HomeReportsBureau of Economic and Business Affairs2020 Investment Climate Statements…Estonia

# 					2020 Investment Climate Statements: Estonia			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## EXECUTIVE SUMMARY

Estonia is a safe and dynamic country for investment, with a business climate very similar to the United States. As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investments and export-oriented companies. Creating favorable conditions for foreign direct investment (FDI) and openness to foreign trade has been the foundation of Estonia’s economic strategy. The overall freedom to conduct business in Estonia is well protected under a transparent regulatory environment.

- Estonia is among the leading countries in Eastern and Central Europe regarding FDI per capita. At the end of 2019, Estonia had attracted in total USD 27 billion (stock) of investment, of which 34 percent was made into the financial sector, 17.7 percent into real estate, 12 percent into manufacturing and 11 percent into wholesale and retail trade.

- Estonia’s government has not yet set limitations on foreign ownership and foreign investors are treated on an equal footing with local investors, but the government is currently developing a framework to screen FDI. There are no investment incentives available to foreign investors.

- While some corruption exists, it has not been a major problem faced by foreign investors.
- The Estonian income tax system, with its flat rate of 21 percent, is considered one of the simplest tax regimes in the world. Deferral of corporate taxation payment shifts the time of taxation from the moment of earning the profits to that of their distribution. Undistributed profits are not subject to income taxation, regardless of whether these are reinvested or merely retained.

- Estonia offers key opportunities for businesses in a number of economic sectors like information and communication technology (ICT), chemicals, wood processing, and biotechnology. Estonia has strong trade ties with Finland, Sweden and Germany.
- Estonia suffers a shortage of labor, both skilled and unskilled.

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

Estonia is currently open for FDI and foreign investors are treated on an equal footing with local investors, though the government is developing a screening mechanism to adhere to the EU Foreign Investment Screening Regulation (Regulation 2019/452) entered into force on 10 April 2019. This new regulation will be applicable from 11 October 2020 and creates an information-sharing mechanism between Member States and allows Member States and the European Commission to comment on foreign investments foreseen in other Member States.

The Estonian Investment Agency (EIA), a part of Enterprise Estonia, is a government agency promoting foreign investments in Estonia and assisting international companies in finding business opportunities in Estonia. EIA offers comprehensive, one-stop investment consultancy services, free of charge. The agency’s goal is to increase awareness of business opportunities in Estonia and promote the image of Estonia as an attractive country for investments. More info: http://www.investinestonia.com/en/estonian-investment-agency/about-the-agency

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Estonia’s government has not set limitations on foreign ownership. Licenses are required for foreign investors to enter the following sectors: mining, energy, gas and water supply, railroad and transport, waterways, ports, dams and other water-related structures and telecommunications and communication networks. The Estonian Financial Supervision Authority issues licenses for foreign interests seeking to invest in or establish a bank. Additionally, the Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investment and export-oriented companies. Creating favorable conditions for FDI and openness to foreign trade has been the foundation of Estonia’s economic strategy. Existing requirements are not intended to restrict foreign ownership but rather to regulate it and establish clear ownership responsibilities.

**Other Investment Policy Reviews**

In 2019 the government had a third-party investment policy review (IPR) through the Organization for Economic Co-operation and Development (OECD).  The outcome showed Estonia’s economy is performing well and public finances are in excellent shape, yet growth is softening and spending pressures from infrastructure needs and an ageing population are mounting. The report said efforts should now focus on improving income equality and well-being, greening growth and accelerating the country’s digital transformation. Full report: http://www.oecd.org/economy/estonia-economic-snapshot.

**Business Facilitation**

The World Bank’s Ease of Doing Business report ranks Estonia in 18th place out of 190 countries on the ease of Starting a Business. Economic freedom, ease of doing business, per capita investments, the record-low national debt, euro zone membership, and low corruption scores – all these factors play a role in fostering a good climate for business facilitation.

In Estonia there are two ways to register your business:

- Electronic registration via the e-Commercial Register’s Company Registration Portal (takes between 5 minutes and 1 business day)

- Through a notary (takes 2-3 business days)

Access to the Register: https://www.eesti.ee/en/doing-business/establishing-a-company/comparison-of-each-form-of-business/

On July 1, 2014, an amended Taxation Act establishing the employment register entered into force, requiring all natural and legal employers to register the persons employed by them with the Estonian Tax and Customs Board.  The company must register itself as a value-added tax payer if the taxable turnover of the company, excluding imports of goods, exceeds EUR 40,000 as calculated from the beginning of the calendar year.

There are certain areas of activity (like construction, electrical works, fire safety, financial services, security services, etc.) in which business operation requires an additional registration in the Register of Economic Activities (MTR), but this can be done after registration of the company in the Commercial Register: https://mtr.mkm.ee/

International institutions and organizations give Estonia’s economic policies high marks. The Wall Street Journal/Heritage Foundation’s 2020 Index of Economic Freedom ranked Estonia 10th in the world. The index is a composite of scores in monetary policy, banking and finance, open markets, wages and prices. Full report: https://www.heritage.org/index/country/estonia Estonia scores highly on this scale for investment freedom, fiscal freedom, financial freedom, property rights, business freedom, and monetary freedom.

The World Bank DB 2019 Starting a Business Score also ranks Estonia 18th in the world.  https://www.doingbusiness.org/en/rankings

**Outward Investment**

Estonia does not restrict domestic investors from investing abroad nor does it promote outward investment. Estonia companies have invested abroad about USD 10 billion, mostly into EU countries. The main sectors for outward investments are services, manufacturing, real estate and financial.

							2. Bilateral Investment Agreements and Taxation Treaties					

Estonian BITs with third countries are available at the following link:

http://investmentpolicyhub.unctad.org/IIA/CountryBits/66#iiaInnerMenu

A Bilateral Taxation Treaty with the U.S. came into force on January 1, 2000. The United States and Estonia signed a Foreign Account Tax Compliance Act (FATCA) agreement in April 2014.

List of agreements with the United States can be found at: http://www.vm.ee/en/countries/united-states-america?display=relations#agreements

							3. Legal Regime					

**Transparency of the Regulatory System**

The Government of Estonia has set transparent policies and effective laws to foster competition and establish “clear rules of the game.” Despite these measures, due to the small size of Estonia’s commercial community, instances of favoritism are not uncommon.

Accounting, legal, and regulatory procedures are transparent and consistent with international norms. Financial statements should be prepared in accordance with either:

- accounting principles generally accepted in Estonia; or
- International Financial Reporting Standards (IFRS) as adopted by the EU.

Listed companies and financial institutions are required to prepare financial statements in accordance with IFRS as adopted by the EU.

The Estonian Generally Accepted Accounting Principles (GAAP) are written by the Estonian Accounting Standards Board (EASB).  Estonian GAAP, effective since 2013, is based on IFRS for Small and Medium-sized Entities (IFRS for SMEs) with limited differences from IFRS for SMEs with regard to accounting policies as well as disclosure requirements. More info: https://investinestonia.com/business-in-estonia/establishing-company/accounting-requirements/

The Minister of Justice has responsibility for promoting regulatory reform. The Legislative Quality Division of the Ministry of Justice provides an oversight and coordination function for Regulatory Impact Analysis (RIA) and evaluations with regards to primary legislation. For government strategies, EU negotiations and subordinate regulations, oversight responsibilities lie within the Government Office.

The government of Estonia has placed a strong focus on accessibility and transparency of regulatory policy by making use of online tools. There is an up-to-date database of all primary and subordinate regulations (https://www.riigiteataja.ee/en/) in an easily searchable format. An online information system tracks all legislative developments, and makes available RIAs and documents of legislative intent (http://eelnoud.valitsus.ee/main). Estonia also established the website www.osale.ee, an interactive website of all ongoing consultations where every member of the public can submit comments and review comments made by others. Regulations are reviewed on the basis of scientific and data-driven assessments.

Estonia, an OECD member country, has committed at the highest political level to an explicit whole-of-government policy for regulatory quality and has established sufficient regulatory oversight. Estonia scores the same as the United States on the World Bank`s Global Indicators of Regulatory Governance on whether governments publish or consult with public about proposed regulations: http://rulemaking.worldbank.org/en/data/explorecountries/estonia  Estonia’s widely-praised “e-governance” solutions and other bureaucratic procedures are generally far more streamlined and transparent than those of other countries in the region and are among the easiest to use globally. In addition, Estonia’s budget and debt obligations are widely and easily accessible to the general public on the Ministry of Finance website.

**International Regulatory Considerations**

Estonia is a member of the EU.  An EU regulation is a legal act of the European Union that becomes immediately enforceable as law in all member states simultaneously. Regulations can be distinguished from directives which, at least in principle, need to be transposed into national law. Regulations can be adopted by means of a variety of legislative procedures depending on their subject matter. European Standards are under the responsibility of the European Standardization Organizations (CEN, CENELEC, ETSI) and can be used to support EU legislation and policies.

Estonia has been a member of WTO since 13 November 1999. Estonia is a signatory to the Trade Facilitation Agreement (TFA) since 2015.

**Legal System and Judicial Independence**

Estonia’s judiciary is independent and insulated from government influence. The legal system in Estonia is based on the Continental European civil law model and has been influenced by the German legal system.  In contrast to common law countries, Estonia has detailed codifications.

Estonian law is divided into private and public law. Generally, private law consists of civil law and commercial law.  Public law consists of international law, constitutional law, administrative law, criminal law, financial law and procedural law.

Estonian arbitral tribunals can decide in cases of civil matters that have not previously been settled in court. More on Estonian court system: https://www.riigikohus.ee/en.  Arbitration is usually employed because it is less time consuming and cheaper than court settlements. The following disputes can be settled in arbitral tribunals:

–        Labor disputes;

–        Lease disputes;

–        Consumer complaints arguments;

–        Insurance conflicts;

–        Public procurement disputes;

–        Commercial and industrial disputes.

The Court of Arbitration of the Estonian Chamber of Commerce and Industry serves as a permanent arbitration court to settle disputes arising from private law relationships, including foreign trade and other international business relations. More info: https://www.koda.ee/en/about-chamber/court-arbitration

Recognition of court rulings of EU Member States is regulated by EU legislation. More: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(2015)509988_EN.pdf

**Laws and Regulations on Foreign Direct Investment**

Estonia is part of the Continental European legal system (civil law system). The most important sources of law are legal instruments such as the Constitution, European Union law, international agreements and Acts and Regulations. Major laws affecting incoming foreign investment include: the Commercial Code, Taxation Act, Income Tax Act, Value Added Tax Act, Social Tax Act, Unemployment Insurance Payment Act. More information is available at https://www.riigiteataja.ee/en/.  An overview of the investment-related regulations can be found: http://www.investinestonia.com/en/investment-guide/legal-framework

**Competition and Anti-Trust Laws**

The Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

More info on specific competition cases: https://www.konkurentsiamet.ee/en

**Expropriation and Compensation**

Private property rights are observed in Estonia. The government has the right to expropriate for public interest related to policing the borders, public ports and airports, public streets and roads, supply to public water catchments, etc. Compensation is offered based on market value. Cases of expropriation are extremely rare in Estonia, and the Embassy is not aware of any expropriation cases involving discrimination against foreign owners.

**Dispute Settlement**

*ICSID Convention and New York Convention*

Estonia has been a member of the International Center for the Settlement of Investment Disputes (ICSID) since 1992 and a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1993, meaning local courts are obliged to enforce international arbitration awards that meet certain criteria

*Investor-State Dispute Settlement*

The Embassy is not aware of any claims under Estonia’s Bilateral Investment Treaty (BIT) with the United States. Investment disputes concerning U.S. or other foreign investors in Estonia are rare.

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. In June 2019 a majority of the arbitration tribunal decided to dismiss AS Tallinna Vesi ́s and United Utilities (Tallinn) B.V.’s claims against the Republic of Estonia.

*International Commercial Arbitration and Foreign Courts*

The Arbitration Court of the Estonian Chamber of Commerce and Industry is a permanent arbitration court which settles disputes arising from contractual and other civil law relationships, including foreign trade and other international economic relations. More info: http://www.lawyersestonia.com/arbitration-in-estonia

Recognition of court rulings of EU Member States is regulated by EU legislation. More: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509988/IPOL_STU(2015)509988_EN.pdf

Local courts recognize and enforce foreign arbitral awards. The Embassy is not aware of any investment disputes involving SOEs.

**Bankruptcy Regulations**

Bankruptcy is not criminalized in Estonia.  Bankruptcy procedures in Estonia fall under the regulations of Bankruptcy Act that came into force in February 1997. The Estonian Bankruptcy Act focuses on the protection of the debtors and creditors’ rights. According to the Act, bankruptcy proceedings in Estonia can be compulsory, in which case a court will decide to commence the procedures for debt collection, or voluntarily by company reorganization. More info on bankruptcy procedures: http://www.lawyersestonia.com/bankruptcy-procedures-in-estonia

The detailed information about the creditor’s rights: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/504072016002/consolide

More info from World Bank’s Doing Business Report on Estonian ranking for ease of “resolving insolvency” http://www.doingbusiness.org/data/exploreeconomies/estonia#resolving-insolvency

							4. Industrial Policies					

**Investment Incentives**

Estonia is open for FDI and foreign investors are treated on an equal footing with local investors. There are no investment incentives or government guarantees available to foreign investors.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Estonia’s Customs Act permits the government to establish free trade zones. Goods in a free trade zone are considered to be outside the customs territory. Value-added tax, excise, import and export duties (as well as possible fees for customs services) do not have to be paid on goods brought into free trade zones for later re-export.

In Estonia, there are four free trade zones: Muuga port (near Tallinn), Sillamae port (northeast Estonia), Paldiski north port (northwest Estonia) and in Valga (southern Estonia). All free trade zones are open for FDI on the same terms as Estonian investments.

**Performance and Data Localization Requirements**

There are no specific performance requirements for foreign investments that differ from those required of domestic investments. The Estonian government does not mandate local employment or follow “forced localization” in which foreign investors must use domestic content in goods or technology.

Estonia continues to refine its immigration policies and practices. More info on work permits, visas, residence permits in Estonia: https://www.politsei.ee/en

U.S. citizens are exempt from the quota regulating the number of immigration and residence permits issued, as are citizens of the EU and Switzerland.

There are no requirements for foreign IT service providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software or turning over keys for encryption) or to maintain a certain amount of data storage in Estonia. There is no general requirement to register data processing activities in Estonia. Registration is required only if the data processor handles sensitive personal data.

The EU General Data Protection Regulation (GDPR) entered into force on May 25, 2018, with the goal of harmonizing the already existing data protection laws across Europe. The Estonian Personal Data Protection Act came into force on January 15, 2019.  More info: https://e-estonia.com/how-to-be-compliant-gdpr-5-steps/

Restrictions on transfer of data offshore:

Information on data transfer is available at: https://www.riigiteataja.ee/en/eli/523012019001/consolide or by contacting

Estonian Data Protection Inspectorate39 Tatari St., 10134 TallinnTel: (+372) 627 4135.https://www.aki.ee/en

							5. Protection of Property Rights					

**Real Property**

Secured interests in property are recognized and enforced. Mortgages are quite common for both residential and commercial property and leasing as a means of financing is widespread and efficient.

The legal system protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages. As of 1 October 2011, land reform in Estonia was almost complete.  Restitution and privatization of lands commenced in 1991, but in almost every municipality there remain several complicated cases to be settled.  In total, less than 4 percent of the Estonian territory (waterbodies included) lacks a clear title.

Foreign individuals and companies are allowed to acquire real estate with the permission of the local authorities. There are legal restrictions on acquiring agricultural and woodland of 10 hectares or more, and permission from the county governor is needed.  Foreign individuals are not allowed to acquire land located on smaller islands, or listed territories adjacent to the Russian border.

Property may be taken from the owner without the owner`s consent only in the public interest, pursuant to a procedure provided by law, and for fair and immediate compensation. Everyone whose property has been taken from them without consent has the right to bring an action in the courts to contest the taking of the property, the compensation, or the amount of the compensation.

More info: http://www.globalpropertyguide.com/Europe/Estonia/Buying-Guide

http://www.doingbusiness.org/en/data/exploreeconomies/estonia/registering-property#DB_rp

http://www.lawyersestonia.com/purchase-a-property-in-estonia

**Intellectual Property Rights**

Estonia maintains a robust intellectual property rights (IPR) regime. The quality of IP protection in legal structures is strong, enforcement is good, and infringement and theft are uncommon. Estonia adheres to the World Intellectual Property Organization (WIPO) Berne Convention, the Paris Convention, the Rome Convention, the Geneva Convention, and the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Estonian legislation fully complies with EU directives granting protection to authors, performing artists, record producers, and broadcasting organizations.  Equal protection against unauthorized use is provided via international conventions and treaties to foreign and Estonian authors.

Companies should recognize that IPR is protected differently in Estonia than in the United States, and U.S. laws do not protect IPR in Estonia.  Registration of patents and trademarks in Estonia is on a first-in-time, first-in-right basis, so companies should consider applying for trademark and patent protection before selling products or services in the Estonian market. IPR is primarily a private right, and the U.S. government generally cannot enforce rights for private individuals in Estonia.  It is the responsibility of the rights’ holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors.  Companies may wish to seek advice from local attorneys or IPR consultants.

Estonia is not included in USTR’s Special 301 Report or the Notorious Markets List.

Estonian Customs tracks and reports periodically on seizures of counterfeit goods.  In 2019, the Estonian Tax and Customs Board processed 249 cases involving counterfeit goods resulting in seizures of 10,013,641 items.  Most of the infringed goods were detected in mail, and the volume of goods seized per case was small.  The largest trademark-infringing commodity groups were footwear, clothes, accessories, toys, and electronics.  In Estonia, IPR crimes are prosecuted.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Estonia is a member of the Euro zone. Estonia’s financial sector is modern and efficient. Credit is allocated on market terms and foreign investors are able to obtain credit on the local market. The private sector has access to an expanding range of credit instruments similar in variety to those offered by banks in Estonia’s Nordic neighbors Finland and Sweden.

Legal, regulatory, and accounting systems are transparent and consistent with international norms. The Estonian capital markets are rather inactive as both stock and bond market liquidity has been in a downward trend for the past ten years.

The Security Market Law complies with EU requirements and enables EU securities brokerage firms to deal in the market without establishing a local subsidiary. The NASDAQ OMX stock exchanges in Tallinn, Riga and Vilnius form the Baltic Market, which facilitates cross-border trading and attracting more investments to the region. This includes sharing the same trading system and harmonizing rules and market practices, all with the aim of reducing the costs of cross-border trading in the Baltic region.

Certain investment services and products may be limited to U.S. persons in Estonia due to financial institutions’ response to the U.S. Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Estonian financial services market overview:  https://www.fi.ee/en?id=12737

IMF report on Estonia: https://www.imf.org/en/Publications/CR/Issues/2020/01/21/Republic-of-Estonia-2019-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-48963

**Money and Banking System**

Estonia’s banking system has consolidated rapidly. Total assets of the commercial banks were approximately EUR 32 billion in early 2020. The banking sector is dominated by two major commercial banks, Swedbank and SEB, both owned by Swedish banking groups. These two banks control approximately 65 percent of the financial services market. The third largest bank is Luminor Bank. There are no state-owned commercial banks or other credit institutions.

More information is available at: http://statistika.eestipank.ee/#/en/p/FINANTSSEKTOR/147/645

The Scandinavian-dominated Estonian banking system is modern and efficient. Local and international banks in Estonia provide both domestic and international services (including internet and mobile banking) at competitive rates, as well as a full range of financial, insurance, accounting, and legal services. Estonia has a highly advanced internet banking system: currently 98 percent of banking transactions are conducted via the internet.

The Bank of Estonia (Eesti Pank) is the independent central bank. As Estonia is part of the Euro zone, the core tasks of the Bank are to help to define the monetary policy of the European Community and to implement the monetary policy of the European Central Bank, including the circulation of cash in Estonia. Eesti Pank is also responsible for holding and managing Estonian official foreign exchange reserves as well as supervising overall financial stability and maintaining reliable and well-functioning payment systems. The Central Bank and the government hold no shares in the banking sector.

EU legislation requires Estonia to make its AML regime compliant with EU directives. Due to strict anti-money laundering (AML) regulations and bank compliance practices, it can be difficult for non-residents to open a bank account. More info on opening a bank account for investors: https://transferwise.com/gb/blog/opening-a-bank-account-in-estonia  Changes in local AML regulations and oversight are evolving following some large-scale money laundering cases through branches of Nordic banks uncovered in Estonia.

**Foreign Exchange and Remittances**

*Foreign Exchange Policies*

Estonia has been a member of the euro currency area since 2011. There are no restrictions on currency transfers or conversion.

**Remittance Policies**

There are no restrictions, limitations or delays involved in converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into other currencies at market rates. There is no limit on dividend distributions as long as they correspond to a company’s official earnings records. If a foreign company ceases to operate in Estonia, all its assets may be repatriated without restriction. These policies are long-standing; there is no indication that they will be altered in the future. Foreign exchange is readily available for any purpose.

**Sovereign Wealth Funds**

There are no sovereign wealth funds or state owned investment funds in Estonia.

							7. State-Owned Enterprises					

In Estonia SOEs are primarily engaged in the provision of services of strategic importance.

In early 2019, the Republic of Estonia held an interest in 29 companies of which 27 were solely owned by the state. The largest SOE`s are Eesti Energia (electricity production), Elering (electricity TSO), Estonian Railways, Tallinn Airport, and the Port of Tallinn.

The full list of SOEs is available at: https://www.eesti.ee/eng/contacts/riigi_osalusega_ariuhingud_1/riigi_osalusega_ariuhingud_2

SOEs have assets worth about 6.6 billion euros, and they employ about 13,000 people.

Public enterprises operate on the same legal basis as private enterprises. Until recently SOEs had politically-appointed boards but today board members are appointed by an independent committee. SOEs are governed by the different ministries.

Competition and public procurement of SOEs is subject to EU law.  All SOEs have audited accounts. Large SOEs’ audits are publicly available on their websites.  The activities of the SOEs are also audited by the National Audit Office of Estonia, which conducts assessments and provides recommendations directly to the Parliament.

**Privatization Program**

Estonia’s privatization program is largely complete. Only a small number of enterprises remain wholly state-owned. There have been recent discussions on the political level about the possible listing of additional SOEs, such as Port of Tallinn and part of Eesti Energia.

							8. Responsible Business Conduct					

The majority of OECD Guidelines for Multinational Enterprises are incorporated into Estonian legislation. The non-profit organization, Responsible Business Forum in Estonia, aims to further corporate social responsibility (CSR) in Estonia, and is a partner in the CSR360 Global Partner Network. CSR360 (www.csr360gpn.org) is a network of independent organizations, which work as the interface of business and society to mobilize business towards socially responsible aims.

The Estonian Ministry of Economy and Communication works closely with CSR on educating private businesses and SOEs on responsible business conduct, recognizing best practices, and factoring RBC policies or practices into its procurement decisions. The American Chamber of Commerce in Estonia also maintains a Corporate Social Responsibility committee.

Government in general enforces the labor, human rights, employment rights, consumer protection, and environmental protection related laws effectively and these requirements cannot be waived to attract foreign investment. Estonia has adhered to the OECD Guidelines for Multinational Enterprises since 2001. The National Contact Point can be accessed here:

https://www.mkm.ee/en/objectives-activities/economic-development/oecd-guidelines-and-surveillance%20

Natural resource extraction related revenues, including mining licenses, are less than 0.6 percent of government budget revenues and less than 0.3 percent of the GDP.  The revenues are reflected in the national budget.

Here you can find a summary of the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain:  http://www.doingbusiness.org/data/exploreeconomies/estonia/protecting-minority-investors/

							9. Corruption					

Estonia has laws, regulations, and penalties to combat corruption, and while corruption is not unknown, it has generally not been reported to pose a major problem for foreign investors. Both offering and taking bribes are criminal offenses which can bring imprisonment of up to five years. While “payments” that exceed the services rendered are not unknown, and “conflict of interest” is not a well-understood issue, surveys of American and other non-Estonian businesses have shown the issue of corruption is not a serious concern.

In 2019, Transparency International (TI) ranked Estonia 18th out of 180 countries on its Corruption Perceptions Index.

Anti-corruption policy and implementation are coordinated by the Ministry of Justice and the strategy is implemented by all ministries and local governments.  The Internal Security Service is effective in investigating corruption offences and criminal misconduct, leading to the conviction of several high-ranking state officials. Until recently corruption was most commonly associated with public sector activities. Recently the government initiated efforts to educate private sector businesses about the risks of business-to-business corruption, for example within procurement activities.

Estonia cooperates in fighting corruption at the international level and is a member of GRECO (Group of States Against Corruption). Estonia is a party to both the Council of Europe (CoE) Criminal Law Convention on Corruption and the Civil Law Convention. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and accounting offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia.

More info on the corruption level in different sectors in Estonia can be found at: https://www.business-anti-corruption.com/country-profiles/estonia/

**UN Anticorruption Convention, OECD Convention on Combatting Bribery**

The UN Anticorruption Convention entered into force in Estonia in 2010. Estonia has been a full participant in the OECD Working Group on Bribery in International Business since 2004; the underlying Convention entered into force in Estonia in 2005. The Convention obligates Parties to criminalize bribery of foreign public officials in the conduct of international business.

The United States meets its international obligations under the OECD Anti-bribery Convention through the U.S. Foreign Corrupt Practices Act.

*Resources to Report Corruption*

Government agency contacts responsible for combating corruption:

+372 6123657 Central Criminal Police corruption hotline

Or e-mail: korruptsioonivihje@politsei.ee

Transparency International in Estonia: http://www.transparency.org/whoweare/contact/org/nc_estonia

							10. Political and Security Environment					

Civil unrest generally is not a problem in Estonia, and there have been no incidents of terrorism. Public gatherings and demonstrations may occur on occasion in response to political issues, but these have proceeded, with very few exceptions, without incidence of violence in the past.

							11. Labor Policies and Practices					

Estonia has a small population – 1.31 million people. The average monthly Estonian salary at the end of 2019 was about USD 1,700. About 75 percent of the workforce is employed in the services sector. With an aging population and a negative birth rate, Estonia, like many other countries of Central and Eastern Europe, faces demographic challenges affecting its long-term supply of labor. Improving labor efficiency is a key focus for Estonia in the short-to-mid-term.  At the end of 2019, the unemployment rate was 4.4 percent but it is expected to increase significantly in 2020 due to the Covid-19 crisis.  More on the labor market: http://www.eestipank.ee/en/publications/series/labour-market-review

The Law of Obligations Act, the Individual Labor Dispute Resolution Act and the Occupational Health and Safety Act address employment and labor issues.  Labor laws may not be waived in order to attract or retain investment. Labor laws are generally strict, and the principle of employee protection is applied in which the worker is considered the economically weaker party. Upon termination of an employment contract due to a lay-off, an employer must pay an employee compensation in the amount of one month’s average wage. In addition, an insurance benefit shall be paid to an employee by the Estonian Unemployment Insurance Fund depending on the length of service. More info: https://www.oecd.org/els/emp/Estonia.pdf

Trade union membership remains low compared to most countries in the EU. Estonia has ratified all eight ILO Core Conventions.

Estonian labor regulations on labor abuses, health and safety standards, labor disputes etc. are effectively monitored by the Estonian Labor Inspectorate: http://www.ti.ee/en/

							12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs					

Estonia has a bilateral agreement with the Overseas Private Investment Corporation, the predecessor agency to the U.S. International Development Finance Corporation (DFC).

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

Source: Bank of Estonia, IMF http://data.imf.org/regular.aspx?key=60587804

							14. Contact for More Information					

United States Embassy, Political/Economic SectionKentmanni 20, 15099 Tallinn, EstoniaTel: 372 668 8130Contact: Mrs. Reene Moschella, Economic/Commercial SpecialistE-mail:  Moschellar@state.gov

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### On This Page

                    -  EXECUTIVE SUMMARY 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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