ESTONIA Law and Practice Contributed by: Maria Pihlak, Carri Ginter, Raul Kartsep and Katariina Kuum, Sorainen
• It shows that tribunals may weigh heavily the legiti- macy and history of title, especially in post-conflict or post-occupation situations. • The case confirms that jurisdictional challenges about ownership, control and legality of acquisi- tion are not always sufficient to block a case at the outset; tribunals will analyse whether the claimant has prima facie met the required thresholds. OKO Pankki Oyj and Others v Republic of Estonia (ICSID Case No. ARB/04/6) Brought under the Estonia–Germany BIT (1992) and the Estonia–Finland BIT (1992) Case initiated in 2004 Award rendered in 2007 Facts of the case • This early ICSID case involved a group of Finn- ish and German investors, including OKO Pankki Oyj (a Finnish bank), which had invested in the Estonian real estate and banking sector during the post-independence liberalisation period. • The dispute stemmed from the failure and subse- quent liquidation of an Estonian bank in which the claimants held a controlling interest. The investors alleged that the Estonian authorities’ conduct in handling the bank’s collapse, including the role of the Estonian Financial Supervision Authority and the courts, amounted to a breach of international obligations under the Estonia–Finland BIT and the Estonia-Germany BIT. Key legal principles Fair and equitable treatment (FET) and denial of justice • The claimants argued that the Estonian authorities’ actions – including procedural delays, regulatory decisions and court rulings – constituted arbitrary treatment, a lack of transparency and a denial of justice.
Expropriation • The investors alleged that Estonia’s failure to prop- erly regulate and oversee the insolvency process, combined with unfavourable judicial decisions, amounted to indirect expropriation of their invest- ment. Attribution of conduct • The case also touched upon whether the actions of private liquidators and court-appointed officials could be attributed to the Estonian state. Outcome • The tribunal rejected most of the claimants’ claims, including those based on expropriation. • However, it did find that Estonia had violated the FET standard, primarily due to procedural failings in the handling of the bank’s liquidation process, which failed to meet the standard of transparency and due process required under international law. • The tribunal awarded the claimants upwards of EUR12 million in compensation, making it the only known ISDS case where Estonia was found liable. Legal significance • This remains the only known case in which Estonia was found liable under an investment treaty. • It set an early precedent for the procedural aspects of FET, particularly the requirement for transparen- cy and due process in regulatory decision-making. 1.6 Reaction to Awards Made Against the State In the only known ISDS case where an award was made against the state – OKO v Estonia – Estonia did not pursue annulment proceedings and complied with the award voluntarily. There is no evidence of any refusal to pay awards. As such, according to known case law, Estonia remains an arbitration-friendly jurisdiction and has not sought annulment proceedings relating to ISDS awards made against it.
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