Latvia\u2019s Competition Council has imposed a \u20ac7.86 million fine on state-owned Latvijas Valsts Me\u017ei (LVM), ruling that a group of wood-processing companies received preferential access to state roundwood under contracts dating back to the 1990s.<\/p>\n
LVM has rejected the decision and said it will challenge the fine in court, opening another legal front around the sale of timber from Latvia\u2019s state forests. The ruling is separate from the investigation into the government-backed reduction of softwood sawlog prices that GWMI has reported on extensively in recent months.<\/p>\n
The Competition Council\u2019s decision concerns long-term logging agreements inherited by LVM when the company was established, rather than the pricing measures introduced at the end of 2023.<\/p>\n
Between January 2020 and April 2026, six wood-processing companies were able to obtain agreed volumes of roundwood outside the public auction system, according to the regulator. Other buyers had to compete for available timber through auctions.<\/p>\n
The Competition Council concluded that this difference gave the contract holders an advantage that was no longer justified under current market conditions.<\/p>\n
Softwood sawlogs at the centre of the ruling<\/strong><\/p>\n The volumes involved were significant, particularly in the softwood sawlog market.<\/p>\n From 2020 to 2025, timber supplied under the disputed agreements represented an average 9.6% of LVM\u2019s total timber sales. For softwood sawlogs, however, the proportion reached an average 16.4%.<\/p>\n Around 2.9 million m\u00b3 of roundwood worth close to \u20ac240 million was supplied to the six companies during the six-year period.<\/p>\n The regulator argues that these volumes would otherwise have been available to the wider market, where qualified buyers could have competed for them on price. In the case of softwood sawlogs, it estimates that the system reduced volumes reaching competitive sales channels by at least 12.6%.<\/p>\n This distinction is important for Latvia\u2019s sawmilling industry. Guaranteed access to raw material allows mills to plan production and investment without facing the same procurement uncertainty as companies dependent entirely on auctions.<\/p>\n The Competition Council has therefore ordered LVM not only to pay \u20ac7.86 million \u2013 equivalent to around 1.3% of its 2025 turnover \u2013 but also to ensure equal sales conditions for qualified timber buyers in the future.<\/p>\n Contracts inherited from the 1990s<\/strong><\/p>\n The origins of the dispute go back to the years immediately following Latvia\u2019s restoration of independence.<\/p>\n Between 1991 and 1998, the State Forest Service concluded long-term logging agreements with timber companies as part of efforts to rebuild and develop the domestic forest industry. Companies received access to designated state forest resources while assuming responsibilities for forestry and maintenance work.<\/p>\n Most agreements initially had considerably shorter durations, but extensions granted during the 1990s pushed some contracts far into the future. Several eventually carried terms approaching a century.<\/p>\n When LVM took responsibility for managing Latvia\u2019s state commercial forests in 2000, it inherited 361 such agreements.<\/p>\n Their number subsequently declined sharply. By 2023, only 11 remained, while some of the longest contractual arrangements extended into the 2090s.<\/p>\n The commercial basis of the agreements also changed. LVM gradually assumed forest management and maintenance activities itself, meaning contract holders were no longer providing some of the services that had originally formed part of the exchange for guaranteed timber access.<\/p>\n Later revisions shortened the duration of some agreements but did not proportionately reduce the timber volumes available to the companies.<\/p>\n The Competition Council considers that this effectively preserved preferential access to state timber long after the economic circumstances that had justified the original contracts had disappeared.<\/p>\n LVM says it was legally obliged to honour the agreements<\/strong><\/p>\n LVM disputes that interpretation and argues that the regulator has placed the company in an impossible legal position.<\/p>\n The state forest company stresses that it did not negotiate the original agreements. They were inherited by law when LVM was established.<\/p>\n More importantly, LVM says it previously attempted to have the contracts terminated through the courts. Those efforts were unsuccessful, with courts requiring the company to continue fulfilling the contractual obligations.<\/p>\n According to LVM, simply stopping deliveries could therefore have exposed the company \u2013 and ultimately the Latvian state \u2013 to compensation claims from contract holders.<\/p>\n The company also argues that it acted as soon as the Competition Council clearly stated in January 2026 that the agreements could conflict with Latvia\u2019s competition-neutrality provisions.<\/p>\n LVM subsequently began legal proceedings seeking to have the remaining contracts declared invalid and requested interim measures suspending their execution. Five cases concerning the agreements are currently before Latvian courts.<\/p>\n The company says the 11 remaining contracts now represent around 3% of its timber sales and approximately 1.3% of Latvia\u2019s total roundwood market.<\/p>\n Several contract holders are also expected to challenge the Competition Council\u2019s decision.<\/p>\n A second major dispute over LVM timber sales<\/strong><\/p>\n The ruling adds another layer to the unusually intense legal scrutiny surrounding Latvia\u2019s state timber market, although it should not be confused with the much larger controversy over LVM\u2019s softwood sawlog pricing mechanism.<\/p>\n That separate case concerns a government decision made at the end of 2023 that changed the method used to calculate prices for long-term softwood sawlog customers from the beginning of 2024.<\/p>\n The intervention resulted in lower prices for participating wood-processing companies and has subsequently become the subject of criminal and institutional investigations. Estimated losses to LVM have been put at more than \u20ac30 million, with later assessments indicating that the financial impact could be considerably higher.<\/p>\n Latvia\u2019s Prosecutor General has also challenged the legality of the government decisions behind that pricing intervention.<\/p>","protected":false},"excerpt":{"rendered":" Latvia\u2019s Competition Council has imposed a \u20ac7.86 million fine on state-owned Latvijas Valsts Me\u017ei (LVM), ruling that a group of wood-processing companies received preferential access to state roundwood under contracts dating back to the 1990s. LVM has rejected the decision … Continue reading