomerate of companies managed to have the court strike out the certificate issued by the Financial Intelligence Centre, referring to 72 transactions involving the Guptas and companies affiliated with them as part of Gordhan’s application.

Besides the local banks, the Bank of China and the Bank of Baroda also recently cut ties with the Gupta facility and their group of companies.

Judge Ledwaba said while the Guptas in their presentation to the court had agreed that the minister did not need the declaratory order, the court noted with concern the family’s conduct.

“We note with concern, though, that while the Oakbay Group knows and has conceded the legal position regarding the powers and functions of the minister, they persisted in their requests to him for assistance.