Category: Estonia

Lawin has represented AB bankas SNORAS in a dispute with Corvus Holding OU in Estonia in a dispute involving application of the Estonian Bankruptcy Act.

SNORAS had filed a petition in Parnu County Court seeking to have Corvus Holding declared bankrupt. The court found the petition meritorious, and declared Corvus Holding bankrupt. Corvus Holding then appealed the ruling to the Tallinn Circuit Court, which overturned the Parnu County Court’s ruling, finding that Corvus Holding should not have been declared bankrupt as the claim of SNORAS was unclear. SNORAS in turn appealed to Supreme Court, arguing that the Tallinn Circuit Court incorrectly applied Bankruptcy Act subsection 31 (1) in conjunction with subsection 31 (2). Specifically, SNORAS argued that pursuant to subsections 31 (1) and (2) of the Bankruptcy Act — which entered into force on January 1, 2010 — it is not possible to refuse to declare a legal entity obligor bankrupt when the interim trustee has determined that the obligor is permanently insolvent even without taking into account the claim of the obligee who filed the bankruptcy petition.

On June 10, 2014, the Estonian Supreme Court ruled that the Tallinn Circuit Court had indeed misinterpreted subsections 31 (1) and (2) of the Bankruptcy Act. The Supreme Court agreed with the position advocated by SNORAS, that upon determining that a legal entity obligor is permanently insolvent, it must be declared bankrupt even if the claim of the obligee who filed the bankruptcy petition is unclear. This decision carries significant meaning in terms of bankruptcy law, as it reverses the previous understanding: that a legal entity obligor is not to be declared bankrupt if the claim of the obligee who filed the bankruptcy petition is unclear.

Lawin represented AB bankas SNORAS in all court instances. The litigation team consisted of Partner Liina Linsi, Senior Associate Kadri Michelson, and Associate Lembit Tedder. 

The Estonian Bar Association has identified three Estonian lawyers as “Attorneys of the Year” in the Bar Association’s 95th anniversary gala, held on June 12th.

In the “Professional” category the honorary title was given to lawyer Anti Aasmaa, in the “Organization” category the title was given to Lextal Partner Urmas Ustav, and in the “Social and Voluntary Work” category to Sirel & Partners lawyer Ene Ahas.

The Lextal website quotes Sten Luiga, the chairman of the board of the Estonian Bar association, as saying that “the profession of an attorney is programmed to deal with complex matters that sets high demands and tests one’s personal qualities. In addition to education and experience, it is essential to have professional commitment and this is what we want to recognize with the honorary title ‘attorney of the year.’ The winners have demonstrated outstanding performance in their fields.”

Ustav is Chairman of the qualification committee at the Estonian Bar Association, where he made changes to the qualifying examination given to attorneys. According to Lextal, “in leading the qualification committee, Ustav has demonstrated the utmost commitment to the Estonian Bar Association as an organization.”

The Estonian office of Sorainen has advised Danpower on setting up a new 10 MW shale oil boiler and a new 6 MW biofuel boiler.

The firm advised Danpower, the local subsidiary of a German district heating supplier, on the procurement, installation, implementation, and the contracts for the design and construction of the two heating installations and technical works. In addition to preparing the design and construction contracts, Sorainen also represented Danpower in the negotiations associated with the project. 

The Sorainen team consisted of Partner Toomas Prangli, Specialist Counsel Urmas Volens, Senior Associate Kristjan Tamm, and Associate Kaija Riismaa. 

The Varul Tax Department has successfully represented Nordea Bank Finland’s Estonia branch in a dispute with the Tax and Customs Board. The case concerned legal issues related to tax obligations on foreign companies` permanent Estonian branches, pursuant to statutory amendments which entered into force in 2010.

According to Varul, in 2012, the Estonian Tax and Customs Board ordered Nordea to pay an additional income tax in the sum of EUR 7.6 million on payments the branch had made to its Finnish headquarters. The Tallinn administrative court and Tallinn circuit court did not accept Nordea`s defenses, and the Tax and Customs Board’s order remained in force. Based on Nordea`s appeal in cassation, however, the Supreme Court annulled the decisions of lower instance courts with its April 19, 2014 judgment. The Supreme Court also annulled the contested tax decision.

“Though Nordea contested the tax decision the tax authority had made, the case concerns a broader array of legal issues related to the taxation of foreign companies` permanent Estonian branches and the corresponding law amendments that entered into force in 2010, which the Supreme Court judgment finally clarified,“ asserted Kerstin Pilt, the Head of Nordea Bank Legal Department.

Varul Partner Helmut Pikmets represented Nordea in court, and explained that: “The Supreme Court found that the law amendment was constitutional and the legislator did not aim to change the principles of tax calculation for permanent places of business, but amend the tax object accountancy methodology. However, the tax decision was annulled due to wrongful application of the law. Namely, the Supreme Court found that ‘taking out assets’ in the context of the previous law and new norm implementing provisions had to be considered as taking out only those assets from the permanent establishment  which in economic terms corresponds to payments received from equity, i.e. no other assets are provided for it. In this case, it was not so, because in essence, it was a repayment of a loan, i.e. the permanent establishment`s obligations to the head office decreased in the same amount as the sum paid to the head office.”

Hedman Partners is advising the Estonian Uuskasutuskeskus (the “Re-Use Center”) on employment and labor law issues to help the NGO revise its employment contracts with its staff.

Katriin Juriska, the CEO of Uuskasutuskeskus, said that the organization has been expanding its activities successfully to include five re-use shops in Tallinn, Tartu and Parnu. “We had to rely on external professional advice to manage employment risks during the expansion phase and also to ensure full compliance with the latest employment and labor law changes,” she explained. 

Uuskasutus is a non-profit and independent social undertaking established in 2004 by the Good Deed Foundation. Its objective is to put used things back in circulation and to make re-use and re-design easily accessible and commonplace for everyone in Estonia. The organization works in close co-operation with the Estonian Association of Families with Many Children, the Dharma Foundation, shelters, fire victims and the social departments of many local authorities. 

The Good Deed Foundation is the only venture philanthropy organization in the Baltics, concentrating on supporting high-impact social initiatives (both social enterprises and non-profits). The foundation’s achievements include both achieving systemic change (state-level adoption support system for children without parental care) and starting off successful social enterprises (in the fields of: employment for people with disabilities; HIV-prevention; re-use). The organization’s portfolio includes such spin-offs as Youth to School program to solve educational problems, Health Estonia Foundation for HIV-prevention and the Re-use Center to promote sustainable consumption. 

Hedman Partners’ Managing Partner Merlin Salvik believes that social responsibility is an integral part of the law firm’s corporate philosophy. “We are happy to invest our time and know-how to help charity organizations and NGOs, because a third sector based on a solid and transparent foundation is a great asset to the society,” added Salvik. 

In a formal statement on the firm’s website, Hedman Partners claims that, “according to a cooperation agreement between the Good Deed Foundation and the Estonian Bar Association, Estonia’s leading law firms are providing more and more pro bono legal advice to third sector organizations, because most NGOs lack the means to bring their activities to compliance with all the latest legal acts on their own.”

The Estonian office of Fort has announced that Ilona Nurmela, a commercial mediator, has joined its team as Counsel.

Nurmela is a former General Counsel and Management Board member of a NASDAQ OMX-listed company, and has 12 years of experience in dispute resolution and prevention. She has a background in utilities, regulatory, contract management and IT, and helps businesses and their legal advisors to conduct classical (non-legal) and adjudicative mediations of international as well as local disputes in Estonian, Russian and English.

Talinn Managing Partner Kuldar-Jaan Torokoff was enthusiastic about Nurmela’s decision to come on board, exclaiming that: “I can say on behalf of our firm that we are very proud that she has joined our team. Her recruitment marks a significant step in development of our dispute management practice. It is our strong belief that courts should always be treated as a last resort and our law firm hopes to promote mediation in general in the Estonian legal culture. We are confident that with the help of her unique skill-set and experience our law firm shall stand out in the market as the leading law firm in the field of mediation.”

Red Attorneys-at-law has advised the EPI Baltic I real estate fund on the sale of 100% shareholding in subsidiary DLG Holding to Lepidus Invest, represented by Sorainen.

As a result of the sale, the De La Gardie building — a 4-story building on Viru street in Tallinn’s Old Town, with leasable space of 2,139 square meters — changed hands. The largest tenant in the De La Gardie Building is Lindex, one of the leading fashion chains in Northern Europe. The property had been acquired by EPI Baltic I in July 2006.

EPI Baltic I is managed by Northern Horizon Capital and Amplion Asset Management.  The transaction was financed on the buyer’s side by Nordea Bank’s Estonian branch. “De La Gardie is a class-A building with a solid tenant base and good performance and as such we have been very satisfied to have it as part of our portfolio. The EPI Baltic I fund is in its exit phase and so we are happy to conclude another successful divestment in this process,” said Jussi Palmu, Fund Manager at NHC. 

The EPI Baltic I fund only has one property left for divestment: the Gedimino 20 retail/office building in Vilnius, Lithuania. “NHC will continue on the market as an active buyer through our Baltic Opportunity fund which is open also for new investors,” said Palmu.

EPI Baltic was advised by Catella Corporate Finance (property advisory) and RED Attorneys-at-law (legal advisory). Lepidus Invest was founded and advised by Zenith Capital Management (investment advisory) and Sorainen (legal advisory). Financing was provided by Nordea Bank AB Eesti filiaal. The Red team was led by Partner Ermo Kosk and Associate Rutt Vark.

In a follow-up to the story initially reported by CEE Legal Matters on April 24, Lawin is reporting that it has successfully represented the Government of the Estonian Republic in a controversial and widely-covered dispute against the City of Tallinn, the City of Narva, and a father of a pupil from Narva, who demanded that upper secondary schools continue using Russian as a language of instruction. 

The cities of Tallinn and Narva had applied for exceptions to adopting Estonian as the language of instruction in several schools, seeking instead to continue using Russian as the language of instruction. The Government of Estonia refused to grant the requests. The cities appealed, claiming that the Government’s decision violated their right to self-governance, and that the organization of studies in municipal schools was a local matter. The city governments also claimed that adoption of Estonian as the language of instruction requires additional financial resources, which had not been allocated to them. The appellants also argued that pursuant to the Estonian Constitution, the language of instruction in minority education institutions is to be selected by the respective institutions and that the orders of the Estonian were contrary to the provisions of international law and legislation. The father of the pupil from Narva requested that Russian be retained as the language of instruction for his son, as the boy’s native language is Russian and the abolishment of teaching in Russian would violate his right to preserve his national identity.

The Government of the Republic considered the complaints unfounded and argued against them in full, noting that each application for an exception had been carefully considered, but that there was no reason to forego the adoption of Estonian as the language of instruction in the referred schools. Estonian as the official language has a special status and priority in its use also in education — making it its use as the language of instruction in schools a national issue. The opinion of the Government of the Republic was that the use of Estonian as the language of instruction does not jeopardize the preservation of the identity or the language of an ethnic minority, as it is still possible to continue learning in Russian for up to 40% of the mandatory volume of the curriculum. Furthermore, over the years, schools have been provided additional financial resources to prepare for the adoption of Estonian as the language of instruction.

In its decision of April 28, the Administrative Chamber of the Supreme Court explains that determining the language of instruction in municipal secondary schools is a national issue and the local government does not have the right to decide on the language of instruction in secondary schools or to demand that Russian be retained as the language of instruction in municipal secondary schools.

The Estonian Government was represented by Lawin Senior Associate Triinu Hiob, working under the supervision and guidance of Partner Liina Linsi. As reported previously, the Cities of Talinn and Narva were represented by Lextal Partner Karl Kask and attorney Margus Reiland.

The Tallinn office of the Triniti law firm has advised the Ducto piping systems construction company with regard to its expansion in Estonia and entrance into the Finnish market.

The Triniti team, led by Partner Tonis Tamme and lawyer Siim Maripuu, assisted in the creation of a new group company — PRS OU — and the acquisition of a share in a Finnish partner company, as well as advising on Ducto shareholder matters and intra-group contracts.

Varul has advised Pigu, the largest e-commerce company in the Baltics, on the acquisition of remaining shares of DLB e-shop (which operates in Estonia and Finland).

The acquisition of a majority of shares in DLB Trading was completed in early 2013, and the remaining shares were acquired in March, 2014. According to Dainius Liulys, the executive director of the Pigu Group, the Group decided to expand to Estonia and Finland because its sales rose by 76% in Lithuania and Latvia last year, reaching more than EUR 25 million. “We started merger negotiations with existing e-stores and selected DLB, because we see it as holding the potential for rapid growth,” Liulys said. “We will seek to improve DLB’s market position in Finland and Estonia, using our experience.” 

The Pigu Group operates an e-store in Lithuania at www.pigu.lt and in Latvia at www.220.lv. DLB Trading operates an e-store in Estonia at www.dlb.ee and in Finland at www.dlb.fi.