Investor–State Arbitration 2025 Comparisons

Estonia participates in investor–state arbitration through its ratification of various bilateral investment treaties (BITs) and multilateral treaties.

Historically, Estonia has been a country that has honoured its commitment to arbitrating investors’ claims in arbitration. Estonia has expressed no reluctance to join treaties with investor–state arbitration clauses, nor has it expressed a wish to terminate any BITs on its own initiative.

While the intra-EU BITs have been terminated or have ceased to be in force, this is solely because of the EU’s internal policies and laws, and is aligned with EU integration dynamics rather than being a specific policy against investor–state dispute settlement (ISDS).

More recently, Estonia has adopted an FDI screening regime (Foreign Investment Reliability Assessment Act, FIRAA), effective since 1 September 2023, which focuses on national security and public order concerns. While the adoption of FIRAA suggests a more careful regulatory stance, this does not directly appear to affect Estonia’s ISDS treaty obligations. Estonia continues to negotiate new BITs with third countries where its nationals and companies have commercial interests.

Estonia is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards as well as the ICSID Convention.

Additionally, as Estonia is part of the EU, an additional layer of treaty obligations (eg, EU investment and arbitration rules) and constraints apply, especially in relation to intra‑EU investment disputes.

The number of ISDS cases involving Estonia is relatively low. There have been five known ISDS cases against Estonia under various BITs (namely, the Estonia–USA BIT, Estonia–Finland BIT, Estonia–Germany BIT and Estonia–Netherlands BIT).

Thus, ISDS is not particularly prevalent. In many instances, contractual or domestic remedies are used first, including exhausting all means of litigation in domestic courts before pursuing arbitration, while most cases are resolved via negotiations or settlement.

As a small and diversified economy, Estonia has not seen a concentration of investor–state arbitration claims in any one particular industry. Instead, disputes have arisen across various sectors. This might be attributed to the fact that Estonia’s economy is not heavily reliant on extractive industries, large-scale infrastructure projects, or other sectors that commonly dominate ISDS caseloads in larger jurisdictions. Additionally, many investments are in light industries, ICT and services, which often rely less on state contracts or concessions and more on open-market dynamics, reducing the frequency of treaty-based disputes.

While no single industry stands out as disproportionately involved in investor–state arbitrations in Estonia, disputes have tended to cluster in sectors where the state has regulatory authority, historical legal complexities or legacy obligations. These include public utilities, property restitution and financial services. This reflects the nature of a small, open economy where a variety of industries may generate isolated but high-stakes disputes rather than a pattern of systemic conflict in any one sector.

AS Tallinna Vesi and United Utilities (Tallinn) B.V. v Republic of Estonia (ICSID Case No. ARB/14/24)

Brought under the Estonia–Netherlands BIT (1992)

Case initiated in 2014

Award rendered in 2019

Facts of the case

• The case was brought by AS Tallinna Vesi (Estonia’s largest water utility) and its foreign investor, United Utilities (Tallinn) B.V., a Dutch company. The investor had acquired the utility in the early 2000s during Estonia’s privatisation drive, with an agreed-upon tariff methodology embedded in the Shareholders’ Agreement and Services Agreement, which was endorsed by the city of Tallinn.
• After regulatory reforms in 2010, Estonia’s Competition Authority began exercising new powers over tariff approval. It rejected Tallinna Vesi’s applications to increase water tariffs, citing consumer protection and public interest. The investor claimed that Estonia had breached its legitimate expectations and unlawfully interfered with its contractual rights, leading to substantial financial losses.

Key legal principles

Fair and equitable treatment (FET) and legitimate expectations

• The investor claimed that Estonia violated the FET standard under the Estonia–Netherlands BIT by frustrating its legitimate expectations that the pre-agreed tariff formula would remain enforceable.
• Estonia argued that its regulatory reforms were legitimate exercises of sovereign authority aimed at protecting public welfare and reducing excessive consumer pricing.

Umbrella clause and contractual rights

• The investor alleged that Estonia’s actions breached the umbrella clause of the BIT, which protects contractual commitments made with foreign investors.

Expropriation

• Though not the primary issue, the investor also argued that the state’s refusal to approve tariff increases amounted to indirect expropriation of their economic rights.

Outcome

• In June 2019, the ICSID tribunal dismissed all of the claimants’ claims and found that Estonia had not violated the BIT.
• The tribunal accepted that while the claimants may have had commercial expectations, those expectations did not amount to protected legitimate expectations under international law, particularly given the regulated nature of the water sector.
• Estonia’s actions were found to be consistent with its sovereign right to regulate in the public interest.
• The claimants were ordered to cover a portion of Estonia’s legal costs.

Legal significance

• The case is a leading example of how tribunals distinguish between commercial disappointment and treaty violations, especially in highly regulated industries.
• It confirmed that legitimate expectations under FET must be based on clear and specific assurances, not just general policy or contractual provisions.
• The award affirmed the principle that states can revise regulatory frameworks to serve evolving public needs, particularly where no guarantees of regulatory stability have been made.
• It strengthened Estonia’s reputation as a rule-of-law jurisdiction capable of defending itself successfully in complex treaty disputes.

ELA USA, Inc. v Republic of Estonia

Brought under the Estonia–United States of America BIT (1994)

Case initiated in 2018

Award rendered in 2025

Facts of the case

• The dispute concerned the ownership of historic military seaplane hangars in Tallinn (now part of the Estonian Maritime Museum. The claimant, ELA U.S.A., Inc., a US company, claimed investment in the Seaplane Harbour (Lennusadam) in Tallinn, including operations such as timber processing and cargo transport.
• ELA alleged that Estonia’s domestic courts invalidated its titles, that they asserted unlawful transfers of property originally associated with the Russian military, and that Estonia had persecuted the claimant’s officers, thereby breaching investment treaty obligations under the US–Estonia BIT. Estonia rejected these claims, asserting that the investor had never lawfully acquired ownership.
• The dispute has its roots in the aftermath of Estonia regaining independence: during the Soviet/Russian military presence, certain property transfers allegedly occurred under dubious circumstances; over time, ELA (and its associated entities) acquired control over companies said to have held title to the property. The state, after protracted legal proceedings, regained control of the property in 2006 and later converted part of it into a museum (2012). ELA initiated the arbitration in 2018, seeking over EUR200 million in damages.

Key legal principles

Definition of “investment” and ownership/validity of title

• Whether ELA and/or its subsidiaries were sufficiently established that they held a legally recognised title or control over the property in a manner protected by the BIT.
• Whether transfers of the property (especially under the Soviet/Russian military presence) were lawful, and whether ELA could reasonably expect respect for illegitimate or defectively acquired rights.

Fair and equitable treatment (FET)

• Whether Estonia’s restoration of state rights over the property, judicial rulings invalidating title, or other measures amounted to a breach of FET – for example, whether ELA had legitimate expectations that its ownership would be maintained or respected.

Discrimination claims

• ELA claimed discrimination or persecution, alleging that its treatment was different compared to others, or that Estonia treated investor rights in a discriminatory manner.

Illegality/bad faith

• Estonia asserted that some of ELA’s claimed rights were acquired illegally or in bad faith (eg, through transfers that were themselves unlawful or invalid under domestic or post-occupation law). The issue was whether rights acquired under such circumstances are protected under the BIT.

Jurisdictional objections/admissibility

• Estonia raised objections to jurisdiction (eg, about whether the claimant was the proper entity, whether ownership/control was proven, whether claimed rights were timely, etc). However, the tribunal rejected these objections and proceeded to examine the merits.

Outcome

• On 21 February 2025, the tribunal issued its final award, dismissing all of ELA’s claims.
• The tribunal rejected the jurisdictional objections raised by Estonia and found that the claims were admissible and that the claimant had satisfied the thresholds to proceed.
• On the merits, the tribunal found in favour of the state, namely that:
1. Estonia had acted lawfully in reclaiming the Seaplane Harbour property;
2. Estonian courts’ decisions invalidating ELA’s title were valid; and
3. there was no violation of the investor’s rights as claimed (no discrimination, no breach of fair and equitable treatment, etc).

Legal significance

• The case clarifies that investor expectations rooted in rights or titles that are ultimately held to be invalid under domestic law do not necessarily give rise to treaty protections, at least if the rights were not lawfully acquired.
• It shows that tribunals may weigh heavily the legitimacy and history of title, especially in post-conflict or post-occupation situations.
• The case confirms that jurisdictional challenges about ownership, control and legality of acquisition are not always sufficient to block a case at the outset; tribunals will analyse whether the claimant has prima facie met the required thresholds.

OKO Pankki Oyj and Others v Republic of Estonia (ICSID Case No. ARB/04/6)

Brought under the Estonia–Germany BIT (1992) and the Estonia–Finland BIT (1992)

Case initiated in 2004

Award rendered in 2007

Facts of the case

• This early ICSID case involved a group of Finnish and German investors, including OKO Pankki Oyj (a Finnish bank), which had invested in the Estonian real estate and banking sector during the post-independence liberalisation period.
• The dispute stemmed from the failure and subsequent liquidation of an Estonian bank in which the claimants held a controlling interest. The investors alleged that the Estonian authorities’ conduct in handling the bank’s collapse, including the role of the Estonian Financial Supervision Authority and the courts, amounted to a breach of international obligations under the Estonia–Finland BIT and the Estonia-Germany BIT.

Key legal principles

Fair and equitable treatment (FET) and denial of justice

• The claimants argued that the Estonian authorities’ actions – including procedural delays, regulatory decisions and court rulings – constituted arbitrary treatment, a lack of transparency and a denial of justice.

Expropriation

• The investors alleged that Estonia’s failure to properly regulate and oversee the insolvency process, combined with unfavourable judicial decisions, amounted to indirect expropriation of their investment.

Attribution of conduct

• The case also touched upon whether the actions of private liquidators and court-appointed officials could be attributed to the Estonian state.

Outcome

• The tribunal rejected most of the claimants’ claims, including those based on expropriation.
• However, it did find that Estonia had violated the FET standard, primarily due to procedural failings in the handling of the bank’s liquidation process, which failed to meet the standard of transparency and due process required under international law.
• The tribunal awarded the claimants upwards of EUR12 million in compensation, making it the only known ISDS case where Estonia was found liable.

Legal significance

• This remains the only known case in which Estonia was found liable under an investment treaty.
• It set an early precedent for the procedural aspects of FET, particularly the requirement for transparency and due process in regulatory decision-making.

In the only known ISDS case where an award was made against the state – OKO v Estonia – Estonia did not pursue annulment proceedings and complied with the award voluntarily. There is no evidence of any refusal to pay awards.

As such, according to known case law, Estonia remains an arbitration-friendly jurisdiction and has not sought annulment proceedings relating to ISDS awards made against it.

Bilateral Investment Treaties (BITs)

Estonia has ratified a total of 32 BITs; 14 of these are currently in force. Following the Court of Justice of the European Union’s Achmea and Komstroy rulings, Estonia has terminated or suspended the operation of intra-EU BITs.

The BITs currently in force are as follows:

1. Estonia–Switzerland BIT (1992);

2. Estonia–China BIT (1993);

3. Estonia–Israel BIT (1994);

4. Estonia–United States of America BIT (1994);

5. Estonia–Ukraine BIT (1995);

6. Estonia–Turkey BIT (1997);

7. Estonia–Viet Nam BIT (2009);

8. Estonia–Morocco BIT (2009);

9. Estonia–Georgia BIT (2009);

10. Estonia–Azerbaijan BIT (2010);

11. Estonia–Jordan BIT (2010);

12. Estonia–Moldova BIT (2010);

13. Estonia–Kazakhstan BIT (2011); and

14. Estonia–United Arab Emirates BIT (2011).

While Estonia always strives to improve its trade relations, particularly with developing economies, and is therefore constantly exploring opportunities for new BITs, it must also bear in mind the EU law constraints and its FDI screening framework. Per public information, there are no new BITs currently in negotiation.

Multilateral Investment Treaties (MITs)

• Estonia is a contracting party to the Energy Charter Treaty.
• Additionally, as a member of the EU, Estonia is indirectly bound by a large number of MITs negotiated and concluded between the EU and third parties.

Estonia does not use a specific “Estonia model BIT” that is distinct and published. The BITs follow fairly standard templates for the promotion and protection of investments, fair and equitable treatment, non-discrimination, expropriation with compensation, and other provisions.

Additionally, as a member of the EU, Estonia is guided by the policies and directions of the EU when drafting and negotiating BITs. For example, Estonia can take guidance from the aiding tools and instructions published by the EU, such as the European Union Model BIT Clauses (2023), which seek to ensure that investment protections in BITs concluded between EU member states and third countries are consistent and harmonised with EU law and policy.

As an EU member, Estonia is party to the EU’s trade agreements and subject to its internal market rules and the investment protection elements in EU agreements (eg, EU–New Zealand FTA (2023), EU–Viet Nam FTA (2019), EU–Singapore FTA (2018), EU–Korea FTA (2010), etc).

While Estonia’s treaties may have preambles, exchange of notes and standard treaty texts, there is no well‑known, widely used published commentary or model treaty with interpretive notes specific to Estonia.

Domestic courts (especially the Supreme Court) have, in some instances, clarified how public policy is interpreted, what non‑arbitrable disputes are, etc. These act as interpretive precedents.

There is no single comprehensive Estonian national investment law (in the sense of a law that mirrors treaty protections for foreign investors across the board) that provides exactly the same protection as treaty obligations. Estonia protects foreign investment through treaties, domestic constitutional property rights, general civil law, etc.

More recently, the Foreign Investment Reliability Assessment Act (from 2023) provides regulatory oversight/screening of certain foreign investments in strategic sectors. It does not replace treaty protections or arbitration rights, but imposes prior authorisation in certain sectors for non‑EU investors.

Direct arbitration clauses in contracts between the state (or state‑owned entities) and investors are possible, but their frequency is less well documented, as many investors rely on treaty protections/BITs rather than contract‑based arbitration.

The protection offered by individual contract clauses depends on their terms (seat of arbitration, rules, enforcement) and must be respected under domestic contract law as well. Treaty protections often add additional layers (eg, minimum standards, protections in BITs, and the ability to go to ISDS) that a contract alone may not provide (eg, contract claims may be limited in scope or subject to domestic courts; treaty claims may allow direct access to arbitration under international rules).

From the known ISDS claims involving Estonia, the frequent complaints or issues include:

• Violation of fair and equitable treatment (FET) – eg, claims that the state’s regulatory actions or decisions violated legitimate expectations or treated the investor unfairly.
• Expropriation, both direct and indirect – claims that property or de facto control was removed or rights impaired without adequate compensation.
• Discrimination (ie, breach of national treatment or non‑discrimination) – eg, claims about discriminatory treatment or unequal treatment of foreign investors.
• Breach of contract/regulatory change risk – eg, when state regulation or refusal of tariff increases or regulatory approvals disrupts expected cash flows or investments.
• Issues about investor rights transfers and the ability to freely transfer capital and/or profits under BITs.

Estonia’s arbitration law for both domestic/international arbitrations largely imports or is compatible with the UNCITRAL Model Rules.

A natural person of full active legal capacity may be appointed as an arbitrator. An arbitrator may be recused if circumstances are present that cast a reasonable doubt concerning their impartiality, independence or competence or if they do not fulfil the requirements agreed by the parties. Estonian courts treat arbitrator independence as a core legal value and a matter of public policy. If an arbitrator acts in a way that is not independent or impartial (eg, protecting one party’s interests), that can be grounds for refusing enforcement provided that the misconduct can be proven.

Under Estonia’s arbitration law, parties may freely agree on the rules for appointing arbitrators. If their chosen method fails, default procedures apply:

• If three arbitrators are required and no rules are agreed, each party appoints one arbitrator, and those two select a presiding arbitrator. If a party fails to appoint within 30 days of a request, or the two arbitrators cannot agree on the third within 30 days, the court appoints the missing arbitrator upon a party’s petition.
• If a sole arbitrator is required and the parties cannot agree on appointment rules or on the arbitrator, the court appoints one upon petition.
• If agreed appointment rules are breached, the parties or arbitrators fail to agree, or a third party fails to perform its appointment role, either party may petition the court to appoint the arbitrator, unless otherwise provided by the agreed rules.

As mentioned in 4.2 Default Procedures, in certain circumstances, a state court may appoint an arbitrator on the petition of a party.

Under the applicable laws, the court must appoint the arbitrator within 30 days following the reception of the corresponding petition.

Additionally, when appointing the arbitrator, the court has regard to the following:

• the requirements agreed by the parties concerning the arbitrator; and
• the circumstances that ensure the appointment of an independent, impartial and competent arbitrator.

The parties cannot appeal the order by which the state court appoints an arbitrator.

Under Estonian law, an arbitrator may be recused if circumstances raise reasonable doubts about their impartiality, independence or competence, or if they fail to meet agreed qualifications. A party may challenge its own appointee if the grounds for recusal became known after appointment.

Arbitrator candidates must promptly disclose any circumstances that could raise doubts about their impartiality or independence. This duty continues throughout the proceedings, and arbitrators must immediately notify the parties of any such developments.

If an arbitrator cannot perform their duties within a reasonable time, their mandate ends upon self-recusal or by agreement of the parties. If the arbitrator refuses to step down or no agreement is reached, either party may petition the court to terminate the mandate, unless otherwise agreed.

The parties may agree on recusal procedures. If no such rules exist, a party may request recusal within 15 days of the tribunal’s formation or of learning of the relevant circumstances. If the arbitrator declines to step down or the other party objects, the tribunal – without the challenged arbitrator – decides the matter.

If the issue cannot be resolved under the agreed or default procedures, a party may petition the court within 30 days of learning that its motion was rejected. The tribunal may suspend proceedings until the court’s decision.

Arbitrators must be impartial and independent, and disclose potential conflicts. These requirements derive from international conventions, arbitration rules, and Estonian judicial interpretation of public policy under the New York Convention.

Unless the parties have agreed otherwise, arbitral tribunals may grant interim relief on a party’s application. However, measures of interim relief that restrict personal freedoms may not be imposed. The arbitral tribunal may, in connection with interim relief, require both parties to provide reasonable security.

The decision on interim relief is enforced on the basis of a state court order. The court makes the order on the petition of the party and allows the decision to be enforced only if the relevant measure of interim relief has not already been sought from the court. The court may rephrase the interim relief order if this is needed to apply the relief. In relation to the petition filed with the court, security must be provided analogously with interim relief in relation to a court claim.

As mentioned in 5.1 Types of Relief, under Estonian law, arbitral tribunals’ decisions on interim relief are enforced through a state court order. The court makes the order on the petition of the party and allows the decision to be enforced only if the relevant measure of interim relief has not already been sought from the court. The court may rephrase the interim relief order if this is needed to apply the relief. In relation to the petition filed with the court, security must be provided analogously with interim relief in relation to a court claim.

Further, the court may, on petition, revoke or vary interim relief on the same grounds and following the same rules that apply when granting interim relief in relation to a court claim dealt with in judicial proceedings.

Additionally, until the formation of the arbitral tribunal to resolve the dispute, the competent body of the tribunal may transmit a party’s application for interim relief to the court. The application is disposed of following the rules provided by law for disposing of such applications.

Estonia’s legal framework does not place any restrictions on courts and arbitral tribunals to order security for costs. Both courts and arbitral tribunals have discretion in this regard.

Estonia’s legal framework does not regulate or place any restrictions on third-party funding of investor–state claims. As case law is limited due to the low number of ISDS cases in Estonia, no consistent practice has been established in this regard.

There is no known case law specific to Estonia that addresses third‑party funding, its disclosure or its regulation.

The only ISDS case involving Estonia where third-party funding has been discussed and disclosed is the ELA v Estonia case, where the claimant disclosed its third-party funder. However, in that case, the place of arbitration was Geneva, Switzerland, and thus the domestic laws and regulations of Estonia did not apply.

As mentioned in 6.2 Third-Party Funding Case Law, there are no regulations or known case law specific to Estonia that address third‑party funding, its disclosure or its regulation. As such, it is difficult to predict how tribunals and courts would treat the existence of third-party funding when, eg, considering applications for security for costs.

The applicable Estonian laws do not set out requirements for a notice of dispute or a consultation period. In practice, the investor may need to follow treaty‑specified procedural requirements as Estonia’s treaties typically include a dispute resolution clause under which investors must give notice and allow time for amicable settlement. This is standard in many BITs.

In its approach to transparency in ISDS, Estonia largely follows the example and guidance of EU policy, which favours greater transparency (eg, the EU’s approval of the UN Convention on Transparency in Treaty-based Investor-State Arbitration). For example, the recordings of the hearing in AS Tallinna Vesi and United Utilities (Tallinn) B.V. v Republic of Estonia (ICSID Case No. ARB/14/24) were publicly available for viewing for quite some time. Additionally, most of the key case materials, such as procedural orders, the tribunal’s decisions and the award, are still publicly available on the ICSID website. The same is true for OKO Pankki Oyj and Others v Republic of Estonia (ICSID Case No. ARB/04/6), where Estonia was held liable for a breach of the BIT. Additionally, the latest 2025 award in ELA USA, Inc. v Republic of Estonia is also publicly available.

The above confirms that the Estonian state welcomes transparency in ISDS proceedings and decisions and does not seek to shield itself from public scrutiny.

Tribunals can award monetary damages, interest and costs (legal, expert, institutional) if the treaty/arbitration rules allow.

Estonia does not impose domestic law limits on types of remedies in ISDS beyond what the applicable treaty and arbitration rules allow. However, as punitive damages are not part of the Estonian legal system and their award is not allowed under domestic law, such a remedy might be contrary to public policy and thus unenforceable.

Standard valuation methodologies are common in Estonia, namely, discounted cash flow, market value and loss of profits; sometimes cost‑based approaches are used depending on the treaty, the sector, and the nature of the investment.

Parties are entitled to recover interest as well as legal and expert fees and arbitral institution costs. Under Estonian law, unless otherwise agreed by the parties, the arbitral tribunal, in its decision, rules on the allocation, between the parties, of the costs of arbitration proceedings and of the necessary costs incurred by the parties as a result of attending the proceedings. Where the amount of the costs has not been determined or cannot be determined before the end of arbitration proceedings, the costs are dealt with in a separate decision of the arbitral tribunal.

A ‘costs follow the event’ approach is commonly adopted, though the exact allocation depends on the treaty, the specific tribunal, the rules, and the conduct of the parties.

There is a general expectation that investors should mitigate losses.

Estonia enforces foreign arbitral awards under its domestic law (Code of Civil Procedure) and obligations under treaties/conventions (eg, New York Convention and ICSID Convention).

While ICSID awards are enforceable as though they were final and enforceable decisions of national courts of Estonia, to enforce other ISDS awards, one often must apply to an Estonian court to recognise an award under the New York Convention. Courts check whether grounds for refusal apply (eg, invalid arbitration agreement, lack of due notice, scope beyond submission, composition of tribunal, subject matter non‑arbitrable, public policy).

If an award has been set aside by the courts at the seat of arbitration, Estonian courts may refuse enforcement. Additionally, if there are ongoing annulment/set-aside proceedings, these may affect enforcement (but details depend on specific circumstances).

As to sovereign immunity, Estonia is guided by international law and practice. There is no case law of Estonian courts regarding the upholding of sovereign immunity to avoid the enforcement of an ISDS award.

Estonian courts are generally arbitration‑friendly, meaning they tend to enforce foreign arbitral awards unless strong grounds for refusal exist. The Supreme Court has made statements to this effect.

Additionally, Estonian courts define public policy narrowly. For example, in case 2‑18‑4731, the Supreme Court held that not all mandatory provisions are public policy – only core values such as arbitrator independence, non‑arbitrability, etc.

As is typical in small jurisdictions, enforcement depends on whether there are identifiable state or state‑entity assets in Estonia or elsewhere that can be attached.

Estonian courts consistently recognise foreign arbitral awards and permit their enforcement through bailiffs. As holders of a public-law office, bailiffs possess extensive powers to identify the debtor’s assets through state registers, enquiries to financial institutions, etc.

There is no relevant case law or practice of Estonian courts regarding the piercing of the corporate veil.