The judgment of the Supreme Court Senate’s Department of Administrative Cases in the construction cartel case has brought to the forefront essential issues concerning cooperation between law‑enforcement authorities, the transfer of lawfully obtained evidence for uncovering cartel agreements, and the effective application of competition law, the Competition Council states.
The Competition Council (CC), while respecting the Senate’s decision, emphasizes that in its Judgment the Senate did not assess the existence of the prohibited cartel agreement on the merits and did not analyze that, without the lawfully obtained conversation recordings from the criminal proceedings, it would be impossible to prove such a long‑term, secret and orally implemented infringement. The Judgment does not question that this evidence was obtained lawfully and is reliable; however, the court’s assessment is limited solely to a formal review of the process for transferring the evidence, in effect leaving without evaluation the most crucial aspect – the real possibilities of detecting and proving the infringement.
The Senate has annulled the judgment of the Administrative Regional Court in the case regarding the CC’s decision of 30 July 2021 on a prohibited agreement in the construction sector and has remitted the case for a new examination to the Administrative Regional Court.
In its Judgment, the Senate focused on a procedural aspect – namely, the interpretation of the legal framework in the context of admissibility of evidence. The Senate concluded that, for proving a competition law infringement – a cartel agreement – information is not admissible that the Anti‑Corruption Bureau (KNAB) transferred to the CC from the evidence in the criminal case it was investigating, which had been obtained as a result of operational activities measures. The Senate indicated that the detection of cartels is not included among the objectives and purposes laid down in the Law on Operational Activities, and therefore concluded in the Judgment that persons involved in a cartel do not and cannot have grounds to foresee that information obtained in operational activities measures may be transferred and used in an administrative procedure to prove a cartel agreement. Consequently, the Administrative Regional Court will have to assess whether the lawfulness of the CC’s decision is supported by other evidence in the case.
First, the CC stresses that, under the Competition Law, the CC is entitled to initiate and conduct an investigation also on the basis of information provided by another institution. In this particular case, the CC obtained the information supplied by KNAB and the materials obtained in the criminal proceedings, including conversations intercepted through operational activities, which at the time of transfer of the materials had lost their status as classified information. Before using them, the CC verified the lawfulness of these materials – namely, that the operational activities measures had been carried out with the authorization of a Supreme Court judge, and confirmation was obtained that the materials were authentic. An expert examination was carried out in the case, in which it was established that the conversation recordings were not edited or falsified and corresponded to the conversations that actually took place. These circumstances are not disputed in the Judgment, but at the same time the court has not assessed these facts on the merits either.
Second, the Judgment does not assess the position of KNAB as the authority in charge of the criminal proceedings, which is also reflected in the case file, namely, that the protection of materials obtained in criminal proceedings is not an end in itself. The authority conducting the criminal proceedings has rights enshrined in law to disclose the evidence obtained to another institution at the moment when this does not interfere with the ongoing investigation and is recognized as justified and necessary. Since KNAB identified indications of the most serious competition law infringement in the conversations intercepted through operational activities, the anti‑corruption authority, in accordance with the Criminal Procedure Law and its competence, forwarded the information to the CC.
Third, the Judgment does not carry out a proportionality assessment in a broader context, answering the question of whether the transfer to the CC of conversations intercepted by law‑enforcement authorities, for the purpose of revealing cartel agreements, is necessary in a democratic society and proportionate to individuals’ rights to respect for private life. In other words, it does not balance the rights of a few individuals to respect for private life against the interests of society as a whole in preventing a long‑term (more than 5 years), systematic and large‑scale prohibited agreement in public procurement. Importantly, in the construction cartel case uncovered by the CC, the impact on public procurement reached more than 600 million euros, causing significant harm to the state budget, to the use of European Union co‑financing, and to fair competition.
In the CC’s view, it is important to strike a reasonable balance between the individual right to respect for private life and the public interest in preventing long‑term and large‑scale competition law infringements, as also indicated in a judgment of the European Court of Human Rights, which is mentioned in the Judgment. The European Court of Human Rights held that the transfer to a competition authority of intercepted conversations between company representatives contained in a criminal case, which indicate the implementation of a cartel agreement, for the purpose of investigating and uncovering this competition law infringement in administrative proceedings, does not violate the rights of private individuals to respect for their private and family life guaranteed by Article 8 of the European Convention on Human Rights.
Fourth, the Judgment does not assess inter‑institutional cooperation and the main objective achieved as a result of such cooperation – the detection and termination of a significant competition law infringement. It was precisely as a result of close cooperation between law‑enforcement authorities that a long‑term cartel agreement was identified and stopped, which, given its secret nature, would practically not have been detectable otherwise.
Fifth, in the CC’s view, the message expressed in the Judgment creates a risk that in situations where a law‑enforcement authority, in fulfilling its statutory duties, identifies indications of another serious infringement – in this case a cartel agreement that causes significant harm to society as a whole – it will not be able to transfer this to the CC solely because the Law on Operational Activities does not contain a direct and detailed reference to the transfer of such information. This approach ignores both the interests of society – to prevent and uncover serious infringements of this kind and scale – and the principle of cooperation between institutions.
The CC draws attention to the fact that the conclusions expressed in the Judgment about shortcomings in the quality of the legal framework, which restrict the transfer to the CC of information obtained as a result of operational activities by law‑enforcement authorities for use in administrative proceedings, create substantial challenges for the effective detection of hidden cartel agreements. The CC has no right to carry out operational activities itself, including the interception of conversations, whereas the procedural measures provided for in the Competition Law are aimed at obtaining evidence of communication already conducted in writing, as well as at obtaining explanations from parties to the case about the prohibited agreements they have concluded. The Senate has also recognized that cartel agreements are made in secret and that related documentation is kept to a minimum. Therefore, operational activities measures carried out by law‑enforcement authorities are often the only way, alongside uncovering corrupt actions by officials in public procurement, to detect cartel agreements, especially where cartel participants have concluded and maintained such agreements orally, leaving no other significant evidence.
CC Chair I. Šmite: “The CC does not agree with the reasoning provided in the Judgment and considers that the Senate’s assessment in this case was narrow and formal, being limited only to one aspect of the overall issue to be assessed – the formal compliance of the transfer of evidence – without analyzing the issue in the context of proportionality, the protection of the public interest and the outcome of this type of investigative cooperation between law‑enforcement authorities.
At the same time, while respecting the Senate’s decision, the CC will use all legal remedies to achieve a fair outcome that corresponds to the interests of society and to ensure effective protection against the most serious competition law infringements that are covertly organized, such as cartel agreements.”
In its decision of 30 July 2021, the CC established that ten construction companies had engaged in a long‑term prohibited agreement concerning participation in public and private procurement, and the companies were fined a total of EUR 16.65 million.
Originally published at https://inc-baltics.com/kp-augstaka-tiesa-buvnieku-kartela-lieta-nepamatoti-ierobezo-tiesibsargajoso-iestazu-sadarbibu/
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