AS Latvijas valsts meži (LVM) considers the fine imposed by the Competition Council (KP) over long-term logging contracts concluded in the 1990s – before LVM was even established – to be unfounded and unfair.
The company will appeal the KP’s decision to impose the fine in court.
LVM’s goal has always been, and remains, both to protect the economic value of state forest resources and to prevent a situation in which the company or the state could suffer major losses. Had performance of the long-term contracts been halted without legal grounds, there would have been a risk of former contractual partners going to court to claim damages.
The long-term logging contracts (IML) covered by the KP’s decision were concluded in the 1990s, before LVM was established, by three district forestry offices of the State Forest Service (VMD). Some of these contracts ran for terms of up to 96 years. In 1999 the State Forest Service Law was adopted, which obliged the newly founded company AS Latvijas valsts meži to take over these specific IMLs and the obligations arising from them.
LVM also disagrees with the KP’s decision because, soon after taking over the contracts in the early 2000s, the company sought to have them terminated. Relying, among other things, on an opinion from the Prosecutor General’s Office that extending the contracts had not complied with the regulatory framework in force at the time, LVM went to court seeking to have them annulled. However, all three court instances ruled against LVM, obliging the company to perform the contracts in full for their entire term.
The KP spent more than five years assessing whether the IMLs complied with the Competition Law. Only at the end of 2024 did the KP indicate a possible failure of the IMLs to meet competitive-neutrality requirements. Only on 9 January 2026 did LVM receive a clearly formulated KP position stating that the contracts breached Section 14¹ of the Competition Law.
Having received this KP position, LVM acted immediately. As early as late January – that is, even before the KP opened proceedings – the company began taking steps to go to court, one by one, against all of its IML partners, seeking to have the contracts declared invalid, and filed the first such claim with the court. At the same time, LVM applied for interim protective measures, namely to suspend the contracts until a final judgment took effect. The courts granted these applications, and all the IMLs then in force were suspended.
However, at the end of July, in one of the proceedings, LVM received a regional court ruling that overturned the first-instance decision and granted the application to lift the interim protective measure that had been applied. At the same time, the regional court noted that LVM’s claim was prima facie well-founded. The KP was also kept informed about the filing of claims, the suspension of contract performance and the progress of the proceedings.
By going to court, LVM has chosen a lawful route for resolving the question of the IMLs’ status and their future performance.
Given all this, LVM cannot understand the KP’s decision to impose a fine. LVM stresses that, after receiving the KP’s position in January this year, it immediately took lawful action to address the question of the IMLs’ status and future performance.
LVM does not dispute that, in certain cases, the legislator may intervene in existing civil-law relationships. However, established legal understanding holds that such intervention takes place through the legislator giving direct instructions on how that intervention affects prior contractual relationships.
LVM notes that, during meetings, the KP expressed the position that the company should unilaterally terminate the contracts in question. That would mean LVM having to assume all the potential financial risks arising from such a unilateral withdrawal. In LVM’s view, such conduct would not be responsible – it would run counter to the prohibition on squandering LVM’s and the state’s assets.
LVM has previously reported that, upon its establishment in 1999, it was legally required to take over 361 long-term logging contracts with terms ranging from a few years to as long as 96 years. Since it began operating, the company has repeatedly sought to resolve this situation through lawful means. Eleven IMLs currently remain in force, which LVM has sought to have declared invalid through legal action in the courts. Five cases seeking termination of these contracts are currently before the courts. The volume covered by the IMLs amounts to roughly 3% of the timber LVM sells, or about 1.3% of the total Latvian roundwood market.