Three legal firms join Norton Rose Fulbright in challenging BEE code

Three of South Africa’s major legal firms announced on Tuesday their intervention in the legal proceedings initiated by Norton Rose Fulbright (NRF) to challenge the government’s legal sector BEE code.

In a joint statement issued by Bowmans, Webber Wentzel, and Werksmans, the firms note their decision to intervene is aimed at ensuring that any legal sector code is “evidence-based, practical, tailored to the unique nature of the legal profession, and that it does not discard the well-established principles of the generic codes that benefit black lawyers as well as other black persons more generally”.

The firms expressed particular concern that the legal sector code overlooks the fact that large corporate law firms operate as complex commercial businesses within a regulated profession.

“It also fails to recognise the vital role these firms play in training black legal professionals who go on to become judges, senior counsel, and corporate legal leaders,” the trio said in the statement.

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The Department of Trade, Industry and Competition (dtic) published the Broad-Based Black Economic Empowerment Legal Sector Code of Good Practice (LSC) in September 2024, stipulating a range of compliance targets for higher B-BBEE ratings for large law firms, including that 50% of black legal practitioners should have ownership, voting rights and positions in executive management in the next five years.

According to Bowmans, Webber Wentzel and Werksmans, which all currently hold Level 1 B-BBEE ratings under the Generic Codes, the LSC would mean their B-BBEE rating scores are set to decline from Level 1 to Level 6 or lower.

The trio further stated that the timeline for achieving the code’s black ownership targets is problematic, with a doubling of black ownership targets to 50% by year five.

“This overlooks the fact that in the legal sector, only practicing lawyers in a firm can be owners [in the form of an equity partnership]. They are personally liable for the debts of the firm and retain ownership until retirement. Junior lawyers follow a structured progression path that generally takes 10 to 11 years before becoming equity partners, whereafter most tend to retain ownership until retirement.”

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According to the firms, even with the best intentions, they simply cannot meet these targets within the required timeframe.

“Revising the implementation timelines would allow firms to meet transformation goals effectively while maintaining stability in the sector, as well as ensuring that junior lawyers are properly trained and equipped with the necessary skills to advance to more senior positions,” they said.

NRF went to court in January to block the new sector code, arguing that it sets unreasonable and impractical targets on legal firms.

Two weeks later, the firm withdrew its bid, although it stated at the time that it did not drop its opposition to the code, reiterating that it was still unconstitutional and unimplementable.

Paul Janisch, a BEE consultant and analyst, believes a legal challenge against the code has a very good chance of succeeding.

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“You have the best collection of legal minds in Sub-Saharan Africa taking on the dtic that has been running roughshod over SA businesses with their empowerment processes and gazetting codes at will, saying it’s legal and legitimate and no one has ever questioned it,” said Janisch.

“It’s a typical feature of legislation in SA – where due process is often not followed. And due process requires a proper analysis of the sector or industry to make sure the proposals will work in the legal sector. They failed to do this.”

This article was republished from Moneyweb. Read the original here.