Lithuanian Railways, Orlen Lithuania fail to reach deal

State-owned Lithuanian Railways has failed to reach an agreement with the Lithuanian unit of Poland’s biggest oil group Orlen to end their protracted dispute over freight tariffs.

“The deadline for the negotiations and Lithuanian railway’s proposal for a deal has passed. Therefore, from now on everything will go to institutions for mediation. The current contract remains in effect until 2024, unless it is revised or terminated,” Lithuanian railways chief executive Stasys Dailydka said.

Lithuanian railways are claiming that Orlen Lietuva has failed to comply with its freight transportation contract, which was signed in 2009 and would remain in effect until 2024, and claimed it owed approximately €30 million to the railway company.

However, the European Commission is set to impose a fine of up to €50 million on Lithuanian Railways, equivalent to up to 10% of Lithuanian Railway’s annual revenue for dismantling track between Lithuania and Latvia that forced Orlen had to send its cargo to Latvia through a far longer route which was more expensive to the company, but that meant additional revenue for Lithuanian Railways.

The Rengė section was dismantled in September 2008 forcing railway traffic between Lithuania and Latvia to be suspended. As a result, Orlen had to send its cargo to Latvia through a far longer route which was more expensive to the company, but that meant additional revenue for Lithuanian Railways.

The European Commission fine on Lietuvos Geležinkeliai would allow the Polish company Orlen to claim for compensation for the damage the company suffered from the disassembling of the railway section.

Last year Lietuvos Geležinkeliai said that Rengė section reconstruction project was ready, but has not been started due to lack of funds.

According to preliminary estimates, the reconstruction of the section would cost about €11.5 million. It is expected that part of the funds could be covered with the EU funds.

Meanwhile, Lietuvos Geležinkeliai is seeking around 8.4 million euros from Orlen Lietuva in compensation for unpaid infrastructure fees.

In 2014 the company’s revenue it €473 million meaning that the European Commission fine could reach €50 million.

Lrytas.lt