EC slaps Lithua­nian rail­ways with heavy fine, Lithua­nia weighs re­sponse op­tions

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Lithua­nia’s re­luc­tance to turn ear to the Euro­pean Com­mis­sion’s long de­mands has fired back – the Euro­pean Union’s ex­ec­u­tive body im­posed Mon­day, Oc­to­ber 2, a 27.87 mil­lion euro fine for the state-run com­pany Li­etu­vos Geležinke­liai (Lithua­nian Rail­ways) for re­strict­ing com­pe­ti­tion by dis­man­tling a rail­way stretch be­tween the town of Mažeikiai, where Poland’s oil re­fin­ery Orlen op­er­ates, and the Lat­vian bor­der vil­lage of Renģe in 2008.

«It is un­ac­cept­able and un­prece­dented that a com­pany dis­man­tles a pub­lic rail in­fra­struc­ture to pro­tect it­self from com­pe­ti­tion,» EU Com­pe­ti­tion Com­mis­sioner Mar­grethe Vestager said af­ter the rul­ing.

The EC con­cluded that the ab­sence of rail­ways forced the Pol­ish re­fin­ery to trans­port its freight to Latvia on a much longer route. The Com­mis­sion states that Lithua­nia’s na­tional rail­way com­pany failed to prove that the rail­ways had to be dis­man­tled for ob­jec­tive rea­sons.

In­quired by BNN on fur­ther ac­tions fol­low­ing the EC de­ci­sion, Li­etu­vos geležinke­liai replied that the com­pany will de­cide within two months whether to con­test it.

«It is one of our op­tions, how­ever, whether we will re­sort to it will be clear only af­ter we care­fully scru­ti­nise the EC ar­gu­ments and all le­gal pos­si­bil­i­ties, striv­ing for as lit­tle harm to Li­etu­vos geležinke­liai as pos­si­ble,» Tadas Valančius, a rep­re­sen­ta­tive of the com­pany’s Com­mu­ni­ca­tions depart­ment, said in a writ­ten re­ply.

He also ac­cen­tu­ated that the re­build­ing of the de­mol­ished rail­way stretch is also one of al­ter­na­tives.

«We will an­a­lyse is it…It is worth not­ing that the Rengė stretch had not been used as the quan­tity of oil freights from Lithua­nia to Latvia fluc­tu­ated from 480,000 to 941,000 tons a year,» Valančius added.

Last year, Lithua­nia trans­ported 844,000 tons of oil prod­ucts to Latvia. Mean­while, in 2007, with the Rengė stretch in op­er­a­tion, the amount was 675,000 tons.

«The cur­rent con­nec­tions with Latvia are used only at 20 per­cent of their ca­pac­ity,» the com­pany rep­re­sen­ta­tive said. Lithua­nia can ap­peal the EC de­ci­sion with the Lux­em­bourg-based Court of Jus­tice of the Euro­pean Union (EU). Pay­ment of the fine would not, how­ever, elim­i­nate the duty for Lithua­nia to re­store the stretch. Mean­while, Lithua­nia’s of­fi­cials con­tinue to main­tain that the rail­way line had been dis­man­tled for se­cu­rity rea­sons. At the time, the gov­ern­ment was headed by Ged­im­i­nas Kirk­i­las, Al­gir­das Butke­vičius served as trans­port and com­mu­ni­ca­tions min­is­ter, while Sta­sys Dai­ly­dka was the CEO of Li­etu­vos Geležinke­liai. A multi-mil­lion fine, ex­pert agree, would be­come a real chal­lenge for the new man­age­ment of Li­etu­vos Geležinke­liai, how­ever, Ričar­das Degutis, the deputy min­is­ter of Lithua­nia’s Min­istry of Trans­port and Com­mu­ni­ca­tions, ex­horts not to rush with far­reach­ing con­clu­sions and pre­dic­tions. He, how­ever, ad­mit­ted a pos­si­bil­ity that Lat­vian com­pa­nies that have suf­fered loss due to the dis­man­tling can lodge with Lat­vian courts law­suits de­mand­ing to pay them a com­pen­sa­tion.

This is likely as, ahead of the EC de­ci­sion, Latvia, which had filed the ap­peal against Lithua­nia, in­ten­si­fied pres­sure and handed Lithua­nia an of­fi­cial note with a de­mand to re­build the rail­way stretch and re­store the pos­si­bil­ity of trans­port­ing freight on Lat­vian rail­ways.

How­ever, Latvia’s Prime Min­is­ter Maris Kučin­skis said in an in­ter­view with LNT com­mer­cial TV chan­nel that Latvia has not yet dis­cussed the pos­si­bil­ity of claim­ing com­pen­sa­tion from Lithua­nia for the rev­enue Latvia has lost since 2008 as a re­sult of the dis­man­tling of the Mažeikiai-Rengė rail­way sec­tion.

The pre­mier said that Latvia had raised the is­sue with Lithua­nia from time to time, not­ing that the de­ci­sion to dis­man­tle the rail­way sec­tion had been un­fair and that it had crip­pled com­pe­ti­tion.

The re­con­struc­tion of the dis­man­tled rail­way sec­tion would have cost Lithua­nia sig­nif­i­cantly less than the fine im­posed by the Euro­pean Com­mis­sion, prime min­is­ter un­der­scored.

«It is there­fore a pity Lithua­nia did not heed these de­mands ear­lier and we could not re­solve this in a nor­mal, peace­ful way,» PM said.

Asked about ad­di­tional com­pen­sa­tions Latvia might pos­si­bly claim from Lithua­nia based on the Euro­pean Com­mis­sion’s rul­ing, Kučin­skis said that there have been no dis­cus­sions on such a pos­si­bil­ity yet.

«Of course, the Euro­pean Com­mis­sion’s de­ci­sion means that we might claim our un­earned profit, cal­cu­late the losses. But this has not been dis­cussed as yet, and we have not seen the full text of the Euro­pean Com­mis­sion’s de­ci­sion ei­ther,» Kučin­skis said. How­ever, Latvia’s na­tional rail­way com­pany has al­ready con­firmed it was dis­cussing a com­pen­sa­tion claim over rail­way main­te­nance and un­re­ceived in­come. Poland’s Orlen con­cern, which be­sides oil re­fin­ery in Mažeikiai also op­er­ates the Būt­ingė ter­mi­nal, has also re­ported Lithua­nia about the dis­man­tled rail­way to Brus­sels. Brus­sels has also urged Lithua­nia to sep­a­rate Li­etu­vos geležinke­liai op­er­a­tions, how­ever, Lithua­nia balked to do so, ar­gu­ing it could lose the prof­itable freight haulage op­er­a­tions. Ap­proached by Lithua­nian me­dia, Lithua­nian lawyers claimed that the Lithua­nian gov­ern­ment should give a se­ri­ous thought to the pos­si­bil­ity of fil­ing an ap­peal against the Euro­pean Com­mis­sion’s (EC) fine against the state-run com­pany Li­etu­vos Geležinke­liai (Lithua­nian Rail­ways, LG), how­ever, ad­mit­ted that the avail­able in­for­ma­tion does not give rea­sons to strongly ex­pect a suc­cess­ful out­come.

Daivis Sviri­nas, part­ner at So­rainen law of­fice, told BNS, a Baltic news agency, that the state-run com­pany should use «ev­ery pos­si­bil­ity, if there are any and are vis­i­ble, be­fore giv­ing up.»

«In my opin­ion, there are pos­si­bil­i­ties (to ap­peal) but to give a more de­tailed an­swer I would need to know all the ma­te­rial and the rea­son­ing be­hind the com­mis­sion’s rul­ing. The main dis­pute is about whether the rail­way stretch was dis­man­tled to im­pede traf­fic on the track or whether there were other tech­ni­cal rea­sons,» Sviri­nas. An­drius Ivanauskas, part­ner at Glim­st­edt law of­fice, con­curred, say­ing the com­mis­sion’s ar­gu­men­ta­tion should be checked in court.

«…In any case, the com­mis­sion’s vi­sion should be checked in court to see whether ev­ery­thing was done cor­rectly and whether there were pro­ce­dural breaches,» Ivanauskas said. Nev­er­the­less, Mar­ius Juonys, part­ner at Ellex Val­iū­nas law of­fice, cau­tions that that long du­ra­tion of writ­ing con­clu­sions means that «the EC prob­a­bly re­peat­edly weighed all pros and cons be­fore mak­ing the de­ci­sion.»

In his opin­ion, the sta­tis­ti­cal prob­a­bil­ity of re­but­ting the Euro­pean Com­mis­sion’s de­ci­sion was slim.

Lithua­nia has 70 days to de­cide on an ap­peal.

The Lithua­nian Par­lia­ment’s speaker Vik­toras Pranck­i­etis is so far the only Lithua­nian of­fi­cial who has hinted that Lithua­nia may be forced to obey and re­build the stretch. «It seems like we will have to re­build it,» Pranck­i­etis told Žinių Radi­jas news ra­dio on Wed­nes­day, Oc­to­ber 4.

The par­lia­men­tary speaker said he had noted back in spring that re­build­ing the rail­way stretch could be cheaper than pay­ing a fine, how­ever, «the train had al­ready left the sta­tion and we al­ready knew that we might be im­posed the fine.»

Pranck­i­etis ex­pressed doubt whether politi­cians could be made per­son­ally ac­count­able for the de­ci­sions nearly a decade af­ter the re­moval of the rail­way stretch. EU Com­pe­ti­tion Com­mis­sioner Mar­grethe Vestager is ex­pected to visit Vil­nius next week.

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