BY langton mutoya
Background Zimbabwe enacted a number of laws and policies over the last two years, including numerous Statutory Instruments (SIs)that seem to be generated on a daily basis.
Several legal debates about interpretation and enforcement of the laws have been ongoing.
Some have spilt into the courts of law; others just brought about heated arguments and conflicting public views.
The most recent court cases brought into the fore are the Supreme Court and High Court judgements.
Ironically these are our superior courts in the land after the Constitutional Court.
These superior courts at face value have differing interpretations with their judgements which may sound conflicting in principle.
Apparently, the judgements from the two courts on same SI (in this article, debate on RTGS v US$ historical transactions and liabilities) pronounced contrasting decisions.
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Such two dimensions of decisions have legal effect on the country’s currency, which may subsequently impact heavily on investors’ confidence.
Sadly, different meanings were sent to the laymen in the street and the interpretations currently ignited numerous conflicts.
I am not an active legal practitioner and neither am I on the legal register.
But, the following is my interpretation from an academic point of view of the Zimbabwe legal environment and message from the two superior courts of law with regard to the RTGS v US$ historical transactions debate.
Supreme Court judgement The issues which are the subject matter of this article were dealt with in the landmark Supreme Court case of Zambezi Gas Zimbabwe (Private) Limited vs N.R.
Barber (Private) Limited & Anor SC 3/20. Presiding over the case dubbed the ‘Supreme Court judgment’, chief justice Luke Malaba reasoned that, liabilities including judgement debts denominated in United States dollars before the effective date of February 22, 2019 shall on or after the aforementioned date be valued in RTGS dollars at an exchange rate of 1:1.
In essence, the Supreme Court stated that a US dollar obligation or liability before February 22, 2019 can be serviced or discharged in RTGS dollars.
A closer look at the matter which was brought before the Supreme Court can be proclaimed as mainly about the interpretation of SI 33 of 2019, which introduced the RTGS dollar. Precisely, it was to answer the question of law whether judgement debts were part of the liabilities contemplated therein. The validity and/or constitutionality of the SI was not the major source of dispute or simply the matter brought before the court. One may speculate that this may well be the reason why the court did not bother to decide that aspect. Be that as it may, whether the court should have examined the constitutionality of the legal instrument in question is not the scope of this narrative. The coming-in of the Finance (No.2) Act of 2019 legally addressed the question of interpretation of liabilities when it defined “financial or contractual obligations” to include judgement debts. This also addressed another aspect of the bank’s liabilities to its customers for deposits made and the customers’ liabilities to the bank for overdrafts, loans and mortgages.
The sum total of the Supreme Court ruling was that liabilities and assets accrued on or before February 22, 2019 should be valued in RTGS dollars at the rate of 1:1 regardless of the actual date they accrued. It is those liabilities and assets accrued after this date that could be settled at the prevailing market rate.
High Court judgement The High Court case which again relates to this article content is Stone & Beattie t/a The Stone/Beattie Studio v Central African Building Society & Others HH 287/20 where Justice Happais Zhou delivered the judgement on behalf of the court. The Judge declared unconstitutional and invalid the Exchange Control Directive No. R120/2018 (‘Exchange Control Directive’) which created RTGS FCA (domestic) and Nostro FCA (foreign currency) accounts. The court ruled that the exchange control directive was illegal, irrational and grossly unreasonable and ordered payment in US dollars of what was deposited into the bank account as such. The applicant argued in summary that, the value of money is its acceptability and can only be fairly determined by the market. If intended to introduce a new currency, in this case the RTGS account, with a value equal to or different from the previous, in this case the United States dollar account, the decision ought to affect the future transactions rather than existing or historical balances.
My personal perspective is that, in this case, the High Court was challenged and taken to task to determine the constitutionality of the exchange control directive. In coming up with the ruling, it is hypothesised that, the High Court explored the banker-customer relationship (Know-Your-Client principle) that subsists between the applicants and their bank. Justice Zhou argues that, the banker-customer relationship should be preserved or else banking law would cease to make any sense. Basically, the court underscored the bank obligation which is mainly to pay the equivalent sum of money to the account holder on demand notwithstanding the exact notes deposited.
The court most importantly, acknowledged that CABS’s situation was complicated by the fact that it was mandated to follow the exchange control directive from the RBZ notwithstanding the Finance [No.2] Act of 2019. As such, the ruling could not be reached without having determined the constitutionality of the exchange control directive. Eventually, the court considered that the exchange control directive contravened the constitution, the supreme law of the land, and declared it invalid. The court ruled that the exchange control directive could not pass constitutional scrutiny in that it is illegal, irrational and grossly unreasonable. The court further ruled that the exchange control directive is inconsistent with the rule of law and good governance and therefore that constitutes a deficiency of rights.
Academic opinion Based on the two examples of the two superior courts of the land, there seems to be inconsistency in the rulings based on the reasoning brought about between the two courts. This, according to my opinion, is based on the argument that, the High Court ruled the exchange control directive No. R120/2018 unconstitutional and recognised the Finance (No. 2) Act of 2019. Ironically, the Finance Act [No. 2] Act of 2019 is the legal instrument that provides denominations for purposes of discharging financial or other contractual obligations. In this case, it provided that, the RTGS and US$ would be rated on a 1:1 basis and become opening balances of a transformed economic environment. In that case, I foresee the position of the Finance [No. 2] Act of 2019 standing regardless of the High Court ruling. The effect of that would then be, all loans, mortgages and other financial and contractual obligations remain denominated and serviceable in RTGS as pronounced by the Finance (No.2) Act of 2019.
