Law Firms Move Forward with Court Challenge to Override BEE Sector Code

Next week, three of South Africa’s largest law firms will petition the Gauteng High Court to invalidate the legal sector’s black economic empowerment (BEE) code, contending that it is illegal, impractical, and may hinder transformation rather than promote it.

Bowmans, Webber Wentzel, and Werksmans are collaborating in the review application initially filed by Norton Rose Fulbright against the Legal Sector Code (LSC), which was published in the official gazette in September 2024.

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The case is set to be heard from Monday, May 4 to Friday, May 8.

The firms emphasize their commitment to transformation but argue that the current framework is “fundamentally misconceived” and may negatively impact the groups it is intended to support, including black law students, emerging professionals, and public-interest organizations.

Their concern stems from issues raised when the code was first implemented, such as the pace and structure of ownership requirements and the way the sector’s treatment compares to the broader BEE framework.

A key point of contention is that the code only applies to a small fraction of the profession. According to court documents, over 95% of legal practices fall below the turnover threshold and are thus exempt. The firms argue that a code affecting less than 5% of the sector cannot “credibly transform the sector as a whole.”

They contend that this diminishes incentives for transformation across the vast majority of firms, ultimately weakening the overall effect of the policy.

Targets and timelines under scrutiny

The LSC mandates that large firms increase black ownership by 10% every two years. The three firms argue that this requirement is arbitrary, lacks empirical support, and risks resulting in outcomes that are neither sustainable nor lawful.

They assert that these timelines do not reflect the operational realities of law firms, where equity ownership is typically reserved for practicing attorneys who advance through a structured career path over many years.

In addition to ownership targets, the firms express concerns regarding the code’s measurement of transformation.

They argue that the LSC eliminates acknowledgment for essential mechanisms utilized in generic BEE codes, such as scholarships for black students, skills development initiatives, and contributions to socio-economic development.

These components, they claim, are vital for establishing a sustainable pipeline of legal talent and expanding access to the profession.

Moreover, the code excludes black non-lawyer professionals—such as executives in finance, HR, and IT—from management control scoring, despite their significant contributions to managing large firms. This, according to the firms, undermines recognition of existing transformation initiatives.

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Legal and procedural challenge

The review also raises procedural concerns, including whether the Department of Trade, Industry and Competition adhered to necessary procedures in finalizing the code.

The firms argue that previous concerns raised by the ministry were not sufficiently addressed and that no valid BEE strategy was issued to guide the sector code, as mandated by legislation.

Crucially, the firms are not advocating for the complete removal of transformation requirements. Instead, they seek the court’s intervention to invalidate the LSC and allow the generic BEE codes to remain applicable while a revised, evidence-based framework is formulated.

Ezra Davids, chairman and senior partner at Bowmans, states: “We fully support meaningful transformation and believe that, when properly structured, the LSC can build upon the considerable work that has already contributed to widening transformation in the legal sector.”

The firms note that prior to the introduction of the LSC, all three held a level 1 B-BBEE rating under the generic codes and had made significant, measurable contributions to transformation.

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