Summary Report

ESTONIA

Overview

Estonia does not have a specific law for PPPs (neither a PPP Law nor a Concession Law) but there is a Public Procurement Act (“PPA”) in place. Matters of awarding non-concession and concession PPP contracts are governed by the PPA. There is a separate Law for concluding administrative agreements in cases where the state or a local government wishes to delegate its powers to a private partner (Administrative Co-Operation Act). This Administrative Co-Operation Act also refers back to the PPA, obliging the state or the local government to follow the rules for service procurements.

Non-Concession PPPs in particular

In Estonia no specific procedure for the award of PPPs is foreseen – with all advantages (usual procedure well known to national players and review bodies) and disadvantages (adaptation to the needs of such projects more difficult) of such a solution. This results in medium compliance of the legislation in general. In particular, specific rules for a minimum content of project agreements are missing. Nevertheless, the project agreement is still highly compliant, but scored only a “low” for bankability issues.

Highlights: As Estonia has implemented EU procurement rules, it achieves a very high compliance relating to the contract award procedures.

There are some social/political obstacles to implementing PPPs in the country and there is not enough political willingness and social understanding to develop PPPs, which may result from a lack of communication or understanding. The public discussion does not make a distinction between PPP and concession. So far, no major PPP projects have been awarded and there are no specific rules. This might be one of the reasons why Estonia has been slow in developing PPPs. Although in total some 20 PPP and concessions projects have been implemented in the past, no PPP projects are presently in preparation. PPP projects have been awarded in the non-merchant social sector (schools and other public buildings). The corresponding rate is “low compliance”.

The reasons for low scoring in relation to PPP compliance and effectiveness are mainly:

• There is no investment plan, requirement for feasibility study etc. foreseen in the PPA and thus a “very low” compliance rate is unavoidable;

• Although the award rules are very detailed and systematic, there are no statutory rules for the minimum content of PPP agreements covering such items as term, termination and termination compensation, securities, project financing and direct agreement, except step-in-rights. This may result in difficult contract negotiations for foreign investors;

• There is no policy framework (very low compliance) and no institutional framework in place, which explains the very low compliance score of (0,00 for the support Awarding Authorities receive when they develop a PPP project); and

• Although the banking sector and capital market is functioning, there are no facilitation mechanisms or PPP funds, and no reliable PPP project insurance policy is available locally.

As for concession awards, the PPA contains explicit provisions for both service and works concessions, but only as far as required by EU procurement Law. No concessions are currently in preparation. In the past concessions were implemented in the transport sector. This is sufficient for high compliance of the legal framework in general, but overall Estonia does not achieve a very good compliance in this assessment. The main reasons are:

• There is no requirement for an investment plan, a feasibility study etc. in the PPA;

• Although the award rules are very detailed and systematic, there are no statutory rules for the minimum content of concession agreements (term, termination and termination compensation, securities, project financing and direct agreement, except step-in-rights). This may result in difficult contract negotiations for foreign investors;

• The concession legislation is restricted to the minimum required under EU Law;

• There is no policy framework and no institutional framework in place to support Awarding Authorities when they develop a concession project;

• Although the banking sector and capital market is working, there are no facilitation mechanisms or concession funds and no reliable concession project insurance policy is available locally. It seems that local banks were not involved in previous concessions; and

• Further, minor reasons Estonia received fewer points are matters where the majority of the international standards applied in the assessment differ from EU Law. Examples are Estonia’s restrictive approach to unsolicited proposals (due the EU procurement rules) and to state support apart from “own contributions” to PPPs (due to EU state aid and ESA 2010 rules) and to final negotiations (due to non-discrimination rules in EU procurement law).

No concessions are currently in preparation. In the past, concessions have been implemented in the transport sector. The result is disappointingly low effectiveness.

The overall compliance and efficiency of Estonia’s PPP and concession legislation is low for PPP and medium (but almost low) for concession.