THE SUPREME COURT: LEASE CAN BE EXTENDED ONLY AFTER A TENDER

All contracts for leasing state and municipal property must be renewed only after tender procedures. The Supreme Court of the Russian Federation passed the ruling at the beginning of November 2018

In 2015, St Petersburg OFAS received a statement of “Burial Service” Ltd. that intended to lease premises in a mortuary of a hospital in St Petersburg. The application was rejected on the grounds that this space had been occupied by another company since 2000 and the contract is constantly renewed by additional agreements.

Thinking that premises should be leased upon the results of open tenders, “Burial Service” Ltd. approached a Court and then St Petersburg OFAS.

The arguments of the petitioner were based on Article 17.1 of the Federal Law “On Protection of Competition” passed in 2008. Arbitration Courts of three instances ruled that the requirement for competitive bidding do not apply to leasing the premises in question: the law is not retrospective, and the contact between the hospital and the leaseholder had been concluded before the Article came into effect. St Petersburg OFAS also dismissed the claim based on the Court rulings and the Regulations.

In its turn, “Burial Service” Ltd. approached the Supreme Court that reversed the rulings of the lower Courts and the decision of the antimonopoly body. In its definition the Supreme Court emphasized that from the moment of Article 17.1 of the Federal Law “On Protection of Competition” coming into force, concluding lease contracts for a new period without competitive bidding, as well as prolongation of the current contracts, is a breach of the standards of No. 135-FZ Federal Law.

Head of St Petersburg OFAS Vadim Vladimirov pointed out: “The Court ruling is a precedent for us, and, I dare say, an epochal one. I hope that St Petersburg authority will take into account the opinion of the Supreme Court, particularly, with the help of our OFAS, and tidy up the sector of leasing city and municipal property”.