FAS decision on whether to start case against Mechel’s sale of Vanino due in February


Russia’s Federal Anti-monopoly Service (FAS) will decide whether to initiate a case against Mechel’s (MLTR:RM) sale of Vanino after it receives official documents regarding the deal, an FAS spokesperson told PARR. The deadline for submissions is 18 February, the spokesperson added.

On 18 January, Mechel announced that its Mecheltrans unit, which owned 73.33% of the common shares of and a 55% stake in Vanino, had sold 71.8% of the common shares (representing a 53.8% stake) to Russian and foreign investors.

On 21 January, it emerged that FAS has decided to inspect the legality of the sale of 71.8% of the common shares of Vanino Sea Trade Port by Mechel to investors. Port Vanino is regarded in Russian law as a strategic asset, so FAS wanted to find out whether or not the regime on foreign investments has been breached, the spokesperson said.

On 23 January, FAS sent official requests to Mechel and Vanino to disclose new buyers, the FAS spokesperson told PARR.

On Friday, 25 January, the names of three Cyprus-based buyers which had each bought less than 25% of Mechel's stake in Vanino were disclosed, said Anton Panchenkov, Head of Group in Corporate Practice at Goltsblat BLP, the Russian practice of London-based law firm BLP.

The new owners are three Cyprus-based companies, Sedmino Investments Ltd, Opern Trade Ltd and Travine Trading Ltd, each hold 23.68% of the common shares of Vanino.

The owners of these three offshore companies were not disclosed. Vanino revealed these company names well before the 18 February deadline, according to the FAS spokesperson. The Russian foreign investments regime is primarily regulated by Federal Law № 57-FZ "On the Procedure of Making Foreign Investments in Companies of Strategic Importance for National Defense and State Security" of 29 April, 2008 (the "Strategic Investment Law"), which came into force on 7 May, 2008.

Possible FAS measures

FAS can now go to these three Cyprus entities and ask about their respective beneficiaries. The outcome will likely be that these beneficiaries are three different Russian individuals, likely good friends and likely connected to the same Russian group, but legally not affiliated in any way, said one Moscow-based lawyer.

If buyers have violated competition law and FAS manages to prove that the deal has violated competition in the market, the agency can cancel the deal, said Panchenkov. If the deal does not limit competition on a related market, FAS can issue an administrative fine, he added.

This inspection might have been initiated upon petitions by certain informants, the Moscow-based lawyer suggested.

Port Vanino, a Russian commercial seaport, is located in the naturally deep Vanina Bay in the Strait of Tartary, which links the Pacific Ocean’s Sea of Okhotsk and Sea of Japan. According to a company press release, Vanino is the largest transport hub in the Khabarovsk Region and one of Russia’s 10 largest ports. Its cargo turnover in 2012 totalled around 6m tonnes.

Vanino handles cargo bound for Russia’s North-East, Japan, South Korea, China, Australia, the United States and other Pacific states. PARR previously reported on two FAS investigations into the fishing business: a Pollock fishing cartel and a FAS investigation into competition violations in the Norwegian fish supply sector.

In November 2012, Alexander Kinyev, the head of FAS’s cartel division, told PARR that FAS will initiate additional fisheries cartel investigations soon.

by Natalia Lapotko in London

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