Legal Memorandum Example

To: Zarreen Khan​

From: Amera Valiallah​
Date: 21 October 2024​
Subject: Legal Opinion on SatWeb's Challenge Against the State Regarding
Satellite-Based Internet Services

INTRODUCTION

Overview of the Issue

SatWeb, a start-up company that has developed innovative satellite-based internet

technology, is facing significant challenges due to South African legislation
prohibiting any juristic or natural persons from providing communication services,
including internet services, within the borders of South Africa. This prohibition has
prevented SatWeb from obtaining the necessary licences to market or use its
technology.

However, the Department of Communications recently announced the launch of a

state-backed company providing satellite-based internet services to the public, which
raises concerns for SatWeb. They believe the State’s actions contravene the very
legislation that has blocked their entry into the market, and they wish to explore
whether they can successfully challenge this move.

LEGAL ISSUE

The key legal question is whether the Department of Communications, by launching

a new state-owned company offering satellite-based internet services, is violating the
provision of the Act that states: "no persons, juristic or natural, is allowed to provide
communication services, internet-based or otherwise, within the borders of South
Africa." SatWeb seeks an opinion on their chances for a successful legal challenge
against the State’s entry into this market.

LEGAL ANALYSIS

Interpretation of the Prohibition on Communication Services

The key provision in the legislation prohibits both juristic and natural persons from
providing communication services, including internet-based services, within South
Africa. In order to assess whether the State has violated this provision, we must
analyse the statute using South Africa’s inclusive method of legal interpretation
and consider its constitutional implications.
The Presumption That Government Bodies Are Not Bound by Their Own
Legislation

In South African law, there exists a legal presumption that government bodies are
not automatically bound by the provisions of their own legislation unless there is
clear wording within the statute to that effect. This principle is rooted in the idea that
the government, as the body enacting laws, might need flexibility to carry out its
functions in certain regulatory frameworks without being restricted by the same
provisions imposed on private entities. This presumption allows the government, or
state-owned entities, to act with discretion when the interpretation of legislation lacks
explicit guidance regarding its applicability to public bodies. However, this
presumption is not absolute and can be rebutted if the statute indicates, either
expressly or by necessary implication, that government entities are meant to be
included within the scope of the legislation.

Criticism of the Presumption

The presumption that government bodies are not bound by their own legislation has
been met with criticism, primarily because it can create unfair advantages for the
State over private parties. Critics argue that this presumption runs counter to the
principles of equality and fairness enshrined in the Constitution, particularly when
government entities are allowed to operate in regulated markets while private
competitors are excluded. This differential treatment can distort market competition
and infringe upon the constitutional rights of private entities, including their right to
trade and compete on equal terms. Moreover, such a presumption might be seen as
undermining the rule of law, which demands that all parties, including the State, must
act within the bounds of the law.

Legal Position of the Presumption

Despite its criticism, the presumption that the State is not bound by its own
legislation remains a recognised legal principle in South African jurisprudence.
Courts often apply this presumption where the legislative text is ambiguous about
whether it applies to public bodies. However, courts are also guided by principles of
statutory interpretation, including the constitutional obligation to ensure fairness and
non-discrimination. In situations where the government appears to be exempt from
the obligations placed on private entities, courts have been willing to scrutinise the
purpose of the legislation and determine whether such an exemption is justified. If
the legislation’s purpose suggests that the State should not be excluded, or if it
would lead to inequality or unjust outcomes, the courts may find that the presumption
does not apply.

The Inclusive Method of Legal Interpretation

South African courts have moved away from strict literal interpretation and now apply
a more inclusive approach, which considers multiple factors to arrive at a balanced
and fair understanding of the law. The five key aspects of this approach are:

●​ Language Aspect: The wording of the provision is clear in prohibiting both

"juristic and natural persons" from providing communication services. The
term "juristic person" is generally understood to include entities like
corporations, state-owned companies, and other legal entities that are distinct
from private individuals. Therefore, if the new state-backed company
providing satellite-based internet is structured as a separate legal entity, it
would likely fall under this definition of a "juristic person."
●​ Systematic Aspect: The prohibition must be interpreted within the broader
legislative framework, which likely seeks to regulate the telecommunications
market for reasons such as national security or state control. However, the
statute does not appear to provide an explicit exemption for government or
state-owned entities.
●​ Teleological Aspect: This focuses on the purpose of the legislation, which
appears to be aimed at controlling access to the communications market and
ensuring that only authorised entities may operate in this space. The intention
of the legislature was likely to reserve this space for government control, but
the statute itself does not differentiate between private companies and
government entities, meaning that the law, as written, should apply to all
parties equally.
●​ Historical Aspect: The legislation likely aimed to curb uncontrolled entry into
the communications market for various reasons, but the context of its drafting
does not suggest that state entities were intended to be excluded from its
scope.
●​ Comparative Aspect: In other jurisdictions, it is common for governments to
operate within regulated markets, but such operations usually require specific
legal exemptions or legislative amendments to exclude state-owned entities.
Without such explicit provisions in the South African context, there is a strong
argument that the same legal restrictions apply to the State.

Constitutional Influence on Statutory Interpretation

South African law mandates that all legislation must be interpreted in line with
constitutional principles. Section 39(2) of the Constitution obliges courts to interpret
laws in a manner that promotes the values of the Bill of Rights. This includes
considerations of equality, fairness, and non-discrimination.

●​ Section 1 of the Constitution enshrines values of equality and fairness,

which could support SatWeb’s argument that the State should not be allowed
to benefit from the legislation while private companies are excluded.
●​ Section 36 (Limitation Clause): The government may argue that restricting
private entities like SatWeb is justified on grounds of public interest, such as
 ensuring national control over communication infrastructure. However, any
such limitation must be reasonable and justifiable in a democratic society. The
State would need to demonstrate that its actions are proportionate to the
legislative goals and do not unfairly discriminate against private companies.

Possible Defences by the State

The State may raise the following defences in response to SatWeb’s challenge:

●​ Government Exemption Argument: The State might argue that the

legislation is intended to regulate only private entities and that government
entities, including state-owned companies, are implicitly exempt. However,
without explicit wording in the legislation to this effect, this defence may be
weak.
●​ Public Interest Argument: The State may claim that its involvement in the
satellite-based internet market serves a public interest, such as promoting
access to internet services for under-served communities. This argument
would rely on showing that the legislative purpose justifies excluding private
companies like SatWeb while allowing the State to operate.
●​ National Security Argument: The State may argue that control over
communications infrastructure is essential for national security and that
allowing private entities to enter this market could pose risks. This argument
would require balancing the State's interest in controlling the
telecommunications sector against SatWeb's constitutional rights, such as the
right to trade and compete fairly.

The Impact of the Act on Private Entities

In Affordable Medicines Trust v Minister of Health (2005), the Constitutional Court addressed
the scope of the right guaranteed under section 22 of the Constitution, which protects the
freedom to choose and practise a profession. The Court highlighted that while section 22
allows for the regulation of professional practices, such regulation must not unjustifiably
infringe upon an individual's right to choose their profession. In this context, the Court
emphasised that the choice of a profession is intrinsic to personal dignity and is a key
element of one's identity. Thus, while regulation is permissible when it serves the public
interest and is not arbitrary or capricious, limitations that unduly restrict access to a
profession or its practice must be closely scrutinised. Applying this reasoning to SatWeb’s
case, the legislative restrictions preventing them from obtaining a licence to operate their
satellite-based internet service could be seen as an infringement on their constitutional right
to freely choose and practise their trade. Such restrictions may be subject to challenge if
they do not serve a legitimate public interest or if they disproportionately limit SatWeb’s
ability to operate in the telecommunications sector.

Affordable Medicines Trust further refines the constitutional standard for permissible
regulation under section 22 of the South African Constitution, which guarantees the right to
freely choose and practise a trade, occupation, or profession. The court emphasises two key
constraints on legislative power: rationality and the Bill of Rights.
The rationality requirement mandates that legislation regulating the practice of a profession
must have a rational connection to a legitimate government purpose. As noted in the New
National Party case, this means Parliament cannot act capriciously or arbitrarily when
enacting such legislation. Courts apply an objective inquiry to ensure that the legislation is
not irrational, as this would render it unconstitutional. However, this is a "minimum threshold"
for review and does not allow courts to substitute their judgment for that of Parliament.

Moreover, the regulation must not infringe any fundamental rights contained in the Bill of
Rights. If it does, it must satisfy the proportionality analysis required by section 36(1) of the
Constitution, which is stricter than the rationality test. The court also draws on the German
"gradation theory" to highlight that the scope of permissible regulation is broader when it
pertains to the practice of a profession, as opposed to the choice of a profession.

Ultimately, the regulation of the practice of a profession under section 22 must be rationally
related to a legitimate purpose and avoid infringing constitutional rights, or if it does, meet
the proportionality requirements under section 36. This nuanced approach ensures a
balance between legislative authority and the protection of individual rights, while
recognising the Legislature's broad powers to regulate professional conduct in the public
interest.

Obstacles to SatWeb’s Success

SatWeb may face several obstacles in their legal challenge:

●​ Government's Broad Discretion: Courts tend to give the government wide

discretion in regulating industries that are considered vital to national
interests, such as telecommunications. The State could argue that its
involvement in the market is necessary for achieving important public goals,
and the court may be hesitant to interfere with this discretion.
●​ Proportionality of the Restriction: If the court finds that the prohibition on
private entities like SatWeb serves a legitimate public interest, such as
ensuring equitable access to communication services, it may uphold the
restriction as reasonable and justifiable. SatWeb would need to prove that the
State’s actions are discriminatory and not proportionate to the stated goals of
the legislation.

CONCLUSION

SatWeb has a viable argument that the prohibition on providing communication

services applies to both private and state-owned entities, and the State’s actions
may be in breach of the legislation. The inclusive method of legal interpretation,
coupled with the constitutional principles of equality and fairness, strengthens
SatWeb’s position.

However, the State may argue that its entry into the market is justified on grounds of
public interest, national security, or public welfare. These arguments, if accepted by
the court, could present obstacles to SatWeb’s success.
Recommendation:

SatWeb should consider proceeding with a legal challenge based on the inclusive
method of interpretation and the Constitution’s guarantee of equality. However, they
must be prepared to counter the State’s potential defences, particularly around
public interest and national control of communication services. A careful
constitutional argument, focusing on the fairness and non-discrimination principles,
will be crucial to increasing their chances of success.