Cassation complaint on the Moscow Arbitration Court verdict and the resolution of the Moscow Arbitration Court of Appeals

Moscow District Federal Arbitration Court

107078 Moscow, Akademika Sakharova ave. 18


Applicant:

Open Joint Stock Company «Vnukovo Airport»

119027 Moscow

1st Reysovaya st. 12



State Body Which Adopted the Act Being Disputed (applicant of the complaint): Federal Antimonopoly Service

123995 Moscow,

Sadovaya Kudrinskaya st. 11



Third party:

Limited Liability Company «Provider Service»

113035 Moscow

Kosmodamianskaya st. 40-42







CASSATION COMPLAINT



on the Moscow Arbitration Court verdict of 17 November 2003 and the resolution of the Moscow Arbitration Court of Appeals of 25 March 2004

on the case No. A-40-38117/03-92-410





Under the Russian Federation Presidential Decree No. 314 of 9 March 2004 «On the System and Structure of the Federal Executive Authorities» there were introduced changes into the structure of the federal executive authorities, according to which the Russian Federation Ministry for Antimonopoly Policy and Support of Entrepreneurship (MAP of Russia) was reorganized into the Federal Antimonopoly Service. In accordance with the Russian Federation Government Resolution No. 189 of 7 April 2004 the Federal Antimonopoly Service is the federal executive authority carrying out functions for control and supervision over observance of legislation on competition at the commodity markets and financial services market, on natural monopolies, on advertising as well as on issuing individual legal acts in the state fields within the scope of its competence.



Pursuant to clause 1 of the MAP of Russia Order No. 5-LK of 23 April 2004 the Legal Department of the MAP of Russia transferred to the Legal Department of the Federal Antimonopoly Service documents and other materials being handled by the former.



According to the Moscow Arbitration Court verdict of 17 November 2003 the claims of OAO «Vnukovo Airport» towards the MAP of Russia on recognition as invalid of the resolution and injunction on cessation of violation of antimonopoly law of 30 July 2003 No. AG/9434 were satisfied. The verdict of the Moscow Arbitration Court of Appeals of 25 March 2004 confirmed the verdict of the first instance arbitration court.



These legal acts were issued with violations of the material and procedural laws and shall be invalidated due to the following reasons:



The MAP of Russia identified that the actions of OAO «Vnukovo Airport» comprised violation of Clause 1 Article 5 of the RSFSR Law of 22 March 1991 No. 948-1 «On Competition and Restriction of Monopolistic Activities in the Commodity Markets» (hereinafter the «Competition Law») expressed in creation of conditions of access to the market of flight meals supply for passengers of aircrafts in Vnukovo airport, which disadvantage OOO «Provider Service» in comparison with other business entities, which have contracts with OAO «Vnukovo Airport» on flight meals supply for passengers of aircrafts flying to/from Vnukovo airport.



The MAP of Russia instructed OAO «Vnukovo Airport» to send to OOO «Provider Service» a draft agreement on flight meals supply for passengers of aircrafts in Vnukovo airport under non-discriminatory conditions and to conclude such agreement in case of its acceptance.



1. Dominant position abuse may take place at the adjacent market.



While acknowledging the acts of the MAP of Russia invalid the arbitration courts concluded that the MAP of Russia had unfoundedly implemented Article 5 of the Competition Law to these legal relations, since:



1. Flight meals supply does not relate to the types of activities which are regulated by the antimonopoly legislation, therefore, OAO «Vnukovo Airport» not holding a dominant position cannot abuse it;



2. Issues related to restriction of access to the airport territory are not within the competence of the antimonopoly body;



3. The MAP of Russia did not prove the facts of hindering of activities of OOO «Provider Service» by OAO «Vnukovo Airport».



Such conclusions are made in the result of incorrect implementation of legal norms:



Article 5 of the Competition Law prohibits actions (inaction) of a business entity holding a dominant position, which result or might result in prevention, restriction, elimination of competition and/or infringe the interests of other business entities, including such actions (inaction) as creation of conditions of accessing the commodity market, exchange, consumption, purchase, production, sale of goods, which disadvantage one or several business entities compared to other business entities (discriminatory conditions).



Analysis of this provision shows that it does not require that the dominating business entity impedes access to the same market, on which it works and dominates himself. Therefore, Article 5 of the Competition Law also prohibits such actions (inaction) of a business entity, which create discriminatory conditions for business entities working at other markets. It is obvious that the market at which the dominating business entity works and the market where another business entity operates have to be economically interconnected with each other and a dominating business entity should be able to have a decisive influence on the general conditions of goods circulation at such (adjacent, linked) market.



The flight meals supply market, where OOO «Provider Service» operates, and the airport activities market, where OAO «Vnukovo Airport» operates and dominates, are interconnected. Without the flight meals supply market OAO «Vnukovo Airport» cannot carry out its activities in full, and vice versa, the flight meals supply market is completely subject to and dependant on the airport activities market.



OAO «Vnukovo Airport» is the natural monopoly and under resolution of the Board of the MAP of Russia No. 16/1 of 28 April 1998 has been included into the Register of Natural Monopolies on Transport in the field of airport services (a copy of resolution is attached to the case materials).



The Russian Federation Higher Arbitration Court clarified in Clause 13 of the Review of Practice of Resolution of Disputes Connected with Implementation of Antimonopoly Legislation (sent via the Informational Letter of the Russian Federation Higher Arbitration Court No. 32 of 30 March 1998) that «the natural monopolies as such dominate at a commodity market and are subject to restrictions established by antimonopoly legislation».



OAO «Vnukovo Airport» being a natural monopoly holds dominant position at the market of airport activities, hence it may create and creates conditions of access to the markets in the field of airport activities adjacent to the market of airport activities, thus it has decisive influence on the general conditions of goods circulation at such markets. It also depends on the fact thin the territory of Vnukovo airport is a territory with restricted access and it is OAO «Vnukovo Airport» which regulates the procedure for granting access thereto.



The air companies are engaged in passenger transportation on the airport territory. They conclude standard agreements with OAO «Vnukovo Airport» on provision of airport services for regular flights (copies of which are attached to the case materials), clause 2.2.24 of which stipulates: «In the course of servicing in Vnukovo Airportto use services granted either by the «Airport» (OAO «Vnukovo Airport»), or handling companies contracted by the «Airport» for provision of such types of services (operative technical maintenance, flight meals supply and others).»



The companies engaged in flight meals supply conclude with OAO «Vnukovo Airport» agreements on the right to supply flight meals to aircrafts (copies of the agreements are attached to the case materials). It is this agreement which entitles them to supply flight meals to aircrafts (clause 2.4 of the standard agreement) and allows to carry out such activity by granting permanent access to the restricted area of the airport (clauses 2.5 and 2.6 of the standard agreement).



In individual cases the flight meals supplier, which does not have an agreement with OAO «Vnukovo Airport», is able to get access to the restricted area of the airport in order to deliver flight meals to aircrafts but only under the preliminary inquiry of the air company, which has to be filed beforehand.



Such procedure established by OAO «Vnukovo Airport» creates unequal (discriminatory) competitive conditions for flight meals suppliers which do not have contractual relations with OAO «Vnukovo Airport» in comparison with those suppliers which have concluded with the airport an agreement on the right to supply flight meals to aircrafts.



In particular, such suppliers cannot duly perform their obligations vis-a-vis the air company in case of unscheduled landing of an aircraft of that air company in Vnukovo airport since the air company will be unable to submit a prior inquiry and will have to keep the equipment and wastes onboard or to look for alternative ways of cleaning the aircrafts. In this case the aircraft would either have to be out of action waiting for flight meals from its supplier or to apply to another supplier which has contractual relations with OAO «Vnukovo Airport». Moreover, the necessity of permanent filing of inquiries for arranging the supplier's access to the airport territory also forces air companies to conclude agreements with those suppliers which have relevant contracts with OAO «Vnukovo Airport».



The Commission found out that OAO «Vnukovo Airport» refuses to conclude an agreement with OOO «Provider Service» on flight meals supply for various reasons:



a) on the airport territory there are already enough business entities engaged in flight meals supply to aircrafts;



b) OOO «Provider Service» is significantly far away from Vnukovo airport.



Taking into consideration that OOO «Provider Service» has agreements on flight meals supply with air companies, the Commission of the MAP of Russia acknowledged such arguments unsound, since the question about the number of participants of the adjacent market cannot and shall not be solved by a natural monopoly, while the remoteness factor is not significant at all, since other contracted suppliers are even more far away than OOO «Provider Service».



Hence, the applicant's refusal from conclusion of an agreement with OOO «Provider Service» on flight meals supply for aircrafts creates discriminatory conditions for that entity and violates clause 1 Article 5 of the Competition Law.



2. The Commission of the MAP of Russia did not interfere into the issues of regulation of access to the territory of Vnukovo airport, but rather ordered to establish equal competitive conditions for the participants of the market of flight meals supply.



The courts made wrong conclusion that the Commission of the MAP of Russia not having valid powers to regulate issues of accessing the airport territory interfered into the airport's activity.



Such conclusion does not match the case's circumstances.



According to clause 1 of this complaint, the Commission of the MAP of Russia was considering an issue on creation of unequal (discriminatory) conditions of accessing the market via refusal from conclusion of an agreement on flight meals supply. The injunction contains the requirements aimed at ensuring equal conditions for competing business entities but not at regulation of the procedure for granting access to the airport territory.



3. The MAP of Russia identified the fact of creation of unequal conditions for competing business entities but not the fact that OAO «Vnukovo Airport» was hindering the activities of OOO «Provider Service».



The courts interpreted the MAP's decision incorrectly and concluded that the MAP of Russia had not identified the fact that OAO «Vnukovo Airport» had been hindering the activities of OOO «Provider Service».



However, pursuant to the decision, the MAP of Russia did not identify that fact but rather identified the fact of creation of unequal conditions for business entities competing at the market of flight meals supply falling under clause 1 Article 2 of the Competition Law.



According to Article 13 of the Russian Federation Civil Code (hereinafter «RF CC»), a court may acknowledge a non-normative legal act of the federal executive authority invalid if such act does conform to the law and other legal acts and violates rights and lawful interests of a legal entity. Given that, the Resolution and the Injunction of the MAP of Russia were adopted soundly in accordance with material and procedural law and do not violate rights and legal interests of OAO «Vnukovo Airport», thus, there are no grounds for invalidating the Resolution and the Injunction of the MAP of Russia.



Therefore, while issuing verdicts the first instance and appeal courts violated and incorrectly implemented material law, and the conclusions of the courts stated in the verdicts do not match the case's circumstances. Hence, the court verdict shall be cancelled under Article 288 of the RF Arbitration Procedural Code.



Given that and pursuant to Articles 23, 275-277, 287 of the RF APC, the Federal Antimonopoly Service hereby



REQUESTS



1. To cancel the Moscow Arbitration Court verdict of 17 November 2003 and the resolution of the Moscow Arbitration Court of Appeals of 25 March 2004 on the case No. A-40-38117/03-92-410 in full .



2. To adopt new verdict refusing claims of OAO «Vnukovo Airport» in full without transferring the case for new consideration.



Attachments:

1. Copy of the power of attorney for representative;

2. copy of the Moscow Arbitration Court verdict of 17 November 2003 on the case No. A-40-38117/03-92-410;

3. copy of the resolution of the Moscow Arbitration Court of Appeals of 25 March 2004 on the case No. A-40-38117/03-92-410;

4. proof of dispatch of this cassation appeal to the parties participating in the case.



Deputy Head of the Legal Department

of the Federal Antimonopoly Service Mishakov O.G.