Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of Estonia
ICSID · Investment (ICSID and treaty) · Estonia · 19 Nov 2007
Why it matters
This case is significant for its detailed analysis of the fair and equitable treatment standard in the context of state succession and nationalization. It clarifies that a state's failure to ensure that a state-owned entity honors its guarantees can constitute a breach of fair and equitable treatment. The award also addresses the calculation of compound interest and the allocation of costs in ICSID arbitration.
Summary
Three banks (two Finnish, one German) lent money to ESVA, a joint venture in Estonia, guaranteed by state-owned entities. After Estonia regained independence, it nationalized the guarantor, Ookean. ESVA defaulted, and Ookean failed to pay under its guarantee. The banks sued Estonia under the Finland-Estonia and Germany-Estonia BITs. The Tribunal held that Estonia's actions, including nationalizing Ookean and failing to ensure it honored the guarantee, violated the fair and equitable treatment standard. Estonia argued the banks' investment was not protected because it was made before the BITs entered into force, but the Tribunal found the investment was covered. The Tribunal awarded damages for the unpaid loan amounts, interest, and costs. The case is notable for its treatment of the fair and equitable treatment standard in the context of state succession and for its detailed discussion of compound interest.
The detail
Parties: Oko Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank Plc v. The Republic of Estonia
Case number: ICSID Case No. ARB/04/6
Outcome: The Tribunal found Estonia violated fair and equitable treatment under the BITs and ordered Estonia to pay damages to the Claimants.
Quantum: USD 3,837,801.49 and EUR 7,320,315.80 plus interest and costs
Applicable law: Estonia-Finland BIT (1992), Estonia-Germany BIT (1997), ICSID Convention, Finnish law (loan agreement), Swedish law (payment agreement)
Issues in play: The case involved the fair and equitable treatment standard under two BITs and whether Estonia's actions in nationalizing assets and failing to enforce guarantees breached that standard.
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