The Supreme Court of the Russian Federation decided that regional capital repair funds are subject to antimonopoly control and the same restrictions as government authorities
The Supreme Court of the Russian Federation (SC) decided that regional capital repair funds are subject to antimonopoly control and the same restrictions as government authorities. The powers of the FAS in this area were challenged by the St. Petersburg overhaul operator, citing the fact that he does not have authority. The Economic College of the Supreme Court recognized that the requirements of the law on the inadmissibility of restricting competition also apply to the fund, since, in particular, budget money is transferred to it. Lawyers believe that the position of the Supreme Court can be applied to other similar legal entities, including housing renovation funds.
The Supreme Court considered the issue of extending the rules of antimonopoly regulation applied to government bodies to capital repair funds. The dispute unfolded between the St. Petersburg department of the FAS and the regional operator of capital repairs (the fund), the reason for which was a complaint from the contractor. At the beginning of 2022, the operator terminated the contracts concluded with LLC UNR-398 for the repair of roofs of apartment buildings in St. Petersburg due to a delay in the start of work by five days, after which the fund held new auctions and entered into agreements with other companies.
The original contractor considered the actions of the overhaul operator to be a restriction of competition, which, under Art. 15 of the Law on Protection of Competition is unacceptable on the part of authorities and organizations performing their functions. The company filed a complaint with the antimonopoly service, which issued a warning to the fund, calling on it to withdraw its refusal to agree to contracts with UNR-398. However, the operator of the overhaul did not comply with the warning and challenged it in the arbitration court.
The first instance and the appeal sided with the contractor and the FAS, agreeing that the fund unreasonably interfered with the activities of UNR-398, including by establishing requirements not provided for by law. The delay arose due to the fault of the customer himself, who did not provide a warrant for the work on time, the decisions say. However, the cassation took the opposite position, considering that the restrictions of antimonopoly regulation provided for government authorities do not apply to the capital repair fund.
FAS and the contractor considered the conclusions of the cassation to be incorrect and filed a complaint with the Supreme Court. In their opinion, the authority to carry out major repairs of apartment buildings belongs to the state, so the fund must obey the same requirements as the authorities. The case was referred to the economic board, which supported the arguments of the applicants, upholding the decision of the first and appellate instances.
Authority above form
As follows from the definition of the Supreme Court, the fund was established by the government of St. Petersburg “in order to ensure the capital repairs” of residential buildings. The decision notes that it is the operator who is engaged in “accumulating contributions for major repairs,” “performing the functions of a technical customer,” and financing expenses using budget funds. Thus, the regional authorities “granted the fund public authority” to ensure the implementation of major repairs, the board emphasized. Considering the transfer of publicly significant functions to the operator, it is subject to the requirements of the competition law applicable to government authorities, the Supreme Court indicated.
“At the same time, the organizational and legal form of the organization in which the fund was created has no legal significance” if the activities of such companies “cannot be considered in isolation from the public functions of the public entity that created them,” therefore the FAS has the right to take response measures in relation to such legal entities, the board concluded. The conclusion of the district cassation on the non-application of antimonopoly control to the fund, the Supreme Court noted, violates the rights and legitimate interests in the economic sphere “not only of the applicant of the cassation appeal, but also of an indefinite circle of persons—economic entities carrying out repair and construction activities in the market for capital repairs of apartment buildings in St. -Petersburg". In addition, the panel added, a warning from the FAS is issued “if only signs of an offense are detected, and not its fact.”
No power without limits
Experts interviewed by Kommersant support the definition of the Armed Forces. “You cannot delegate important powers to some separate structure and say that it can set its own rules of the game without regard to the law,” points out antimonopoly lawyer Natalya Pantyukhina. Kulik & Partners Law.Economics lawyer Dmitry Pavlovsky agrees with her: “It is not the organizational and legal form, but the content of the functions with which the organization is endowed, that determines the ability of the regulatory body to check the actions of a person for compliance with the prohibitions established by law.”
Senior partner of the law firm “Zalesov, Timofeev, Gusev and Partners” Irina Ozolina explains that Art. 15 of the Law on Protection of Competition is aimed, among other things, at “preventing priority provision of information to one contractor, priority performance of work in relation to one category of consumers, and the collection of additional unreasonable payments.” This means that “funds cannot provide preferences to individual companies, indicate them as obligatory for cooperation with other independent contractors, force them to carry out additional approvals and examinations of construction work at their own discretion, and take other actions that lead to restriction of competition,” explains Ms. Pantyukhina. In addition, the position of the Armed Forces will be useful “not only to contractors, but also to meet the interests of consumers - residents of apartment buildings,” concludes Irina Ozolina.
Ms. Ozolina is confident that the decision of the economic board “will be transmitted to capital repair funds in other regions,” and will also apply to other organizations vested with public authority. According to Natalya Pantyukhina, this position can be extended to budgetary, autonomous and government institutions, unitary enterprises and commercial firms (LLC, JSC), in which the government authority acts as a founder. In addition, according to the logic of the Armed Forces, residential renovation funds, state industrial development funds, non-state pension funds and even associations of employers in the form of non-profit organizations fall under the control of the FAS, if they perform publicly significant functions and receive state support, says Dmitry Pavlovsky. He believes that the decision of the Supreme Court will become “a deterrent against such organizations committing various forms of abuse.”
