Case of protecting the rights of the Client in court, prosecutor's office and antitrust authority
What to do if you are not heard at the regional level? Go higher! A difficult case in which the Client became the object of attention of the prosecutor's office and the antimonopoly authority.
Description of the problem
The customer contacted us. The plant was working under the state defense order . The military prosecutor's office conducted an inquiry against him and came to the conclusion that:
1) The plant illegally included technological losses in the price of products.
2) The plant, without the consent of the customer, included in the price of products the costs of the management company, in which management, accounting and financiers worked, as well as legal and consulting services.
According to the prosecutor's office, the plant’s actions caused damage to the state. The supervisor sent a statement of violations to the regional antitrust authority , which instituted antitrust proceedings.
The plant is a modern, highly scientific and profitable enterprise. The client spent significant funds on the re-equipment of fixed assets and increasing labor productivity. The intervention of state bodies threatened the Plant with becoming a loss-making enterprise, in which development became impossible.
The difficulty in such cases is that if the prosecutor’s office made a decision, then the rest of the state bodies begin to reproduce it in a chain:
Prosecutor's Office → Regional OFAS → Arbitration Court →
Arbitration Court of Appeal → District Arbitration Court → Supreme Court
It’s difficult to break such a chain. In the present case, this task was complicated by the following circumstances:
- SDO legislation is not publicly available;
- Many current regulations were adopted by state bodies of the USSR;
- The SDO legislation contains many gaps and conflicts of norms, which in practice are interpreted in favor of the state;
- Judicial practice in such disputes is practically absent.
1). We sent inquiries to the federal authorities with a request to clarify the current standards
The prosecutor’s office put pressure on regional antitrust authority. To counteract the pressure of the supervisor, we sent inquiries to the Federal Antimonopoly Service of Russia, the Ministry of Industry and Trade, and the Ministry of Justice, asking for clarification of controversial issues in the legislation. These government bodies were in the hierarchy of government bodies above the regional regional antitrust authority.
In all responses, government authorities took the position of the Client. We put the regional antitrust authority before the choice: to reject the arguments of the prosecutor's office or go against the position of the federal authorities.
2). We showed the production process
The prosecutor’s office did not see the difference between technological losses and marriage. To explain this difference to UFAS, we, together with the Plant, prepared photo explanations, which clearly showed the differences between technological losses and marriage.
3). We ordered an independent examination
We ordered a commission examination to prove the economic feasibility of including disputed costs in the price. The commission included an appraiser and candidates of economic sciences. Any enterprise includes disputed expenses in the cost of production, therefore there is no damage to the state. The prosecutor’s position was based only on the opinion of the prosecutor’s office. Our position was reinforced by the opinion of experts.
4). We appealed to the Supreme Court of the Russian Federation with an administrative claim in which we asked to declare the order in the field of public defense order invalid
When it became clear that the measures taken were not enough, we decided to appeal to the Supreme Court of the Russian Federation. In a normal situation, it is impossible to immediately contact the highest court. It is necessary to consistently go through courts of all levels, and only after they all refuse, you can file a complaint with the Supreme Court of the Russian Federation.
But the Supreme Court of the Russian Federation accepts for production less than one percent of all complaints filed, we could not get to it.
In order for the Supreme Court of the Russian Federation to consider our case, we filed an administrative lawsuit in which we asked to invalidate one of the Orders in the field of public defense, adopted by the Ministry of Industry and Trade. We understood that the Supreme Court of the Russian Federation would not cancel the normative act, but in the reasoning part of the decision it could indicate how to correctly interpret disputed points.
A few days before the Supreme Court considered the case, regional antitrust authorityissued a decision in which it recognized the Client as having violated the law in the field of public defense and ordered to exclude from the price of products:
– technological losses;
– expenses for the management company, legal and consulting services.
The Supreme Court of the Russian Federation rejected the administrative claim for invalidating the Order of the Ministry of Industry and Trade. However, we achieved the result: in the reasoning part of the decision, the highest court gave an interpretation of the controversial norms that coincided with the position of the Client.
We appealed the decision of the regional antitrust authorityto the Arbitration Court, which checked the actions of the Plant for compliance.