South Africa: Oilwell Gone Wrong

Last Updated: 7 June 2011
Article by Conor McFadden

Despite a recent decision of the Supreme Court of Appeal, exchange control approval will still be required in respect of the assignment of intellectual property to a non-resident.

The Supreme Court of Appeal was recently called upon to, in essence, rectify a trade mark register to reflect Oilwell (Pty) Ltd ("Oilwell") as proprietor of the trademark 'Protec' instead of Protec Auto Care Ltd ("Auto Care"), a company incorporated in the United Kingdom.

In 1998 Oilwell and various other parties concluded an assignment agreement in terms of which, inter alia, Oilwell assigned the trade mark 'Protec', to Protec International Ltd ("International") a company incorporated in Guernsey.

As a consequence of relations between the parties to the assignment deteriorating and International running into financial trouble, the trade mark was assigned for a second time to Auto Care by International.

In its application to the Gauteng North High Court Oilwell argued that its assignment of the trade mark 'Protec' to International was governed by Regulation 10(1)(c) of the Exchange Control Regulations, 1961 and as a consequence of non compliance with that regulation the assignment was void. Oilwell relied on the decision in Couve v Reddot International (Pty) Ltd as support for its contention.

Before the Supreme Court of Appeal, one of the issues was whether the original assignment between Oilwell and International was governed by Regulation 10(1)(c) of the Exchange Control Regulations, 1961 ("Regulations").

Regulation 10(1) of the Regulations provides as follows:

Restriction on export of capital

  1. No person shall, except with permission granted by the Treasury and in accordance with such conditions as the Treasury may impose:

    1. export from the Republic during any period of twelve months a total quantity of goods which exceeds in value twenty rand or such greater amount as the Treasury may determine, if:

      1. no payment for such goods has been or is to be received in the Republic from a person outside the Republic; or
      2. such goods are exported at a price which is less than the value thereof; or
      3. the period within which payment for such goods is to be made exceeds six months from the date of shipment from the Republic or such shorter period as an authorised dealer may determine in respect of such goods;

    2. take out of the Republic goods, including personal apparel, household effects and jewellery which has a value in excess of six hundred rand or such greater amount as the Treasury may determine;
    3. enter into any transaction whereby capital or any right to capital is directly or indirectly exported from the Republic.

In determining the ambit of the Regulation the Supreme Court of Appeal took into account the fact that:

  1. the long title of the Currency and Exchange Act, 1933, under which the Regulations were promulgated, indicated that its scope was to amend the law relating to legal tender, currency, exchanges and banking and that 'exchanges' referred to exchange rates; and
  2. the section of the Act under which the Regulations were promulgated empowered the head of state to make regulations 'in regard to any matter directly or indirectly relating to or affecting or having any bearing upon currency, banking or exchanges.'

In the Couve decision Jajbhay J pointed out that the term capital was not defined and considering the wide wording of the provision and the general objects of the Regulations "capital is anything (or everything) with monetary value)."

In our view the definition ascribed to the term capital by Jajbhay J was exceptionally and unnecessarily wide.

However, the Supreme Court of Appeal's has accepted a very narrow definition of 'capital' as referring to 'cash for investment, money that can be used to produce further wealth' and that 'capital is not the thing that for the time being represents capital in the sense of being things in which the capital has been laid out.'

Despite the narrow definition, the Supreme Court of Appeal immediately after defining capital held that capital also refers to issued share capital. This finding is inconsistent with the court's own definition quoted in the paragraph above.

In my view, the court should have adopted the definition of capital in an economic sense, viz that capital is capital, capital goods or real capital in the sense of being factors of production.

The court's definition of capital in Regulation 10(1)(c) does not fit in with the scheme of Exchange Control. As most legal practitioners are aware exchange controls are imposed in order to manage South Africa's balance of payments position. A country's balance of payments position is split into a current account and a capital account and exchange controls apply to both accounts. In fact, the present exchange control measures were initially introduced to block the repatriation of the proceeds of non-resident securities as a result of the deterioration of the capital account of South Africa's balance of payments.

Furthermore, if one has reference to section 9 of the Currency and Exchanges Act, No. 9 of1933 the Governor General (the President) is empowered to make regulations in regard to any matter directly or indirectly relating to, affecting or having a bearing upon, inter alia, currency. Accordingly, the externalising of funds indirectly through the export of capital assets instead of cash or shares is definitely a matter indirectly affecting or having a bearing upon South Africa's currency, the rand. In this regard the Oilwell decision appears to result in the following anomalies:

  1. intellectual property may be assigned abroad without exchange control approval required for the assignment (even though the subsequent payment of royalties to the intellectual property owner requires exchange control approval in terms of Regulation 3(1)(c); and
  2. exchange control restrictions apply to exports on the current account of the balance of payments but not on the capital account.

The main purpose of exchange control, implemented legally by way of the Regulations, is to ensure the timeous repatriation into the South African banking system of foreign currency acquired by South African residents, whether through transactions of a current or capital nature and to prevent the loss of foreign currency resources through the transfer abroad of real or financial capital assets held in South Africa.

In light of the above it is unlikely that the status quo, abolition of exchange control as a requirement for the export of incorporeal capital assets as a consequence of the Oilwell judgment, can be maintained.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.