Pretoria High Court: Sets Aside Legal Sector BEE Code

• The Pretoria High Court has set aside Minister Parks Tau's decision to gazette the Legal Sector Code due to a procedural flaw.
• The court found that Minister Tau failed to exercise independent judgment before publishing the code in September 2024.
• The matter has been referred back to the Minister's office for reconsideration, without a ruling on the code's substantive legality or constitutionality.
• Four law firms, Deneys, Bowmans, Webber Wentzel, and Werksmans, successfully challenged the code's promulgation.
• The judgment emphasized the continued necessity of transformation in the legal profession, despite the procedural invalidation of the code.

The court's decision, while setting aside the code on procedural grounds, explicitly acknowledged the critical and ongoing imperative for meaningful transformation within the legal profession.

The Pretoria High Court has invalidated Minister of Trade, Industry and Competition Parks Tau’s decision to gazette the Legal Sector Code, ruling that he failed to exercise independent judgment before its publication in September 2024. This significant Pretoria High Court BEE ruling sends the matter back to Minister Tau’s office for reconsideration, without making any determination on the code's consistency with the Constitution or existing Broad-Based Black Economic Empowerment legal frameworks.

Four prominent law firms — Deneys, Bowmans, Webber Wentzel, and Werksmans — spearheaded the legal challenge against the Parks Tau Legal Sector Code. A separate challenge was also lodged by the trade union Solidarity. The legal proceedings involved 12 respondents, including Minister Tau, the Legal Practice Council (LPC), the Minister of Justice and Constitutional Development, and Advocates for Transformation. Despite Minister Tau's assertions that he had applied his mind to the matter, the court found that his own account indicated his role was primarily to acknowledge, accept, and publish the sector's consensus.

The Legal Sector Code was designed to advance transformation within the legal profession by setting targets for black ownership and leadership in law firms, expanding opportunities for black women, and directing more work towards black-owned legal practices. However, the challenging firms, Deneys Bowmans Webber Wentzel Werksmans, contended that the proposed code risked hindering rather than promoting genuine broad-based transformation.

Their arguments highlighted several critical flaws, including the code's exemption of over 95% of legal practices. Specifically, legal entities with one to three partners, which constitute 95.07% of the profession, fall below the turnover threshold for compliance, rendering the code inapplicable to them. The firms argued that a code affecting such a small fraction of the profession could not credibly achieve sector-wide transformation. They also objected to the removal of recognition for existing transformation initiatives, such as bursaries for black students, skills development for employees and learners with disabilities, and socio-economic development contributions.

Crucially, the court did not address these substantive objections regarding the code's content or its potential impact. Its decision was strictly confined to the procedural flaw in Minister Tau's promulgation process, specifically his failure to independently evaluate the code and justify its departures from the general BEE codes.

The court's decision, while setting aside the code on procedural grounds, explicitly acknowledged the critical and ongoing imperative for meaningful transformation within the legal profession. The judgment noted that evidence presented demonstrated the continued necessity and urgency of transformation, expressing regret that the substantive challenges to the code itself could not be determined at this stage.

The ruling indicates that should Minister Tau decide to re-promulgate the code, the substantive challenges raised by the firms may again require judicial determination. The court stated it held no view on the merits of these challenges, emphasizing that they would need to be considered in light of any fresh decision and its supporting reasons. This leaves the door open for future legal battles over the code's specific provisions.

Following the judgment, Deneys reiterated its unwavering commitment to transformation, stating that it remains a strategic and professional imperative rather than merely a regulatory formality. The firm clarified that the objective of its court action was to secure a Legal Sector Code that is workable, evidence-based, and genuinely capable of delivering effective transformation outcomes for the sector.

Lawyers and compliance officers should note that the Legal Sector Code is currently unenforceable due to procedural flaws, not its substantive provisions. They must monitor the Minister's reconsideration process for any new gazetting, as the underlying policy objectives and potential for a revised code remain, and substantive challenges to the code's content were not addressed.

Source: Original reporting via Moneyweb