Latvia’s Supreme Court of Latvia has overturned a judgment of the Administrative Regional Court that had rejected applications by construction companies seeking to annul a decision of the Competition Council (KP), and has referred the case back to the Administrative Regional Court for reconsideration.
The Supreme Court stated that both the Competition Council and the Administrative Regional Court had unlawfully relied on information obtained through operational activities conducted by the Corruption Prevention and Combating Bureau (KNAB) to prove the alleged competition law violations. Specifically, this involved secretly intercepted conversations and their transcripts.
The Court emphasised that uncovering a competition law infringement such as a cartel agreement does not fall within the exhaustively listed objectives and tasks of the Law on Operational Activities, for which information obtained through special operational measures may be used.
The Supreme Court found that such information, even when attached to the materials of a criminal case, cannot be freely transferred for use in proceedings unrelated to the objectives of operational activities. Otherwise, this would create broad and uncontrolled possibilities to pass on information obtained through operational activities—without limits on data type or volume—via criminal proceedings to an undefined circle of recipients for use in virtually any other process where it is allegedly needed.
According to the Court,
this would clearly create a significant risk of arbitrary interference and abuse of powers
and would fail to meet the legal quality requirement of foreseeability.
The Supreme Court further stressed that information obtained through operational measures retains its special legal status and restrictions on use even after being added to criminal case materials, as occurred in the case at hand.
Moreover, the Court noted that its case law has previously established that operational wiretapping may only be used to uncover crimes, not criminal offences. Since the legislator has repeatedly and deliberately rejected the criminalisation of conduct related to prohibited agreements under competition law, operational measures may not be used to uncover such conduct.
The Supreme Court concluded that Latvian law does not provide a clear legal basis allowing information obtained through operational activities to be transferred to the Competition Council for use in administrative proceedings. On the contrary, the Law on Operational Activities contains an explicit prohibition on using operational measures for purposes and objectives not listed in that law.
This means that
individuals cannot reasonably foresee that information obtained through operational measures could be transferred
and used in administrative proceedings to prove cartel agreements. As a result, the Supreme Court held that the use of such information in this case violated the scope of the right to respect for private life.
When reconsidering the case, the Administrative Regional Court will need to assess whether the legality of the challenged Competition Council decision can be substantiated by the remaining evidence in the case. The court will also have to consider whether to refer preliminary questions to the Court of Justice of the European Union, as requested by the applicants in their cassation appeals.
Previously, the Administrative Regional Court had rejected applications by 13 construction companies seeking annulment of the Competition Council’s decision of 30 July 2021 in the construction cartel case.
The court dismissed applications submitted by SIA Abora and SIA Tehnocentrs, SIA Arčers, SIA Latvijas energoceltnieks, AS LNK Industries, SIA LNK (Latvijas Novitātes Komplekss), SIA Merks and AS Merko Ehitus, SIA Re&Re, SIA Rere būve and AS Rere grupa, SIA Skonto būve, and AS UGN.
In 2021, the Competition Council uncovered a cartel among construction companies
involved in at least 70 public procurements with a total contract value of €687 million.
Ten companies involved in the cartel were fined a total of €16,652,927. These included SIA Skonto būve, SIA Latvijas energoceltnieks, SIA Velve, SIA Arčers, SIA Rere būve, SIA Re & Re, SIA RBSSKALS būvvadība, SIA Abora, LNK Industries, and SIA Merks. As RBSSKALS būvvadība had already been liquidated, no fine was imposed on it.
Eight of the ten fined companies appealed the Competition Council’s decision to the Administrative Regional Court. Since several appeals were filed together with parent companies, a total of 13 companies participated as applicants in the combined case.
The combined proceedings concern applications submitted by Skonto būve, Latvijas energoceltnieks, Rere būve and its parent company AS Rere grupa, Arčers, LNK Industries, Abora and its parent company SIA Tehnocentrs, Re & Re, the parent company of LNK Industries—SIA LNK (Latvijas Novitātes Komplekss), Merks and its parent company AS Merko Ehitus, as well as the parent company of Arčers, AS UGN.
Two of the ten fined companies did not appeal the Competition Council’s decision—Velve, which reached a settlement with the Council and received a positive assessment of measures taken to restore the contracting authority’s trust, and RBSSKALS būvvadība.
If the court ultimately rules against the applicants, they will be required to pay the fines, will be barred from participating in public procurements for a certain period, and may also face civil claims related to projects already implemented.
Read also: After criticism and risks, privatization of “Gors” removed from the agenda