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Tuesday 19.03.2019 | Name days: Jāzeps

Riga Freeport decides it is easier to pay fines and breach the law than respect CC decision

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«Riga Freeport authority is the only institution to have been penalized by the Competition Council the most in Latvia. No other company in Latvia has received four fines [from CC]. All other companies had learned their mistake after the first or second fine. Riga Freeport, on the other hand, continues with its illegal activities, because fines applied to the company so far have been lower than its profits. Basically they calculated that it is far cheaper to pay the fine and continue breaching the law, not respect CC’s decision and cease criminal activities. Riga Freeport authority has ceased providing tugboat services, but it continued for a long time before authorities stepped in,» BNN was told by PKL Flote’s representative in court Artūrs Spīgulis.

A 9-year long court process, a penalty worth EUR 1.35 million, and EUR 200,000 spent on legal services – these digits are detailed in the litigation between Riga Freeport authority and PKL Flote.

There are people working in Riga Freeport authority who also work in ministries and Riga City Council – state governance. How could the authority that also manages taxpayers’ money every day afford to act in such a way towards a state structure? «Who will answer for the failure to sort things out? Because if we allow exceptions and discounts for public persons, what can we request from private companies?» Competition Council chairperson Skaidrīte Ābrama explains her confusion over the ignorance of state structures towards the country’s laws.

Will others think about their decisions before performing calculations and whether or not it is more beneficial to pay the fine and break the law?

The EUR 1.35 million was not the end. State Audit plans to evaluate the extent of finances Riga Freeport authority has wasted instead of investing the port’s development. PKL Flote plans to raise a complaint in regards to losses from other years, because the aforementioned EUR 1.35 million are for the period between August 2008 and April 2009. It is possible several more million could be enforced from Riga Freeport authority. Someone lobbied their interests, whereas others are then forced to pay enormous fines.

Obvious nihilism

In August 2008, Riga Freeport authority started abusing its dominating position at Riga Freeport by organizing tugboat services to force AS PKL Flote from the business, Spīgulis explains.

PKL Flote then submitted a complaint to Competition Council. In 2009, Riga Freeport authority was punished for distorting the tugboat service market.

It should be added that a breach of the Competition Law results in damages being caused to someone else, the victim has the right to turn to court and request compensation. PKL Flote was the first company in Latvia to take such a case to court in 2009. After a 9-year long court process, Riga Regional Court declared that AS PKL Flote is eligible not only for the compensation of profits lost in 2008-2009 period, but also the losses caused by idleness of its own tugboats. The total estimate of losses is around EUR 1.35 million.

Spīgulis told BNN about the beginning of the case: «Everything started with PKL Flote complaint to Competition Council, saying there had been a breach of the Competition Law. In six months CC concluded that Riga Freeport had, indeed, breached several sections of the aforementioned law. Riga Freeport was then fined LVL 45,000 (EUR 64,000)».

Although CC had uncovered the violation, Riga Freeport objected the losses from day one. «They said in court they do not admit their own crime and the losses it had caused others,» said the lawyer.

According to the lawyer, the case was simple and complicated at the same time. «Only companies with permits [to engage in business activities] can work at Riga port. Respectively, if I decided to work there – as a taxi driver or ice cream salesman – I would not be able to. The paradox lies in the fact that Riga Freeport authority is the institution that issues permits to others, and they had issued a permit for themselves. It would be the same if Riga City Council, which issued permits to taxis to work in the city, decided to issue a permit to itself and join the taxi service market.»

«The case itself demonstrates obvious nihilism – Riga Freeport authority supervises the business it decided to join at one point. It would be the same if a court of justice decided to offer legal representation services and represent itself in court hearings,» says the lawyer.

In the fight for tugboat services: Riga Freeport versus PKL Flote

PKL Flote representative continues by explaining how this situation appeared: «Riga Freeport authority was the institution that invited private companies to work at the port. Then, at some point, Riga Freeport authority built two tugboats and joined the same business it is supposed to supervise. On top of that, they did not allow other companies to enter, even though Finnish and Lithuanian companies wanted to come and use their own tugboats.»

Spīgulis explains: «In the period of time detailed in our complaint there were only two companies that provided tugboat services – PKL FLote and Riga Freeport authority. Things went the following way: a ship entered Riga port and requested via radio for PKL Flote to provide tugboats to lead the ship to port. PKL Flote wants to, but Riga port dispatch straight up tells us: ‘No, you won’t – out tugboats will do that.’ Imagine you’re a taxi driver. You sit behind the wheel and wait for a call. When you get one, you are not allowed to move an inch and do your job. This is what happened with tugboats.»

He stresses that State Audit found that Riga Freeport was not allowed to engage in tugboat service business at all. «This is fundamental for this case. All the money Riga Freeport earned belongs to PKL Flote – the court agreed with this. The size of losses is large, because the enforcement period covers 2008 – 2009.»

The lawyer adds the fight in court was also about the fact that Riga Freeport authority was not allowed to join the tugboat service market.

Spīgulis stresses: «This is the first time when such a litigation came to a close. There are also several other cases the viewing of which still continue, but this is the first one to be concluded so far. The ruling of the court has been announced and is not subject to appeal.»

In a telephone conversation with BNN, Riga Freeport authority board member Baiba Broka mentioned that Riga Freeport is allowed to engage in business activities, because it was permitted by European Commission. It is mentioned in Riga Freeport’s statement that EC had concerns over Latvia’s legal and supervisory system that governs tugboat services at Riga Freeport and its possible non-compliance with Treaty on the Functioning of the European Union Section 49 – on the freedom to perform business activities. The freeport also notes that EC does not question Riga Freeport authority’s choice to provide tugboat services using a subsidiary.

The lawyer says that both PKL Flote and court had offered Riga Freeport authority to settle things without going to court and instead paying a compensation: «Riga Freeport authority never showed up for talks – they were too sure about their position. In spite of the fact that the Supreme Court had already ruled that Riga Freeport authority had acted illegally and that serious damages were caused to PKL Flote, Riga Freeport authority decided to ignore conclusions and continue stressing that no damages were caused.»

Three more fines

He continues: «CC said the freeport is not allowed to engage in tugboat service business, but they simply closed their eyes and continue working as usual. Basically they had cynically concluded that it is far cheaper to pay a fine and continue breaking the law instead of respecting CC’s decision, the court’s ruling and ceasing illegal activities. They have stopped providing tugboat services, but they continued for a long time.»

«After the first fine, Riga Freeport continued working in the tugboat business. This is why CC applied three more fines in 2009,» says Spīgulis.

The lawyer stresses that CC was very serious about this precedent, because all these years they expected the case to conclude with enforcement of losses to thereby stop other perpetrators. «This would help CC take it easier, because they would have fewer perpetrators who would not want to end up in a situation when they have to pay a fine to the State Treasury and compensate victims,» says Spīgulis.

CC chairperson Skaidrīte Ābrama comments on the benefits from enforcement of losses: «Since Latvia has adopted European Union Directive on Damages, any person who suffered in a competition violation has the right to request compensation of losses. The more often victims use this right, the more potential perpetrators will learn from other people’s mistakes and refrain from dishonest actions. Thereby reduction of competition distortion benefits not only from penalties applied by Competition Council and enforced losses.»

«CC applied a fine of LVL 45,000 – Riga Freeport continued its activities. We enforced EUR 1.35 million for this period. An enormous difference – either a violation costs LVL 45,000 or EUR 1.35 million. This is important because such a request could be used to discourage other potential perpetrators. Respectively, if some business or state institution is suspected of breaking the law, such an outcome could make them thin if it is worth it – receiving  a fine from CC and risking having to pay compensation in court,» the lawyer comments.

When asked if PKL Flote’s losses could be enforced from taxpayers’ money, considering that Riga Freeport authority is a state structure, the lawyer explains that it is not taxpayers’ money because Riga Freeport authority earns money of ships that enter Riga port. «The management of Riga Freeport authority do not pay corporate income tax. It is a unique subject in Latvia – they do not have to pay income tax. All the money they earn off ships they get to keep. When an international ship enters Riga port, they pay fees. The ship pays the money to Riga Freeport authority, which gets to keep the money. They have to use this money to manage the port canal.»

«The annual account of Riga Freeport authority mentions ‘excess of income over expenses’ instead of ‘profits’. This is the money they get to keep. They don’t pay the State Treasury, Riga City Council budget, or even residents. At the same time, not a single cent of residents’ money was invested in the freeport’s development,» the lawyer explains.

It should be said that there are representatives from Finance Ministry, Economy Ministry, Transport Ministry, Environment Protection Ministry, as well as Riga City Council – people who work in state administration, manage taxpayers’ money and its flow. There should be some responsibility before the state and taxpayers’ money, even considering Riga Freeport is not sustained using taxpayers’ money.

«If we allow exceptions and discounts for public persons, what can we really request from private companies?»

Commenting if responsibility lies with the now former head of Riga Freeport Leonids Loginovs, the lawyer said there is a law that allows institutions punish their own employees if they cause losses. «Respectively, we as society cannot do this, but this can be done by the institution if it funds out their employee or former manager had caused losses for it.»

On top of that, when decisions were made in regards to commencement of tugboat services by Riga Freeport authority, Andris Ameriks was the board chairman. The vice-mayor of Riga also told portal that he denies his guilt, adding that the board does not decide how tugboats are used.

It should be noted that the board of the freeport decided to compensate losses. At the same time, the CEO of Riga Freeport Ansis Zeltiņš has been ordered to search for the ones guilty of causing competition distortions.

Communication office manager Inga Šabovica told BNN over the phone commented that the official statement from Riga Freeport authority will be released next week.

Baiba Broka said in a telephone conversation with BNN that the institution continues fighting against the consequences of the previous board. She said «the board has decided to commence an internal process to evaluate the responsibility of different people and processes». When asked if it is planned to evaluate Leonids Loginovs’ possible responsibility separately, Broka said currently no specific names to speak of.

Riga City Council deputy Vilnis Ķirsis has sent a letter to Riga Mayor Nils Ušakovs and Vice-Mayor Andris Ameriks. In this letter both politicians asked to pay out EUR 1.35 million from private finances, as confirmed by Unity representative Edmunds Jurēvics.

«The standing board has reached an agreement with State Audit, introducing several changes proposed by them,» said Riga Freeport authority board member.

As concluded by State Audit in its report, Riga Freeport authority’s actions in preventing the violations previously uncovered by Competition Council, the fine applied by the council (EUR 64,000) was a chance for Riga Freeport to fix everything. No future fines would have followed if Riga Freeport authority had simply complied with the decision. However, Riga Freeport authority decided not to cease providing tugboat activities, thereby further violating requirements of the Competition Law, but now using its subsidiary – Riga Freeport Fleet, SA mentioned in its report.

According to SA report for 2016, Riga Freeport had wasted EUR 200,000 on legal representation services.

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  1. Zerry says:

    Latvia should make corruption as an export product to ensure financial wellfare of country.

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