The Bank’s assessment of laws in the region shows that Estonian commercial laws are advanced in comparison with other countries where EBRD operates. As Estonia is among the most advanced countries of operations, the Bank’s operations have been limited for some time. During the next Strategy period, the EBRD’s activities will become even more focused on a small number of priorities; primarily the Legal Transition Team will be supporting the energy efficiency and renewable energy schemes and to improve the use of advanced technology to enhance competition in industry.
- Access to Finance
- Capital Markets
- Contract Enforcement and Judicial Capacity
- Corporate Governance
- Debt restructuring and bankruptcy
- Electronic Communications
- Energy and resource effiency
- Energy legal and regulatory reform
- Public Procurement
Access to Finance
In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for Estonia.
The basic legal act regulating capital markets activities in Estonia is the Securities Market Act of 17 October 2001 (as amended). It established the regulatory framework for the operation of the Estonian securities market governing, inter alia, the provision of investment services, regulated markets and stock exchanges, initial public offering of securities, settlement of transaction with securities and other relevant matters.
Despite recent developments related to Estonia’s implementation of EU legislation, the Estonian capital market remains rather small and illiquid. The legal framework, however, is not an impediment to the market development since it implemented various EU legislation, such as the Market in Financial Instruments Directive.
Contract Enforcement and Judicial Capacity
Estonia is considered to have a well-functioning court system that deals efficiently with commercial matters.
Judges receive life tenure upon appointment to judicial office. Courts are well funded and resourced. The Supreme Court is allocated a dedicated percentage of the national budget. However, the financing of the lower courts is set by the Ministry of Justice, which has attracted some controversy as it potentially affects the independence of these courts.
The Commercial Code, entered into force in September 2005, as amended, is the primary legislation concerning corporate matters and governance in Estonia.
Estonia’s legal framework has been amended several times in the last few years in order to harmonise the national legislation with the Acquis Communautaire. The corporate governance framework now appears to be of good overall quality. In the EBRD Corporate Governance Sector Assessment 2007 Estonia was scored as being in “medium compliance” with international best
Debt restructuring and bankruptcy
The Bankruptcy Act of 2003 (as amended) is the main legislation governing the insolvency of businesses (including individual entrepreneurs) in Estonia. A separate procedure exists under the Reorganisation Act of 2008 (as amended) for legal entities which are likely to become insolvent in the future and which require reorganisation. A further act, the Debt Restructuring and Debt Protection Act of 2010 regulates the restructuring of the debts of natural persons
Based on the results of the assessment, a partly developed legal framework appears to exist for the IOH profession in Estonia, which prima facie, displays a number of strengths. Nevertheless, such a framework would benefit from further improvement to address certain important areas of weaknesses and thereby improve IOH capacity and performance.
- Assessment of Insolvency Office Holders (2014) – country report
- Assessment of Insolvency Office Holders (2014) – country profile
The electronic communications sector in Estonia is governed by the Law on Electronic Communications of2005 (as amended) and supplemented by implementing regulations.
In the EBRD Telecommunications Regulatory Assessment 2008, the telecommunications regulatory framework of Estonia scored very well, in particular, in areas of wired and radio market access, SMP and safeguards, interconnection and special access as well as dispute resolution and appeal, each of which scored fully compliant with international best standards; regulatory independence, however, posed some concerns.
Energy and resource efficiency
The main sector law regulating energy from renewable sources is the Electricity Market Act of 2003. The recent EBRD assessment of energy laws and practices (2010) has shown that the market framework is the biggest gap in the country’s energy as compared to international best standards
Energy legal and regulatory reform
The legal framework for Estonia’s energy regulator nonetheless presents some
regulatory risks for investors. In the 2010 energy sector assessment Estonia did perform reasonably well overall and with respect to its regional grouping (Group A), which was slightly below average for electricity and slightly above for gas.
In Estonia there is no one single act dealing specifically with PPP projects or concessions. These are largely regulated by the Public Procurement Act.
In the recent EBRD assessment of PPP laws and their effectiveness Estonia was rated in “low compliance” with international best standards and but “low effectiveness” for its practices.
Public procurement in Estonia is regulated by the Public Procurement Act (the PPA), as amended. The latest amendment took place in 2011 and aimed to introduce electronic communication and e-auctions in the Estonian public procurement framework.
Overall, in the 2010 EBRD Public Procurement Assessment, local public procurement practice in Estonia scored well and was reported to be in good compliance with international best practice (see Chart 10). However, some implementation problems were reported, related to internal allocation of roles in the procurement process and contract monitoring and auditing arrangements not always established by contracting entities.
- Public Procurement Sector Assessment 2010 – country profiles