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Wednesday 17.10.2018 | Name days: Karīna, Gaits

Concerns about market distortion among freight carriers; sanctions may be ruinous for Latvia

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvian State Railway Administration currently views a complaint submitted by Baltic Express in regards to possible market distortion, when some carriers are allowed to do what others are not.

«An absurd situation appears, when private carriers are forced to order part of services from their biggest competitor – Latvian Railways subsidiary LDz Cargo – just to transport freight. If consequences of lasting market distortion are not removed, the sanctions European Commission may impose against the country will likely turn out ruinous,» said Director of State Railway Administration Juris Iesalnieks in an interview to BNN.

«If Latvian Railway continues doing things the same way and instead of resolving the problem turns to court against us [Railway Administration] as a supervisory institution with unjustified complaints, it is possible it will not be possible to resolve this matter on the spot [in Latvia] and instead we will have to resolve it with involvement from the European Commission,» Iesalnieks continues.

«Competition rights-wise this is an unprecedented case in Latvia. As a supervisory institution, we are forced to work on preventing this lasting freight market distortion,» stresses the director of State Railway Administration.

He says European Commission also studies possible market distortion in Latvia. ‘They cooperate with us – request information. We do try to convince them that we can handle this situation, that there is no need to apply sanctions worth millions of euros, like it was with Spain and Holland’.

«Currently we are looking through legal reasons to resolve the situation. Our goal is not punishing Latvian Railway in accordance with the Law on Competition. Because Latvian Railway will become a state-subsidized company, it means any penalties applied to it will have to be paid from the state budget, which is not something we as a state institution are interested in,» Iesalnieks told BNN.

Latvian Railway’s behaviour plays a major role for Latvia to avoid receiving a fine. «If the company comes to the conclusion that it is necessary to change the current approach, that turning to court against a supervisory institution was completely wrong and against Latvian and European legislation, then this will present us an opportunity to convince European Commission that we can resolve the situation on our own,» says Iesalnieks.

According to Iesalnieks, this is one of the reasons why Latvian Railway wants to dismiss him from his post.

Iesalnieks says that the situation at the moment – the court process between the supervisory institution and its supervised company – is a nightmare. «Latvian Railway, which is a 100% state owned company, is fighting the state using state subsidies. Can our taxpayers imagine anything worse than that?» Iesalnieks comments on the court process Latvian Railway has pulled the State Railway Administration in an attempt to dismiss its director.

In the court process between Latvian Railway and State Railway Administration on the use of Ventspils depot building the Administrative District Court has rejected Latvian Railway’s request to replace the representative of State Railway Administration Juris Iesalnieks, who is also the institution’s director.

The process revolves around Latvian Railway’s appeal of the State Railway Administration’s administrative act issued 5 December 2017, in accordance with which the supervisory institution denied Latvian Railway the right to transform Ventspils depot building into an unused equipment warehouse.

Iesalnieks says Latvian Railway is the owner of the building. Baltic Express has signed a contract for 12 years with the company to use the depot building for locomotive maintenance. Approximately one year after signing the contract Latvian Railway decided to terminate it and transform the depot building into an unused equipment warehouse.

State Railway Administration prohibited Latvian Railway from doing it, because, according to Iesalnieks, the redaction of the Railway Law added in 2016 states that it is not allowed to reconstruct depot building for functions those buildings are not intended for. «This is allowed to do only if the building in question has not been used for its intended purpose for two years. However, in this case there was a contract that clearly stated that the building is only allowed to be used for the purposes it was built for,» said Iesalnieks.

As part of the court process, Latvian Railway also requested replacing Iesalnieks because the company doubted his objectivity, saying that Iesalnieks manages the State Railway Administration alone, without consulting with his colleagues. In the request to the court Latvian Railway also noted that Iesalnieks is purposefully negative about Latvian Railway. According to the company, Iesalnieks believes Latvian Railway limits intentionally limits competition.

Iesalnieks, on the other hand, says Latvian Railway wants to dismiss the head of a supervisory institution using fabricated facts, lies and documents that have no relation to the case.

«I believe Latvian Railway wants to discredit me, and this has no relation to this court process. I believe it is related to State Railway Administration’s stance on the matter regarding Latvian Railway costs, which can be reduced to help save up state budget finances,» said Iesalnieks.

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