courts in 84% of cases cancel the results of tenders and contracts based on FAS claims

Arbitration courts are considering more and more claims from the Federal Antimonopoly Service (FAS) of the Russian Federation challenging bids or transactions due to violations of competition law – the number of such cases increased by 60% in 2023. In general, since 2020, the service has achieved the cancellation of tenders and contracts worth almost 7 billion rubles. Lawyers attribute the increase in the number of cases to the growth of government procurement and the tightening of legislation on foreign investment in Russian strategic enterprises.

The MEF Legal studied the judicial practice on claims by the FAS and its territorial departments with demands to invalidate tenders, agreements and contracts from January 1, 2020 to October 30, 2023. Cases in which court decisions came into force were analyzed: a total of 164 such cases, of which in 108 cases the claims of the service were satisfied (66.3%). The study notes a trend towards an increase in the number of disputes: 35 in 2020, 49 in 2021 and 56 claims in 2023 (January-October). There was a noticeable decrease only in 2022 – 24 claims.

Oksana Pavlukhina, Antimonopoly Practice Advisor at the MEF Legal, explains the failure of 2022 to “a change in the general economic situation in the country” and a softening of the control functions of government agencies “in order to avoid unnecessary pressure on business.” “In 2022, the economy was overcoming a state of shock, and the FAS tried to maintain a balance: to develop mechanisms for interaction with companies so that pricing would not lead to a shortage of goods on the market, and at the same time provide some relief so that administrative pressure would not contribute to bankruptcies,” adds the antimonopoly lawyer practice of CA Delcredere Maria Lisichenkova. In 2022–2023, she clarifies, the number of government contracts increased, and many amendments were made to the laws on the contract system and government procurement: “More tenders were held, their participants and organizers did not have time to immerse themselves in legislative changes.”

The percentage of courts satisfying the department’s demands also increased significantly: in 2020 it was 62.9%, in 2021 – 49%, in 2022 – 62.5%, and in 2023 – as much as 83.9%. Oksana Pavlukhina explains the situation with “an increase in the quality of the evidence base and the accumulated experience of the FAS in challenging violations.” “The regulator has learned to concentrate on cases with the best judicial prospects,” adds Oleg Moskvitin, partner at Muranov, Chernyakov and Partners. Maria Lisichenkova notes that in general the number of cases considered by the FAS has decreased, which allows for “a more thorough analysis and a better identification of violations.”

The practice was also influenced by the resolution of the plenum of the Supreme Court of the Russian Federation on antimonopoly disputes adopted in 2023. It, according to Irina Akimova, partner of the BGP Litigation competition law practice, “resolved many conflicts and gaps, and clarified the rules for assessing circumstances.”

In just almost four years, the service managed to cancel trades and transactions worth 6.9 billion rubles, of which in 2020 – 3.94 billion rubles, in 2021 – 1.16 billion rubles, in 2022 – by 380.6 million rubles, in 2023 – by 1.41 billion rubles. The FAS demands were made in connection with violations of laws on the protection of competition, on foreign investment in strategic enterprises (FZ-57) and on trade. In the vast majority of cases (139 cases out of 164) we are talking about the first law. At the same time, since 2022, the number of claims regarding non-compliance with Federal Law 57 has increased significantly. In total, the courts have considered 14 such claims since 2020, of which almost half (6) occurred in 2023. Only two demands were rejected, the rest were satisfied, which led to the cancellation of transactions with a nominal value of shares of 2.667 billion rubles.

In 2022–2023, amendments were made to the legislation on foreign investment and control by government agencies over transactions in relation to shares (stakes) in strategic enterprises was strengthened, explain the authors of the study. For example, since 2023, the presence of a residence permit for a Russian citizen in another state has become a sign of a foreign investor, which has led to an increase in the range of transactions falling under the law, notes Maria Lisichenkova. An additional role, according to Oleg Moskvitin, is played by “a certain support by the courts of the national regulator, if we are talking about disputes with foreign companies, often belonging to unfriendly jurisdictions, which takes place in absolutely any country, not only in Russia.”

In addition, the study says, thanks to the amendments, the FAS was able to demand the recovery of shares of strategic companies for the income of the Russian Federation, and not simply reverse the transaction and deprive them of the right to vote. In total, in 2020–2023, the courts, based on the service’s claims, recovered in favor of the state shares (shares) in “strategists” with a nominal value of more than 516 million rubles. After the shares are recovered for the benefit of the state, “foreign investors are deprived of the possibility of various types of abuses, including those of a corporate nature; they cannot withdraw property from the company or worsen its financial and economic situation,” explains Irina Akimova.

According to the MEF Legal, the FAS fares worst of all with claims under the trade law, for which the least number of claims are filed. This is explained by a general decrease in the number of cases initiated by the service under this law. If in 2018 there were 121 of them, then in 2022 there were only 10, of which only three were recognized by the FAS as violations, imposing fines totaling 2.5 million rubles, notes Maria Lisichenkova. In just almost four years, the courts considered 11 FAS claims under the trade law, but the service won only one case.

Lawyers explain this by the specifics of the trade law, which distinguishes it from the general rules of antimonopoly regulation. “In essence, both business, the FAS, and the courts were faced with a rather new complex interweaving of administrative and civil rules on which these disputes were based,” explains Oleg Moskvitin. The reason for the difficulties, Maria Lisichenkova clarifies, is that “those affected by violations of the retail chain (manufacturers or suppliers) often refuse to help with evidence or do not file complaints with the FAS at all,” preferring not to risk their relationship with the retailer.

Anna Zanina