In the case of Ecenter Trading (Pty) Ltd and Others v First National Bank Ltd and Another, the Gauteng Division of the High Court, Pretoria, made various findings as to the remedies available where a block on transactions has been imposed by the South African Reserve Bank ("the SARB"). These blocks are imposed in terms of regulations 22A and 22C of the Exchange Control Regulations ("the Regulations").
Background
Ecenter held various accounts with First National Bank ("FNB") for making certain payments to their Chinese suppliers. However, the suppliers did not receive the payments as the SARB had instructed FNB to block the transactions. Prior to the court proceedings, Ecenter was not aware of the reasons behind the transactions being blocked. As such, the applicants instituted a mandatory interdict to compel the SARB to release the funds subject to the block and then after the answering affidavit was delivered, Ecenter amended the relief to compel the SARB to furnish reasons as to why the transactions were blocked.
Legislative framework
Regulations 22A and 22C read with section 9(2)(b) of the Currency and Exchanges Act 9 of 1933 ("the Act") permits the SARB to block transactions where there is a reasonable suspicion of contraventions of the Regulations.
Regulation 22D read with section 9(2)(d) of the Act provides that anyone aggrieved by a blocking order in terms of Regulation 22A and/or 22C may apply to the court to review and set aside the block of the transactions
The court's findings
In respect of the mandatory interdict to compel the furnishing of reasons, the court found that Ecenter sought inappropriate relief. The court referred to the Constitutional Court decision of Armbruster v SARB and reiterated the principle that the SARB may impose a block before furnishing reasons as to why the block occurred. The court explained that to do the opposite would result in the Regulations being ineffective.
The court found that the block of the transactions constituted administrative action. As such, an aggrieved party must bring review proceedings before a court in accordance with the remedies set forth in the Act and the Regulations and not seek relief under the Promotion of Administrative Justice Act.
Consequently, Ecenter's application was dismissed with costs including the costs of two counsels.
Conclusion
Parties aggrieved by such blocks are not entitled to reasons for the blocks, prior to the block being implemented. To do so would defeat the purpose of the Regulations.
An interdict in these circumstances is not the appropriate relief to seek, but rather, the correct route to follow would be pursuing an application to review and set aside the decision to block the transactions.
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