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Pealkiri

Tallinn District Court confirmed that tariffs part of the Services Agreement is a public law agreement

Teade

On 31.05.2012 the Tallinn District Court issued a ruling, deeming the tariffs
part of the Services Agreement signed in 2001 as part of AS Tallinna Vesi’s
privatization package of agreements to be an administrative (public law)
agreement. The District court has thereby ruled in favour of AS Tallina Vesi,
overturning the Competition Authority’s claim that the tariff mechanism
specified in the Services Agreement is allegedly a civil law agreement that the
company cannot rely on in an administrative court. 

The CEO of AS Tallinna Vesi, Ian Plenderleith, expressed his content with the
issued ruling. „The ruling of the District Court extends more legal protection
to the Services Agreement and the tariff mechanism established by the City of
Tallinn at the time of privatization. This ruling is also very welcome in the
interests of improved regulation and in order to ensure greater regulatory
transparency and open communication with all stakeholders,“ he explained. 

Tallinn District Court stated that the tariffs part of the Services Agreement
was an administrative contract because the contract was concluded to provide a
public (water and waste water) supply service securing which is a public law
obligation of the City of Tallinn. The court concluded that when municipalities
regulate the water and wastewater sector, this public law relationship involves
imposing tariffs for the service, and the City of Tallinn was entitled to
regulate pricing of the service via an administrative (public law) agreement
instead of an administrative act. 

The Competition Authority alleged that the tariffs charged by AS Tallinna Vesi
are not in accordance with the law, and based solely on its own unsubstantiated
opinion that the agreement stipulating the tariff model is an illegal civil
agreement. The court has indicated that besides the law, also the Services
Agreement as a public law agreement regulates the tariffs charged by AS
Tallinna Vesi. 

This now means that under the Administrative Procedure Act (APA) unilateral
changes of administrative agreements may only happen if this is absolutely
necessary to avoid severe damage to a predominant public interest. Public law
agreements cannot be changed by virtue of simply changing a law (PWSSA). To
date the Competition Authority has not presented any verifiable evidence to
demonstrate that service quality standards would equal ASTV’s current standards
for lower tariffs had it regulated the Company since 2001. 

While the company has done nothing but fulfill a valid public law agreement,
unilaterally discarding this agreement when issuing a negative tariff decision
could potentially be construed as a gross breach of procedure. The ruling
validates the company’s complaint to the courts, although the Tallinn District
Court has still instructed the Tallinn Administrative Court to assess whether
the Services Agreement is binding on the Competition Authority. Should the
Competition Authority fail to prove that the Services Agreement was against a
predominant public interest, then the Competition Authority will either have to
follow the contract or the company will have a compensation claim against the
state. Should the Competition Authority be able to prove that the Services
Agreement severely damages a predominant public interest, the company will have
to claim compensation. 

Ian Plenderleith says that the Competition Authority cannot continue to ignore
the Company’s tariff applications made on the basis of the long-term
privatisation agreement. “The Competition Authority cannot discard this
agreement from all the evidence submitted, whilst trying to force the Company
to use the Competition Authority´s own unsubstantiated recommended internal
guidelines,“ he added. 

This latter point is further re-enforced by the Tallinn District Court ruling
of 2nd March 2012 in which it clearly highlighted that the Competition
Authority could not use its own recommended internal guidelines as a proxy for
the PWSSA. 

Tallinn District Court remanded the case back for the review of the Tallinn
Administrative Court that now has to fully consider all evidence submitted in
the tariffs dispute, including the public law agreement. However, under the
APA, parties to a public law agreement that has been unilaterally amended are
entitled to compensation of proprietary damages by the relevant public
authority. 

The Competition Authority has 15 calendar days until 15.06.2012 to appeal the
ruling. 


         Mariliis Mia Topp
         Head of Communications
         AS Tallinna Vesi
         62 62 275
         [email protected]