Category: Estonia

Sorainen has advised Northern Horizon Capital on issuing EUR 42 million in Baltic Horizon Fund corporate bonds to refinance outstanding bond debt.

The Baltic Horizon Fund is a real estate fund with a focus on commercial properties in the capitals of the Baltic States. It is managed by licensed alternative investment fund manager Northern Horizon Capital.

According to Sorainen, “in total, the fund issued 420 bonds at a price of EUR 100,000 each. The money received will be used in full to refinance the fund’s bonds redeemed on May 8, 2023. Although the new bonds have a five-year term, the Baltic Horizon Fund will partially redeem them for EUR 20 million within one year. The fund also has the right to prematurely redeem the remaining EUR 22 million of bonds. The Baltic Horizon Fund will also submit an application for the listing of the bonds on the Nasdaq Tallinn Stock Exchange.”

According to Baltic Horizon Fund Fund Manager Tarmo Karotam, “the fund aims to reduce the financial capacity of its portfolio below 50% and continually wishes to invest in the renovation of its real estate objects.”

Back in 2020, Sorainen advised Northern Horizon Capital on a secondary public offering on Nasdaq Tallinn and Nasdaq Stockholm (as reported by CEE Legal Matters on November 3, 2020).

Sorainen’s team included Partner Katlin Krisak, Counsel Jane Eespold, and Associate Oliver Amarik.

Sorainen did not respond to our inquiry on the matter.

Estonia is looking at reforming its tax system and the legal profession’s standards, amid overall economic uncertainty that is impacting banking, finance, and start-ups, according to TGS Baltic Partner Kirsti Pent.

“One of the main general talking points in Estonia recently has been the planned governmental tax reform,” Pent begins. According to her, the government of Estonia is planning to “balance the state budget by raising the income tax for both natural and legal persons by two percentage points.” Currently, Estonian companies pay income tax only upon distributing profits. “For some years already, income tax at a lower rate has applied in case dividends are paid out regularly, but now the government is planning to abolish this advantage. The value-added tax will also be increased by two percentage points and accommodation services will become subject to the same general tax rate,” she explains.

Furthermore, Pent reports that the government seeks to introduce a vehicle tax – the lack of which has set Estonia apart from most other countries up to this point. “We’re one of the few countries that have yet to introduce a vehicle tax, but that stands to change soon,” she says. “While it is still not clear how this will be done, it is expected that two factors will weigh heavily: carbon dioxide emissions and whether the vehicle is a luxurious one.”

While Pent posits that the ongoing tax reform, if carried out correctly, might not generate much additional work for lawyers – and might not hold their interest for long – she says that the proposed reform to introduce a general legal exam very much will. “There have been substantial talks about potentially introducing a general legal exam in Estonia as means of remedying shortcomings in legal education and, potentially, also making it easier for legal professionals to change their career paths.” Currently, the country has dedicated exams for judges, attorneys, notaries, prosecutors, etc. – but not a general legal exam. “The general position of the Bar Association is that the draft law that seeks to implement this exam is not as thought through as it should be, seeing as how the overarching goal – as publicly declared – is to improve the quality of legal professionals in the country,” she says.

From a macro perspective, Pent says that the Estonian economy is in a bit of a gray area. “It is a sort of limbo status we are currently in, not being sure if we are going to enter into an even deeper downturn or if the worst has passed, given the highest inflation rates in the EEA we experienced recently,” she shares. “As a testament to the general uncertainty, for the past two to three years, domestic start-ups have had no problem with accessing finance, but this has become increasingly more difficult of late. Several factors have played into this, including the war in Ukraine and Estonia sharing a border with the aggressor,” Pent elucidates.

Finally, Pent reports that the banking and capital markets in Estonia are becoming more weary as well. “While we have had quite a few IPOs lately, especially on the alternative market, we do expect there to be fewer in the next couple of years.” According to her, the banks have become more conservative “given the overall economic situation and it is becoming a bit more difficult to raise money at a reasonable price.” Still, she points out, the “outcome will vary from one sector to another.”

Ellex has advised Specialist VC and Superangel on their investment in technology company Value.Space, with Linnar Viik and Latvia’s BADideas.fund also participating in the EUR 2.1 million round.

Value.Space is a technology company that uses satellites to conduct assessments for commercial properties and infrastructure aiming to improve risk assessment, deformation identification, and disaster prevention. The company operates in Estonia and the UK. 

According to Ellex, “to date, more than 3,500 risk profiles have been created for customers in 70 different countries around the world.”

The Ellex team included Partner Antti Perli, Counsel Rudy Rimal, and Senior Associates Merlin Liis-Toomela and Hanna Pahk.

Ellex could not provide further information on the deal.

Sorainen has successfully represented SA Kunstihoone in registering the Tallinna Kunstihoone trademark.

SA Kunstihoone is a foundation established by the Estonian Artists’ Association and the Ministry of Culture.

According to Sorainen, “the Estonian Patent Office refused the registration of the word mark Tallinna Kunstihoone on the ground that the word combination Tallinna Kunstihoone means “art gallery located in Tallinn” and, thus, the mark is descriptive and not distinctive.”

The firm reported it had “challenged the refusal by claiming that the trademark is well-known and has acquired distinctiveness through an intensive, wide-scale, long-term, and continuous use dating back to the year 1934.” The Estonian Patent Office ultimately decided to grant the registration. 

Sorainen’s team included Partner Kaupo Lepasepp and Senior Associate Olivia Kranich.

Sorainen has advised Fairown on a EUR 3 million capital raising from investors including the Commerzbank Group, Gateway Ventures, and Stihl Digital and on structuring its business model.

According to Sorainen, Fairown is a fintech company “that allows banks, brands, retailers, residual value providers, and end-customers to participate in the circular economy centered around producing, consuming, and reusing products, thereby reducing excessive waste and the need for raw materials by extending the lifetime value of the products.”

“Fairown currently operates in eight countries in Baltics, Nordics, and Poland, and expansion into Germany and the UK is in progress. The company has grown its end-subscriber base to around 60,000 within the past two years and anticipates growing it to around 800,000-plus subscribers within the next four years,” the firm informed.

Sorainen’s team included Counsel Hetti Lump.

Sorainen did not respond to our inquiry on the matter.

Cobalt has advised the BaltCap Private Equity Fund III on its acquisition of a minority stake in Eesti Digiraamute Keskus.

Eesti Digiraamute Keskus is a Tallinn-based company that cooperates with publishers and booksellers. In addition to the online store, the company also offers sales and marketing platform services for publishers and authors. According to Cobalt, BaltCap’s goal with this investment is to further develop the company’s technology platform and services, providing customers with solutions for e-books and audiobooks.

BaltCap is a private venture capital fund operating in the Baltic States, whose portfolio includes, among others, Rahva Raamat, transport ticket system developer Ridango, ticket sales platform Piletilevi Grupp, and meat processing company Krekenavos.

The Cobalt team included Partner Peeter Kutman, Managing Associate Ott Aava, Specialist Counsel Liina Jents, and Junior Associate Elis Toim.

Editor’s Note: After this article was published, TGS Baltic announced it had advised the Eesti Digiraamute Keskus minority stake sellers. The firm’s team included Managing Partner Sander Karson and Senior Associates Maris Alt and Silvia Urgas. 

Cobalt has advised Tallinn’s Creative Hub on public procurement proceedings for the design and maintenance of a reconstructed building as a center for cultural exports and the creative economy.

“Creative Hub emerged from the European Capital of Culture project in 2011,” Cobalt informed. “Creative Hub was founded by the city of Tallinn, and the purpose of the foundation is to diversify the cultural life of Tallinn and Estonia in cooperation with various organizations. The goal is to design and maintain the reconstructed building as a center for cultural exports and a regional creative economy. It also serves as an attractive part of the urban space, and an educational and leisure center.”

The Cobalt team was led by Specialist Counsel Kadri Matteus and included Associate Marit Piirisaar and Junior Associate Liisa Puu.

Cobalt could not provide further information on the deal.

Cobalt has represented Hundipea in multiple disputes related to the Paljassaare port and related water area before the Estonian Transport Administration, the Ministry of Economic Affairs and Communications, and the Administrative Court.

According to Cobalt, “Hundipea is developing a complete, accessible, and climate-neutral Hundipea district on the industrial landscape of Paljassaare. Correspondingly, Hundipea has been the operator of Paljassaare port since August 10, 2022, instead of Tallinna Sadam. One owner of a property bordering the port has initiated various administrative disputes in the Estonian Transport Administration, the Ministry of Economic Affairs and Communications, and in the Administrative Court, concerning issues related to the port and the water area in the Ports Act.”

Cobalt’s team included Specialist Counsel Kadri Matteus, Associate Marit Piirisaar, and Junior Associate Liisa Puu.

Cobalt has advised the Estonian Transport Administration on the procurement procedure for the design and construction of the Sindi-Lodja Bridge on the Reiu River.

According to Cobalt, “for the first time in Estonia, the work is carried out based on the alliance procurement model.”

“Such a procurement method has been successfully implemented in Finland, and its advantages are much more active cooperation between the parties and the development of the best and sustainable solutions through cooperation,” Transport Administration Head of the Eastern Region Anti Palmi explained. According to him, the aim of the Transport Administration is to contribute to the implementation of more value-based and cooperation-based construction procurement, which is being piloted with this project.

According to Cobalt, “in the first stage, the project team formed as a result of the procurement plans to design the bridge and the accompanying traffic environment. This is followed by the implementation stage, during which the necessary construction works are carried out. Public procurement paperwork is available in the Public Procurement Register.”

Cobalt’s team included Specialist Counsel Kadri Matteus and Associate Marit Piirisaar.

Sorainen has advised the Estonian Artists Association on restoring legal and historical continuity with the Estonian Center of Visual Artists and changing the founding date of the union from 1943 to 1922.

According to Sorainen, “the Association of Estonian Visual Artists was founded in Tallinn as a central organization uniting Estonian professional artists. The first steps to unite Estonian artists who studied art in St. Petersburg were made by the Noor-Eesti (Young Estonia) group in Tartu and the Art Society in Tallinn. In the years that followed, the Central Association became the largest artists’ organization uniting Estonian artists and was recognized as a partner by the state. Until the Second World War began.”

According to the firm, “the central association was liquidated after the coup of 1940. On January 4, 1943, by order of the Soviet government, the Union of Estonian Soviet Artists was founded in Yaroslavl (by artists gathered in the rear). This was the name of the union until 1957, when it was renamed the ENSV Artists’ Union. It continued to operate as the Estonian Artists Association from 1990, but the legal connection with the original central association was not restored for the time being.”

Sorainen describes the Estonian Artists Association as one of the “largest creative unions in Estonia with 998 members (as of 14.03.2023) and 18 sub-unions. The purpose of the association is to develop the art field, protect the interests of artists, curators, art researchers, and art workers, and support creative activities. The Union participates in shaping cultural policy and in sectoral development activities and is the owner and developer of the largest art infrastructure aimed at professional artists in Estonia and a provider of production and presentation environments for active artists.”

Sorainen’s team included Partner Karin Madisson, Counsel Piret Lappert, and Assistant Lawyer Katariina Kuum.