AS Tallinna Vesi and United Utilities (Tallinn) B.V. v. Republic of Estonia

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Global Legal Chronicle | 6 September 2019

AS Tallinna Vesi and United Utilities (Tallinn) B.V. v. Republic of Estonia

by Paolo Bossi

Squire Patton Boggs has successfully defended the Republic of Estonia against a US$100 million investment treaty claim brought under the Netherlands-Estonia Bilateral Investment Treaty by Estonian water provider AS Tallinna Vesi and its Dutch shareholder United Utilities (Tallinn) B.V., over the state’s refusal to allow an annual increase in water tariffs.

An international arbitration tribunal made a decision on AS Tallinna Vesi´s and United Utilities (Tallinn) B.V.’s claim in the proceedings against the Republic of Estonia for compensation for losses caused by a breach of the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Estonia. A majority of the arbitration tribunal decided to dismiss AS Tallinna Vesi´s and United Utilities (Tallinn) B.V.’s claims.

The tribunal decided that the claimants shall cover 25% of respondent´s legal costs, fees and expenses and 25% of the expended portion of respondent´s share of the advance costs of the arbitration. 25% of respondent’s legal costs is approximately €500,000 and 25% of the respondent’s share of the advance costs is approximately €165,000. The exact amount to be paid by AS Tallinna Vesi is yet to be determined.

In October 2014, AS Tallinna Vesi and its shareholder United Utilities (Tallinn) B.V., registered in the Kingdom of the Netherlands, commenced international arbitration proceedings against the Republic of Estonia for breach of the Agreement on the Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Republic of Estonia (the Treaty). The Company claimed compensation for the total loss in revenue caused by the inability to charge tariffs according to the Services Agreement between 2011-2020.

As a signatory to the Treaty, the Republic of Estonia undertook to ensure “the fair and equitable treatment” of investments protected by the Treaty. AS Tallinna Vesi claimed that the Republic of Estonia had breached the requirement by changes to the law and activities of the public authorities which deprived AS Tallinna Vesi of tariffs approved according to the Services Agreement concluded as part of the privatisation in 2001.

The Squire Patton Boggs team representing Estonia was led by partners Rostislav Pekar (Picture), Eveli Lume, Horst Daniel, Luka Misetic, and Mária Poláková, as well as associates Ariane Sproedt, Matej Pustay and David Seidl.