LDZ released the statement on May 13 confirming that it had asked relevant authorities to launch an investigation of the country’s minister of transport, Mr Tālis Linkaits. The railway says it believes that Linkatis is deliberately undermining the company in order to achieve favourable conditions for privatisation.

Linkaits issued a declaration of no confidence in LDZ’s board on May 7. The minister alleges that the state-owned railway, including freight subsidiary LDZ Cargo, was abusing its dominant position by distorting the level of competition in the market, which could result in penalties for LDZ and the Latvian state.

However, LDZ alleges that Linkaits is attempting to influence its council with the goal of dismissing Bērziņš and two members of the board. The railways has also asked the relevant authorities to evaluate the possible involvement of Linkaits in corrupt actions while lobbying in the interest of private operator, Baltijas Ekspresis.

PA says it categorically disagrees with the railway and Bērziņš’s opinion. Under Section 17 of the Law on Completion of the Privatisation of and Municipal Property and Use of Privatisation Vouchers, state-owned companies like LDZ and their shares are not allowed to be privatised or alienated.

“Public servants with appropriate education, experience and qualifications have to perform duties of a board member and be well-informed about the principles of state property conversion and regulations associated with such procedures,” the PA says. “PA reminds that non-compliance with regulations and intentional misleading of society for personal gain is unacceptable.”

Baltijas Ekspresis

Baltijas Ekspresis has also expressed its support for the minister’s position. The operator issued its own extensive statement on the matter on May 14, which includes a dossier of grievances against LDZ.

The operator cites the state-owned railway’s failure to comply with European Union legislation regarding the opening of the market to free competition, which was enacted in 2007, and alleges that a culture of discrimination exists in which LDZ and LDZ Cargo continuously work to obstruct operation.

“Despite the fact that 12 years have passed since the opening of the rail freight market, it turns out that there is one state capital company LDZ, who, together with its subsidiary LDZ Cargo, can completely ignore and disregard Latvian legislation in its day-to-day operations, with their leadership striving to preserve the principles of railway activity inherited from the Soviet Union,” Baltijas Ekspresis says.

Bērziņš says the minister’s statement poses significant risks to the company. This includes endangering existing and potential loan agreements, threatening the country’s electrification programme and projects financed by the EU. It could also result in a fall in the number of foreign customers and a rapid decline in rail freight volumes.

“Public statements regarding possible participation of the company and its management in corrupt transactions create an adverse influence not only on the company, which is significant to the national economy, but also to the reputation of the country in general,” Bērziņš says. “Such unjustified statements, even if based on deliberately false information provided to the minister of transport by the third parties, affects the creditworthiness of LDZ and the conditions of financial obligations; these statements harm relationships with partners and customers.”

LDZ says it recorded its best result for three years in 2018, a trend which has continued in the first quarter of 2019 with 11.6 million tonnes transported and the company on target to achieve its annual objective of 47-49 million tonnes.

Baltijas Ekspresis was the first private freight operator to work in the 1520mm-gauge region and transported 8 million tonnes of freight in 2018, or 16% of the total carried on the LDZ network.