RASK prepares legal analysis for the state in ICSID dispute over Tallinn water tariffs.


On 21 June 2019, an arbitration tribunal of the International Centre for Settlement of Investment Disputes (ICSID), which operates under the World Bank, ruled against Tallinna Vesi AS in a tariff dispute with the Estonian state, saving consumers in the country's capital over 67 million euros. RASK partner Märt Rask and attorney Birgit Aasa prepared an in-depth legal analysis for the Estonian state in the arbitration dispute, providing their expert opinions on the disputed issues of Estonian and EU public law.

Already in March 2018, while the ICSID tribunal was still deliberating, RASK’s EU law expert Birgit Aasa wrote in Postimees, discussing a recent judgment of the Court of Justice in a similar dispute over agreements between Member States on the protection of investments, or intra-EU bilateral investment treaties (BITs), which made it possible to predict that the Tallinna Vesi dispute would also be settled in favour of the state. Perhaps influenced by the judgment of the Court of Justice in the Achmea case, the recent ruling by the arbitration tribunal definitively confirms that Tallinna Vesi had no legal basis for setting the price of water higher than stipulated in national law.

The object of the lengthy dispute was a contract signed by Tallinna Vesi and its owners with the City of Tallinn for 20 years in 2001. According to the contract, the price of water was to be economically justified and in conformity with Estonian law. Legislative amendments in 2009 brought water prices within the competence of the Competition Authority, which determined that the high prices were earning Tallinna Vesi more profit than is allowed for monopolies under Estonian law. Regardless, Tallinna Vesi requested the authority’s approval for even higher water tariffs. When the authority refused, the water supplier filed an action with an Estonian court and lost. The Estonian Supreme Court ruled on the matter in 2017, confirming that the company was not allowed to set unjustifiably high prices.

In 2016, Tallinna Vesi and its owner United Utilities (Tallinn) filed a claim with the ICSID for damages against the Estonian state based on the agreement regarding the encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Republic of Estonia. The ICSID tribunal agreed with the Estonian state and RASK experts that neither the public-law contract signed upon privatisation nor the bilateral agreement on the encouragement of investments allowed water tariffs to be raised above the level permitted by law.