Construction, EU – Baltic States, Legislation, Lithuania, Railways

Skinest complained over activities of LG and its subsidiaries, including LG Cargo, Gelezinkeliu Tiesimo Centras (GTC) and Vilniaus Lokomotyvu Remonto Depas (VLRD), allegedly distorting competition, and it also suspects the state company of providing unlawful state aid to its subsidiaries.

The complaint was filed with the EC's DG Competition in June, and Brussels then sent question for the Lithuanian government which asked for more time to provide its answers. They are expected by early September.

"Skinest Baltija believes LG's activity runs counter to both Lithuania's and EU law and violates interests of all market participants," Daiva Usinskaite-Filonoviene, lawyer for Skinest Baltija, told.

Mantas Dubauskas, head of communication at LG, says the company's overhaul is taking place based on the EU's railway directive, and LG Cargo's establishment process has been transparent and open as the whole information has been published.

"The information about the progress of the planned activity transfer was published back in January. And the inflow of complaints started in the middle of the year after Vilnius Regional Administrative Court rejected Skinest Rail's complaint. Skinest appealed against the decision on the company's owner not meeting Lithuania's national security interests," he told.

Skinest Baltija told the Commission unlawful state aid was provided after LG established LG Cargo and invested 30 mln euros into its capital. Later on, LG transferred assets worth 30.4 mln euros to the newly established company. The two also signed a joint activity contract under which human resources, infrastructure capacities and other resources were handed over to the subsidiary.

Dubauskas says human resources and other assets were transferred not under a joint activity contract but transferring the whole freight transportation activity, and that was announced in public. And the joint activity contract was signed temporarily and is no longer in force.

Skinest Baltija states that the all three subsidiaries (VLRD, GTC and LG Cargo) buy goods and services non-publicly, set any qualification requirements and very short deadlines for submitting applications.

Skinest Baltija has already turned to a Lithuanian court over the LG subsidiaries' two tenders, including a freight railcar tender by VLRD and a railcar tender by LG Cargo.

LG says LG Cargo sent information about the railcar purchase tender to all known producers, including a company linked to the Skinest group. The company said it sent invitation directly to producers, and not intermediaries.

"In terms another tender, on the purchase of railcar parts, VLRD also announced information in public. Skinest took part in this tender and offered higher prices than other suppliers. And only afterwards, when it lost the tender, Skinest appealed," Dubauskas said.

The Public Procurement Office said in June LG's subsidiaries LG Cargo, GTC and VLRD must be deems contracting authorities and their procurement tenders must be called under the Law on Public Procurement. LG says in that case its subsidiaries would be subject to worse competitions conditions.

In April, another Lithuanian railway services company, LGC Cargo, also lodged a complaint with the European Commission against LG, as the company, indirectly linked to well-known former Latvian politicians and the Russian Railways (Rossiyskie Zheleznye Dorogi) via its major shareholder, Latvia's Baltic Transit Service, has been barred from transporting freight via Lithuania.

Speaking with LETA/BNS, LGC Cargo's CEO Sergejus Graciovas confirmed the complaint had been accepted for processing.