Investment Treaty Arbitration

Investment Treaty Arbitration: Estonia

Overview of investment treaty programme

1. What are the key features of the investment treaties to which this country is a party?

Estonia

BIT Contracting Party or MIT

Substantive protections

Procedural rights

Fair and equitable treatment (FET)

Expropriation

Protection
and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off period

Local courts

Arbitration

Austria (1 October 1995)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Azerbaijan (30 June 2011)

No

Yes

Yes

Yes

No

6 months

Yes

Yes

Belarus (not in force)1

-

-

-

-

-

-

-

-

Belgium (23 October 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

China (1 June 1994)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Czech Republic (terminated)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Denmark (24 February 1993)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

Energy Charter Treaty
(2 August 1998)

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

Finland (2 December 1992)

Yes

Yes

Yes

Yes

No

3 months

No

Yes

France (25 September 1995)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Germany (12 January 1997)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Greece (7 July 1998)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Israel (23 May 1995)

Yes

Yes

Yes

Yes

No

3 months

No

Yes

Italy (terminated)

Yes

Yes

No

Yes

Yes

6 months

Yes

Yes

Jordan (6 June 2011)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Kazakhstan (26 August 2014)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Latvia (23 May 1996)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Lithuania (20 June 1996)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Luxembourg (23 October 1999)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Moldova (21 April 2011)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Morocco (4 November 2012)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Netherlands (1 September 1993)

Yes

Yes

Yes

Yes

Yes

None

No

Yes

Norway (15 June 1992)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Poland (06 August 1993)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Spain (1 July 1998)

Yes

Yes

No

Yes

Yes

6 months

Yes

Yes

Sweden (20 May 1992)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Switzerland (18 August 1993)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Turkey (29 April 1999)

No

Yes

No

Yes

No

6 months

Yes

Yes

Ukraine (5 July 1995)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

United Arab Emirates (21 March 2012)

Ye

Yes

Yes

Yes

No

6 months

Yes

Yes

United Kingdom (16 December 1994)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

United States (16 February 1997)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Viet Nam (11 February 2012)

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

Qualifying criteria - any unique or distinguishing features?

2. What are the distinguishing features of the definition of “investor” in this country’s investment treaties?

Estonia

Issue

Distinguishing features in relation to the definition of ‘investor’

Seat of the investor/place of business

A legal person is normally considered to be any entity, which is incorporated or constituted in accordance with the laws and regulations of one Contracting Party. However, the Morocco BIT also requires a legal person to have a registered office, central administration and principal place of business in the territory of a Contracting Party. Poland and Switzerland BITs require a seat, together with real economic activities in the territory of a Contracting Party. Spain, Jordan and Azerbaijan BITs requires ‘actual management from a territory of a Contracting State’. Sweden BIT considers a legal person with a seat in a third country with a predominant interest of an investor of either Contracting Party to also constitute an investor. Turkey BIT requires an investor to have headquarters in a Contracting State.

Nationals/permanent residents

The definition of the term ‘Investor’ does not generally include permanent residents of a Contracting Party.

Dual nationality

The Azerbaijan BIT explicitly provides that an investor does not mean a natural person having the nationality of the Contracting Party in whose territory the investment is made.

3. What are the distinguishing features of the definition of "investment" in this country’s investment treaties?

Estonia

Issue

Distinguishing features in relation to the concept of ‘investment’

Assets which qualify for protection

Most BITs include an open list of examples of investments. In addition to the most common categories of investments, the Italy BIT specifically includes ‘any increase in value of the original investment’ in the exemplary list of investments and Jordan, Kazakhstan and the UAB BITs include ‘rights in plants varieties, know-how, trade secrets, trade names and goodwill’ as investment.

Indirect control

Belgium-Luxembourg, the USA, Poland and France BITs explicitly extend protection to indirect investments.

Commencement of treaty protection

Treaty protection generally covers investments made prior to the entry into force of the BITs. Exceptions are Israel and Ukrain BITs. Belgium-Luxembourg BIT does not apply to investments made before 21 August 1991. Most treaties that protect investments made prior to the entry into force of the BIT exclude the application of the treaty to disputes that arose prior to the treaty’s entry into force.

Compliance with national law

Most Estonian BITs extend protection only to investments that have been made in accordance with the legislation of the host country.

Substantive protections - any unique or distinguishing features?

4. What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

Estonia

Issue

Distinguishing features of the fair and equitable treatment standard

Relationship with customary international law

Most BITs do not link FET with customary international law. An exception includes Moldova BIT, which requires the treatment to be ‘no /…/ less favorable than that required by national and international law’. Morocco and Azerbaijan BITs do not use the language ‘fair and equitable’ at all, but instead require treatment ‘no less favourable than that required by international law’. The USA BIT specifically states that under the FET standard investors can ‘in no case be accorded treatment less than that required by international law’. Finland, Jordan, Kazakhstan and France BITs refer to FET as treatment ‘in conformity/accordance with international law’ and Belgium-Luxembourgian BIT explicitly requires that the treatment be ‘no less favourable than accorded by international law’.

Language of the FET standards

Standard usage of FET (‘shall ensure fair and equitable treatment’) is common to most of the treaties (Moldova, Latvia, Lithuania, Netherlands, Poland, Spain, Sweden, Switzerland, UK, Ukraine, Denmark, Finland, Greece, Israel, Austria, China, Czech Republic, Belgium-Luxembourg, France, Germany). Lone exceptions are the Norwegian BIT, which requires ‘equitable and reasonable treatment’ and Italian BIT, which refers to ‘just and fair treatment’.

5. What are the distinguishing features of the protection against expropriation standard in this country’s investment treaties?

Estonia

Issue

Distinguishing features of the ‘expropriation’ standard

Indirect expropriation

13 Estonian BITs expressly protect against indirect expropriation.

In accordance with ‘due process of law’

20 Estonian BITs require expropriation to take place in accordance with ‘due process of law’. Similarly, Norway BIT uses language ‘under domestic legal procedures’, Spain BIT ‘pursuant to the law’, Italy BIT requires expropriation to be carried out in ‘conformity with all legal provisions and procedures’ and China BIT refers to expropriation ‘under the process of national law’.

Payment of ‘prompt, adequate and effective compensation’

Most Estonian BITs require prompt, adequate and effective compensation. However, several BITs use a different language and/or specify what is meant by ‘prompt compensation’. Eg the Netherlands BIT simply requires ‘just compensation’, while Italy BIT requires ‘full and effective compensation’. Poland BIT requires ‘effective and adequate’ compensation ‘without undue delay’, which means it is ‘effected within such period as is normally required for the completion of transfer formalities. The said period shall commence on the day on which the relevant request has been submitted and may not exceed three months.’ Under the Italy BIT compensation is considered timely if it ‘takes place without undue delay and, in any case, within one month’ and under Denmark BITs ‘made within such period as is normally required by international financial custom and not later than three months’.

Utilization of expropriation

The Italy BIT explicitly provides that ‘If, after the expropriation, the investment concerned has not been utilized for that purpose, the investor concerned or his assignees are entitled to the repurchasing of the expropriated assets at the market price.’

6. What are the distinguishing features of the national treatment/most-favoured-nation treatment standard in this country’s investment treaties?

Estonia

Issue

Distinguishing features of the ‘national treatment’ and/or ‘most favoured nation’ standard

Scope of national and MFN treatment

Most Estonian BITs only include ‘investment’ in national and MFN treatment clauses. 11 BITs include ‘investments and returns’ (Azerbaijan, Czech Republic, Denmark, Israel, Jordan, Kazakhstan, Latvia, Lithuania, Norway, Ukraine, UK). 10 of the latter BITs also extend national and MFN treatment to ‘management, maintenance, use, acquisition or disposal of investment’ (Norway BIT is an exception). The US BIT uses language ‘investment or associated activities’ and gives an inexhaustive list of examples that are considered associated activities, eg the granting of franchises or rights under licenses; access to registrations, licenses, permits and other approvals; the dissemination of commercial information etc.

Common exceptions

Most Estonian BITs provide that MFN treatment shall not apply to benefits of membership in free trade area, customs union or common market; privileges arising from any international agreement or arrangement relating to taxation; or benefits arising from agreements facilitating frontier trade.

Specific exceptions

Moldova BIT specifically excludes ‘public security and order or public health’ from national and MFN treatment. Sweden BIT excludes commercial agreements with Ivory Coast, Madagascar and Senegal from the scope of MFN clause. Azerbaijan and Viet Nam BITs exempt multilateral or regional agreements relating wholly or mainly to investments from the scope of MFN treatment.

Taxation

Netherlands BIT explicitly provides national and MFN treatment to ‘taxes, fees, charges and to fiscal deductions and exemptions’ excluding, however, such advantages that derive from double taxation agreements, customs unions and on the basis of reciprocity with a third state.

Limitation on national treatment

USA BIT contains an annex which lists specific sectors and matters that are exempted from the MFN treatment. Such sectors and matters include: air transportation; ocean and coastal shipping; banking, securities, insurance and other financial services; government grants; energy and power production; ownership of real property; etc.

7. What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this country’s investment treaties?

Estonia

Issue

Distinguishing features of the ‘protection and security’ standard

Scope

The formulation of the standard varies in the Estonian BITs. Most BITs provide for ‘full protection and security’ (Azerbaijan, Jordan, Moldova, Latvia, Lithuania, Morocco, the US, UK, Ukraine, Denmark, Finland, Greece, Israel, Czech Republic, France, Germany, Kazakhstan), one BIT requires ‘full protection’ (Sweden), a few refer simply to ‘protect[ion]’ (Norway, Poland, Switzerland, China) and one to ‘constant protection and security’ (Viet Nam). Dutch BIT specifically requires ‘full physical security and protection’.

Customary international law

Most BITs do not refer to customary international law in the context of FPS standard. Moldova BIT is an exception by requiring such treatment to be ‘no … less favorable than that required by national and international law’. Belgium-Luxembourg BIT explicitly requires that the treatment be ‘no less favourable than accorded by international law’.

8. What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

Estonia

Issue

Distinguishing features of any ‘umbrella clause’

Scope

12 Estonian BITs include an umbrella clause. The BITs generally use the following language: ‘Each Contracting Party shall observe any other obligation it may have entered into with regard to investments of investors of the other Contracting party.’

Specific language

The Italian BIT ensures ‘compliance, in good faith, of all undertakings assumed with regard to each specific investor’. Switzerland BIT stresses that the observance of commitments shall be ‘constantly guarantee[d]’.

9. What are the other most important substantive rights provided to qualifying investors in this country?

Estonia

Issue

Other substantive protections

Free transfer of payments

All Estonian BITs include clauses regarding free transfer of payments. A few BITs additionally include a prerequisite clause ‘after fulfilment of any financial obligations pertaining to the investment’ (eg Greece and Israel). Kazakhstan BIT provides that in exceptional financial and economic circumstances, as well as in the case of serious difficulties with payment balance Contracting Parties may impose currency restrictions. Similar clause appears in the Azerbaijan BIT. The USA BIT includes a provision allowing protection of the rights of creditors, or to ensure the satisfaction of judgments.

Non-impairment

Several Estonian BITs contain a provision that neither Contracting party will in any way impair by unreasonable or discriminatory measures the operation, management, maintenance, use, enjoyment or disposal of investments in its territory (eg Azerbaijan, Belgium-Luxembourg, Denmark, Germany, Israel, Moldova, Netherlands, Poland, Spain, Sweden, Switzerland, UAB, UK, the USA, Viet Nam). France BIT prohibits impairment de jure and de facto. Azerbaijan and Jordan BITs require that Contracting Parties consider in good faith all applications for necessary permits in connection with investments in its territory, including authorisations for engaging executives, managers, specialists and technical personnel. A few BITs require that the Contracting Parties assist investors in obtaining visas and working permits in relation to their investment (eg China, Kazakhstan). Under the Italy BIT, Contracting Parties are required to treat ‘as favourably as possible the matters connected with the entry, stay, work and movement in its territory of nationals of the other Contracting Party, and members of their families’.

Mandatory measures

Azerbaijan, Jordan and the UAB BITs prohibit the imposition of ‘mandatory measures on investments by investors of the other Contracting Party concerning purchase of materials, means of production, operation, transport, marketing of its products or similar orders having unreasonable or discriminatory effects.’

Compensation for losses

Most Estonian BITs provide compensation of losses in case of armed conflict or civil rife (eg China, Czech Republic, Finland, France, Greece, Israel, Italy, Jordan, Kazakhstan, Latvia, Lithuania, Moldova, Morocco, Netherlands, Norway, Spain, Switzerland, Ukraine, UK). Azerbaijan BIT also allows compensation in case of a natural disaster.

Transparency

Azerbaijan BIT requires that ‘laws, regulations, procedures, administrative rulings and judicial decisions of general application, as well as international agreements after their entry into force, which may affect the investments of investors of the other Contracting Party in its territory, are according to its legislation promptly published, or otherwise made publicly available.’ Similar requirements appear in the UAB and Viet Nam BITs.

Access to justice

The Protocol to an Italy BIT includes a clause whereby each Contracting Party is required to provide effective means of asserting claims and enforcing rights with respect to investments and investment agreements. The UAB BIT ensures to investors of the other Contracting Party the right of access to its courts of justice, administrative tribunals and agencies and all other judicial authorities.

Procedural rights in this country’s investment treaties

10. Are there any relevant issues related to procedural rights in this country’s investment treaties?

Estonia

Issue

Procedural rights

Fork-in-the-road

Several Estonian BITs include the fork-in-the-road clause (eg Azerbaijan, China, Jordan, Kazakhstan, Moldova, Maroko).

Exhaustion of local remedies

Under the Turkish BIT, an investor who has brought a dispute before local courts can initiate arbitration only if a final award has not been rendered within one year.

ICSID or ad-hoc arbitration

All Estonian BITs provide a right of recourse to ICSID. Some BITs also allow investors to pursue an arbitration claim through: (a) an ad hoc tribunal constituted in accordance with the UNCITRAL rules (e.g, Austria, Azerbaijan, Czech Republic, Denmark, Finland, France, Greece, Italy, Kazakhstan, Latvia etc); and/or (b) any other tribunal acting in accordance with any other arbitration rules as is mutually agreed by the parties (eg Belgium-Luxembourg, Poland, Spain, Switzerland, Turkey).

Restrictions

China BIT only grants a right to arbitration in relation to disputes regarding the quantification of an expropriation claim. Italian BIT states that in case an investor and an Agency of one of the Contracting Parties have stipulated an investment agreement, the procedure foreseen in such investment agreement shall apply.

Notice of dispute

The Belgium-Luxembourg BIT requires that the Contracting Parties be informed in writing of a dispute with an investor. The notice of dispute must be supplemented with a detailed memorandum.

Arbitration procedure (arbitrators, rules)

China BIT establishes rules for arbitration procedure if an amount for expropriation is in dispute. Switzerland BIT includes a mechanism for constituting the tribunal.

11. What is the status of this country’s investment treaties?

Estonia

Consistent with investment treaty practice, all of Estonia’s BITs can be unilaterally terminated by a Contracting Party at any time after the end of the initial term of the treaty (5, 10, 15 or 20 years) by giving six months’ or one year’s written notice of the termination. If the BITs are not terminated, they will renew for a definite (1, 2, 5 or 10 years) or indefinite period. All of Estonia’s BITs incorporate a ‘survival clause’, which extends a treaty’s application in relation to existing investments for a further period (5, 10 or 20 years) from the date of termination.

In recent years, there have been discussions over the necessity to terminate intra-EU BITs that the member states have entered into among themselves prior to the accession to the EU. Additionally, after the entry into force of the Lisbon Treaty in 2009, the EU has sole competence to negotiate extra-EU BITs. However, the negotiation that were ongoing at the time of entering into force of the Lisbon Treaty were permitted to be be concluded by member states themselves with an obligation to ensure compliance of such treaties with EU law. Hence, Estonia has become cautious in its investment treaty practice. Eg, Kazakhstan BIT includes a clause, whereby the Agreement may be terminated by giving notice in writing through diplomatic channels six months beforehand, if the obligations of the Republic of Estonia arising from its membership of the European Union necessitate it. There are no public statements made by the Estonian government regarding its position on Estonia renewing the existing investment treaties or concluding new ones.

Practicalities of commencing an investment treaty claim against this country

12. To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is there a particular person or office to whom a dispute notice against this country should be addressed?

Estonia

Government entity to which claim notices are sent

There is no designated office within the Estonian government responsible for the handling of investment disputes. It is advised that the notice of dispute should be sent to the Ministry in whose competence the subject matter of the dispute belongs, as well as to the Ministry of Foreign Affairs (Islandi väljak, 15049 Tallinn) and to the Prime Minister through the Government Office (Rahukohtu 3, 15161 Tallinn).

13. Which government department or departments manage investment treaty arbitrations on behalf of this country?

Estonia

Government department which manages investment treaty arbitrations

Investment treaty arbitrations can be managed by several government departments, most common ones including the Ministry of Foreign Affairs, the Ministry of Economic Affairs and Communication, the Ministry of Justice and the Ministry of Finance. The department in charge for the management of the investment treaty arbitration will likely be designated based on the subject matter of the dispute.

14. Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external counsel are used, does the state normally go through a formal public procurement process when hiring them?

Estonia

Internal/external counsel

Both internal and external counsels are used in investment treaty arbitrations. Both counsels are hired based on market research and submitted proposals. Official call for tenders is not mandatory.

Practicalities of enforcing an investment treaty claim against this country

15. Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.

Estonia

Washington Convention implementing legislation

Estonia ratified the Washington Convention on 22 April 1992 based on the decision nr 258 of the Supreme Council regarding an ‘Acceptance to Become a Member of the International Monetary Fund, the International Bank for Reconstruction and Development and Their Organisations’. The Washington Convention is in force as of 22 July 1992.

16. Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.

Estonia

New York Convention implementing legislation

Estonian Parliament ratified the New York Convention on 16 June 1993. The New York Convention is in force as of 28 November 1993. Section 754(1) of the Estonian Code of Civil Procedure establishes that the decisions of arbitral tribunals of foreign states are recognised and accepted for enforcement in Estonia only pursuant to the New York Convention.

17. Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?

Estonia

Legislation governing non-ICSID arbitrations

Part 14 of the Estonian Code of Civil Procedure regulates the conduct of all arbitral proceedings in Estonia, including investment arbitrations.

18. Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional proceedings been necessary to enforce these against the state?

Estonia

Compliance with adverse awards

Based on publicly available information, Estonia has voluntarily complied with one of its adverse investment treaty awards (Oko Pankki Oyj, VTB Bank AG and Sampo Bank Plc v. The Republic of Estonia, ICSID Case No. ARB/04/6.

19. Describe the national government’s attitude towards investment treaty arbitration

Estonia

Attitude of government towards investment treaty arbitration

Estonian government has made no official declarations or statements regarding its attitude towards investment treaty claims.

20. To what extent have local courts been supportive and respectful of investment treaty arbitration, including the enforcement of awards?

Estonia

Attitude of local courts towards investment treaty arbitration

Estonian courts have never been asked to enforce an investment treaty award against Estonia. The dispute between Tallinna Vesi and the Estonian Competition Authority (a dispute pending in ICSID case No. ARB/14/24) is currently pending in the administrative court in Tallinn. The court has not been asked to reflect on the interplay between the international arbitration and local dispute. As regards to commercial arbitration, Estonian courts are considered friendly towards recognition and enforcement of the awards.

National legislation protecting inward investments

21. Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.

Estonia

N/A

National legislation protecting outgoing foreign investment

22. Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which an investor can invoke the protections?

Estonia

Relevant guarantee scheme

Qualifying criteria, substantive protections provided and practical considerations

Multilateral Investment Guarantee Agency

Estonia is a member of the Multilateral Investment Guarantee Agency as of 24 September 1992. MIGA’s guarantees protect investments against-non-commercial risks and can help investors obtain access to funding sources with improved financial terms and conditions.

Awards

23. Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties.

Estonia

Awards

Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia , ICSID Case No. ARB/99/2 (http://italaw.com/sites/default/files/case-documents/ita0359.pdf)

Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of Estonia , ICSID Case No. ARB/04/6 (http://italaw.com/sites/default/files/case-documents/ita0583.pdf)

Rail World Estonia LLC, Railroad Development Corporation and EEIF Rail BV v. Republic of Estonia , ICSID Case No. ARB/06/6 (http://italaw.com/sites/default/files/case-documents/ita0712_0.pdf) (discontinued due to settlement)

Pending proceedings

United Utilities (Tallinn) B.V. and Aktsiaselts Tallinna Vesi v. Republic of Estonia , ICSID Case No. ARB/14/24. (On 5 February 2016, Respondent submitted its counter-memorial on jurisdiction and merits.)

Reading List

24. Please provide a list of any articles or books that discuss this country’s investment treaties.

Estonia

N/A

Notes

1 The treaty was signed on 21 October 2009 but it has not yet entered into force. The text of the treaty is not publicly available.

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