Freeport of Riga: Opinion on State Audit Office Report (Latvia)

  • Business & Finance

Opinion on State Audit Office Report

Having reviewed the State Audit Office report, the FPRA have come to the conclusion that previous FPRA objections highlighting three main aspects, defined as incompliant with the legal enactments by the report, were not taken into account.

According to the State Audit Office report, the FPRA implemented the projects that do not comply with the Development Program, still, the port infrastructure development projects, that were implemented, are included as guidelines into the port Development Program, and therefore were planned. According to the FPRA, the port Development Program is the document that focuses on major development trends rather than specific projects. It should be noted that the port development trends include fairway dredging as well as other infrastructure object development and maintenance, and the Freeport Authority invested financial resources into implementation of those activities.

Prior to implementation of those development projects, the Freeport Authority has carried out a special procedure in compliance with the requirements, stipulated by the Law on the Procurement of Public Service Providers. Moreover, dredging and infrastructure development activities, implemented on the port territory, are rather specific, and are related both to environmental legislation and seasonality, as well as depend on available technological solutions.

The State Audit Office report indicated that establishment of the “RB flote” (Riga Freeport Fleet) does not comply with the procedure, stipulated by laws and regulations, and that the FPRA is engaged in commercial activities, violating procedures laid down by law. In compliance with the State Administration Structure Law, the FPRA as a derived legal body governed by public law may conduct commercial activities by setting up a subsidiary capital company. The FPRA attributes establishment of the said capital company to the fact that the company’s activity field is related to the sector of strategic importance, namely, port tugboat services are crucial to ensure safety and security at the port.

With the aim to avoid a situation where a private towing service provider decides to stop doing business at the port, thus creating huge losses for the port, the FPRA decided to ensure provision of these services and eliminate risks. Therefore, in accordance with the Law on Ports, and the State Administration Structure Law the Freeport of Riga Authority is entitled to provide services and establish capital companies, so the State Audit Office’s comment in regards of this issue is not clear.

As for the allegations related to the land lease contract terms for some companies, the FPRA disagrees with the statement that the lease terms are unduly long. According to the Civil law, the lease term must be at least 10 years, as this is the minimum time limit in which to start construction on the leased land. Furthermore, at present, many stevedores operating in the Freeport of Riga have acquired ownership rights for buildings and structures in accordance with the Law on Privatization of State and Municipal Property. That is why the FPRA is not inclined to set unreasonably short lease terms to avoid enforced lease.

Given that a variety of laws and regulations were in force during the time period when the Freeport of Riga Authority was audited by the State Audit Office, and the fact that provisions of those regulatory enactments are not unambiguously applicable, in accordance with the standard procedure it would be useful to assess the SAO report at the Prosecutor’s Office of the Republic of Latvia.

[mappress]

Press Release, March 15, 2013

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