OREANDA-NEWS. March 22, 2011. The Presidium of the Supreme Arbitration Court of the Russian Federation took jurisdiction of supervisory appeal of the Federal Antimonopoly Service (FAS Russia) on the case challenging legitimacy of forest auctions in the Moscow region organised by the Forestry Office of the Moscow Region (Mosleskhoz) on 19th and 20th December 2007 to sell the rights for concluding lease contracts for forest plots owned by the state, reported the press-centre of FAS Russia.

The appeal was lodged after the Cassation Court ruled that the FAS Russia’s decision about antimonopoly violations committed by Mosleskhoz had been unlawful.

On 6th June 2008, FAS Russia found that Mosleskhoz violated Part 2 Article 17 of the Federal Law “On Protection of Competition” (prohibiting the authorities to restrict access to competitive bidding if it is not provided for by the law). Organising the forestry auctions, Mosleskhoz set restrictions to the interested persons for access to competitive bidding that were not provided for by normative legal acts. For instance, Mosleskhoz set restrictions for the potential forestry auction bidders. In particular, members of staff of Mosleskhoz only accepted the bids on a single day from 10 a.m. to 2 p.m. The bids could only be delivered in person, according to a preliminary registration that was organised by members of staff of Mosleskhoz themselves, and the bidders were not provided an opportunity to file the bids, for instance, by mail. The auction organisers also did not specify the procedures for accepting the auction bids. Neither the notices about the forest auctions, nor the auction documentation contained information about the preliminary registration.

Such restrictions are not provided for by the law.

As a result, the time allocated to accepting the bids was not sufficient to accommodate all willing to file the bids, which is confirmed by numerous complaints from physical persons and legal entities.

Mosleskhoz disagreed with the FAS Russia’s decision and filed a lawsuit.

On 26th September 2008, Moscow Arbitration Court allowed the claim and pronounced the FAS Russia’s decision unlawful. On 22nd December 2008, the 9th Arbitration Appeal Court confirmed the judgment of the Court of First Instance. However, on 27th April 2009, the Third Court Instance - the Federal Arbitration Court of the Moscow District (the Cassation Court) allowed the FAS appeal and dismissed the claim of Mosleskhoz against the antimonopoly authority, which finally confirmed legitimacy of the FAS Russia’s conclusions.

On 20th August 2008, FAS Russia filed lawsuits (under Part 4 Article 17 of the Federal Law “On Protection of Competition”, breaching the rules of competitive bidding constitutes the grounds for judicial invalidation of such tenders or auctions and contracts concluded as a result of them, particular on a claim of the antimonopoly authority). The 10th Arbitration Appeal Court allowed the claims. Moscow Arbitration Court suspended state registration or lease and sub-lease contracts for the forest plots. As a result, 2007 forest auctions were pronounced invalid as well as the lease contracts concluded with the auction winners.

On 12th September 2008, Moscow Arbitration Court passed a definition for provisions remedies on the claim of the Federal Antimonopoly Service (FAS Russia) against the Forestry Office of the Moscow Region and Moscow (Mosleskhoz). Having considered FAS claim, the Court suspended state registration of the lease and sib-lease contracts for the forest plots, based on the results of the auction that had taken place on 19th December 2007.

The Courts established that actions of Mosleskhoz had restricted access to the auction, which had breached the law on competition prohibiting restrictions to participation in competitive bidding if tenders or auctions are organised by federal executive bodies. Mosleskhoz was accepting the auction bids only during four hours and the procedures for issuing the entry passes to the building where the auction took place were not simple; so many potential bidders were not able to file their bids.

The Court noted that the number of auction bidders had not exceed one or two per lot, so the rights for concluding 49-year lease contracts for forest plots in the area of Rublevskoye Highway had been sold to a limited number of persons. The Appeal Court stated that as a result, it directly infringed the interests of the owner – the Russian Federation that is interested in selling property at the highest price offered at the auctions.

“ProInvestCapital” Ltd. - one of the auction winner – at the end of 2010 filed an appeal to the Cassation Court requesting to reconsider the case upon discovery of new facts. On January 24, 2011 the Cassation Court verified legitimacy of the judicial acts on the case and upheld the rulings of the Courts of Lower Instances that the FAS Russia’s decision about Mosleskhoz violating the law on competition had been wrong. FAS Russia filed a claim to the Supreme Arbitration Court of the Russian Federation for a judicial review of the Court ruling.