Börsiteade

Pealkiri

AS Tallinna Vesi gave notice to the Republic of Estonia of a potential legal claim for breach of international treaty

Teade

The Supervisory Council of AS Tallinna Vesi has decided to give notice of
potential international arbitration proceedings against the Republic of Estonia
for breaching the undertakings it is required to abide by in a bilateral
investment treaty (the Treaty). This follows three years of intensive effort by
the Company in trying to agree a solution which regretfully, despite both local
and European intervention, has not been achieved. 

As a signatory to the Treaty the Republic of Estonia undertook the obligation
of ensuring the fair and equitable treatment of investments protected by the
Treaty. The Company requests that the Republic of Estonia complies with its
obligations under the Treaty. In the event that Estonia is unable or unwilling
to do so, AS Tallinna Vesi reserves the right to commence international
arbitration proceedings against Estonia, on the terms which the parties agreed
in the Treaty. 

International arbitration is a procedure where an independent, international
tribunal issues a final ruling on the dispute.  Pursuant to the Treaty,
arbitration would be carried out through the International Centre for the
Settlement of Investment Disputes (ICSID), which is part of the World Bank. 

If the Republic of Estonia does not comply with its obligations and AS Tallinna
Vesi is forced to commence its arbitration, AS Tallinna Vesi will claim
compensation for potential damages of over 90 million euros for total losses
over the lifetime of the contract to 2020. Of this amount, over 50 million
euros of damage has been already caused by the refusal to permit tariff
increases in the period of 2011 - 2013, and its ongoing impact to the period
2014 - 2020. 

AS Tallinna Vesi has always been open for meaningful dialogue to resolve the
dispute, at the same time respecting the terms and conditions of the 2001
privatization contract. 

Background to the dispute

In 2001, at the request of Estonia, United Utilities (Tallinn) BV made an
investment in AS Tallinna Vesi by purchasing 50.4% of the shares in The
Company. This was a part of Estonia's privatisation of AS Tallinna Vesi.  The
privatisation was sponsored and closely supervised by the European Bank for
Reconstruction and Development (EBRD). The privatisation of AS Tallinna Vesi
was undertaken by the City of Tallinn for three main reasons: 

  -- To avoid political tariff setting;
  -- To achieve the water quality and service standards required by national and
     European regulations. The tariff mechanism set as part of the privatisation
     was directly related to the required service level and the resultant
     investment required to achieve these service levels;
  -- To allow the replacement of sovereign guarantees granted by Estonia to the
     EBRD as security for an EBRD loan to AS Tallinna Vesi.

United Utilities (Tallinn) BV and AS Tallinna Vesi have fully complied with
their obligations undertaken at the time of the privatisation. Estonia and the
City of Tallinn have received the full benefit of the privatisation and the
investment. Pursuant to the terms and conditions of the privatisation, the
investment made by United Utilities (Tallinn) BV and the quality improvements
in the City of Tallinn's water services were made in the first part of the 15
year licence period. The returns which United Utilities (Tallinn) BV and AS
Tallinna Vesi would earn would, through the 15 year agreed tariff mechanism and
the 15 year approved financial business plan, occur in the latter part of the
15 year licence period. 

Background to International arbitration

As the Company has not been able to find a solution to the dispute concerning
its privatisation contract AS Tallinna Vesi has taken the decision to escalate
the dispute. United Utilities (Tallinn) B.V., the controlling shareholder of AS
Tallinna Vesi, is a Dutch company, which enables both United Utilities
(Tallinn) BV and AS Tallinna Vesi to take advantage of the protections in the
Treaty, which was entered into between the Republic of Estonia and the Kingdom
of the Netherlands. 

In the Treaty, in order to encourage investment, the Republic of Estonia and
the Kingdom of the Netherlands each undertook to observe any obligations
entered into with each other's nationals in relation to their investments, to
ensure fair and equitable treatment of their investments, and not to
discriminate against investments by investors from each other's country. 

AS Tallinna Vesi and United Utilities (Tallinn) BV believe that the Estonian
authorities' refusal to honour the terms and conditions of the contracts agreed
and approved by the Estonian government during the privatisation of AS Tallinna
Vesi in 2001 is a breach of these undertakings. 

In their notice, AS Tallinna Vesi and United Utilities (Tallinn) BV request
that the Republic of Estonia complies with its obligations under the Treaty. In
the event that Estonia is unable or unwilling to do so, AS Tallinna Vesi and
United Utilities (Tallinn) BV reserve their right to commence international
arbitration proceedings against Estonia to require Estonia to comply with its
undertakings in the Treaty and to compensate AS Tallinna Vesi and United
Utilities (Tallinn) BV for all the losses they have suffered as a result of
Estonia's actions. 

In the Treaty, Estonia agreed that disputes should be resolved by international
arbitration through the International Centre for the Settlement of Investment
Disputes (ICSID), part of the World Bank. International arbitration is a
procedure where an independent, international tribunal issues a final ruling on
the dispute. Estonia has agreed to be bound by the ruling of such a tribunal. 


         Mariliis Mia Topp
         AS Tallinna Vesi
         Head of Communications
         Tel: (+372) 62 62 275
         [email protected]