A Chronology of a Monopoly Crisis Foretold

11 years ago, a 58% share of Bulgaria's state-owned Neftochim refinery was sold to Lukoil Petrol, a subsidiary of Lukoil Europe.

The government retained a so-called golden share, giving it voting rights equivalent to a 34% blocking stake.

In 2011, Bulgaria fell in the grip of a prolonged commotion over the high cost of fuel in the country, which revealed that the Russian-owned Burgas-based oil-processing plant had spiraled out of control.

The end-July campaign aimed at forcing the refinery to install measuring devices and ensure accountability and transparency of its operations was advertised as a demonstration that "the law in Bulgaria applies to everyone".

However, it emerged that "the law" in Bulgaria is subject to different interpretations, while its enforcement depends on diffident, unscrupulous, elephantine structures employing protracted procedures.

The Customs Agency, which dared to revoke Lukoil Neftochim's two tax warehouse operator permits on July 27, took over a year to impose a penalty for the refinery's regulatory noncompliance. The actual deadline for the installation of the electronic measuring equipment was June 26, 2010.

In March 2011, a reluctant Commission on Protection of Competition (CPC) was forced to conduct an analysis of the fuel market in the country in order to establish the reasons behind the fuel price spikes and assess the degree of real competition.

Bulgaria's anti-trust watchdog initially refused to launch a cartel probe, saying that the last inspection, which spanned the period 2005-2008, had been completed quite soon, in 2009, and had failed to detect signals about price-fixing practices or abuse of dominant position on the part of Lukoil Neftochim.

On August 03, CPC published an excerpt from its belated conclusions under the March-2011 probe. The statement hinted at the possible existence of a fuel cartel and abuse of dominant position.

At the same time, the competition watchdog said it was necessary to open a new inspection into the matter (which should take no less than a year, given its current pace of work), which made it impossible to disclose the full results of the already completed check.

Against that backdrop, Lukoil Neftochim's half-revoked license was half-restored. The decision of the Customs Agency for the suspension of the permits provided for a preliminary execution (preliminary production halt in this case) in a bid to sidestep the lengthy court procedures.

The act of the customs administration was snubbed by the Administrative Court Sofia City (ACSC), which stopped the preliminary execution, citing the substantial/hardly repairable damage it would inflict to Lukoil, and allowed the refinery to resume operations.

The step triggered legal battles over the timing of ACSC's ruling's entry into force, with some experts saying that the refinery had jumped the gun in becoming operational and a 7-day appeal period should have expired before the restart.

Court proceedings on the actual point of contention, Lukoil's compliance with the requirements for a tax warehouse operator, will start after the court vacation in September.

The case will pass two court instances with a final pronouncement due to be made by a three-judge panel of the Supreme Administrative Court (VAS).

As a result of the intense game of hot-potato, Lukoil is being given an indefinitely long deferral regarding the installation of measuring devices, amid glaring faults with regulatory oversight in Bulgaria and the government's enacted righteous helplessness.

Can the state fight this overgrown monopoly after it invited it on home soil 11 years ago? Which branch is strong enough to lead the battle- executive, legislature or judiciary?

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