Last year the prosecution office sent a warning to Latvian state forest management company Latvian State Forests (LVM) in regards to exclusive long-term contracts that were amended in the interest of certain businesses despite objections from the industry, as reported by TV3 programme Nekā personīga on Sunday, the 12th of February.
After the restoration of Latvia’s independence, a total of 361 contracts were signed with multiple Soviet-era forestry holdings. Most of them were for 10 to 20 years. In certain cases the State Forest Service
even signed contracts for up to 99 years for unexplained reasons.
Later those long-term contracts and management of state forests in general were taken over by the newly-formed LVM. Little by little contracts ran out, but LVM refused to fulfil contracts with longer terms. The court, on the other hand, decided this is illegal. This is why LVM started signing additional contracts after the end of previous long-term contracts. The last time the contracts were updated was the start of 2022.
According to the programme, now long-term contracts no longer apply to specific territories. Instead the contracts cover supplies of specific types of lumber. Although contract terms have been shortened,
privileged companies are able to purchase what they need in a shorter period of time.
There are six contracts with four companies in force at the moment. The terms of two contracts will come to an end in 2026, whereas for the rest the end terms will come after several decades (2047, 2094 and 2096), as reported by TV3. In 2022 LVM signed contracts with two companies – Metsa Forest Latvia and Pata.
Latvian Timber Industry Federation’s CEO Artūrs Bukonts told the programme that an absolute majority of businesses would like to see such long-term contracts gone entirely.
In December 2022 the prosecution office sent a warning to LVM and its shareholder – Ministry of Agriculture of the Republic of Latvia. In it, the prosecution office explained that by updating old contracts, LVM did not act in a transparent and honest manner. Nekā personīga reports that
the prosecution office commenced an investigation following a request from Stiga RM LLC owner Andris Ramoliņš.
LVM Council ordered the board to prepare information about these contracts by the end of February and come up with a plan. Existing LVM board members, except one, were elected after those contracts were updated. The management of LVM did not respond to the invitation from Nekā personīga for an interview. In a written response the management explained that the warning from the prosecution office will be taken seriously.
The audit at LVM performed by Sorainen law firm in 2020 pointed out the long-term contracts. Auditors warned that if the Competition Council decided that the state company is a dominant market position, the existence of such contracts could be considered abuse of this position, the programme notes.
Finnish management of Metsa Forest Latvia did not respond to the questions from the programme. Pata LLC owned by Latvian businessman Uldis Mierkalns noted in its response that the company did not sign long-term contracts on its own. Instead the company purchased companies with pre-existing contracts.
Latvian state is the sole owner of LVM. The Ministry of Agriculture is the shareholder. The company’s turnover was EUR 405.291 million and profits reached EUR 111.53 million in 2021.
Also read: Constitutional Court to look into Latvian government’s given permission to cut down young forests