Insolvency Amendment Bill: hearings; Reinstatement of Certain Legal Practitioners Bill: deliberations

Meeting report

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE
10 May 2002
INSOLVENCY AMENDMENT BILL: PUBLIC HEARINGS; REINSTATEMENT OF CERTAIN LEGAL PRACTITIONERS BILL: DELIBERATIONS

Documents handed out:
COSATU submission on the Insolvency Amendment Bill
Cape Law Society comment on the Insolvency Amendment Bill 2002
Comment on the Insolvency Amendment Bill by Mr Cronje
Opinion on the establishment of the African Court on Human and People's Rights
The Reinstatement of Certain Legal Practitioners Bill

Chairperson: Advocate J De Lange (ANC)

SUMMARY
The meeting was convened in order to hear submissions from COSATU and the Cape Law Society relating to the Insolvency Amendment Bill. In addition, the Committee deliberated on the Reinstatement of Certain Legal Practitioners Bill.

MINUTES
Insolvency Amendment Bill
Submission by COSATU
COSATU was represented by Mr Neil Coleman and Ms Govender. Mr Coleman began by saying that they had hoped that the Chief Negotiator for Labour could have attended the meeting, however, he was unable to make it. The Bill is part of a triad of laws that were negotiated by NEDLAC in 2001. The amendments to the Insolvency Act had been captured in the NEDLAC agreement in fairly broad formulations, and he noted that some problems with the process related to the failure to adequately capture the agreements in legal drafting. Nevertheless, he stated that whilst the NEDLAC draft was never formally signed off, it would still be an important indication of the agreements that had been reached.

He explained that a two-pronged understanding of the matter had been reached. Firstly, it was decided that urgent and immediate amendment of the Act would be necessary, and this was why the current Bill was before the Committee. However, it was also decided that a broader group of laws would have to be amended, an example including changes to the current Companies Act. These laws would be included in the review conducted by the South African Law Commission, and the Department of Justice, a more comprehensive overhaul.

Mr Coleman went on to indicate the short-term agreements. He referred the Committee to the NEDLAC agreement on page 2 of the submission, point 1.1, and explained that the submission goes through the three areas that had be noted. COSATU was asking the Committee to ensure that the three aims would be reflected in the Bill.

Adv De Lange wanted to know why such a duty had to be imposed on the Committee. He explained that Parliament was the legislature and as a result, the NEDLAC agreement could not be binding on the Committee. This is important to note to ensure that such a suggestion was not being made.

Mr Coleman explained that they believed that a failure to implement the three agreements had led to some of the current faults in the system. This showed that a connection existed between the two.

Mr Coleman handed the floor over to Ms Govender, and explained that she would take the Committee through the substantive issues contained in the submission.

Adv De Lange noted that as a principle, the Committee could not be bound to make sure that total compliance with the aims recognised by COSATU would be achieved.

Ms Govender referred to voluntary sequestration and compulsory sequestration. The distinction was important in order to accommodate for the differing notification requirements. She said that although Section 4 fell into the unsigned NEDLAC agreements, there were compelling reasons why the section had to be amended. It would be necessary to require the debtor to give notice to trade unions and employees, published in the Government Gazette, in advance of the institution of sequestration proceedings. She added that such a requirement would not be onerous burden. Their concern was that workers would be substantially prejudiced, usually only informed after the institution of the proceedings.

Adv De Lange asked her whether she was saying that S 6(c) and S 6(d) did not fulfil that requirement, thereby meaning that they sought the giving of notice before the matter was placed in the hands of the trustee.

Ms Govender responded that this was the case.

Ms Govender moved on to compulsory sequestration, and stated that NEDLAC had expressly agreed to amend S 9 of the Act. She noted that this also related to S 11 of the current Act. The Committee was referred to page 4, point 2.2, of the submission, and she explained that through the amendment, the debtor would be required to serve a copy of the notice to petition on employees and trade unions within two days of receiving it (or within twelve hours in urgent instances). She added that this did not place an onerous burden. In relation to S 11, she explained that the amendment would also mean that regarding the service of notification of a provisional sequestration order, the debtor would also be required to serve a copy on employees and trade unions.

Adv De Lange explained that he was not ill-disposed to the suggestions that were being made. However, he was not clear as to whether such amendments related to the particular sections that had been highlighted. He wondered whether such matters did not fall into the broader amendments to insolvency matters, as earlier identified by Mr Coleman.

Ms Govender responded that the matter would depend on when notification became an issue. She explained that the amendments would seek to make it a requirement before the application. S 9 also dealt with notification prior to the grant. However, the proposed S 11 became operative once a provisional sequestration order had been granted. Thus she did not know how it would fit in under S 38.

Adv De Lange explained that the matter would be further discussed by the Committee, and noted that he did not have the technical knowledge.

Ms Govender proposed that in terms of S 136 of the Act, the failure to provide notification to employees and trade unions should also be criminalised. She was not sure why the provision applied only to compulsory sequestration, and therefore proposed that the provision relate also to compulsory sequestration procedures. She further proposed an amendment to S 40 of the Act, thereby requiring written notice for the first and second meetings of creditors, simply for the sake of parity.

Ms Govender went on to deal with a matter that had not been noted in the submission but was nonetheless very important to the issue before the Committee. She referred to the National Leather Workers Union case where the labour appeal court in a voluntary sequestration matter held that the automatic termination of employment in the event of sequestration led to a dismissal under the Labour Relations Act. With this in mind, she directed the Committee to page 6 of the submission, and explained that employment contracts currently terminated automatically in terms of S 38. She noted that with compulsory sequestration procedures, a provisional order would firstly be granted. As a result, they were concerned with situations in which the provisional order would later be set aside, because employment contracts would not automatically revive as a result thereof. This was an anomaly in our law.

Ms Govender stated that their reading of the proposed S 36 was that suspension would operate in the same manner as the termination of contracts under compulsory sequestration, and that this had been confirmed in the SA Agricultural Plantation and Allied Metals case, and in the Waverly Blankets case.

Before dealing with point 3.1, she moved on to point 3.2.

Ms Govender explained that they were concerned with S 38 (5). This is because the words "trustee" and "sequestration order" read with S 1 of the Act, could also include "provisional trustees" or "provisional sequestration order", if not qualified. She believed that a provisional trustee could not be granted the power to terminate employment contracts, and she noted that in terms of S 18 (3) of the Act, a provisional trustee could not sue or be sued. It would also be necessary to view the termination differently to the current view, because as the situation presently stood, an automatic termination was not deemed to be a dismissal in terms of the Labour Relations Act. She noted that the trustee would step into the shoes of the employer, and that as a result, if would not fit accordingly if the provisional trustee were granted the power to automatically terminate employment contracts.

Adv De Lange stated that S 5 specifically provided for a "trustee". Why was she suggesting that a provisional trustee was also included.

Ms Govender responded that this was the case in light of the definitions provided in S 1.

Adv De Lange stated that although the definition could include provisional trustees, the Act stipulated that S 5 would apply only to trustees. He wondered whether a provisional trustee at all came into play in the matter.

Ms Govender said that a provisional trustee automatically came into play by virtue of S 1. She did not think that timing of suspension was different for the timing of the automatic suspension guaranteed under the existing law.

Adv De Lange said that his understanding of the provision was that employees would be given breathing space, and that this was there to protect them. He did not fully understand whether the law was very strict regarding the steps that had been identified by Ms Govender.

Ms Govender explained that the reading of the section was that provisional trustees would have the power to terminate employment contracts upon the granting of the sequestration order.

Adv De Lange understood her remark. However, he wanted clarification as to whether that was her point of concern.

Ms Govender gave the example of debtors using friendly sequestration proceedings to evade certain debts, and she stated that it would be possible in terms of the new amendment to S 197 for employees to evade employment contracts. Thus it would be necessary to prevent such instances.

Adv De Lange wanted to know how a provisional trustee worsened the position because they would also be appointed by the Master.

Ms Govender spoke in relation to the first and second meeting of creditors, and explained that their proposed amendment would therefore allow employees and trade unions to engage in that process. She gave the example of the S 311 scheme in terms of the Companies Act.

Adv De Lange questioned whether she was not dealing with a separate issue because steps had been provided in this particular instance.

Ms Govender explained that even a final sequestration order could be set aside. Their concern was the fact that terminated employment contracts would not be revived, and she found this unfair and illogical to workers. Such an amendment would protect employees while at the same time not removing the mandate of provisional trustees.

Adv De Lange understood her point and directed her to proceed with the submission.

Ms Govender moved on to point 3.1 dealing with the entitlement to employment benefits. She stated that they were concerned by the fact that the original wording qualified the benefit. The amendment therefore sought to broaden the scope beyond what was necessary.

Adv De Lange asked her whether they were attempting to limit the benefit in terms of the Basic Conditions of Employment Act.

Ms Govender responded affirmatively, and added that a proviso could be included.

Adv De Lange wanted to know whether any benefits accrued to the average employee, other than those identified in the Basic Conditions of Employment Act.

Ms Govender replied that from her reading, this was not the case.

Adv De Lange confirmed that they were worried that more benefits than necessary would be included.

Ms Govender said that was the case.

Ms Govender moved on to point 3.3 on page 9 of the submission. She explained that some parity with lease agreements would be necessary, and that as a result thereof, the automatic termination of employment contracts should not occur before the second meeting of creditors.

Adv De Lange commented that it was possible that final sequestration would not take place expeditiously, especially in relation to big companies. He suggested that they were attempting to introduce a whole new contract. Nevertheless, he chose not to presently debate the matter.

Ms Govender referred to the S 38 (7) scheme, the possibility of automatic termination of contracts without revival.

Adv De Lange wanted to know whether all other contracts continued to run.

Ms Govender responded that all other contracts would terminate, from her reading. However, in terms of S 37, lease agreements would not terminate.

Adv De Lange asked her whether she wanted lessors to be treated in the same manner as employees. He noted that such a provision could be detrimental to the aims of the company, and gave the example of the company being kicked off the premises.

Ms Govender referred to the provisions on consultations, and stated that the proposed S 38 (6) would require trustees to go through various motions. This reflected S 189 of the Labour Relations Act. However, they were concerned with the amendments to S 189 and S 189 (a) of the Labour Relations Act, and said that they wanted to see consistency between the provisions.

Adv De Lange said that the matter was technical, and that they would look into it.

Ms Govender added that the proposal relating to S 38 (5) was also a technical matter. They felt that it also had to be subject to subsection 7.

Ms Govender said that they had essentially understood point 4.3 to relate to a dismissal. To involve the creditor would undermine the process. Thus they proposed that the provision also include employees and trade unions.

Adv De Lange was not sure whether she was relating to the inclusion of creditors. He felt that S 38 (9) dealt with the matter.

Ms Govender stated that they were concerned that it essentially undermined the consultation process between employees and employees.

Adv De Lange said that it would not be possible to exclude creditors. Nevertheless, he noted that the provision was not obligatory.

Ms Govender concluded her presentation by dealing with S 38 (43), S 38 (4) and S 38 (11). She said that COSATU supported the amendments.

Adv De Lange thanked her for the good input that had been made. He opened the meeting to the floor.

Discussion
Mr Delport (DP) referred to page 5 of the submission and stated that he did not see the reason for its inclusion. He explained that he opposed the inclusion of offences in legislation. He noted that COSATU sought to introduce failure on a service. However, other remedies already existed, and he gave the example of the final order not being granted.

Ms Govender said that the issue of offences was currently not problematic as there was no onerous requirement.

Adv De Lange stated that to make a crime out of not giving notice represented quite a jump in the law. He agreed that a sanction would be necessary. The problem then lay in the mode of sanction.

Ms Govender emphasised that a sanction would be necessary in order to protect employees because they would be in vulnerable positions.

Mr Delport (DP) had a remark relating to the consultations to make. He explained that the idea of insolvency was that trustees would take command of the situation. He wondered whether the consultative processes would be effective on the aims of the trustee.

Mr Coleman began by making a general introductory point in respect of what they were trying to achieve. He noted that there were three points that could not be forgotten:
a) that workers would be in the most vulnerable position
b) the extensive abuse of employees in terms of the Insolvency Act
c) the recognition by government of this factor
The situation was therefore not only about following prescribed processes. It would also be necessary to involve employees because they would have the greatest interest in the preservation of the business. The consultation would ensure that the employees would go through the process, in an attempt to save the business.

Ms Govender added that the powers of the trustee would have to be exercised with prior authorisation from either the Master or the creditors. This was a form of protection, and the acts concerned were atypical of normal day to day acts.

Ms Camerer (NNP) was concerned with the proposal because her understanding was that the provisions of the Insolvency Act were there to protect creditors. She noted that although the inclusion of employees would be a good thing, the correct balance would have to be struck.

Mr Coleman responded that the reality of the situation was that the scales were already horribly tipped, and that this was therefore simply an attempt to restore the balance.

Ms Govender added that although the SALC had noted that the Act was intended to protect creditors, the problem was that the scales weighed too heavily in favour of the creditors, at the prejudice of employees. She noted that although the matter turned upon issues that were not in the framework of the Committee, the economic knock-off effects would have to be considered.

A Member said that although he understood the importance of NEDLAC, it would not be possible to bind the Legislature to their agreements. He referred to point 2.2 and point 2.3 on page 3, and also to page 5, in an attempt to highlight the instances where NEDLAC had not been mentioned. He wanted to know whether this meant that no agreement with NEDLAC had been reached and that COSATU's personal opinion had been conveyed. He noted that the distinction would be necessary.

Mr Coleman said that it would not be possible to have it both ways, that is, to allow an amendment only in instances when NEDLAC agreed upon it. He said that the protocol in NEDLAC, through which extensive negotiations were conducted over a number of months, led to binding agreements between the parties. However, where the agreement was silent, all the parties would then have the latitude to come to Parliament in order to raise silent issues.

Adv De Lange stated that such measures would result in problems with point 3.2 and point 3.3.
Ms Govender responded that suspension did not amount to the termination of contracts.

Adv De Lange said that the Act clearly envisaged that all contracts would terminate 45 days later. In light of this, he stated that Ms Govender was suggesting that the 45 days would become uncertain, and that this potentially had the nature of changing what had already been agreed upon.

Ms Govender replied that not all gaps in the Bill were concretely decided because of the technical nature of the Bill. She added that they were attempting to accommodate the oversight.

Mr Jeffery (ANC) wanted to know whether submissions were made by COSATU to NEDLAC on point 3.2 and point 3.3.

Mr Coleman reiterated their understanding of the process, and the division between short and long-term goals. He explained that at this stage they sought to capture the key issues in the NEDLAC agreement. However, he noted that the Department had left out certain matters. Nevertheless, they were essentially confined to the short-term matters.

Ms Govender went on to highlight two distinctions in the NEDLAC process, the accompanying Bill that had not been signed, and the agreements in terms of annexure 1, at point 3.2.2.

Adv De Lange asked whether annexure B related to short-term goals.

Mr Coleman affirmed this position. He added that they would clearly have been unable to draft the long-term goals without having dealt with the issues in annexure B.

Adv De Lange enquired whether S 3, S 4, S 11 and S 136 were in the draft Bill.

Ms Govender stated that from her understanding, they were not included.

Mr Jeffery asked whether a NEDLAC agreement was attached to point 2.1 in the Bill. In addition, he wanted to know COSATU's response to the amendment.

Ms Govender responded that they considered notification to be extremely urgent. She explained that they would receive calls from farm workers, complaining that they were only informed of the liquidation at the time of dismissal. She felt that the process could not wait until that. The two principles would have to be considered, namely the prejudice to creditors and the value of the estate. However, it would not be correct to simultaneously undermine workers.

Mr Jeffery began by saying that COSATU had come up with a number of amendments that seemed reasonable in terms of part 2 of the submission. He referred to the matter at point 2.1 and stated that the department considered them to be long-term. However, he felt that the distinction between long and short-term goals would have to be looked at in greater detail.

Adv De Lange agreed and stated that they would look into the issue.

Imam Solomon (ANC) broadly understood that COSATU had a number of genuine concerns. He wanted to know whether he was correct in his analysis, and went on to list the concerns: -
1. Fear that the labour contract would not be fully protected.
2. The protection of benefits, i.e. for farm workers.
3. The role of labour in consensus.

Ms Govender explained that they were looking to ensure that labour, trade unions and employees would be consulted. She added that this had to occur both during and prior to sequestration. She noted that the Act clearly did not apply prior to sequestration. However, the fact that different phases in sequestration existed was an important point to bear in mind.

Adv De Lange asked the delegation from COSATU to provide the Committee with the amendments to S 189 of the Labour Relations Act.

Submission by the Cape Law Society
Adv De Lange asked the Society to consider whether S 38 fitted in to the scheme of the Act.

Mr Harris referred to the compatibility of S 38, and mentioned that the team from COSATU had raised an analogy with S 37. He explained that their understanding was that S 37 was indeed very similar to the proposed S 38, and that the provision did not relate to a provisional trustee at all.

Adv De Lange wanted to know where S 38 would fit in.

Mr Harris reminded the Committee that S 37 was the point raised about the lease. However, S 38 would kick in upon the granting of the provisional sequestration order. To interpose, he stated that for company applications, this would be when the papers were lodged.

Adv De Lange stated that he had read the provision in a similar light.

Mr Harris stated that the submission was fairly brief, and he noted that they had anticipated responding questions. He introduced Mr Gore from the Insolvency Practitioners Society of South Africa (IPSO), and explained that he would also assist in answering questions.

Mr Harris said that the thrust of their concern was the implementation and effect of the proposed legislation. He felt that the trustee should be able to preserve the business as a going concern. However, it would be necessary to read this in the context of S 197 A of the Labour Relations Act, because a strong parallel existed between the two. The difficulty lay in the abuse of sequestration proceedings. Nevertheless, the trustee would be faced with the tail end of the situation, being required to realise the assets. The Insolvency Act did not have an established rescue culture. Thus in terms of the legislation as it stood, the trustee would have to ensure the maximisation of the claims of all creditors.

Mr Harris noted that they fully endorsed the alteration of the position of employees from concurrent creditors to preferred creditors.

Adv De Lange commented that most of what Mr Harris had said was based on paragraph 6 in his submission. However, he did not agree with the reading of the section that had been suggested, namely that the provision was open-ended.

Mr Harris explained that his understanding was that the situation arose from the appointment of the trustee in terms of S 66. However, he stated that the 45 days provided for did not indicate a fixed or determinate period, and he gave the example of opposed motions or delays in the process. He added that this was in itself open-ended.

Adv De Lange questioned whether the provision was not already open-ended as it stood.
Mr Harris responded that the trustee was empowered by the Act to take steps to realise all the assets.

Adv De Lange stated that nevertheless, a clever provisional trustee would already take such steps.

Mr Harris told him that he was quite correct. However, he explained that the trustee was constrained, such as by virtue of the security costs or insurance premiums. He said that the concern simply related to the disposal of the business as a going concern.

Adv De Lange asked him whether he meant that the Act did not deal with that situation.

Mr Harris explained that the transfer of employees was not part of the going concern. He noted that it was possible that new employers would not want the obligations of the old employer.

Adv De Lange directed him to suggest a solution to the problem.

Mr Harris stated that although they had raised concerns, they were not sure how the problems could be dealt with. He noted that the Act itself did not interfere with the power of the trustee to approach the court.

Adv De Lange confirmed therefore that the point raised earlier by COSATU relating to the provisional trustees was not a problem because the subsection would only kick in following the appointment of a provisional trustee.

Mr Harris responded affirmatively.

Adv De Lange stated that subsection 10 clearly referred on to trustees appointed in terms of S 56.

Mr Harris said this was certainly the case as far as he had understood the provision.

Adv De Lange noted that the meaning given accorded with his personal opinion, as from when he first heard the issue mentioned by the team from COSATU.

Mr Harris added that subsection 10 specifically related to S 56.

Adv De Lange wanted to know whether points 6.1, 6.2, 6.3, and 6.4 in the submission were issues further than those that had already been raised.

Mr Harris explained that point 6.2 was a practical point, although he was not sure how it could be implemented. He noted that the trustee would have to notify the employer upon the termination of employment contracts, and that the possibility of damages claims existed.

Mr Harris stated that point 6.3 had been answered by the point dealing with consultative processes, raised by COSATU.

Adv De Lange asked him if he had any other issues to deal with.

Mr Harris had a point of clarification to make regarding the submission made by COSATU. He explained that the cancellation of employment contracts did not automatically result upon the granting of the sequestration order. He added that lease contracts were specifically regulated. Nevertheless, the trustee would be given the election whether or not to abide by existing contracts. He noted that in terms of the schemes of the Act, this would give trustees the opportunity to investigate the contracts.

Adv De Lange stated that he had made a useful point. He asked Mr Harris for his views surrounding the proposals relating to S 4 and S 9 that had been made by COSATU. In particular, he wanted to know whether they were major issues.

Mr Harris said that one had to guard against the situation where such measures had the potential to be inappropriate. He added that the putting up of posters could turn out to be counterproductive. Nevertheless, he noted that he did not have a problem with the principle.

Adv De Lange stated that the fallout could possibly go both ways. He noted that now that a steam letting off process was provided, that could possibly negate the undesirable effects.

Mr Harris explained that employees as preferred creditors would be able to vote for the appointment of trustees. He noted that in practice employees would be more vigilant in finding the appropriate trustee. Thus the distinction between the employees and trustees was not totally appropriate.

Adv De Lange wanted to know whether the Act guaranteed employees preferential status.

Mr Harris responded that the amendment to S 98 A approximately three years ago advanced the position of creditors. He explained that the appointment of provisional trustees would be by the Master upon the recommendation of the creditors. This meant that employees, probably carrying the largest number of votes, would usually be able to ensure the appointment of their trustee of choice.

Discussion
Mr Mzizi asked for clarification regarding page 2 of the submission as he was concerned with item 7, the reference to the Committee.

Mr Harris handed the floor over to Mr Gore, as a practicing litigator, to respond to the questions.

Mr Gore stated that the dealing had to either occur in the early stages of liquidation, or not at all. He noted that in his 25 years of practice, he had never come across the situation where sequestration proceedings were used to defraud employees. However, this did not mean that he was excluding the possibility. He agreed with COSATU that employees were ill-treated. However, the reality of the situation was that the dealing would have to occur quickly. This therefore made it necessary to strike the correct balance. He added that over the past few years, it had become very difficult to sell businesses as going concerns, and he noted that it would have been possible to save the businesses had the buyers not been scared off. Nevertheless, he stated that the only contracts that he knew to be automatically terminated were employment contracts. Although he fully supported the amendments to S 38, he said that S 197 of the Labour Relations Act would cause a problem, and that this is where his greatest concern lay.

Adv De Lange stated that a clever trustee would therefore use the provision in order to ensure that dealing could occur earlier.

Mr Gore stated that the concern shared by practitioners was that consultations would have to occur earlier in order to save jobs.

Adv De Lange mentioned that the Act only required that trustees attempt to reach a consensus. In the event of failed consensus, the Act therefore did not prevent the trustee from proceeding with the duties. He noted that the comment made was not in order to teach Mr Gore bad law!

Mr Gore responded that it would be better to save 100 jobs out of 200 jobs, than not to save any jobs at all.

Adv De Lange repeated the trustee would simply be required to try. Nevertheless, he understood the point that was being made, and noted that everyone was scared of change.

Mr Gore replied that the fear was not of change. Rather, his experience had shown him that employees were not properly treated.

Ms Camerer enquired whether 45 days was too long a period.

Mr Gore explained that there would be a return date for final liquidation matters, and that the process therein was long. As a result, the 45day period did not mean anything, and he added that it would begin to run only upon official appointment.

Adv De Lange added that by then it would be too late.

Mr Gore stated that businesses would be sold following liquidation mostly at very early stages. He added that in the event of failing to sell the business, the effect would probably be that the business would be run down.

Mr Smit referred to the NEDLAC agreement, page 2 of the COSATU submission, and stated that the NEDLAC agreement did not include employees. He wanted to know whether the balance had not been reached in NEDLAC. He noted that although he could be missing the point, it seemed that such a point was being advanced.

Mr Gore explained that in practice, trade unions would be very proactive in the nomination of liquidators in an attempt to secure their protection. Therefore, although workers could now be seen to be mostly aware, he added that such instances had resulted only fairly recently. He noted that trade unions would be able to vote for all the employees, thereby showing that the process had become increasingly transparent. He added that putting up notices did not do the staff any favour, probably doing the employees more damage than good, and that the better option would rather be to get in touch with the union.

Mr Gore noted that sometimes workers would not be represented by trade unions.

Adv De Lange agreed with him, and added that the word "or" was used in an attempt not to omit any employees. He suggested that they would further discuss the matter as a Committee. Nevertheless, he stated that he would seek a response from the department as to why it dealt only with the 2clauses.

Mr Jeffery (ANC) stated that it would be useful to hear whether Mr Gore agreed with point 2.1 of the memo. He added that he was slightly concerned with the assertion that S 4 was inappropriate. Nevertheless, he wanted to know whether they agreed with the sections referred to in point 2.1.

Mr Swart (ACDP) wanted to understand the NEDLAC process, and asked whether their concerns were covered there.

Mr Harris responded that he was not personally involved in the NEDLAC process.

Adv De Lange stated that he should not have raised the point in the first place because Mr Harris had not had the chance to apply his mind to the issue. He decided to leave it at that, and noted that any comments in the future would be most welcomed by the Committee.

Mr Harris said that he would happily do so.

Adv De Lange wanted to know why Mr Cronje did not deal with the two clauses.
Mr Cronje responded that they would be part of the broader process. He noted that the project was not currently before the SALC.

Adv De Lange directed Mr Cronje to: -
a) Draft a resolution for the Committee in relation to S 4 and S 9.
b) Follow up on the difference of opinion surrounding the appointment of provisional trustees. He noted that he followed the understanding given by the law society, and added that if that was indeed the correct view, the Act would technically be correct.
c) Look at the further amendments to S 189 of the Labour Relations Act, because they were not taken into account when the agreement was reached, thereby outdating the agreement.
d) Revisit the previous discussions surrounding factors that would have to be changed.

Adv De Lange asked that Committee whether there were other issues that they felt had to be checked in terms of the Insolvency Act.

Mr Smit explained that labour law contained different categories of persons. He referred to the NEDLAC agreements annexed to the submissions, and asked whether the reference to trade unions was specifically meant to exclude workers.

Adv De Lange responded that he had made the suggestion that such issues not be included in the current Bill. He stated that the issue raised would become relevant in the bigger Insolvency Act.

Adv De Lange told Mr Cronje to also investigate the issue surrounding benefits.

Mr Cronje stated that although he wished to explain paragraph 3.1, he would not do it at this stage.

Adv De Lange said that he would be given time to prepare.

Mr Swart (ACDP) referred to the issue relating to the going concern of the business that had been raised by Mr Gore. He stated that he could not suggest how to deal with it.

Adv De Lange stated that upon discussing the amendments, the Committee would be able to revisit the issues.

Adv De Lange directed Mr Cronje to prepare all the information for the Committee.

Opinion on the African Court by the State Law Advisor
Ms Susan Masaphu, a State Law Advisor, had done an opinion on the African Court opinion been written a year earlier. He said that he felt that the issue had been dragging on, and that the time had come to reach a decision upon the matter, whether way or the other. He stated that the issue surrounded the creation of the African Union. The Union contained many institutions, and he explained that the African Court to be created would have jurisdiction over all matters relating to the African Charter. However, he went on to explain that the main problem was the fact that the South African Constitution was categorical. This was in contrast to the African protocol which stated that the African Human Rights Court would be the highest court. In light of this, he made a few distinguishing points: -
a) There are two courts.
b) Both interpret different institutions.
c) The equality clause in the African Charter is simple. However, the equality clause in our Constitution was drafted in a totally different manner, thereby making our equality clause prima facie different.
d) Although the African Charter guarantees the right of self-determination, our Constitution does not do this.
e) Our Constitution contains other rights, such as property rights.

Adv De Lange explained that as the protocol currently stood, countries would be allowed to bring claims only against each other. He noted that the previous memo received had provided the Committee with background information, and he reminded the members that they had been concerned with the court system. He explained that this was because they had felt that the protocol was inconsistent with the Constitution. He added that they had noted that it could be that the protocol would be the final arbiter. However, he stated that they decided as a Committee to get an opinion from the law advisors. He said that the task had been carried out, and that it was now time to table the opinion.

Adv De Lange handed the floor over to Ms Masaphu. He thanked her for coming at such a short notice, and directed her to deal mostly with the conclusion of her opinion.

Ms Masaphu thanked the Chairperson for the opportunity to slightly elaborate on the opinion that she had written in 2001. She explained that her opinion had been based on the questions posed by both the portfolio Committee and the department, identified in point 2 of her opinion. She went on to illustrate how she had attempted to answer the questions, referring the Committee to point 3 of her opinion. She noted that S 167 (3) (a) of the Constitution was violated in light of the fact that the decisions of the African Court would be final and binding. She felt that it would be necessary to analyse the different jurisdictions, and in this regard explained that our Constitutional Court would apply Constitutional jurisdiction whilst the African Court would apply and interpret the African Charter.

Adv De Lange added that the only issue then would be the situation that could arise should the African Court interpret the right to equality whilst excluding affirmative action, as in the USA, for example.

Ms Masaphu identified 2stages in the process:
1. Ratification of the Charter.
2. Binding obligation to give effect to the rights guaranteed therein.
Nevertheless, she noted that until there was compliance with S 231 (4) of the Constitution, the treaty would not form part of domestic law.

Adv De Lange stated that it was really moral persuasion.

Ms Masaphu said that on her thinking that was the case.

Adv De Lange confirmed that the obligation would not be binding on our law.

Ms Masaphu agreed. She handed the floor over to her colleagues.

Mr Myberg added that once protocol like this becomes part of our law, our Constitutional Court would suffice. This means that it would not be possible to comply with the protocol in practice, regardless of the moral obligation.

Adv De Lange stated that although the protocol could literally be correct, there was a possibility that it would not be correct in the broader perspective.


Discussion
Adv De Lange opened the floor to any questions.

Ms Chonkota wondered whether the provision was self-executing, and considered the fact that the department could have made such a policy decision.

Ms Masaphu responded that from her reading of the protocol, she did not think that such provisions existed. She emphasised the fact that the clause was not self-executing.

Adv De Lange enquired about the situation regarding NGOs.

Ms Masaphu explained that Article 5 allowed the court to grant them observer status.

Ms Camerer commented that inability to comply with the African Court judgements would amount to hollow ratification. In this regard, she wanted to know what the point was.

Ms Camerer asked for an indication of how such processes were carried out in Europe, such as in the EU Human Rights Court.

Adv De Lange suggested that a similar situation occurred there. He said that although moral enforceability existed, there was no supra sheriff ensuring compliance. He noted that a further question to consider would be whether positive orders could be granted. He stated that S 30 of the protocol worked like that, and that despite the fact that an undertaking existed, no enforcement mechanisms could be identified. On a slightly different issue, he added that the EU also allowed compensation to be granted. Nevertheless, he emphasised that the African Charter did not make provision for compensation.

Adv De Lange begged that Ms Camerer would read before posing further questions. He said that it would not be necessary to deal with irrelevant matter, and he emphasised that in our protocol, the undertaking regarded only the enforcement mechanism.

Adv De Lange added that it was important to be aware of the fact that the law advisors had merely submitted an opinion. In order to allay the fears of the Committee, he explained that when he read the opinion, he had sent it back to the advisors indicating that the Committee would never agree with such a clause. He said that he had directed them to provide alternative solutions, and noted that the possibility of the SA government reserving enforcement was not an option.

Ms Masaphu referred Ms Camerer to Article 16 of the EU Convention, a particularly similar provision. She noted that most of the European countries did not have Constitutions. This contrasted with the different jurisdiction operative in SA, and it was for this reason that it had been found difficult to agree with Article 16. She was of the opinion that the African Court could not operate in a vacuum, and would take from other jurisdictions in that regard. However, she highlighted the fact that most African countries admired the SA Constitution. Therefore, she stated that SA would probably dominate to such an extent that in the event of apparent conflicts, they would not materialise. She stated that our Constitutional Court would not be called upon to decide for the African Charter, and vice versa. Nevertheless, the two would complement each other.

Adv De Lange added that the reservation solution could be dropped.

Mr Myberg stated that it was advanced in Article 5 (3) that the government approval would be required.

Adv De Lange noted that the question was not to be answered at this stage. He stated that he would suggest, in resolution to the Committee, that governmental actions would have to be placed before Parliament for approval.
Adv De Lange explained that Ms Masaphu had made his position more comfortable. He suggested that the Committee look beyond the mere wording. He added that it would be necessary to firstly exhaust all internal remedies before granting jurisdiction to the African Court. He stated that understood in that context, he did not find inconsistency between the African Court and our Constitutional Court. In light of this, he proposed that the Committee pass the African protocol. He noted that he had spoken to Justice Chaskalson, and that the judge had also taken the pragmatic view. Nevertheless, he stated that it would be necessary to add to the Act that in terms of S 5 (3), any government actions would also require the approval of the Committee. He added that it would not even be necessary to mention the reservations, and he ended by saying that if he really felt that an inconsistency existed in light of the original concerns, he would not have proceeded to suggest that the Committee pass the protocol.

Mr Myberg referred the Committee to the objective article written by the State Law Advisor dealing with Foreign Affairs. He stated that the article would probably allay any fears carried by the Committee.

Adv De Lange asked him to provide the Committee clerk with the article.

Ms Camerer enquired whether it would be possible to have a look at the Charter.

Adv De Lange told her to look at her files because the Charter had been handed out to the Committee approximately 2years ago.

Mr Smit referred to pages 1 to 5 of the opinion and stated that at least two issues were raised, namely:
that of sovereignty
the fact that the application of S 231 (4) of the Constitution could be problematic.

Adv De Lange stated that there had not been any suggestion to do that. He explained that the Charter had only gone as far as S 231 (4), and would not be able to do S 231 (4). He noted that our Constitutional Court would probably have some influence in that respect because it would firstly be required to exhaust internal remedies.

Adv De Lange directed Mr Rlles to draft a resolution for the Committee indicating that they had adopted the protocol. He asked him to make an attempt to accommodate the fact that the Committee had looked at both the African Court and our Constitutional Court, in an attempt to ensure that no inconsistencies existed with our Constitution. He added that it would also be necessary to include the fact that the Committee was aware that the Charter was not yet part of SA domestic law by virtue of the SA Constitution. Thus at this stage the jurisdiction would be between states. He noted that the protocol required the exhaustion of internal remedies, and concluded by saying that having weighed up all relevant factors, the Committee decided to agree to the protocol. He cautioned Mr Rlles to deal with S 5 (3) and S 36, and to spell out the matters in a more nuance way.

Adv De Lange stated that he would leave it to Mr Rlles, and noted that the Committee had no doubt that he would do a brilliant job in the drafting thereof.

Ms Chonkota noted that the opening remarks in the opinion spelt the matter out very nicely. Thus she suggested that Mr Rlles begin on that note.

Adv De Lange agreed with her.

Ms Masaphu suggested that the Committee read the protocol simultaneously with the Charter because the two were complementing documents. She gave the example of Article 50 of the Charter requiring that all internal remedies be exhausted, and explained that the Protocol did not contain a similar provision.
Adv De Lange agreed. He thanked the law advisors for their contribution and stated that the Committee really appreciated the work that they had done.

Rules relating to the Promotion of the Administration of Justice Act

Adv De Lange moved on to the next issue. He reminded the Committee that they had discussed the rules relating to PAJA in their previous meeting, and that he had hoped to have an amended version of the rules presently before the Committee. He explained that the rule was intended to amend the present rule of court dealing with review proceedings. In this regard, the amendment would then require that the state respond by attaching all relevant documentation to the response. He stated that his feeling was that the rules had to be changed in order to accommodate this issue. He explained that the Committee did not have a draft before it because of the relatively short notice to prepare for the meeting. However, he said that the amendment should have been approved in November 2001, and noted that the Committee was really late with the matter.

Adv De Lange asked the floor whether there were any further points to be made.

The floor did not have additional points to raise.

The Reinstatement of Certain Legal Practitioner's Bill

Adv De Lange turned to the last issue on the agenda. He reminded the Committee that the Bill was on the agenda because they had already had some discussions surrounding it during the last meeting. He stated that he was dealing with a further proposed amendment to the Bill that had been sent to the Committee by Mr Bam. He explained that Mr Bam was currently dealing with a reinstatement case, and had suggested that through the present drafting of the Bill, one should be allowed to be reinstated if one was removed as a result of one's own activism. He noted that the letter had been circulated to the Committee, and he suggested that Mr De Lange add the suggested amendment to the amendments that had been agreed upon at the previous meeting.

Adv De Lange asked Mr De Lange whether he had any additional comments.

Mr De Lange responded negatively. However, he noted that at some stage the Committee would have to discuss the matter at length.

Adv De Lange asked the floor for additional comments.

The Committee did not have any additional remarks to make.

Committee Programme

Adv De Lange stated that it would be necessary to make some points surrounding the Committee programme. He explained that he had currently asked Mr Durand to harmonise and collect all the provincial reports, and was awaiting the documentation. He noted that there had been some difficulties collecting the reports relating to 3 of the trips, and that the hold up was in the department. He hoped that the report would arrive as soon as possible. He added that the brief inputs that he had received from those that attended the trips had been positive. The next step would therefore be to discuss the reports as a Committee, and then debating them in the House.

Adv De Lange commented on the fact that they were still awaiting the 2001 Report. He hoped that it would be finalised soon.

Ms Chonkota stated that although the idea had been to adopt a uniform standard, there were currently 4 uniform standards.

Adv De Lange added that they had gone way beyond uniformity. He mentioned the fact that he would attempt to organise trips to the Western Cape. However, most importantly, he stated that Mr Durand would have to speak to Mr Rudman.

Mr Jeffery (ANC) noted that he had managed to receive a fax from the North West province. However, he was of the opinion that there were certain changes that would have to be made. Nevertheless, he said that it was a matter that would have to be discussed between him, Mr Swart and the Chair.

Adv De Lange agreed that such a step would be necessary.

Adv De Lange moved on to the programme for next week, and stated that it would be necessary to finalise the hearings and to mandate upon them. He added that towards the end of the week, he hoped to begin dealing with the budget, deciding the matter one way or the other.

Mr Jeffery (ANC) suggested that the Chair set down a provisional date on Monday due to the fact that the agenda was filling up.

Adv De Lange outlined the rest of the programme:
Week beginning 13 May would be dedicated to finalising the crossing.
The following Monday and Tuesday would be set out for legislation.
Input on the limitations would then be heard, in order to fully prepare to respond to the NCOP.
The Interception and Monitoring Bill would then be dealt with in the event of spare time.
Briefing from the International Criminal Court. He noted that although the Bill had been drafted, it would be necessary for him to go through it with them

Adv De Lange explained that the only outstanding matter would be the Judicial Officers Bill. He noted that he had no doubt that Mr De Lange was soon to provide some information in that respect.

Adv De Lange told the Committee that he had spent 2days at a seminar with the Magistrates Commission, and that he had found the experience to be very fruitful. He reminded the Committee of the fact that they had determined that there were problems with the disciplinary mechanisms and with the appointment mechanisms. He stated that there would have to be urgent amendments to the relevant Acts. Nevertheless, the seminar was exceptionally good, and he suggested that he would get a copy of it available to the Committee.

Adv De Lange stated that 6members had attended the Constitutional Court in order to hear the Neviropene debate, because it would impact upon the separation of powers between the 3spheres of government. He said that it had been very useful to be there for 2days, and added that he had been told that all the documentation was available on the net.

Ms Camerer thanked the Chair for taking the initiative. She noted that it was a faith restoring exercise into our Constitutional democracy.

Adv De Lange referred to the Braisles judgement that had been handed out to the Committee, and stated that the case was outrightly racist. He noted that it was an important judgement dealing with the freedom of expression.

Adv De Lange made some final comments on the budget vote. He stated that he had proposed they would begin the votes by hearing the Minister within 2weeks. He said that they would then invite the Auditor General, noting that this would be for the first time. This would then be followed by visits to the provinces.

Adv De Lange noted that the Committee was facing a full agenda, leaving no real room for legislation. Nevertheless, he stated that the Committee would make a plan. After saying that he had given the Committee an idea of where they were going, he asked the members whether there were any questions.

No questions were raised.

On that note, the meeting was adjourned.