ST PETERSBURG OFAS WARNS THE LEGISLATURE NOT TO PASS AMENDMENTS TO THE LAW ON STATE UNITARY ENTERPRISES THAT ARE CONTRARY TO THE PRESIDENTIAL ORDER

St Petersburg OFAS issued a warning to St Petersburg Legislature

The Legislature published an Amendment on its web-site to St Petersburg draft law “On amendments to Article 7-1 of St Petersburg Law “On state unitary enterprises".

The amendment to the city law is made on the grounds that St Petersburg City Court and then the Supreme Court invalidated the previous version of the Article.

The legislator, however, did not fully attend to the Court opinion. In particular, as follows from the Amendment, “City Department of Inventory Taking and Real Estate Assessment” (“CDIVREA”) subordinate to the Property Relations Committee, is assigned exclusive powers to inventory land plots by functional use of the area in order to obtain information necessary to calculate the lease payments for the land plots in the state property of St Petersburg and the land plots, the state property for which is not delineated (further on referred to as the Services).

In March 2018 St Petersburg OFAS established that the Committee unlawfully, without competitive bidding, concluded a contract with “CDIVREA” in 2017 for rendering Services (breaching Part 1 Article 15 of the Federal Law “On Protection of Competition”). As follows from the decision of the antimonopoly body, the market of such Services in St Petersburg is competitive, therefore the Committee must have organized competitive bidding in line with the Law on the contractual system (No. 44-FZ Federal Law).

It was also found that for several years “CDIVREA” was attracting other economic entities, for instance, “Megatex” Ltd. (1998-2018) as subcontractors to render the Services. It completely refutes an argument of the Committee and “CDIVREA” that only a state unitary enterprise can provide such Services.

Changing the St Petersburg Law in accord with the Amendment would lead to preventing competition for the right to render the Services. Such actions constitute a violation prohibited by Part 1 Article 15 the Federal Law “On Protection of Competition”.

St Petersburg OFAS reminds the city legislators in its warning that No.618 Order of the President of the Russian Federation Vladimir Putin “On the basic directions of the state policy towards developing competition” of 21 December 2017 approved the National Competition Development Plan, that limits establishing unitary enterprises on competitive markets and requires twofold reduction of the violations by the authorities by 2020.

On 5 April 2018 the President chaired the meeting of the State Council on priorities in the work of the subjects of the Russian Federation to support competition.

The President emphasized that the Constitution of the Russian Federation determines the fundamental importance of competition. This is one of the mainstream areas for achieving the ambitious aims facing Russia. He also pointed out that the regional authorities do not pay enough attention to developing competition, particular, by setting priorities for regional state and municipal unitary enterprises.

Among the main issues, Vladimir Putin named absence of precompetitive approaches in the work of the authorities. “Currently government bodies, companies with state participation occupy the niches where small and medium business can work, pushing them from the markets, monopolising those markets. As a consequence, competitive sectors of the economy are cartelized, entrepreneurial initiative and incentives to open business are undermined”, thinks the President.

“Fair competition is the basic condition for economic and technological development, the pledge for modernizing the country, its dynamic movement forward in all spheres of life”, pointed out Vladimir Putin at the State Council. 

Guided by Article 25.7 of the Federal Law “On Protection of Competition”, St Petersburg OFAS warns the City Legislature to avoid the plans to adopt a new St Petersburg Law in the version of the published Amendment. 

“We believe that adopting the Amendment is contrary to the National Competition Development Plan and contravenes the goals and objectives set by President Vladimir Putin to develop priority areas of the work of the subjects of the Russian Federation in order to support competition”,summed up Head of St Petersburg OFAS Vadim Vladimirov.