By Lehlohonolo Lehana.
The Gauteng High Court in Pretoria has reviewed and set aside Trade, Industry and Competition (DTIC) Minister Parks Tau’s decision to gazette the B-BBEE Legal Sector Code.
The Code was published under the Broad-Based Black Economic Empowerment Act and set new transformation and ownership targets for legal practices to hit over five years.
Among other requirements, the code required these firms to move towards 50% black ownership, including at least 25% black women’s ownership.
It also set representation targets of up to 50% for black managers, executives, partners, and directors.
Notably, the rules had exemptions, with law firms and attorneys with an annual turnover of R5 million and R3 million or less, respectively, not impacted.
This was a lower threshold than previously, meaning that smaller firms would have had to comply with rigid BEE requirements.
The four law firms Deneys, Bowmans, Webber Wentzel and Werksmans brought the legal challenge. A separate challenge was brought by trade union Solidarity.
There were 12 respondents, including Tau, the Legal Practice Council (LPC), the Minister of Justice and Constitutional Development and Advocates for Transformation.
The High Court found that Tau had failed to apply his mind and exercise his ministerial discretion when promulgating the Code.
According to the ruling, the minister’s position throughout the process was that he had no say in the “nitty gritty” and minutiae of the Code, relying on the legal sector itself to resolve its issues.
The three-judge bench ruled that he still had to independently assess whether the code, including its departures from the general BEE framework, was justified.
“Should the Minister decide afresh to promulgate the Code, those challenges may again require judicial determination,” the judgment states.
“This Court expresses no view on their merits. They must, if necessary, be considered in the light of the fresh decision and the reasons supporting it.”
The firms argued that a code applying to less than 5% of the profession could not credibly transform the sector as a whole.
They also objected to the removal of recognition for existing transformation initiatives, including bursaries for black students, skills development for employees and learners with disabilities, and socio-economic development contributions.
The court did not rule on these substantive objections.
Instead, it found that Tau had failed to exercise his own judgment before publishing the code, including making an evaluation as to whether its departures from the general BEE codes were justified.
The Court said that the constitutional requirement is simply that the Minister must independently evaluate that material, apply his own judgment, and satisfy himself that the requirements for the promulgation of the Legal Sector Code have been met. The minister was ordered to pay the applicants’ costs.