The High Court of Zimbabwe has nullified the exchange control directive No. R120/2018, issued by the Reserve Bank of Zimbabwe (RBZ), which created FCA “nostro” accounts as distinctive from “RTGS” accounts, saying it is unconstitutional.
This follows an application by Penelope Douglas Stone from The Stone/Beattie Studio, which was represented by Tendai Biti, challenging the directive to convert its US$142 000 bank balance held by CABS to RTGS balance.
At the time, the directive resulted in several companies and pension funds suffering huge exchange losses. The RBZ directed that all bank deposits made prior to October 2018 be converted from then-existing United States Dollar balances into RTGS balances. Prior to October 2018, the US dollar was trading at par with the local currency-the bond note and RTGS.
Now, the court ruling could potentially open floodgates of cases over the conversion of United States dollars bank balances to RTGS balances.
In the judgment, Justice Happias Zhou granted the application on the grounds that the RBZ decision was not legally and morally justified, to change the currency of a bank account by simply ‘renaming it’.
The court ordered CABS, the applicants’ bankers, to pay The Stone/Beattie Studio US$142,000 which is the amount that they held in their account in 2016 or transfer it into a “nostro” account nominated by the applicants.
“Exchange Control Directive No. R120/2018 issued by the first respondent through its Governor on 4 October 2018 be and is hereby declared to be invalid, and is accordingly set aside.
The first respondent shall pay to the applicant the sum of US$142 000.00 in the currency of the United States of America or transfer that amount into a Nostro Foreign Currency Account as may be directed by the applicants within seven days from the date of this order together with interest thereon at the prescribed rate of 5% per annum from the 17th October 2018, being the date of the letter of demand, to the date of full payment or transfer into the Nostro Foreign Currency Account as directed herein. The respondents shall pay the costs jointly and severally the one paying the others to be absolved,” reads part of the judgment.