Estonia

324 Estonia





Estonia

Chamber of commerce: Professional body:

Estonian Chamber of Commerce and Estonia Bar Association

Industry Rävala pst 3

Toom-Kooli 17 10143 Tallinn

10130 Tallinn Estonia

Estonia Tel: +372 662 0665

Tel: +372 6 04 00 60 Fax: +372 662 0677

Fax: +372 6 04 00 61 Web: www.advokatuur.ee

Email: koda@koda.ee

Web: www.koda.ee





Aspects of Estonian financial law Estonian regulation of multilateral settle- Secured claims enjoy priority in bankrupt-

ment netting through a central party is based cy proceedings. However, the amount of divi-

Vadim Filimonov on the EU Settlement Finality Directive. dends payable from the sale of the security to

Law Office Paul Varul the secured creditor in bankruptcy proceed-

Tallinn Secured finance ings can be reduced up to 15% to cover costs

Estonian law recognises the following types of of the bankruptcy proceedings and make

Insolvency set-off is generally permitted in security interests: a registrable real security other compulsory payments (for example,

Estonia. If a creditor had the right to set off its (mortgage), security over movables (possesso- claims arising from the consequences of exclu-

claim against the claim of the debtor before a ry or registrable) and security over receivables. sion or recovery of assets or current expenses

declaration of bankruptcy, the creditor may Real security is by far the most important incurred during the bankruptcy proceedings).

also set off its claim after the declaration of security interest in Estonia. Under Estonian law a notice to the debtor

bankruptcy. The law imposes restrictions on A commercial floating charge is a type of is not the condition of validity of a transfer of

set-off of claims acquired by way of assign- non-possessory registrable security over mov- a claim (if the transferor becomes insolvent).

ment and contingent claims. A claim acquired ables, trade receivables and claims. This can be However, the consent of a debtor is mandato-

through assignment may be set off in bank- established by a notarial deed and needs to be ry if an executory contract (with all rights and

ruptcy proceedings only if the claim was registered in the Commercial Registry. The obligations arising from it) is transferred.

assigned and the debtor was notified of the commercial charge covers all present and

assignment in writing not later than three future assets of a company. However, it does Trusts

months before the declaration of bankruptcy. not extend to money in a cash register or cred- In Estonia there is no special regulation of

Close-out netting occurs automatically by it institution; shares, stocks, investment fund trusts similar to that of common-law jurisdic-

virtue of law with regard to many executory shares, contributions in cooperatives or partic- tions. However, with respect to claims and

financial contracts concluded on a regulated ipation in other companies belonging to an movables the effect akin to that of a bare trust

securities market, for example derivatives or undertaking; promissory notes or other loan can be achieved by concluding an authorisa-

swaps. Under Estonian law, such contracts documents accepted in common usage; or tion agreement. In Estonia, claims and mov-

remain formally in force upon insolvency of other securities. The floating charge does not ables that a mandatary acquires under such an

one of the parties, but the parties cannot give any special rights to the creditor in the agreement in the mandatary’s name but on

demand specific performance of the contract. debtor’s insolvency proceedings. account of the mandator, and claims and

Instead, they can claim damages arising from Real security, commercial floating charges movables that the mandator transfers to the

failure to perform an obligation. and other registrable security interests are mandatary for performance of the mandate,

The size of such a claim shall be calculated freely transferable - the consent of the chargor are not included in the bankruptcy estate of

as the difference between the agreed price and is not required. The possessory security over the mandatary, and they cannot be subject to

the market or exchange price of the goods, or movables (pledge) transfers to the new credi- a claim against the mandatary in an enforce-

the financial performance applicable at the tor upon transfer of a claim. ment procedure.

place of performance of the obligation on the As a rule, any agreement entered into

second working day after the declaration of before the creation of the right of sale where-

bankruptcy. The mutual claims for damages by the chargee acquires the charged thing for

are subject to insolvency set-off. satisfaction of a claim secured by the charge is

By a current account agreement parties void. The only exception is a financial collat-

may provide for bilateral settlement netting of eral agreement provided that the agreement of

monetary claims and obligations arising from the parties allows determination of the value

contracts entered into in the continuing busi- of the object of security. In accordance with

ness relationship between the parties. In this the EU Financial Collateral Directive, finan-

case, the net balance of the claims and obliga- cial collateral agreements can be concluded in

tions shall be the amount due. The law Estonia if at least one of the parties is a finan-

expressly provides that claims entered in a cur- cial institution. The objects of financial collat-

rent account (before netting) cannot be seized eral can be securities or monetary claims.

or be subject to a claim.



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Financial and corporate | Estonia 325





Financial and corporate five Estonian law firms that dominate the top its acquisition of steel producer Galvex

tiers, and commentators do not expect the Estonia.

Recommended firms entry of a larger international firm in the near Lepik & Luhaäär, together with Klavins &

Tier 1 future, even on a pan-Baltic level. Slaidins in Latvia and Lideika Petrauskas

Lepik & Luhaäär Lawin But for local firms, the emergence of Valiunas ir partneriai in Lithuania, is part of

Raidla Lejins & Norcous regional alliances is a discernable trend. the pan-Baltic Lawin group. The network is a

Tark & Co Although there are obvious benefits to offer- top-tier outfit across all three Baltic countries

ing an integrated service across the Baltic and won an award from the International

Tier 2 region, especially on cross-border deals, juris- Financial Law Review for Baltic law firm of

Luiga Mody Hääl Borenius dictional differences may be an obstacle to full the year in 2008.

Sorainen mergers, and the prospect of a reduction in

referrals is enough to deter many successful Leading lawyers

Tier 3 practices from integrating with each other Ermo Kosk

Eversheds Ots & Co completely. “It is always a question if how Martin Simovart

Glikman & Partnerid many doors you are shutting,” says one part-

Lextal ner.

Paul Varul Luiga Mody Hääl Borenius

Tamme & Otsmann Luiga Mody Hääl Borenius has gone from

Lepik & Luhaäär Lawin strength to strength following its 2005 merg-

Economic growth in Estonia has suffered over Martin Simovart is a driving force behind er. Competitors note that the firm is growing

the past couple of years, falling from 11.4% in much of Lepik & Luhaäär’s work, and is wide- faster than the market, and is now seen as one

2006 to a forecasted figure of 4.0% in 2008. ly respected by his clients and peers as a lead- of the top-five firms that dominate the upper

Although the figures are still relatively positive ing lawyer. The firm promoted Ermo Kosk tiers of the rankings.

compared to other European states, one part- and Gerli Kilusk to associate partnership in Clients increasingly see Luiga Mody Hääl

ner comments that economic uncertainty March 2008, and the pair have been leading Borenius as the go-to practice for complex

“puts a footprint on any business”. some notable transactions. issues. “They were able to move themselves

In this climate, Scandinavian banks have Clients are very satisfied with the firm’s into a very technical field in no time at all.

tightened their lending policies. This more work. “They had very good team activity: if They worked in detail very well,” says one.

conservative approach is making financing one person was away on vacation another The firm has shone in equity capital mar-

some deals difficult, but the impact on each could take their place,” says one client. kets in the past year. In May 2007, the firm

sector depends on its outlook. The real-estate Another says: “It was a positive experience in advised Danish agricultural company Trigon

market has suffered, particularly in residential all respects. They were quick to respond and I Agri on the e50 million private placement of

property. As one lawyer puts it: “Real estate is was pleased with the substance of their work.” the company’s shares, and on its admission to

a dangerous word to use in the banks.” Kosk’s ability to manage transactions and trading on the First North alternative market-

The economic slowdown has produced a quickly pick up financial concepts is also place in Stockholm. In much harder market

buyers’ market in Estonia as companies look noted. “He is very responsive. He is naturally conditions, the firm advised the same client

to sell. The problems that financial investors quick with regards to finance law,” comments again in May 2008 on its secondary offering

are having in leveraging investments means a client. of shares on First North. Both deals were led

that much of the transactional activity is In May 2007 the firm advised the by Priit Pahapill.

strategic. Estonian-based Silvano Fashion Group on its In February 2008 the firm advised the

Global market conditions have also dis- listing on the Warsaw Stock Exchange, fol- Baltcap private-equity fund on the financing

couraged companies from pursuing IPOs as a lowing last year’s listing in Tallinn. This was for its acquisition of the Interinfo Group. The

method of financing, and many listings have the first time an Estonian company has listed e17 million transaction was spread across all

been put on hold. A change in market condi- in Warsaw. Lepik & Luhaäär has advised a three Baltic states, the Netherlands and Jersey,

tions towards the end of 2008 could lead to number of clients, including UBS, Citigroup, and involved the other firms in the Borenius

state industries floating on the stock exchange Barclays Capital and Renaissance Capital, on network.

as the government looks to ease budgetary securities law regulations and issues. The firm has also been advising a syndicate

pressure. The firm’s banking highlights include of banks, including Nordea, DnB Nord and

In project finance Estonia, in common advising OKO Bank as the lead arranger on Unicredit, on an e84 million loan and multi-

with the other Baltic countries, has seen an the financing and collateral issues on a loan currency revolving-credit facility to an indus-

explosion in PPPs. These projects have so far facility, which involved Ermo Kosk coordinat- trial food group operating in the Baltics and

mainly occurred at a municipal level but there ing a team across the Baltic region. The firm is Poland.

are potential projects at a national level, such also at the forefront of project finance devel- Luiga Mody Hääl Borenius’s M&A activi-

as the construction of a highway between opments, advising Tallinn City Municipality ty has been a key part of the firm’s growth.

Tallinn and Tartu. Although law firms may on its e190 million PPP project to renovate The knowledgeable and respected partner

look eagerly at these projects, the government schools. Sten Luiga is an important influence, but

remains hesitant, as the public has been quite In one of the jurisdiction’s standout M&A senior associate Kristel Raidla has been

critical of the financing structure. transactions, Lepik & Luhaäär advised impressing clients. “She was really on top of

Two UK law firms entered the Estonian Interinfo Group, a subsidiary of private-equi- everything,” says one.

market in 2007, as Glikman & Partnerid ty group Texas Pacific, on its sale of internet The firm’s ability to work on international

joined the Pinsent Masons Luther group and portal Delfi to media company Express deals was shown when a team led by partner

Ots & Co joined Eversheds’ international net- Group. In another notable transaction, Peeter Kutman advised media company

work. These firms have yet to trouble the big- Simovart and Kilusk advised ArcelorMittal in Ekspress Group on its e70 million purchase



2009 EDITION www.iflr1000.com

326 Estonia | Financial and corporate



of the internet portal Delfi, which operates in divestment within the Saint Gobain Group of Ukraine. The deal created the largest property

Estonia, Latvia and Lithuania. This was the a Baltic chain of stores to Norwegian compa- agency in central and eastern Europe (CEE).

highlight of several notable deals in the media ny Optimera in February 2008. On the buy- The firm is also very active in the technol-

sector that the firm acted on. ers’ side, the firm is advising Carlsberg in its ogy, media and telecoms sector. In one

public takeover offer for all shares of a listed notable deal, the firm advised Martinson

Leading lawyers Estonian Brewery. Trigon Venture Partners, the first private-

Sten Luiga equity fund focusing on the sector in CEE, in

Priit Pahapill Leading lawyers its investment in software developer Rate

Sven Papp Solutions. The deal was led by partner

Raino Paron Toomas Prangli, who heads the pan-Baltic

Raidla Lejins & Norcous M&A team, but whose personal involvement

Raidla & Partners moved further along the in transactions is noted by clients.

path of consolidating its regional alliance with Sorainen

association partners in Lithuania and Latvia Sorainen is the only single pan-Baltic firm, Leading lawyers

by operating under the common name of operating in all three Baltic states. The firm Reimo Hammerberg

Raidla Lejins & Norcous from May 2008. spread further afield this year, opening an Toomas Prangli

The firm is well established in the top tier in office in Minsk in early 2008. This cross-bor-

banking and finance and in M&A work, with der array is striking a chord with clients. “We

none of its competitors doubting its position. took Sorainen on because it was a known Tamme & Otsmann

“They have a professional approach and a real brand across all three jurisdictions,” says one Tamme & Otsmann does not have the

genuine specialisation,” says one peer. client. breadth of capacity of some firms in the upper

Clients appreciate the efficient service the The firm is relatively young, having started tiers, but clients and competitors respect the

firm offers. “They understood my concerns in Tallinn in 1995, which competitors say high quality that the firm provides. Both Ergo

very well and were very proactive,” says one comes through in Sorainen’s aggression and Blumfeldt and managing partner Tonis

client. “They did not come back with 25 marketing ability. Clients are very pleased Tamme are respected by peers as being active

questions like other European law firms.” with the quality of the firm’s service. “They on corporate matters.

Sven Papp and Raino Paron are highlighted were responsive and knew the market well,” The firm’s workload includes cross-border

by competitors as leading lawyers in the mar- says one. “The integrated service across all deals on a pan-Baltic scale. In October 2007

ket, and Riadla’s clients show admiration for three jurisdictions was fairly seamless from the firm worked with law firms in Latvia and

the pair’s experience. our perspective.” Lithuania to advise Estonian distillery Liviko

Paron heads the banking, finance and cap- The young and talented Reimo in its acquisition of Latvian Alcoholic whole-

ital markets team, which boasts high-level Hammerberg heads the firm’s banking and saler Lion & Ko. In November 2007, in a deal

clients such as SEB, Nordic Investment Bank, finance team. Sorainen is one of only three involving both Blumfeldt and Tamme, the

shipping company Tallink Group, Baltic Estonian certified advisors for the new First firm advised Estonian company Norby

Investment Group, Goldman Sachs, JP North alternative market, operated by Nasdaq Telecom on its acquisition of Latvian telecoms

Morgan and DnB Nord. OMX. Sorainen has advised on a wide variety company Telecentrs.

In the firm’s most notable banking deal, of complex financial transactions and regula- In another regional acquisition, the firm

Paron led a team advising SEB in connection tory issues. worked in cooperation with a Latvian and a

with the financing of the acquisition of a port- The firm assisted the Eastern European Lithuanian firm advising OMX-listed retailer

folio of real estate across all three Baltic coun- Real Estate Trust on its creation of an invest- Tallinna Kaubamaja group on its e10.2 mil-

tries in December 2007. ment vehicle. The firm assisted in structuring lion purchase of vehicle distributor ABC King

Paron and his team were also involved in the vehicle into a regulated fund, using its in June 2008.

some impressive capital markets work. On the debt capital markets expertise to advise on

equity side Raidla Lejins & Norcous advised bond issues, and subsequently advising on the Leading lawyers

SEB as the manager of real-estate company launch of the fund’s public offering. Ergo Blumfeldt

Arco Vara on its June 2007 IPO. The IPO All three of Sorainen’s offices advised pri- Tonis Tamme

raised e70 million and was the largest in the vate-equity fund AAC Capital as local counsel

Baltics in 2007. The transaction involved the on its e170 million financing for the acquisi-

first public offering of shares in Estonia and tion Finnish company Empower. The firm is Tark & Co

Latvia under the European passporting sys- also active in project finance, and is involved Tark & Co was dealt a blow when it lost part-

tem. in one of the first large-scale Estonian PPP ner Kilvar Kessler in December 2007, who

On the debt side, the firm advised projects, which is for a parking facility. became a board member of the Financial

Estonian bank BIG in connection with the Sorainen is taking full advantage of the Supervision Authority. But the firm has bol-

issuing of its debt securities in Sweden and the Baltics’ M&A boom, positioning itself as a stered its team by adding seven new lawyers,

registration of the issuance with the Nordic regional specialist. The team was strengthened and leading partners Hannes Vallikivi and

central depository of securities. The e100 mil- this year by the addition of senior associate Risto Vahimets remain to drive the firm to

lion security offering was the first by an Piret Lappert from the law firm Hedman further success. According to one peer the

Estonian issuer on the Swedish market. Osborne Clark. firm is still rising, as is often the case in

Raidla Lejins & Norcous has also The firm advised Finnish real-estate com- Estonia’s developing legal market, where the

impressed in the M&A market, where Sven pany Realia Group on its acquisition of Ober- established stars are still relatively young.

Papp has headed a team on several notewor- Haus Real Estate Advisors, which operates Hannes Vallikivi is widely regarded as one

thy deals. These include representing Estonia across the Baltics as well as in Poland and of the leading lights in Estonia’s market for

company Ehituse ABC on its e100 million financial law. In June 2007 Vallikivi advised



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Financial and corporate | Estonia 327





Glikman & Partnerid is recognised by the

Arco Real Estate on its e70 million IPO - the market as a practice with a corporate focus,

only new listing since May 2007. In a rare and its highlights from the past year include

Estonian debt issue, the firm advised the City advising Baltic Property Trust on the disposal

of Tallinn on its e25.6 million offering of of its real-estate fund - one of the biggest in

debt in November 2007. the Baltics. The firm is also a member of the

The firm was busy on a number of real- Baltic Legal Solutions network.

estate financings before problems hit the sec-

tor. These include advising lender Aarel bank

on a e68 million secured loan for the devel-

oper of the New Sakala shopping and enter-

tainment centre in Tallinn. The firm was also

active in project finance, advising an investor

on a capital-raising for several Baltic renew-

able-energy ventures.

The firm’s technical abilities in finance

have put it at the forefront of financial regula-

tory work. It has advised Hansa Funds, Evli

Securities and SEB on implementing Mifid

requirements. Vallikivi was elected as a mem-

ber of the Tallinn Stock Exchange’s listing and

surveillance committee in September 2007.

Risto Vahimets is an essential part of the

firm’s M&A team, and has pleased clients on

transactions. “Our bankers went out to meet

him and he worked excellently with them.

Risto understood English law very well. He

was very good,” says one.

The firm advised Estonia’s leading broad-

band and cable TV company Starman on a

e32.2 million takeover bid by private-equity

firm Bancroft. The firm also has experience in

public M&A, advising private investment

company Rubla on its public takeover of con-

fectionary producer Kalev for e18 million in

December 2007.

In the first application of the EU directive

on cross-border mergers in Estonia, the firm is

advising Danske Bank as it merges with

Sampo Bank. The firm is also advising on the

corporate restructuring of Estonia’s largest

publicly traded company, Eesti Telekom.

The firm is part of a pan-Baltic network

with the Latvian firm Loze Grunte & Cers

and the Lithuanian firm Sutkiene Pilkauskas

& Partners.



Leading lawyers

Risto Vahimets

Hannes Vallikivi





Other notable firms

The firm Paul Varul does not operate on the

same level as the top law offices, but it has

been involved in a few noteworthy transac-

tions. The firm advised on the establishment

of the first regulated Estonian real-estate fund,

Avaron RED Volga Fond. Insolvency work

has been relatively rare due to the state of the

economy, but Paul Varul is involved in the

bankruptcy of Eesti Maapank - the largest liq-

uidation in Estonian history.



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