Estonia: Recent Developments in Estonia

New Environmental Impact Assessment Act Adopted

On 22 February 2005 the Estonian Parliament (Riigikogu) adopted the Environmental Impact Assessment and Environmental Management System Act. The aim of the new act is to bring the Estonian laws and regulations concerning environmental impact assessment into full harmony with Community law and to eliminate the shortfalls in the current act. The new act specifies the procedure and principles of environmental impact assessment, taking a broader and more in-depth approach to the issues of environmental impact assessment. Until the adoption of the new act environmental impact assessment in Estonia was not in compliance with Community law, especially as regards strategic environmental assessment. The new act makes strategic environmental assessment mandatory in the case of plans and national, county and local plans and programmes. The new act unambiguously states the cases, when environmental impact assessment is required. The procedure of environmental impact assessment has also been improved, leading hopefully to more transparency and less disputes. In addition, it has become possible to join a Community eco-management and audit scheme (EMAS) and apply for the grant of a Community ecolabel. Except for a few provisions, the act entered into force on 3 April 2005.

On 9 March 2005 the Riigikogu passed the Public Procurement Act Amendment Act. The amendments are aimed at simplifying the public procurement procedure for the purchase of various services (e.g. hotel and restaurant services, rail and water transport services, legal services etc). Services procured under the simplified public procurement procedure must meet the technical specification and after the conclusion of the service contract a contract award notice must be submitted to the state register of public procurements, if the value of the procurement contract equals or exceeds the international threshold prescribed by the act. The act entered into force on 8 April 2005.

On 13 April 2005 the Riigikogu passed the Act Amending the Tourism Act and Other Acts Deriving from the Tourism Act. The amendments bring the procedure for granting accommodation establishments the right to operate in line with the procedure applicable to entities operating in other areas. Under the old procedure accommodation establishments had to seek the approval of their local government and to do so the local government had to adopt administrative legislation. The amendments simplify the procedure. Approval is now replaced by electronic registration in the register of economic activities by the local government. In addition the provisions regulating supervision over the activities of accommodation establishments have been specified in more detail. The amendments enter into force on 1 November 2005. The provisions regulating registration of economic activities took effect as of 11 May 2005.

On 22 February 2005 the Riigikogu passed the Courts Act Amendment Act. According to the amendment the territorial jurisdictions of the courts are to be joined together as of the beginning of 2006 and only four county courts will be left instead of the current 16 city and county courts. Two administrative courts will be left instead of the present four administrative courts. The number of courts is reduced by merging the territorial jurisdictions of the current courts. However, all the currently operating court houses continue to administer justice. The objective is to improve the quality of administering justice, since larger courts make it possible to level out the work load of the judges and reduce the time of judicial proceedings. The amendments enter into force on 1 January 2006.

On 9 March 2005 the Riigikogu passed the Act Amending the Principles of Legal Regulation of Industrial Property Act, the Trade Marks Act and the Patents Act. The act specifies the provisions pertaining to the Industrial Property Board of Appeal, as a result the procedural rules concerning appeals and revocation applications became clearer and less ambiguous. The act entered into force on 8 April 2005.

On 23 March 2005 the Minister of the Environment issued a regulation establishing the size of deposits for packages of beverages. The regulation was issued on the basis of the Packaging Act, pursuant to which a deposit based system of returning packages has to be in place in Estonia from 1 May 2005. The system is launched with a period of transition and the relevant persons have until 1 August 2005 to join the system. Such system is expected to closely monitor the amount of packaging waste and deposits generated. Pursuant to the Packaging Act the deposit system includes plastic, glass and metal packages of water, non-alcoholic beverages, beer and low-ethanol alcoholic beverages.

In its 26 April 2005 ruling the Civil Chamber of the Supreme Court discussed the issues pertaining to the powers of management board members. The Supreme Court was interpreting the provisions of law regulating the duration of the powers of management board members. In the future management board members should be in a better position in defending their rights, given this decision. The issues of authority of management board members are fairly topical, since there have been cases where the directing body of a company were reluctant to release a member of the management board from office and thus failed to submit an application with the commercial register for deleting the member of the management board from the register. The Supreme Court came to the conclusion that acting as member of management board in a company is similar by nature to acting under an authorisation agreement and thus the relevant provisions of the Law of Obligations Act apply to such relationship. The Supreme Court also found that pursuant to the Commercial Code, no management board member can remain in office without a term. When a person agrees to become a management board member of a company, he/she knows that his/her term of office is limited to three years, or less, if the articles of association of the company so provide. This means that the term of office of a management board member expires three years after election, at the latest, provided the term is not extended, subject to the person’s consent, by decision of the shareholders or the person is not removed before term. The Supreme Court emphasised that upon expiry of the term of office, the company had the obligation to submit an application with the commercial register for deleting the member of the management board from the register. The Supreme Court stated that the commercial register entry concerning a management board member was aimed at disclosing the relationship for third parties, however, the registry entry did not establish or terminate this relationship. The Supreme Court also pointed out that it was not necessary for the directing bodies of companies to execute a separate resolution concerning the expiry of the term of office of a management board member and append it to the application submitted to the commercial register, according to the Supreme Court referring to the expiry of the term of office of a management board member was sufficient. The Supreme Court also referred to subsection 29(2) of the Estonian Constitution, pursuant to which "No one shall be compelled to perform work or service against his or her free will". This supports the fact that the powers of management board members do not last indefinitely and that they have the right to step down. However, the Supreme Court also found that the term of office of a management board member could be deemed to have been extended by tacit agreement with the shareholders, irrespective of the expiry of the term of office of the management board. In this case it is not excluded that upon the expiry of the term of office of a management board member the registrar enquires from the company whether the person still is a member of the management board. The Supreme Court found that if the rights of a management board member have been infringed through failure to delete his/her name from the commercial register and a legal dispute emerges, concerning whether the term of office of the management board member has expired, the management board member can protect his/her rights through action, seeking to establish that his term of office as management board member has expired (claim for recognition) or demanding that the private limited company submit the application for deleting the relevant entry (claim for performance).

On 11 May 2005 the Supreme Court made another important judgement in the civil case AS "Walko" versus Kalle Pilt. This decision dealt with the liability of management board members, an issue that has been steadily gaining in importance. The Supreme Court decided in this case that members of the management board who cause damage to the company are liable on the basis of the Commercial Code and the provisions concerning compensation for tort are not applicable with regard to compensation for the damage caused. The court also noted that in order for the claim for the compensation of damage to be satisfied, the violation, damage, as well as the causal link between the two must be established. In its decision the Supreme Court listed the most important obligations of a management board member, deriving from law: i) to operate in the best interests of the company (the so-called general duty of care: acting with diligence, being sufficiently informed, refraining from taking unjustified risks); ii) to operate in good faith (the so-called duty of loyalty); iii) to adhere to the lawful orders of the supervisory board; iv) to inform the supervisory board and to conclude transactions which are beyond the scope of everyday economic activities with the consent of the supervisory board; v) to keep business secrets and adhere to the prohibition on competition. The Supreme Court emphasised that pursuant to law, certain transactions could only be concluded with the consent of the supervisory board and if there was no consent, the transactions so concluded were void.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.