ESTONIA Law and Practice Contributed by: Maria Pihlak, Carri Ginter, Raul Kartsep and Katariina Kuum, Sorainen
4. The Arbitral Tribunal 4.1 Limits on Selection
2.6 Arbitration Clauses in Investor–State Contracts Direct arbitration clauses in contracts between the state (or state‑owned entities) and investors are pos- sible, but their frequency is less well documented, as many investors rely on treaty protections/BITs rather than contract‑based arbitration. The protection offered by individual contract claus- es depends on their terms (seat of arbitration, rules, enforcement) and must be respected under domes- tic contract law as well. Treaty protections often add additional layers (eg, minimum standards, protections in BITs, and the ability to go to ISDS) that a contract alone may not provide (eg, contract claims may be limited in scope or subject to domestic courts; treaty claims may allow direct access to arbitration under international rules). 3. Substantive Protections and Breaches 3.1 Common Complaints From the known ISDS claims involving Estonia, the frequent complaints or issues include: • Violation of fair and equitable treatment (FET) – eg, claims that the state’s regulatory actions or deci- sions violated legitimate expectations or treated the investor unfairly. • Expropriation, both direct and indirect – claims that property or de facto control was removed or rights impaired without adequate compensation. • Discrimination (ie, breach of national treatment or non‑discrimination) – eg, claims about discrimi- natory treatment or unequal treatment of foreign investors. • Breach of contract/regulatory change risk – eg, when state regulation or refusal of tariff increases or regulatory approvals disrupts expected cash flows or investments. • Issues about investor rights transfers and the abil- ity to freely transfer capital and/or profits under BITs.
Estonia’s arbitration law for both domestic/interna- tional arbitrations largely imports or is compatible with the UNCITRAL Model Rules. A natural person of full active legal capacity may be appointed as an arbitrator. An arbitrator may be recused if circumstances are present that cast a reasonable doubt concerning their impartiality, inde- pendence or competence or if they do not fulfil the requirements agreed by the parties. Estonian courts treat arbitrator independence as a core legal value and a matter of public policy. If an arbitrator acts in a way that is not independent or impartial (eg, pro- tecting one party’s interests), that can be grounds for refusing enforcement provided that the misconduct can be proven. 4.2 Default Procedures Under Estonia’s arbitration law, parties may freely agree on the rules for appointing arbitrators. If their chosen method fails, default procedures apply: • If three arbitrators are required and no rules are agreed, each party appoints one arbitrator, and those two select a presiding arbitrator. If a party fails to appoint within 30 days of a request, or the two arbitrators cannot agree on the third within 30 days, the court appoints the missing arbitrator upon a party’s petition. • If a sole arbitrator is required and the parties can- not agree on appointment rules or on the arbitrator, the court appoints one upon petition. • If agreed appointment rules are breached, the par- ties or arbitrators fail to agree, or a third party fails to perform its appointment role, either party may petition the court to appoint the arbitrator, unless otherwise provided by the agreed rules. 4.3 Court Intervention As mentioned in 4.2 Default Procedures , in certain circumstances, a state court may appoint an arbitrator on the petition of a party.
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