The Federal Arbitration Court of the Povolzhsky Circuit affirmed the legality of the decisions and prescriptions of the Administration of the federal Antimonopoly Service for the Samara Region, taken against the CJSC “Neftekhimiya.”

LLC “Samaraorgsintez” filed an application with the AFAS in the autumn of 2006 regarding violations of antimonopoly legislation by CJSC “Neftekhimiya”insofar as CJSC “Neftekhimiya” terminated a number of services, necessary for the productive activity of LLC “Samaraorgsintez.” The subject of the court’s consideration were services for the supply and removing of railway carriages, use of the infrastructure for the receipt, storage and transfer of hydrocarbonaceous raw materials and also water supply, water diversion and cleansing of residuary waters.

AFAS established, that the indicated services cannot be obtained by LLC “Samaraorgsintez” from any other economic subject apart from “CJSC “Neftekhimiya”, and came to the conclusion that CJSC “Neftekhimiya” holds a dominant position on the relevant goods markets. For this reason and on the basis of art. 10 of the federal Law “On protection of competition”, CJSC “Neftekhimiya” was forbidden to abuse its dominant position and, inter alia, it was forbidden to resort to economically or technically unfounded refusal or evasion of executing agreements with separate customers (clients) when there is the possibility of producing or providing the goods in question.

However, AFAS established that despite the possibility of a loss-free rendering of the indicated services , CJSC refused (evaded) to execute agreements with LLC “Samaraorgsintez.” In connection with this, CJSC “Neftekhimiya” was ordered to cease violating antimonopoly legislation and execute the relevant agreements with LLC “Samaraorgsintez.”

CJSC “Neftekhimiya” applied to the Arbitration Court of the Samara region, demanding the acknowledgement of the prescriptions issued by ADAS as illegal, insofar as, inter alia, it did not agree to recognize its position as dominant, and the requirement that it execute the indicated agreements with LLC “Samaraorgsintez”. LLC “Samaraorgsintez” was included in the matter as a third party that had not filed independent claims regarding the subject of the case.

In its rulings of 20.03.2007, 04.04.2007 and 09.04.2007 the Arbitration Court of the Samara Region upheld the claims of CJSC “Neftekhimiya” and pronounced the decisions and prescriptions of AFAS as invalid. Inter alia, the position of the Arbitration Court of the Samara Region were based on the circumstance that AFAS had not furnished sufficient evidence of the dominant position of CJSC “Neftekhimiya”, and the refusal by CJSC “Neftekhimiya” to execute agreements with LLC “Samaraorgsintez” was due to disagreements between the parties concerning the agreement conditions.

LLC “Samaraorgsintez” and AFAS appealed against the indicated rulings of the Arbitration Court of the Samara region in the order of appeals. These complaints were upheld by the Resolutions of the Eleventh Arbitration Appeals Court of 18.05.2007 and 22.05.2007, and the AFAS decisions remained in force. The legality and grounds of these resolutions were affirmed in cassational order by the Federal Arbitration Court of the Povolzhsky Circuit.

During the consideration of the given dispute, CJSC “Neftekhimiya” pointed out the contradictions between the resolutions of the Eleventh Arbitration Appeals Court of 18.05.2007 and 22.05.2007 with the provisions of antimonopoly legislation. Inter alia, it was stated that CJSC “Neftekhimiya” does not hold the dominant position on the market and did not evade the execution of agreements with LLC “Samaraorgsintez”, and that existing disagreements are of an exclusively civil-legal pre-contractual nature.

Nevertheless, the advocates and attorneys of the Law firm “YUST” clarified at the court hearing that as a result of the specifics of the location of the production infrastructure and production technology, raw materials may arrive only by means of delivery by rail of a gaseous substance, maintained under pressure, its subsequent transfer into tanks adjacent to railroad tracks of CJSC “Neftekhimiya”, and delivery under pressure into the production cycle of LLC “Samaraorgsintez.” Moreover, the pipeline system used for delivery of raw materials to LLC “Samaraorgsintez” is linked with the pipeline system of CJSC “Neftekhimiya”, and no other subject can deliver raw materials through this system.

The market in question can be factually characterized as consisting of a sole seller and a sole buyer. The situation that has emerged is fully consonant with the concept of a dominant position, as determined by antimonopoly legislation. Therefore CJSC “Neftekhimiya” is under an obligation to render services, and refusal to do so, even in conditions of low profitability, is unacceptable. Furthermore, the representatives of LLC “Samaraorgsintez” stressed that within the framework of matters concerning violations of antimonopoly legislation, the civil-legal disputes of these economic subjects were not considered. The antimonopoly body simply defined the obligations of CJSC “Neftekhimiya” to render services to LLC “Samaraorgsintez”, while existing disagreements regarding the conditions of the rendering of services shall be resolved by the Arbitration Court of the City of Samara in considering claims filed by LLC “Samaraorgsintez.”

The interests of LLC “Samaraorgsintez” in all courts were represented by attorneys of the Law firm “YUST.”

The given matter is of interest from the point of view of the application of antimonopoly legislation by the courts, and especially the legislative norms concerning abuse through a dominant position.