High court sets aside Tau’s decision to gazette legal sector BEE code

Four major law firms and Solidarity win their challenges - but court leaves the legality of the code's provisions undecided. The Pretoria High Court has set aside Minister of Trade, Industry and Competition Parks Tau’s decision to introduce the Legal Sector Code, finding that he failed to exercise the independent judgment required before publishing it in September 2024. The court sent the matter back to Tau’s office for reconsideration, but made no ruling on whether the code itself is consistent with the Constitution or black economic empowerment (BEE) legislation. The four law firms that brought the legal challenge were Deneys, Bowmans, Webber Wentzel and Werksmans. 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. Although Tau repeatedly maintained that he had applied his mind to the matter, the court found that his own account suggested that his role had largely been to recognise, accept and publish what the legal sector had agreed. While he was entitled to rely on advice, 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.” What the code aims to achieve The Legal Sector Code sets targets for black ownership and leadership of law firms, seeks to expand opportunities for black women, and aims to direct more work to black-owned law firms. Bowmans, Webber Wentzel and Werksmans argued that the code, as proposed, risked undermining rather than advancing broad-based transformation in the legal profession. For example, the code exempts more than 95% of legal practices from its requirements. According to the firms’ papers before the court, legal entities with between one and three partners make up 95.07% of legal practices, yet the code does not apply to them because they fall below the turnover threshold for compliance. 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. Deneys said its commitment to transformation remained unchanged following the judgment. “Deneys’ commitment to meaningful and sustainable transformation in the legal profession is unchanged. For the firm, transformation is a strategic and professional imperative, not a regulatory formality, and the obligations that go with it do not fall away as a result of this judgment.” The firm said it would continue pursuing its transformation commitments, adding that the objective of the court action was to secure a sector code that is workable, evidence-based and capable of delivering genuine transformation outcomes. Minister ordered to pay costs The minister was ordered to pay the applicants’ costs. “The court is acutely conscious that the Legal Sector Code was developed to advance the constitutional imperative of transformation within the legal profession,” the judgment states. “The evidence before this court demonstrates that meaningful transformation remains both necessary and urgent.” “It is therefore regrettable that the court cannot, at this stage, determine the substantive challenges to the code itself.” The court said the importance of the code’s transformative objectives could not override the constitutional requirements governing the exercise of public power. Solidarity’s challenge upheld The LPC objected to Solidarity’s right to bring its challenge, arguing that the code regulates ownership, management, skills development and procurement in the legal profession rather than labour relations, and therefore falls outside the union’s functions and interests. It argued that Solidarity had not identified members directly affected by the code or established a sufficient legal interest, and characterised the union’s challenge as a disagreement with policy choices. The court rejected the objection, accepting Solidarity’s standing and emphasising that the legality of the code’s adoption raised broader questions of public importance, including accountability and the proper exercise of government power. This article was republished from Moneyweb. Read the original here.