Naglis must now seek Kalvitis' approval for any payment over 15,000 lats ($24,200) pending the outcome of an investigation by the Ministry of Economy. The privatization agency is also conducting its own in-house investigation.
Former Prime Minister Andris Skele, who came to Naglis' rescue last year when former Economy Minister Vladimir Makarovs fired him for incompetence, said the agency had spent enormous sums in legal fees in the Lattelekom proceedings as well as a substantial sum when the Latvian Shipping Company recently purchased three huge tankers.
"The amounts being paid to lawyers representing Latvia in the Lattelekom case, without the knowledge of the Cabinet and the minister of economy, are shockingly large," Skele told reporters.
He refused to reveal the amounts concerned, but the daily Diena reported it could be as much as $11 million and said Naglis' explanation of the figures had been unsatisfactory.
Diena reported the cost of the legal proceedings had amounted to some 3.5 million lats in September and that for October the agency would pay around $1.6 million.
A month ago, Naglis reported to a working group dealing with the case led by Prime Minister Andris Berzins that legal costs from January to September amounted to $4.44 million.
Asked to confirm the Diena report the agency's spokesman, Guntis Karklins, refused to comment.
"We at the Latvian Privatization Agency have submitted all this information to the working group, and it has been available to the minister of economy at all times," Karklins said.
"You could say we are surprised at the minister's decision to take away Naglis' right to sign documents. But it's his decision."
Naglis told the Baltic News Service that because the amount claimed by Tilts Communications from the Latvian state and Latvia's counter-claim in total amounted to about $1 billion the legal fees involved could not be small.
He said the legal expenses had been discussed and approved by the governmental working group.
Skele said Kalvitis' decision was not a challenge to Naglis' authority but stemmed from a straightforward desire to learn more about what was going on.
Evita Timofejeva, a spokeswoman at the ministry, said the investigation was unlikely to last longer than a week."One of the difficulties is that Naglis has given two different kinds of accounts to the Cabinet and to the working group," she said.
She also declined to confirm the size of the sums involved, saying this might be a condition of the deal between the privatization agency and the British law firm Clifford Chance, which is representing the Republic of Latvia in the case.
Tilts Communications turned to the International Court of Arbitration last August when the government announced it was bringing forward by 10 years to 2003 the expiry of Lattelekom's monopoly as a provider of fixed line phone services without prior agreement on compensation for the company's investors. Latvia meanwhile reproaches Tilts for delaying implementation of modernization plans.
The Latvian state holds a 51 percent stake in Lattelekom and Tilts Communications holds 49 percent. Sonera of Finland in turn owns 90 percent of Tilts, with the International Finance Corporation owning the remaining 10 percent.