Source: https://iclg.com/practice-areas/international-arbitration-laws-and-regulations/estonia
Timestamp: 2020-01-23 17:49:30
Document Index: 252069733

Matched Legal Cases: ['§ 717', '§ 717', '§ 718', '§ 719', '§ 719', '§ 7181', '§ 371', 'art 14', '§ 712', 'art 14', '§ 726', '§ 730', '§ 730', '§ 730', '§ 730', '§ 742', '§ 747', '§ 752', '§ 718', '§ 725', '§ 727', '§ 732', '§ 737', '§ 737', '§ 738', '§ 745', '§ 745', '§ 751', '§ 718', '§ 718', '§ 730', '§ 371', '§ 730', '§ 742', '§ 742', '§ 36', '§ 36', '§ 722', '§ 724', '§ 721', '§ 724', '§ 727', 'art 14', '§ 732', '§ 735', 'art 14', '§ 737', '§ 741', '§ 732', '§ 733', '§ 734', '§ 739', '§ 740', '§ 713', '§ 732', '§ 740', '§ 744', 'art 14', '§ 754', '§ 754', '§ 746', '§ 371', '§ 741', '§ 113', '§ 749']

International Arbitration 2019 | Estonia | ICLG
Estonia: International Arbitration 2019
The ICLG to: International Arbitration Laws and Regulations - Estonia covers common issues in international arbitration laws and regulations – including arbitration agreements, governing legislation, choice of law rules, selection of arbitral tribunal, preliminary relief and interim measures – in 52 jurisdictions
ICLG.com > Practice Areas > International Arbitration > Estonia
Pursuant to the definition in § 717(1) of the Estonian Code of Civil Procedure (CCP), an agreement between the parties “to have an arbitral tribunal resolve a dispute which has already arisen or may arise between them over a determined contractual relationship or extra-contractual relationship” constitutes an arbitration agreement. An arbitration agreement may be entered into as an independent agreement, or as a distinguishable term in a contract (CCP § 717(2)).
For the arbitration agreement to be valid, the subject-matter must be arbitrable (CCP § 718; for more details, see question 3.1 below).
As to the form requirement, an arbitration agreement must be in a format which can be reproduced in writing. In practice, this means that the agreement must designate the parties but does not necessarily need to be signed, so it may also be contained in a written confirmation (CCP § 719(1)). Failure to comply with the format requirement does not affect the validity of an agreement if the parties subsequently agree to the resolution of the dispute by an arbitral tribunal (CCP § 719(3)).
Specific legal requirements apply to arbitration agreements concluded with consumers (CCP § 7181). Firstly, these are valid only if concluded as submission agreements after the claim has arisen. Secondly, the consumer must be thoroughly informed about the principles of conducting arbitration proceedings beforehand. Thirdly, the place of arbitration ought to be in the county of residence or place of work of the consumer. Lastly, the arbitration agreement must be signed by the consumer either by hand or a digital signature.
Additionally, pursuant to the Supreme Court, if an arbitration clause constitutes a standard term in the meaning of the Law of Obligations Act (LOA), the specific standard term regulation therein must be applied by the courts ex officio. Estonian standard term regulation applies in certain cases regardless of the law applicable to the contract.
There is no rule on what other elements ought to be incorporated in an arbitration agreement, apart from the designation of the parties and their intent to settle their disputes arising out of a defined legal relationship by arbitration. Still, it is advisable to agree on the seat of arbitration, number of arbitrators and procedure for their appointment, language of the proceedings, substantive law applicable to the contract and, if relevant, the applicable arbitral rules. Otherwise, the parties may need to rely on the default provisions in the CCP.
The national courts habitually enforce arbitration agreements. The courts are legally required to dismiss an action if the dispute is subject to an arbitration agreement, except in the case where the validity of the said agreement is contested (CCP § 371(1)(8)). If the plaintiff does not specifically contest the validity of an arbitration agreement, the court may even reject such an action on its own initiative without the defendant ever needing to make an objection on the basis of the arbitration agreement. However, if a dispute falling within a scope of an arbitration agreement has been admitted by the court, it is for the defendant to raise an objection at the first opportunity in order not to risk losing the right to rely on the arbitration agreement.
Arbitration proceedings are governed by Part 14 “Arbitration Procedure” (“Vahekohtumenetlus” in Estonian) of the CCP, specifically CCP §§ 712–757. The CCP entered into force on 1 January 2006 [RT I 2005, 26, 197].
The CCP does not differentiate between domestic and international arbitration proceedings, which are both governed by Part 14 therein.
The CCP is based on the 1985 UNCITRAL Model Law (without the 2006 amendments) with some unique provisions, e.g.:
In addition to the lack of independence and impartiality, an arbitrator may also be removed (challenged) if circumstances exist which give rise to reasonable doubts regarding his or her competence or if the conditions agreed by the parties are not fulfilled with respect to the arbitrator (CCP § 726(1)).
A plea that the claim exceeds the limits of the arbitration agreement ought to be raised already at the commencement of the arbitration proceedings (CCP § 730(3)).
An objection regarding the validity of an arbitration agreement or the arbitral tribunal’s jurisdiction to settle the dispute must be decided by the tribunal as a preliminary question in a separate decision (CCP § 730(5)). If the arbitral tribunal declares itself to be incompetent, ordinary court jurisdiction is restored, unless the parties have agreed otherwise (CCP § 730(7)).
If a court has been seized with an action to establish the validity of an arbitration agreement or the arbitral tribunal’s jurisdiction to settle the dispute, the arbitral tribunal has no competence to rule on its own competence, i.e. it is not possible to commence or continue the arbitral proceedings (CCP § 730(8)). The court shall not accept such an action if an arbitral tribunal has already been constituted in the matter and has not yet declared itself to be incompetent.
In default situations, where the parties have not agreed on the substantive law and neither does it arise from any act, the arbitral tribunal ought to apply Estonian law as the substantive law to the contract (CCP § 742(2)).
If the arbitration proceedings have been terminated because (i) the plaintiff withdraws the action, (ii) the parties agree on the termination of proceedings or (iii) the parties fail to participate in the proceedings, the proceedings cannot be commenced anew (CCP § 747(2) and (4)).
The application to set aside an award must be submitted within 30 days after the date of service of the award (CCP § 752(1)), instead of the three-month deadline in the UNCITRAL Model Law. Also, the fact that the formation of the arbitral tribunal, or the arbitral procedure, was not in accordance with the provisions of the CCP or the permitted agreement of the parties only serves as a ground for challenge if such fact “can be presumed to have significantly influenced the decision of the arbitral tribunal”.
There is no clear way of distinguishing mandatory rules governing international arbitration proceedings in the CCP. However, according to the commentaries of the CCP, the following provisions could be deemed mandatory:
the rules on the validity of the arbitration agreement (arbitrability) (CCP § 718);
the requirements the court needs to consider when appointing an arbitrator in terms of the qualifications the parties agreed on and the arbitrator’s independence and impartiality (CCP § 725(2));
the right of recourse to a court if challenge of an arbitrator is not successful (CCP § 727(3));
the principle of equal treatment and right to be heard (CCP § 732(1)), the requirement to give the parties sufficient time to prepare for the hearing (CCP § 737(2)), to inform a party of any document submitted to the tribunal by the other party without delay (CCP § 737(3)) and the obligation to disregard the party’s failure to respond to the statement of claim, to appear at a hearing or to submit documentary evidence by the prescribed due date, if justifiable (CCP § 738(3));
the requirement to have an award signed (CCP § 745(2));
the requirement to have an award delivered to the parties (CCP § 745(6)); and
to set aside an award for being contrary to Estonian public order (CCP § 751(2)(2)).
Any proprietary claim may be settled by arbitration, whereas non-proprietary claims may be subject to an arbitration agreement only if the parties, as a matter of law, may settle such a claim by a compromise (CCP § 718(1)). The Supreme Court has explained in connection to the validity of arbitration agreements that basically any legal relationship may give rise to various obligations the contents of which the parties may determine themselves and which may thus be subject to a compromise. In contrast, obligations arising from law which cannot be redetermined by the parties with a compromise agreement cannot be subject to arbitration either.
There are a few exceptions to the general rule as certain types of disputes set out in law may not be referred to arbitration, such as the disputes concerning: (i) the validity or cancellation of a residential lease contract, and vacating a dwelling located in Estonia; (ii) the termination of an employment contract; and (iii) consumer credit contracts (CCP § 718(2)).
Yes, the arbitral tribunal may rule on the question of its own jurisdiction provided that the court has not yet been seized with an action for establishing the validity of an arbitration agreement or the arbitral tribunal’s jurisdiction to settle the dispute (CCP § 730(1) and (8)). The arbitrator’s decision confirming its jurisdiction is subject to the court’s review.
The courts will dismiss such a case and in contrast to UNCITRAL Model Law may even do so on their own motion, provided that the party does not bring a claim to contest the validity of the arbitration agreement (CCP § 371(1)8)).
If a court has been requested to establish the validity of an arbitration agreement or the arbitral tribunal’s jurisdiction to settle the dispute before the arbitral tribunal has been constituted, the national court will conduct a full review and make a substantive decision on the issue (CCP § 730(8)). Such a court decision is subject to normal appeal procedures.
After the constitution of the tribunal, it is the arbitral tribunal that has the competence to rule on its own competence. If a party objects to the jurisdiction and competence of an arbitral tribunal, the tribunal is obliged to rule on this as a preliminary question in a separate decision. The party may then request the court to review the tribunal’s decision confirming its jurisdiction and competence within 30 days. The court ruling reviewing the tribunal’s positive decision on its jurisdiction is not subject to appeal. The law does not prescribe the standard of review in this respect.
In cases where the court is requested to intervene in aid of arbitral proceedings, i.e. to appoint an arbitrator, order interim relief or take evidence, the court would likely apply prima facie standard to satisfy itself that an arbitration agreement exists and the tribunal has jurisdiction over the matter.
As a rule, only signatories to the agreement are bound by the arbitration agreement. If the arbitration agreement is subject to Estonian law, then the arbitral tribunal could assume jurisdiction over individuals or entities which are not named as parties to an arbitration agreement in case of legal succession and assignment. However, in the absence of clear rules on binding the non-signatories in other situations, the prevailing view, as explained also in the commentaries to the CCP, seems to be that an arbitral tribunal cannot assume jurisdiction over individuals or entities that are not parties to the arbitration agreement.
Limitation periods are a matter of substantive law in Estonia. No laws or rules prescribe limitation periods for the commencement of arbitrations.
It is a complex matter which would need to be determined by analogy in most cases. Pursuant to the Bankruptcy Act, the court shall discontinue the court proceedings concerning a proprietary claim against a debtor if no decision has been made at the time the debtor is declared bankrupt. While this provision does not per se apply to ongoing arbitration proceedings, or the arbitral tribunals, there is no possibility to enforce any claims against a bankrupt debtor outside the procedure provided for in the Bankruptcy Act, making an eventual award futile.
However, if such a claim against the debtor deals with the exclusion of an object from the bankruptcy estate, the court shall hear the claim if the trustee chooses to participate in the proceedings or if so requested by the plaintiff. Arguably, the arbitration proceedings could be continued on the same basis. However, without clarity on the matter there remains a risk of having to bring the same claim in court.
If it is the plaintiff that has been declared bankrupt under the Bankruptcy Act, the trustee, in lieu of the debtor, has a choice to participate in court proceedings in an action or any other petition relating to the bankruptcy estate which began before the declaration of bankruptcy or if the debtor participates in court proceedings as a third party. If the trustee is aware of such proceedings but does not enter the proceedings, the debtor may continue as the plaintiff, petitioner or third party. Though it is questionable whether a trustee can be deemed bound by the arbitration agreement, some case law can be found to support the solution that the bankruptcy proceedings would not interrupt the ongoing arbitration proceedings in such situations.
The CCP contains a specific provision on how applicable law should be determined (CCP § 742(1)–(4)):
The arbitral tribunal applies the rules of law agreed upon by the parties (the substantive law of a state, if so chosen, without the conflict of laws rules).
An arbitral tribunal applies Estonian law, if the parties have not agreed on the applicable law and the applicable law does not arise from an act.
An arbitral tribunal may resolve a dispute based on the principle of justice (ex aequo et bono) if the parties have expressly agreed on it. Such agreement can be made until the time the arbitral court makes an award. The arbitral tribunal must not deviate from the imperative provisions of the law of the state which would be applied in case the dispute would be resolved without the agreement to settle the dispute ex aequo et bono.
The arbitral tribunal takes account of the terms and conditions of the contract and of customary practices regarding contracts in so far as this is possible under the legislation which is applied, unless the dispute is settled ex aequo et bono.
The requirement to apply Estonian law to the substance of the dispute, though peculiar in the context of international arbitration, has not yet raised noticeable issues in practice.
Pursuant to CCP § 742(3), the imperative provisions of the law of the state which would apply had the parties not agreed to have the dispute settled ex aequo et bono must be followed in all cases. These imperative provisions may rise from the law of the seat as well as otherwise applicable laws.
For example, the regulation on standard contract terms in the LOA, which the courts must apply ex officio regardless of the parties’ choice of law, applies also to the contracts between professional parties if their places of business related to the contract or the performance thereof are in Estonia (LOA § 36(3)). In case of consumers, the application of the regulation on standard contract terms is even wider (LOA § 36(2)). Though consumer protection laws are considered to contain imperative (mandatory) norms, their non-application would not be considered contrary to the Estonian public order pursuant to the recent rulings of the Supreme Court (see question 11.5 below).
No particular choice of law rules govern this question. The prevailing view is that if the parties have not agreed on the law applicable to the arbitration agreement, it is the law of the seat that applies, though some authors opine that the choice made regarding the law applicable to the underlying contract could indicate the parties’ intent to subject the arbitration agreement to the same law.
Only natural persons with active legal capacity may be selected as arbitrators (CCP § 722(1)). Additionally, by virtue of the Bar Association Act, assistant attorneys-at-law may not serve as arbitrators without the prior permission from the Board of the Bar Association and active judges are precluded from acting as party-appointed arbitrators pursuant to the Courts Act. The requirements of impartiality, independence and competence further restrict the selection of arbitrators.
Yes, in such a case each party has the right to request that the court appoint an arbitrator, unless otherwise agreed in the rules for the appointment of an arbitrator (CCP § 724(5)).
Yes, the court may intervene in the selection of arbitrators if an arbitration agreement gives one of the parties an economic or other advantage over the other party in the formation of an arbitral tribunal which is materially damaging to the other party. In such cases the party may request that the court appoint one arbitrator or several arbitrators differently from the appointment which already took place or from the rules of appointment agreed upon earlier. The request must be made no later than within 15 days as of the time the party became aware of the formation of the arbitral tribunal (CCP § 721(2)).
The court may also intervene when the parties have not agreed on the appointment of arbitrators and fail to abide by the default rules in the CCP (CCP § 724) or by deciding over a challenge of an arbitrator (CCP § 727) upon a party’s petition.
Pursuant to the CCP, a candidate arbitrator must immediately disclose any circumstances which may create doubt in his or her impartiality or independence or which may constitute the basis for his or her removal due to another reason. It is a continuous obligation that lasts from appointment until the end of the arbitration proceedings. The arbitrator may be removed if reasonable doubt exists as to his or her impartiality or independence.
Chapter 74 in Part 14 of the CCP contains the main principles and default rules for conducting arbitration proceedings (CCP §§ 732–741). These apply to all arbitral proceedings sited in Estonia.
No particular procedural steps are required by law as the conduct of arbitration proceedings in Estonia is to a large extent subject to party autonomy. Unless otherwise agreed by the parties, the arbitration proceedings commence once the defendant receives the statement of claim for resolving a dispute by arbitration (CCP § 735).
There are no particular rules that govern the conduct of counsel in arbitral proceedings sited in Estonia. Therefore, only the counsel that have been admitted to practice in some jurisdictions are likely to have their conduct regulated in this respect.
For example, the members of the Estonian Bar Association (EBA) are obliged to follow the EBA Code of Ethics in arbitration proceedings in Estonia and abroad. According to the EBA Code of Ethics, the provisions that regulate the communication with courts also apply to the communication with the courts of arbitration, e.g. the member of the Bar must not influence the judge (arbitrator) in any extrajudicial manner. The EBA members are also obliged to follow the Code of Conduct of the Council of Bars and Law Societies of Europe (CCBE) in cross-border matters within the EEA.
Lawyers admitted to practise in any EU Member State are also bound by the same codes of conduct when acting as counsel in arbitral proceedings in Estonia. This is without prejudice to other rules of conduct that may apply to them. The conduct of lawyers from outside the EU is not regulated.
As a mandatory rule, the arbitrators have a duty to treat the parties equally and grant all parties an opportunity to present their positions in arbitration proceedings. If the parties have not agreed on the rules of procedure to be followed and such rules are not provided by Part 14 of the CCP either, the arbitral tribunal has the power to determine such rules.
As to the duties, the arbitrators are to hold a hearing if not precluded by the parties’ agreement and so requested by one party, to give the parties sufficient time to prepare for the hearing and inform a party of any document submitted to the tribunal by the other party without delay (CCP § 737). The arbitrators are also under a statutory duty of confidentiality (CCP § 741).
At the same time, an arbitral tribunal has the right to decide on the admissibility of evidence, to examine evidence and to be free in its evaluation of the outcome of giving evidence (CCP § 732). Subject to party autonomy, the arbitrators are empowered to determine the place of conduct of arbitration proceedings but may still meet at a place which the tribunal considers suitable to hear witnesses, experts or parties, to conduct discussions between the members of the tribunal or to examine things or documents (CCP § 733). Unless otherwise agreed by the parties, the tribunal also has the power to determine the language of the proceedings and it may demand the submission of written certificates together with a translation thereof into the language agreed upon between the parties or prescribed by the arbitral tribunal (CCP § 734).
The arbitrators also have the power to appoint experts (CCP § 739) and ask the courts to take evidence or perform other judicial acts should the tribunal lack authority to do so (CCP § 740).
No, the rules restricting the lawyers from other jurisdictions to appear before courts are limited to court proceedings.
The CCP does not clearly provide for arbitrator immunity. Pursuant to the Arbitration Rules of the Court of Arbitration of the Estonian Chamber of Commerce and Industry (ECCI), the Court of Arbitration is liable only if it has committed a criminal offence, which may arguably also extend to arbitrators acting under the said Rules.
A court has the right to perform judicial acts in arbitration proceedings only in the cases and to the extent provided by law (CCP § 713). If the party would otherwise have a right of recourse to the courts in case of failure to reach an agreement concerning a procedural issue, the party may do so only if the procedural issue cannot be solved on the basis of the rules and regulations of the arbitral tribunal or other documents regulating arbitration proceedings (CCP § 732(2)).
Yes, the arbitral tribunal may award preliminary and interim relief without seeking the assistance of a court. The arbitrators may order any type of relief they see fit apart from measures which restrict personal freedoms, i.e. to prohibit the defendant from departing from his or her residence, to take the defendant into custody or detain the defendant.
Regardless of whether the seat of arbitration is in Estonia or abroad, the court has the right to grant preliminary or interim relief based on a request of a party even before the beginning of arbitration proceedings. In principle, the court could order the arbitral tribunal to suspend the proceedings.
As with court proceedings, the courts are much more willing to satisfy the requests for interim relief after the arbitral proceedings have been initiated. The Supreme Court has held that in deciding whether to satisfy the request for interim relief, the court ought to assess the legal perspective of the claim submitted in arbitration. This opinion has received a lot of criticism from the practitioners. In practice, the courts do order interim relief, even if the arbitral proceedings take place abroad.
Though in principle the courts may order any measure they deem necessary, Estonian courts do not order anti-suit injunctions in aid of an arbitration.
The arbitral tribunal is not prohibited from ordering security for costs, if not otherwise agreed by the parties, whereas it is currently still debated whether the courts may do the same in support of arbitral proceedings.
Preliminary relief and interim measures ordered by arbitral tribunal need to be granted enforcement by a subsequent order of a court. The court makes the order based on a request of a party and allows the enforcement thereof only if application of the same measure has not already been requested from the court. The court may rephrase the arbitral tribunal’s order if this is necessary to have the measure conform to the types of relief the court is allowed to order under the CCP.
If the arbitral tribunal has not yet been constituted, the competent body of an arbitral tribunal may forward a party’s petition to order preliminary and interim measures to the court.
The CCP on arbitral procedure does not contain any specific rules of evidence, apart from the arbitral tribunal’s explicit right to decide on the admissibility of evidence, to examine evidence and to be free in its evaluation of the outcome of giving evidence.
The arbitral tribunal may order the disclosure of documents and discovery as well as require the attendance of witnesses.
Pursuant to CCP § 740, if the arbitral tribunal in Estonia or abroad is not competent to carry out the taking of evidence or to conduct another court activity, the arbitral tribunal or a party, with the consent of the tribunal, may request the assistance of a court.
In assisting the tribunal or a party in the arbitral proceedings, the court must adhere to the procedural provisions regulating the particular judicial act sought from the court, i.e. the rules on taking of evidence in court. The court may thus order the disclosure of certain specific documents and require the attendance of a witness, while no discovery can be conducted as it is not recognised by the CCP. Arbitrators have the right to participate in such court proceedings and may pose questions (to a witness).
The tribunal does not have the power to swear in a witness. As to witness testimony, both written and oral testimony coupled with cross-examination are extensively used in international arbitration proceedings taking place in Estonia, less so in purely domestic cases.
Client communication with outside counsel who belong to the Bar Association is covered by the relevant rules in the Bar Association Act. These rules do not extend to in-house counsel, which is why it is debatable whether communications with in-house counsel can attract privilege.
An award must be in writing and signed by the arbitrators. If the award is made by several arbitrators, it is sufficient that the majority of them sign the award provided that the reason for missing signatures is indicated. The signed dissenting opinion is set forth after the signatures of all the arbitrators if the dissenting arbitrator so requests.
The award shall set out the date of making the decision and the place of arbitration proceedings. The award must also contain the reasoning for the decision, unless the parties agree otherwise or the decision is based on a settlement. If a settlement is to be recorded in a form of an award, it must be signed by the parties as well (CCP § 744(1)).
The arbitral tribunals’ powers to clarify, correct or amend an arbitral award are based on Article 33 of the UNCITRAL Model Law without major deviations.
An award made in Estonia can be challenged on one of the following grounds:
1) the active legal capacity of a person who entered into the arbitration agreement was restricted;
2) the arbitration agreement is null and void pursuant to the law of Estonia or of another state, based on which law the parties agreed to evaluate the validity of the arbitration agreement;
3) a party was not notified of the appointment of an arbitrator, or of arbitration proceedings, in conformity with respective requirements, or a party was unable to present its case due to another reason;
4) the arbitral award concerns a dispute which was not specified in the arbitration agreement or which exceeds the limits determined by the arbitration agreement; or
5) the formation of the arbitral tribunal or the arbitration proceedings did not conform to the provisions of Part 14 of the CCP or to the permitted agreement of the parties, and such fact can be presumed to have significantly influenced the arbitral award.
The court furthermore annuls an arbitral award based on the request of a party or at the initiative of the court if it establishes that:
1) pursuant to Estonian law, the dispute should not have been resolved by an arbitral tribunal; or
2) the arbitral award is contrary to Estonian public order or good morals.
The courts in Estonia can only act pursuant to the relevant code of procedure. The CCP does not foresee that the parties may exclude any basis of challenge against an arbitral award by agreement. Therefore, such an agreement could not preclude the courts from deciding the challenges on the basis of the grounds set forth in the CCP, especially for the reasons for being contrary to Estonian public policy.
As the court has the right to intervene and perform judicial acts with respect to arbitration proceedings only to the extent provided so by law, the parties cannot expand the scope of appeal of an arbitral award beyond the grounds available in relevant national laws.
An arbitral award may be appealed within 30 days after the date of service of the award by a petition for a fee of EUR 50. A petition for annulment cannot be filed if the court has recognised the award and declared it enforceable. A petition for annulment of an arbitral award is filed with the court of second instance (circuit court) specified in the arbitration agreement or in the absence thereof with the circuit court of the territorial jurisdiction of the place of the arbitration proceedings. An arbitral award may also be annulled at the initiative of the court of first instance (county court) that has been requested to recognise and enforce the arbitral award.
An order on annulment of an arbitral award is subject to appeal.
Estonia has signed and ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) without reservations with the Act “Välisriigi vahekohtu otsuste tunnustamise ja täitmise konventsiooni ratifitseerimise seadus” of 16 June 1993. Foreign arbitral awards are recognised and accepted for enforcement in Estonia only pursuant to the NYC and other international agreements (CCP § 754 (1)).
Estonia has ratified the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1929 (see also section 14 below).
Foreign arbitral awards are habitually recognised and enforced in accordance with the NYC (CCP § 754). To initiate such proceedings, the party must file a petition for the recognition and enforcement of the arbitral award together with the arbitral award or an authenticated transcript thereof, the arbitration agreement and pay the applicable state fee, which pursuant to the State Fees Act is currently EUR 50.
If the said award and/or agreement is not in Estonian, the party applying for recognition and enforcement of the award must produce a translation of these documents, certified by an official or sworn translator or by a diplomatic or consular agent.
If the respondent did not participate in the arbitration, it helps to have a document (and a translation thereof) confirming that an action, summons or other document initiating the proceedings was timely served on the respondent on at least one occasion pursuant to the law of the state of origin of the award.
An arbitral award enters into force on the date on which the award is made and it has the same effect on the parties as a court judgment which has entered into force (CCP § 746). The award thus has a res judicata effect as of date of issue.
According to CCP § 371(1)(7), the court may not admit a claim if a valid award has been made in arbitration proceedings in a matter between the same parties concerning the same object of action on the same grounds, or arbitration proceedings are pending in such a matter. The validity of an award, as opposed to entry into force, seems to refer to a situation where there are no grounds to deny recognition and enforcement of the award even if no enforcement proceedings have been initiated at the time the claim was filed with a court.
According to the Supreme Court, an award would be contrary to Estonian public policy if it was based on concepts totally alien to the Estonian legal system and to its main values (e.g. the constitutional order, fundamental rights and freedoms, moral values, but also the most general principles of substantive and procedural law).
As a result, the Supreme Court has denied recognition and enforcement of an award under NYC Article 5(2)(a) in situations where the matter could not have been settled by arbitration according to Estonian law and has also thought it possible to do the same where the arbitrator was simultaneously representing the interests of one of the parties.
At the same time, the Supreme Court has found that a foreign arbitral award is not contrary to Estonia’s public policy simply for disregarding the imperative (mandatory) norms of Estonia, like the ones applicable to consumers. The public policy exception only concerns the provisions that reflect the main values of Estonia’s legal system, not all imperative norms.
The arbitral proceedings are not confidential by default. However, the arbitrators are required to maintain the confidentiality of information which became known to them in the course of performance of their duties and which the parties have a legitimate interest in keeping confidential, unless the parties have agreed otherwise (CCP § 741). As of 1 April 2015, the court proceedings related to arbitration proceedings are closed and the rulings on such issues are not published (except for the redacted case law of the Supreme Court) to avoid making arbitral proceedings and awards public through court proceedings.
There is no legislation limiting the parties from using information disclosed in arbitral proceedings in subsequent proceedings.
In Estonia, the types of remedies available in arbitration would depend on the applicable substantive law. However, punitive damages would be against Estonian public policy according to the Supreme Court.
Under Estonian law, availability of interest is governed by substantive law. If Estonian law applies, the default interest rate for late payment is determined on a half-year basis being equal to the last interest rate applicable to the main refinancing operations of the European Central Bank before 1 January or 1 July of each year, plus 8%. Thus, the default interest rate changes periodically. If a contract prescribes payment of interest exceeding the rate provided by law, the interest rate prescribed by the contract shall be the interest rate (LOA § 113(1)).
Pursuant to CCP § 749, the tribunal shall make the decision on costs providing for the division of the costs of arbitration proceedings and of the necessary costs incurred by the parties as a result of arbitration proceedings, unless otherwise agreed by the parties. There is no hard rule with regard to shifting fees and costs between the parties. The tribunal has a wide discretion in this respect. However, the tendency is to award costs to the extent to which the claim was satisfied, like in the court proceedings.
There is no specific tax to be collected on arbitral awards. Whether the award, or rather what has been awarded, can be qualified as income and may thus be taxable depends on the relevant tax codes that apply.
There are no restrictions on third-party funders in Estonia and contingency fees are considered legal under the EBA Act. That said, the funders’ market in Estonia is underdeveloped.
Estonia has signed and ratified the ICSID convention. It entered into force on 22 July 1992.
Estonia has concluded 32 BITs, out of which 27 are in force. Estonia is also a party to the Energy Charter Treaty and several multilateral treaties containing investment protection provisions. Being a member of the European Union (EU), all multilateral investment treaties concluded by the EU are also applicable in Estonia.
Estonian BITs include all common investment protection standards and generally do not contain any language out of the ordinary. As an odd one out, the more recent BIT with the United Arab Emirates includes a requirement to submit the dispute to conciliation before the initiation of arbitration and specifically excludes procedural matters from the scope of MFN treatment. Also, the BIT concluded with China only provides for arbitration over the amount of compensation for expropriation.
There is no specific case law nor national legislation on the question, so the general legal doctrine of state immunity applies. State immunity from jurisdiction is waived by entering into an arbitration agreement. State property connected to the exercise of the state’s sovereign powers is immune from enforcement, but this does not apply to property owned and used for commercial purposes.
The part on arbitration procedure in the CCP was amended on 1 April 2019 mainly to address the problems that had arisen due to the regulation that institutional arbitral awards made in Estonia, unlike ad hoc and foreign arbitral awards, were not subjected to the recognition and enforcement proceedings in the courts. This gave way to abuse through so-called “pocket arbitration courts”. Currently, all arbitral awards, apart from the awards of the Courts of Arbitration of the ECCI and the Chamber of Notaries, must first be deemed enforceable by the courts before being recognised as enforceable instruments.
The Rules of the Court of Arbitration of the ECCI were updated as recently as on 11 April 2019. The amended rules are more flexible in terms of allocation of costs between the parties, allowing the tribunal to also take into account the parties’ behaviour during the arbitration proceedings. The fee schedule has also been updated and the Council of the Court of Arbitration of the ECCI may now impose an additional arbitration fee of up to 50% of the original arbitration fee instead of the earlier 10%. The updated Arbitration Rules further contain the long-awaited amendments whereby the arbitrator resolving the dispute can be remunerated through a legal person, e.g. his or her law firm, on the basis of an invoice. Formerly, the arbitrators were technically employed by the ECCI which created difficulties in terms of taxation.
The Court of Arbitration of the ECCI now also has the right to publish excerpts of the arbitration awards on the condition that the names, personal identification codes, dates of birth, registry codes, addresses and circumstances referencing the nature of the dispute which may disclose the content of the arbitration proceedings are not divulged.