Moscow Court of Arbitration
Claimant: Public Limited Company "Russian State Insurance Company"
Agency, issuer of document in dispute: Ministry for the Antimonopoly Policy and Support of
Entrepreneurship of the Russian Federation (MAP of the Russian Federation), as successor Federal Antimonopoly Service of the Russian Federation (FAS of the Russian Federation)
Third parties:
1. LLC "Rosgosstrakh-Accord"
2. LLC "K.F. Stelt"
3. LLC "Mega-Intellect"
4. LLC "Nordtradegroup"
5. PLC "Insurance Company "Accord"
6. PLC Insurance Company "Accord-Garant"
7. LLC "Shareholding Insurance Company "Socinvest"
8. PLC "Insurance Company "Vostok"
Case # 40-20887/04-94-211
STATEMENT OF DEFENSE
for claim filed by PLC "Rosgosstrakh" to invalidate decision and prescription
of MAP of the Russian Federation of 10/03/2004 on case # 2-06/27-04
initiated for violation of antimonopoly lrgislation
FAS of the Russian Federation has examined the claim of PLC "Rosgosstrakh" of 22/04/2004 #
6569/26XK (hereinafter the Claim) seeking to render invalid decisions and prescriptions of MAP
of the Russian Federation of 10/03/2004 on the case # 2 06/27-04 on the violation of
antimonopoly legislation (hereinafter Decision and Prescription) (Appendices 1 and 2 to the
motion of MAP of the Russian Federation on the deposition of evidence (hereinafter
Appendix...) and considers that the arguments of the Claimant groundless and its claims are
subject to dismissal.
According to para 1 of Article 13 of the Civil Code of the Russian Federation (hereinafter CC of
RF) any non-regulatory act, inconsistent with the law or any other act of law, and violating
civil rights and interests of a legal entity safeguarded by law, may be rendered invalid by the
Court.
In the joint Resolution of the Plenary Session of the Supreme Court of the Russian Federation
and the Plenary Session of the Court of Arbitration of the Russian Federation of 01/07/1996 #
6/8 "On issues of application of part one of the Civil Code of the Russian Federation", paragraph
1 reads as follows: "if the Court has determined that the disputed deed is inconsistent with law or
any other act of law and restricts civil rights and interests of a citizen or a legal entity, it may
render such a decision invalid".
Hence, to invalidate the Decisions and Prescriptions of MAP of the Russian Federation two
express conditions should be met, namely, inconsistency of the disputed deeds with the law
and the fact of violation of the claimant's rights.
It is incumbent upon the Claimant to present proof of the alleged violation of his rights, which
follows from part 1 of Article 4, part 1 of Article 65, part 1 of Article 198 and part 2 of Article
201 of the Arbitration Proceeding Code (hereinafter APC).
According to FAS of the Russian Federation, the Decision and the Prescription of MAP of
the Russian Federation were issued in full compliance with the laws of the Russian
Federation and other regulatory legislative documents and do not constitute violation of
the rights and interests of PLC "Rosgosstrakh", and, therefore, there are no grounds for
the Court to render the said deeds of MAP of the Russian Federation invalid.
1. The Decision and the Prescription of MAP of the Russian Federation were issued based
on valid grounds, within the terms of reference of MAP of the Russian Federation and are
consistent with the rules of law of substance and procedure.
The grounds for the examination of the said case by MAP of the Russian Federation and for
issuance of the disputed deeds were provided by the following circumstances.
1.1. Pursuant to Article 11 of the Law of the RSFSR of 22/03/1991 # 948-1 "On competition and
restriction of monopoly activities on product markets" (hereinafter the Law on competition
on product markets), the Decree of the President of the Russian Federation of 22/09/1998 #
1142 and the Resolution of the Government of the Russian Federation of 12/07/1999 # 793
at the time of initiation and examination of the case # 2 06/27-04 and issuance of the deeds
disputed by PLC "Rosgosstrakh", MAP of the Russian Federation was a Federal executive
authority, responsible for the implementation of the Government policies in support of the
development of product markets and competition, for the Federal supervision to ensure
compliance with antimonopoly legislation, as well as prevention and restraining of
monopoly activities, unfair competition and other practices restricting competition.
According to Articles 16 and 17 of the Federal Law of 23/06/1999 # 117-F3 "On protection
of competition on the market of financial services" (hereinafter Law on Competition),
Federal supervision over acquisition of assets and shares of financial organizations is
required in cases of one or more transactions performed by a legal entity or a physical
person (group of persons) to acquire over 20% of shares of a financial organization. If the
size of the equity of the said financial organization, whose assets or shares are acquired,
exceeds the size established by the Government of the Russian Federation for the above
transactions, a prior approval of the Federal antimonopoly authority is required.
Pursuant to the above requirements of the antimonopoly legislation LLC "RosgosstrakhAccord" filed a request to MAP of the Russian Federation (# 730 of 25/09/2003) (Appendix
3) seeking to obtain its approval of a proposed acquisition of 76.9% of shares of the equity
of LLC "Shareholding Insurance Company "Socinvest", and in the course of examination of
the said request, indications of violation under Article 6 of the Law on Competition were
discovered.
In pursuance of Article 30 of the Law on Competition and the Rules of examination of cases
of violations of antimonopoly legislation and other regulatory documents on protection of
competition on the market of financial services (hereinafter the Rules), as approved by the
executive order of MAP of the Russian Federation of 15/09/2000 # 707, MAP of the Russian
Federation determined 09/02/2004 to initiate the case # 2 06/27-04 on violation of
antimonopoly legislation (order of 04/02/2004 3 38a "On establishing a Panel for
examination of the case on violation of antimonopoly legislation of the Russian Federation
and appointment of the Chairperson of the Panel" (Determination of 09/02/2004 to initiate
the case # 2 06/27-04 on violation of antimonopoly legislation – Appendices 4 and 5).
The case # 2 06/27-04 was examined in compliance with the rules of the Law on
Competition and the Rules, and upon completion of the examination MAP of the Russian
Federation issued its Decision, according to which PLC "Rosgosstrakh" and at LLC
"Rosgosstrakh-Accord", LLC "K.F. Stelt", LLC "Mega-Intellect" and LLC
"Nordtradegroup" were found in violation of Article 6 of the Law on Competition.
In accordance with Article 23 of the Law on Competition and the Rules MAP of the Russian
Federation is entitled to issue binding prescriptions to financial organizations to terminate
violations of antimonopoly legislation and other regulatory documents on protection of
competition on the market of financial services and/or to take corrective action to eliminate
consequences thereof, and to restore the prior status of the market.
Pursuant to the Decision MAP of the Russian Federation issued its Prescription to terminate
the violation of antimonopoly legislation.
Thus, the Decision and the Prescription were issued within the terms of reference of
MAP of the Russian Federation and in strict compliance with the rules of law of
procedure contained in the Law on Competition and the Rules.
1.2. The Panel of the MAP of the Russian Federation for examination of cases of violation of
antimonopoly legislation (hereinafter the Panel), having reviewed the documents provided,
the arguments and defenses of the parties determined the following:
1.2.1. The insurance company PLC "Rosgosstrakh" operates on the
PLC "Rosgosstrakh
financial market of the Republic of Bashkortostan together with
the insurance company LLC "Rosgosstrakh-Accord" and PLC
"Accord". It follows from the diagram that the shareholder of
100%
LLC "Rosgosstrakh-Accord" with an 81.22% share in the equity
is LLC "Holding Company "Rosgosstrakh" (Appendix 6).
LLC "RGS-Invest
The only shareholder of LLC "Holding Company
100%
"Rosgosstrakh" is LLC "RGS-Invest" (Appendix 7),
incorporated by PLC "Rosgosstrakh" (Appendix 7). LLC
"Rosgosstrakh-Accord" is the owner of 100% equity share of
LLC "HC-Rossgosstrakh"
PLC "Insurance Company "Accord" (Appendix 8).
According to Article 3 of the Law on competition, 'group of
122%
persons' is defined as a group of legal entities and/or physical
persons, recognized by a group of persons in accordance with the
LLC "RGS-Accord"
laws of the Russian Federation. The legal definition of the
concept "group of persons" is given in paragraph 14 of Article 4
100%
of the Law on competition on product markets.
The above rule of law defines a 'group of persons' as a group of
legal entities and/or physical persons, with respect to which the
PLC "Accord"
following condition should be met: a person or some persons
collectively have the right to directly or indirectly control more than 50 percent of the
total number of voting shares, or constituting contributions to the authorized or share
capital of one legal entity. However 'indirect control of voting shares of a legal entity' is
interpreted as a possibility of actual control through third parties with respect to which
the former person has the above right or authority.
Hence it can be concluded that PLC "Rosgosstrakh", LLC "RGS-Invest", LLC
"Holding Company "Rosgosstrakh", LLC "Rosgosstrakh-Accord" and PLC
"Accord" constitute one group of persons (hereinafter Group "Rosgosstrakh").
1.2.2. The following insurance companies operate on the financial market of the Republic of
Bashkortostan: LLC "Shareholding Insurance Company "Socinvest" , PLC "Insurance
Company "Accord-Garant", PLC "Insurance Company "Vostok". The above-mentioned
companies are not part of the Group "Rosgosstrakh".
LLC "Mega-Intellect", incorporated by physical persons, V. Nacerius and E.
Berlovskaya, owns a 93,16% share of LLC "Shareholding Insurance Company
"Socinvest" (Appendices 9 and 24);
LLC "K.F. Stelt", incorporated by R. Pykhtin and P. Grishin, owns a 16%
share of PLC "Accord-Garant" and a 46.25% share of PLC "Vostok" (Appendix
10);
LLC "Nordtradegroup", incorporated by F. Barchukov, owns a 64.08% of
share of PLC "Accord-Garant" (Appendix 11)
At the meeting of the Board of Directors of the Shareholding Insurance Company "Socinvest" 5
Feb. 2003 (minutes # 9 of 05/02/2003 – Appendix 12) it was announced that the shareholder
"Mega-Intellect" had proposed to nominate the following physical persons to the Board of
Directors of the Shareholding Insurance Company "Socinvest": Yu. Shpizel, S. Odintsov and
A. Sokolov.
At the meeting of the Supervisory Board of the Insurance Company PLC "Accord-Garant" 5
Feb. 2003 (minutes # 14 of 05/02/2003 – Appendix 13) it was announced that the shareholder
"Nordtradegroup" had proposed to nominate the following physical persons to the Board of
Directors of the Insurance Company "Accord-Garant": Yu. Shpizel, S. Odintsov and A.
Sokolov.
At the meeting of the Board of Directors of the Insurance Company PLC "Vostok" 5 Feb. 2003
(minutes # 9 of 05/02/2003 –Appendix 14) it was announced that the shareholders of the
Insurance Company "Vostok", i.e. the "Urals Siberian Bank" and "K.F. Stelt" had proposed their
nominations to the Board of Directors of the Insurance Company "Vostok". The "Urals Siberian
Bank" nominated M. Zakirov, and "K.F. Stelt" nominated S. Gaimanov, Yu. Shpizel, S.
Odintsov and A. Sokolov.
The General Meeting of Shareholders of the Shareholding Insurance Company LLC
"Socinvest" 4 April 2003 (minutes # 1 of 04/04/2003 – Appendix 15) considered election of the
Board of Directors. The vote on behalf of the shareholder "Mega-Intellect" (93.16%) was cast by
its authorized representative Yu. Shpizel (power of attorney of 25/03/2003 - Appendix 16). As a
result of the voting the following persons were elected to the Board of Directors: Yu. Shpizel, S.
Odintsov and A. Sokolov.
The General Meeting of Shareholders of the Insurance Company PLC "Accord-Garant" 4
April 2003 (minutes # 1 of 04/04/2003 - Appendix 17) considered election of the Board of
Directors. The votes on behalf of the shareholders "Mega-Intellect" (15.77%), "K.F. Stelt" (16%)
and "Nordtradegroup" (64.08%) were cast by their authorized representative Yu. Shpizel (three
powers of attorney of 25/03/2003 – Appendices 18, 19, 20). As a result of the voting the
following persons were elected to the Board of Directors: Yu. Shpizel, S. Odintsov and A.
Sokolov.
The General Meeting of Shareholders of the Insurance Company PLC "Vostok" 28 April 2003
(minutes # 1 of 28/04/2003 – Appendix 21) considered election of the Board of Directors. The
meeting was attended by the shareholders of the Insurance Company "Vostok", i.e. the Insurance
Company "Accord" (3.85%) and "K.F. Stelt" (46.25%). The vote for the Insurance Company
"Accord" was cast by the Managing Director of "Accord" S. Gaimanov, acting pursuant to the
Articles of the Insurance Company "Accord". The vote for the shareholder "K.F. Stelt" was cast
by its authorized representative Yu. Shpizel (power of attorney of 25/03/2003 – Appendix 22).
The representative of the "Urals Siberian Bank" was not present at the General Meeting of
Shareholders.
PLC "Rosgosstrakh-Accord" and the Insurance Company LLC "Accord" are part of the Group
"Rosgosstrakh", therefore Yu. Shpizel in his capacity of Managing Director of LLC
"Rosgosstrakh-Accord" on the basis of the resolution of the General Meeting of Shareholders of
LLC "Rosgosstrakh-Accord" (minutes # 3 of 18/02/2003 of the General Meeting of Shareholders
of LLC "Rosgosstrakh-Accord" – Appendix 23) and S. Gaimanov in his capacity of Managing
Director of the Insurance Company "Accord" (Appendices 25, 26), at the time of the General
Meeting of Shareholders of the Insurance Company "Vostok", were also members of the said
group of persons (see para 17 of Article 4 of the Law on competition on product markets). Thus,
Yu. Shpizel and S. Gaimanov, being members of the Group "Rosgosstrakh" owned voting shares
totaling 50.1% of the corporate equity of the Insurance Company PLC "Vostok". As a result of
the voting the following persons were elected to the Board of Directors: Yu. Shpizel, S.
Odintsov and A. Sokolov.
At the time of the General Meetings of Shareholders the physical persons elected to the Boards
of Directors of the said insurance companies, performed their work duties at PLC
"Rosgosstrakh" and at LLC "Rosgosstrakh-Accord", which were part of the Group
"Rosgosstrakh", and specifically:
A. Sokolov was Deputy Manager of the Department of Regional Development of PLC
"Rosgosstrakh" (minutes of the meeting of the Boards of Directors of the Insurance Companies
of 05/02/2003 – Appendices 12, 13, 14);
S. Odintsov was Senior Expert of the Department of Corporate Governance of PLC
"Rosgosstrakh" (minutes of the meetings of the Boards of Directors of the insurance companies
of 05/02/2003 - Appendices 12, 13, 14).
As follows from the excerpt from the order of PLC "Rosgosstrakh" of 28/02/2003 # 47-ls S.
Odintsov was dismissed from PLC "Rosgosstrakh" and transferred to LLC "Holding Company
"Rosgosstrakh". However the above excerpt was not duly certified and may not serve as
acceptable proof according to APC. It is also necessary to indicate that the excerpt provided
corroborates the fact that S. Odintsov was dismissed and transferred to LLC "Holding
Company "Rosgosstrakh" which is part of the Group "Rosgosstrakh";
Yu. Shpizel is the Managing Director of LLC "Rosgosstrakh-Accord" (Appendices 12, 13, 14,
23)
As a result of the election of the above physical persons to the boards of directors of the
Shareholding Insurance Company LLC "Socinvest", Insurance Company PLC "AccordGarant" and Insurance Company PLC "Vostok", over 50% of the membership seats of the
boards of directors of the insurance companies were filled with physical persons who
performed their work duties at PLC "Rosgosstrakh" and LLC "Rosgosstrakh-Accord",
which were part of the Group "Rosgosstrakh".
According to para 20 of Article 4 of the Law on Competition on Product Markets, a 'group of
persons' is defined as a group of legal entities and/or physical persons performing their work
duties at legal entities which are part of one group of persons, exceeding 50% of the membership
of the collective management body and/or of the board of directors (supervisory board) or any
other collective management body of another legal entity.
PLC "Rosgosstrakh
Performing
duties
A. Sokolov
S. Odintsov
100%
Yu. Shpizel
LLC "RGS-Invest
100%
Managing
Director
LLC "HC-Rossgosstrakh"
100%
LLC "RGS-Accord"
100%
PLC "Accord"
3.85%
LLC "Mega-Intellect"
Voting Yu. Shpizel
93.16%
LLC "Socinvest
Yu. Shpizel, A. Sokolov, A. Odintsov
LLC "Nordtradegroup""
64.08%
PLC "Accord-Garant"
Yu. Shpizel, A. Sokolov, A. Odintsov
46.25%
PLC "Vostok
Yu. Shpizel, A. Sokolov, A. Odintsov
Voting Yu. Shpizel
LLC "K.F. Stelt"
Voting Yu. Shpizel
In accordance with part I of Articles 64 and 65 of the Federal Law of 26/12/95 #
208-F3 "On Joint-Stock Companies" and the Articles of the insurance companies
"Socinvest", "Vostok" and "Accord-Garant" the terms of reference of the boards of
directors (supervisory boards) are defined as including the following matters:
determination of top priority business development objectives of the company, increase
of the corporate equity, appointment and early termination of the office of the Managing
Director of the company, deciding on establishment and termination of subsidiaries, etc.
Thus, as a result of concerted actions performed by PLC "Rosgosstrakh",
LLC "Rosgosstrakh-Accord", "K.F. Stelt", "Nordtradegroup", "Mega-Intellect"
PLC "Rosgosstrakh" and LLC "Rosgosstrakh-Accord" were enabled to determine
the conditions for the business activities of the insurance companies "Socinvest",
"Accord-Garant", "Vostok", and the above organizations became members of the
Group "Rosgosstrakh".
1.3. Following the examination of the documents relating to the activities of the insurance
companies "Socinvest", "Accord-Garant", "Vostok" in the time frame AprilSeptember 2003 (in the period following the said general meetings of shareholders up
to the time when indications of the violation were identified), the Panel of MAP of the
Russian Federation established that pursuant to resolutions of the boards of directors
subsidiaries of the insurance companies were liquidated in the communities of the
Republic of Bashkortostan, where the above subsidiaries of the insurance companies
were in competition with LLC "Rosgosstrakh-Accord", a subsidiary of PLC
"Rosgosstrakh", which led to the division of the territory of the insurance market in
the Republic of Bashkortostan.
Pursuant to the minutes of the meeting of the Board of Directors of the Shareholding
Insurance Company "Socinvest" (Appendix 27), represented by Yu. Shpizel, S. Odintsov
and A. Sokolov, which took place 31/07/2003, it was decided to liquidate 9 subsidiaries of
"Socinvest" on the grounds of poor business performance. The executive order of the
management of "Socinvest" of 28/08/2003 # 39 (Appendix 28) imposes on the managing
directors of the subsidiaries subject to liquidation the responsibility to transfer their
current business files to the appropriate subsidiaries of "Rosgosstrakh-Accord".
Pursuant to the minutes of the meeting of the Supervisory Board of the Insurance
Company PLC "Accord-Garant", represented by Yu. Shpizel, S. Odintsov and A.
Sokolov, which took place 31/07/2003, it was decided to liquidate 4 subsidiaries of
"Accord-Garant" on the grounds of poor business performance. The executive order of the
management of "Accord-Garant" of 28/08/2003 # 29 (Appendix 29) imposes on the
managing directors of the subsidiaries subject to liquidation the responsibility to
transfer their current business files to the appropriate subsidiaries of "RosgosstrakhAccord".
Pursuant to the minutes of the meeting of the Board of Directors of the Insurance
Company PLC "Vostok" (Appendix 30), represented by Yu. Shpizel, S. Odintsov and A.
Sokolov, which took place 03/06/2003, it was decided to liquidate 10 subsidiaries of
"Vostok" on the grounds of poor business performance. And it is noteworthy that
30/06/2003 "Vostok" and "Rosgosstrakh-Accord" signed an agreement # 1-12-025-03
(Appendix 31), under which the responsibilities for performance under the written
business of "Vostok" were transferred to "Rosgosstrakh-Accord".
The Insurance Company "Rosgosstrakh-Accord" has subsidiaries in the same locations of
the Republic of Bashkortostan, where the subsidiaries of "Socinvest", "Accord-Garant" and
"Vostok" were liquidated ("List of subsidiaries of the Limited Liability Company
"Rosgosstrakh-Accord", approved by the General Meeting of Shareholders by its resolution
of 30/06/2003 – Appendix 32).
In the city Ufa LLC "Rosgosstrakh-Accord" has 11 subsidiaries. However, 6 subsidiaries of
the insurance companies LLC "Shareholding Insurance Company "Socinvest" , PLC
"Insurance Company "Accord-Garant", PLC "Insurance Company "Vostok" were closed
down.
In Sterlitamak LLC "Rosgosstrakh-Accord" has 3 subsidiaries. 3 subsidiaries of LLC
"Shareholding Insurance Company "Socinvest" , PLC "Insurance Company "AccordGarant", PLC "Insurance Company "Vostok" were closed down.
In Salavat LLC "Rosgosstrakh-Accord" has one subsidiary. 3 subsidiaries of LLC
"Shareholding Insurance Company "Socinvest" , PLC "Insurance Company "AccordGarant", PLC "Insurance Company "Vostok" were liquidated.
In Neftekamsk LLC "Rosgosstrakh-Accord" has one subsidiary. 2 subsidiaries of LLC
"Shareholding Insurance Company "Socinvest" and PLC "Insurance Company "Vostok"
were closed down.
In Tuymazy LLC "Rosgosstrakh-Accord" has one subsidiary. One subsidiary of the
Insurance Company PLC "Vostok" was liquidated.
In Sibai LLC "Rosgosstrakh-Accord" has one subsidiary. One subsidiary of the Insurance
Company PLC "Vostok" was closed down.
In Meleuz LLC "Rosgosstrakh-Accord" has one subsidiary. One subsidiary of the Insurance
Company PLC "Vostok" was closed down.
In Kumertau LLC "Rosgosstrakh-Accord" has one subsidiary. One subsidiary of the
Insurance Company PLC "Vostok" was liquidated.
In Beloretsk LLC "Rosgosstrakh-Accord" has one subsidiary. One subsidiary of the
Insurance Company PLC "Vostok" was closed down.
In Belebei LLC "Rosgosstrakh-Accord" has one subsidiary. One subsidiary of LLC
"Shareholding Insurance Company "Socinvest" was liquidated.
In the village Ermekeevo LLC "Rosgosstrakh -Accord" has one subsidiary. One subsidiary
of LLC "Shareholding Insurance Company "Socinvest" was liquidated.
In Oktyabrskiy LLC "Rosgosstrakh -Accord" has 2 subsidiaries. One subsidiary of LLC
"Shareholding Insurance Company "Socinvest" was liquidated.
In Ishimbai LLC "Rosgosstrakh -Accord" has one subsidiary. One subsidiary of LLC
"Shareholding Insurance Company "Socinvest" was liquidated.
1.4. Based on the analysis of the gross written premium revenue at the insurance companies
"Socinvest", "Accord-Garant" and "Vostok" broken down into types of insurance in the
period 2000-2003, in the course of examination of the case # 2 06/27-04, MAP of the
Russian Federation identified a trend toward reduction of premium proceeds in the wake of
the concerted actions undertaken by the Group "Rosgosstrakh" and "K.F. Stelt",
"Nordtradegroup", "Mega-Intellect"1.
As compared with the performance data for 2002 and incremental for three quarters of 2003
a trend was identified toward a substantial reduction of the gross written premium on the
following insurance types:
LLC "Shareholding Insurance Company "Socinvest":
personal insurance: from RUR 4,700,000 down to RUR 200,000;
property insurance: from RUR 23,100,000 down to RUR 9,300,000;
liability insurance: from RUR 20,800,000 down to RUR 9,200,000.
PLC "Insurance Company "Accord-Garant":
life insurance: from RUR 187,600,000 down to RUR 84,800;
personal insurance: from 3,700,000 down to RUR 40,000;
property insurance: from RUR 37,700,000 down to RUR 4,500,000;
liability insurance: from RUR 12,600,000 down to RUR1,000,000.
1
The analysis of the pattern of gross written premium (as well as the analysis of the competition on the insurance
market of the Republic of Bashkortostan) was performed on the basis of data made available to MAP of the Russian
Federation by the Department of Insurance Supervision of the Ministry of Finance of the Russian Federation under
the agreement on cooperation between the Ministry of Finance and MAP of 16/04/2001. Copies of the letters of the
Ministry of Finance of 6/02/2993 # 24-06/15 and of 27/02/2004 # 24-06/17 are available in Appendices 33 and 34.
PLC "Insurance Company "Vostok":
life insurance: from RUR 10,800,000 down to RUR 400,000;
personal insurance: from 45,400,000 down to RUR 2,400;
property insurance: from RUR 127,600,000 down to RUR 3,800,000;
liability insurance: from RUR 2,900,000 down to RUR 0.
The analysis of the pattern of gross written premium revenue for three quarters of
2003 shows a significant reduction of business on the market of insurance services in the
Republic of Bashkortostan for the insurance companies PLC "Accord-Garant" – by 50%,
and for PLC "Vostok" - 15 times down.
At the same time the revenue in gross written premium of the subsidiaries of PLC
"Rosgosstrakh" during the same period demonstrates a more visible presence of these companies
on the insurance market of the Republic of Bashkortostan: LLC "Rosgosstrakh-Accord" – more
than double; PLC "Accord" – triple; and on life insurance LLC "Rosgosstrakh-Accord" more
than tripled its gross written premium.
PLC "Insurance Company "Accord":
personal insurance: from 27,200,000 up to RUR 40,700;
property insurance: from RUR 19,900,000 up to RUR 82,400,000;
liability insurance: from RUR 5,800,000 up to RUR 100,000
LLC "Rosgosstrakh-Accord":
life insurance: from RUR 30,700,000 up to RUR 101,500;
personal insurance: from 20,000,000 up to RUR 26,200,000;
property insurance: from RUR 114,900,000 up to RUR 146,200,000;
liability insurance: from RUR 13,000,000 down to RUR 16,800,000.
1.5. The analysis of the competition on the market of insurance services of the Republic of
Bashkortostan, based on the market concentration (CR3) and the HerfindaleHirschman Index (HHI), performed by MAP of the Russian Federation as part of the
examination of the case # 2 06/27-04 showed that the concerted actions of the insurance
companies PLC "Rosgosstrakh", LLC "Rosgosstrakh-Accord" and the legal entities
"K.F. Stelt", "Nordtradegroup" and "Mega-Intellect" had resulted in restriction of
the competition on the insurance market of the Republic of Bashkortostan.
The market concentration indicators describe the degree of non-uniformity of distribution
of insurance services among the insurance organizations, as well as their potential impact of
the general conditions of provision of services on specific insurance markets. The market
concentration factor CR3 is calculated as a total of market shares of the three biggest
insurance companies providing services for a specific type of insurance. HHI is calculated as
a total of squares of the shares of all the insurers providing their services on a specific
insurance market, and describes the level of monopolization of the market. The factor takes
into account both the number of insurers, providing services on a specific market, and the
difference in their market positions.
Prior to the concerted actions under consideration the insurance market overall
across the region and the aggregate market of voluntary insurance, according to para
2.6.4 of the Guidelines for procedures of analysis and evaluation of competition on the
market of financial services, as approved by MAP of the Russian Federation (executive
order of 31/03/2003 # 86), was characterized as moderately concentrated (CR3 < 70%,
HHI < 1,800).
As a result of the above concerted actions the level of concentration, the overall
market of insurance services in the Republic of Bashkortostan has migrated from
moderately concentrated to highly concentrated, which is evidenced by the increased
values of the market concentration factor (CR3) from 60.6% up to 74.4%, and that of
HHI - from 1.470 up to 2, 452. In addition, a significant increase in HHI is registered on
the market of property insurance: by 194 units (from 2.101 to 2,295), as well as on the
market of liability insurance: by 549 units (from 3,175 to 3,724) and on the market of
life insurance: by 2,740 units (from 2,786 to 5,526).
1.6. Based on the above the Panel of the MAP of the Russian Federation established the
following findings:
PLC "Rosgosstrakh", LLC "Rosgosstrakh-Accord", "K.F. Stelt", "Nordtradegroup" and
"Mega-Intellect" were engaged in concerted actions which resulted in the election to the
boards of directors (supervisory boards) of the insurance companies "Socinvest", "AccordGarant" and "Vostok" (non-members of the Group "Rosgosstrakh") of persons – members of
the Group "Rosgosstrakh", which enabled the Group "Rosgosstrakh" to determine the
conditions for business activities of the insurance companies "Socinvest", "Accord-Garant"
and "Vostok".
As a result of the said concerted actions PLC "Rosgosstrakh", LLC "RosgosstrakhAccord", ""K.F. Stelt", "Nordtradegroup" and "Mega-Intellect" subsidiaries of the insurance
companies "Socinvest", "Accord-Garant" and "Vostok" were liquidated, gross written
premium diminished, the territory of the insurance market in the Republic of Bashkortostan
was divided by insurance services provided, and other insurance companies are currently
being removed from the market of insurance services.
The concerted actions of PLC "Rosgosstrakh", LLC "Rosgosstrakh-Accord", "K.F. Stelt",
"Nordtradegroup" and "Mega-Intellect" have led to a restriction of the competition on the
market of insurance services in the Republic of Bashkortostan, which fact is demonstrated
by the market concentration indicators, i.e. CR3 and HHI. The said concerted actions have
resulted in modification of the level of concentration of the market of insurance services in
general across the region which is migrating from moderate to high.
Thus the Panel of the MAP of the Russian Federation has established that PLC
"Rosgosstrakh", LLC "Rosgosstrakh-Accord" (members of one group), as well as
"K.F. Stelt", "Nordtradegroup" and "Mega-Intellect", undertook concerted actions
which resulted in restricted competition on the market of insurance services in the
Republic of Bashkortostan, including aiming at division of the territory of the market
of insurance services, as well as by types of services provided on the market of
insurance services and removing other insurance companies from the market.
Article 6 of the Law on Competition on Product Markets prohibits and invalidates in
due process, in whole or in part, any agreements or any concerted actions undertaken
by financial organizations between themselves and/or with other legal entities, if such
agreements or concerted actions result, or may result, in restricted competition on the
market of financial services, including if such agreements or concerted actions are
directly or indirectly intended to achieve:
- division of the territory of the market of financial services, by types of services
provided on the market of financial services, or by customers of financial services on
the market of financial services;
- restricted access to the market of financial services or removal of other financial
organizations from the market.
Considering the above circumstances, the concerted actions of PLC "Rosgosstrakh", LLC
"Rosgosstrakh-Accord", "K.F. Stelt", "Nordtradegroup" and "Mega-Intellect" were
qualified by the Panel of the MAP of the Russian Federation as required by Article 6 of
the Law on Competition, as restricting competition on the insurance market of the
Republic of Bashkortostan, as intended to divide the territory of the market of insurance
services in the Republic of Bashkortostan, to divide the market by types of insurance
services provided, as well as to remove other insurance organizations from the market.
Based on the findings in the examination of the case # 2 06/27-04 the Panel of MAP of
the Russian Federation adopted its Decision which finds PLC "Rosgosstrakh", LLC
"Rosgosstrakh-Accord", "K.F. Stelt", "Nordtradegroup" and "Mega-Intellect" in violation
of Article 6 of the Law on Competition and issued the Prescription to terminate the above
violation and take corrective action to eliminate the consequences of the said violation of
the antimonopoly legislation.
Thus, the above Decision and Prescription of MAP of the Russian Federation were
based on valid grounds, within the terms of reference of MAP of the Russian
Federation and in strict compliance with the requirements of the rules of law of
substance and procedure, whereas the arguments of the Claimant, as given in item 1
and sub-paragraphs 1-3 of para 2 of their Claim are at variance with fact.
Legal and well-grounded non-regulatory deeds of MAP of the Russian Federation
can not violate rights and legitimate interests of persons in respect of which/whom
they are issued.
2. Sub-para 4 of para 2 of the Claim of PLC "Rosgosstrakh" alleges that the order of LLC
"Rosgosstrakh-Accord" of 31/07/2003 # 263-01/06, which according to para 2 of the
Prescription of MAP of the Russian Federation must be reversed, was not enacted by LLC
"Rosgosstrakh-Accord".
This statement of the Claimant is not true, because a duly certified copy of the said
order was provided by LLC "Rosgosstrakh-Accord" for the meeting of the Panel of
the MAP of the Russian Federation and is contained in the records of the case
(Appendix 35).
References of the Claimant to errors, allegedly contained in the Prescription of MAP of
the Russian Federation are not supported by the records of the case or by the text of the
Prescription per se. According to para 2 of the Prescription of MAP of the Russian
Federation the parties at fault are required to take corrective action and eliminate the
consequences of the violation of Article 6 of the Law on Competition by taking the
following steps:
-
reverse the resolutions of the boards of directors of LLC "Socinvest", PLC "AccordGarant" and PLC "Vostok" to liquidate their subsidiaries (including the resolution of
the Board of Directors of LLC "Socinvest" of 31/07/2003, the resolution of the
Board of Directors of PLC "Accord-Garant" of 31/07/2003, the resolution of the
Board of Directors of PLC "Vostok" of 03/06/2003);
- the order of LLC "Rosgosstrakh-Accord" of 02/06/2003 # 170/18 "On approval of
the budget and Articles of project "Reorganization of the network of subsidiaries"
(Appendix 36);
- the order of LLC "Rosgosstrakh-Accord" of 31/07/2003 # 263-01/06 "On
enactment of the Procedures of performance under agreements of the Group
"Accord" companies ("Socinvest", "Accord-Garant" and "Vostok");
-
restore the network of subsidiaries of the insurance organizations of "Socinvest",
"Accord-Garant" and "Vostok" provided availability of demand for insurance
services of the said insurance companies and possibility of break-even provision of
such services by "Socinvest", "Accord-Garant" and "Vostok".
MAP of the Russian Federation thereby prescribes the parties at fault to cancel some of
their local ordinances designed to restrict competition on the market of insurance services in
the Republic of Bashkortostan and restore the network of subsidiaries of the above insurance
companies. Hence, the arguments contained in para 4 of the Claim are contrary to fact.