Latvia moves to criminalize cartels as Estonia chooses opposite path
Latvia is set to criminalize prohibited agreements in procurement this year, shifting from administrative to criminal liability, while Estonia decriminalized cartels last year for the opposite reason.
Amendments to Latvia's Criminal Law are due to take effect this year, turning prohibited agreements — cartels — in procurement into a criminal offense rather than an administrative one. Previously such violations were governed solely by the Competition Law.
The new Article 211.1, prepared for its third reading, covers prohibited agreements in large-scale procurement, such as coordinating bids with a competitor before submission to a contracting authority. Offenders would face imprisonment of up to three years, short-term detention, probation supervision, community service, or a fine, along with restrictions on conducting commercial activity. If the agreement concerns public procurement specifically, the maximum penalty rises to five years in prison.
The amendment was proposed by Andrejs Judins, chairman of the Saeima's Legal Affairs Committee, who was dissatisfied with the outcome of the so-called Construction Cartel case, in which the Competition Council lost in court after evidence obtained from covertly recorded conversations in a separate criminal case was ruled inadmissible. That Supreme Court Senate ruling was sharply criticized by the Competition Council, which is seen as the driving force behind the new provision.
Possible business impact
Observers warn that criminalization could complicate establishing individual guilt in companies with hundreds or thousands of shareholders, since criminal proceedings are considerably more burdensome than administrative ones. The effect on the investment climate of jailing entrepreneurs also remains uncertain.
Estonia's opposite reform
Estonia, once cited as a model for criminal liability on cartels, carried out the reverse reform last year, dropping criminal penalties for individuals and moving cartel violations to administrative law. The main reasons were low investigation and prosecution effectiveness, the requirement to prove each individual's intent and guilt "beyond reasonable doubt," cases dragging on for years without results, and the fact that real prison threats paralyzed leniency programs — even when a company admitted guilt, its manager could still end up behind bars.
