Estonia

Estonia Corruption Report

Snapshot

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Corruption is not a problem for investors in Estonia, which is considered the least corrupt country in Central and Eastern Europe and one of the most competitive new EU member states. The necessary legislation, regulations and penalties to efficiently counteract corruption are in place, and the government has implemented anti-corruption laws effectively. Most of Estonia's public institutions have good anti-corruption and transparency practices. Facilitation payments are prohibited under Estonian law, and the same applies to gifts and hospitality in return for services. Businesses do not perceive these practices to be common in Estonia.

Last updated: December 2015
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Judicial System

There is a very low risk of corruption when dealing with Estonia's judiciary, which is independent and free from corruption (BTI 2014). Less than one in ten surveyed companies identify the courts as being a constraint to business (ES 2013). Companies have a high degree of confidence in the legal system, and the legal framework to settle disputes and challenge regulations is efficient (GCR 2015-2016). Investment disputes involving foreign companies are rare, but some firms find court proceedings too bureaucratic and slow (ICS 2015). Very few Estonians perceive the judiciary as corrupt (GCB 2013), and almost none report being expected to pay a bribe to the judiciary (European Commission, Feb 2014). Less than half of citizens believe there are sufficient successful prosecutions to deter people from corrupt practices (European Commission, Feb. 2014).

The Arbitration Court of the Estonian Chamber of Commerce and Industry is responsible for settling commercial disputes. Estonia is member state of the International Center for the Settlement of Investment Disputes (ICSID) and has ratified the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (UNCITRAL).

Police

There is a very low risk of corruption when dealing with Estonia's police. Businesses find that the police can be relied upon to enforce law and order (GCR 2015-2016), yet more than two-thirds of companies pay for security (ES 2013). The government of Estonia has established effective mechanisms to detect and punish abuse of office and corruption within the police force. Very few citizens perceive the police as corrupt (GCB 2013).

Public Services

Estonia's public services sector carries a low risk of corruption. No companies expect to give gifts in order to obtain a licence, and irregular payments are reportedly rare (ES 2013GCR 2015-2016). Businesses do not find government regulation burdensome, and most believe policymaking is transparent (GCR 2015-2016). Around half of citizens believe that bribery and corruption are widespread among officials issuing business permits (European Commission, Feb. 2014). Starting a business is less costly and less time consuming than the regional average, as is dealing with construction permits (DB 2016). Approximately one third of citizens believe public officials are corrupt (GCB 2013). 

Authorities filed corruption cases against 22 municipal employees during 2014 (HRR 2014). In one corruption case, the Tallinn Mayor Edgar Savisaar was accused of accepting several bribes, gifts and favours for himself and to his party, adding up to a total value of hundreds of thousands of euros. The Internal Security Service is investigating the case and has confirmed that six other Estonians including four businessmen, Tallinn City Chairman and a former politician, are also involved (ERR, Sep. 2015). The former mayor of Tallinn Jüri Mõis commented on the case by stating that corruption is more widespread on the local government level compared to the national government (ERR, Sep. 2015).

Land Administration

There is a low corruption risk for companies dealing with the land administration in Estonia. No surveyed companies report that they were expected to pay a bribe or give gifts to officials in return for obtaining a building permit (ES 2013European Commission, Feb. 2014). Companies' property is protected by Estonian law, and the system of property rights is stable and equitable (BTI 2014). This is also supported by business, which perceives the protection of property rights to be strong (GCR 2015-2016). Registering property is less costly and less time-consuming than the regional average (DB 2016). 

A very small percentage of Estonians report being expected to pay a bribe when dealing with construction permits (European Commission, Feb. 2014), and rare instances of corruption have been detected in this sector. In one case, the former agriculture minister, Ester Tuiksso, the former environment minister, Villu Reiljan, and the former head of the Land Board were found guilty of passive bribery and abuse of office. The defendants had exchanged protected land for environmental reasons for other state-owned land, thus rendering the protected land available for development. They received sentences of suspension from eighteen months to four years and three months, and two companies involved were fined USD 998,000 and USD 160,000 respectively (HRR 2014).

Tax Administration

The tax administration in Estonia carries a low risk of corruption for businesses. No surveyed citizens or companies that had contact with tax officials were expected to pay a bribe or offer a gift (ES 2013European Commission, Feb. 2014). Businesses identify tax rates to be among the problematic factors to doing business in Estonia (GCR 2015-2016), despite the Estonian tax regime considered the simplest in the world (ICS 2015). Paying taxes is more costly on average compared to other OECD countries, but the number of procedures required is lower (DB 2016).

Customs Administration

Corruption is not a significant risk when dealing with Estonia's customs authorities. Companies consider the border administration to be transparent and reliable, and irregular payments at the border are rare (GETR 2014). More than a third of surveyed citizens perceive bribery and corruption widespread among customs, yet almost none report being expected to pay a bribe (European Commission, Feb. 2014). The time required to import to and export from Estonia is lower compared to OECD countries, and the cost required to trade across borders is more costly to export, while it is less to import (DB 2016). 

A criminal investigation has been launched into alleged bribery of officials at the Port of Tallinn. Allegedly, six people (including Tõnis Pohla, shareholder of Baltic Maritime Logistics Group, and Üllar Raad, head of Esteve Terminal) bribed the CEO of the Port of Tallinn Ain Kaljurand and board member Allan Kiil, both of whom have been taken into custody. The total amount of bribes has been estimated to be far bigger than the minimum of EUR 40,000. The case is ongoing (ERR, Aug. 2015).

Public Procurement

Companies may contend with modest corruption risks when venturing into Estonia's public procurement sector. A little more than one-third of surveyed companies find corruption to be widespread in the Estonian procurement sector, particularly among local authorities (European Commission, Feb. 2014). Very few businesses believe that corruption prevented them from winning public contracts (EUACR 2014) and no companies expected to give gifts in order to win one (ES 2013). Companies report that public funds are rarely diverted to companies, individuals or groups as a result of corruption, and businesses tend to behave with high ethical standards in their interactions with public officials, politicians and other companies, giving the country a competitive advantage (GCR 2015-2016). Instances of favouritism are still not uncommon (GCR 2015-2016), due to the small size of Estonia’s business and commercial community. Other corruption risks in procurement include conflict of interest in the evaluation of bids, collusive bidding and tailor-made specifications for particular companies (European Commission, Feb. 2014). The Public Procurement State Register provides online procurement services, such as a company registration and management portal; the service has reportedly increased transparency (EUACR 2014).

Five members of the Estonian intelligence service were charged with corruption and embezzling hundreds of thousands of euros via state procurement (NiT 2015). In a foreign bribery corruption case, investigations launched in Latvia into the alleged bribery of the former head of state rail company LDz, Ugis Magonis. The case also revealed the involvement of one of Estonia’s richest businessman, Oleg Ossinovski. Latvia’s Corruption Prevention and Combating Bureau (KNAB) reports that Magonis accepted a bribe of EUR 500,000 from Ossinovski in return for winning a tender to supply four diesel locomotives. Estonian authorities have also been involved in the case (bne IntelliNews, Aug. 2015). Companies are recommended to use a specialised public procurement due diligence tool to mitigate the corruption risks related to public procurement in Estonia.

Legislation

According to the Anti-Corruption Act and the Penal Code of Estoniabribery, influence peddlingabuse of office and bribery of foreign officials are criminal offences. Bribery and abuse are punishable by imprisonment of up to five years and ten years for repeat offenders. Companies caught committing acts of bribery face fines and possible dissolution. Conflicts of interest are also covered in the country’s legal framework, but the National Audit Office revealed that several authorities breached these provisions in practice (EUACR 2014). Giving and receiving gifts in connection to services is criminalised under the Penal Code and can incur a fine and/or imprisonment of up to 5 years.Facilitation payments are also a criminal offence in Estonia. The government effectively applies these laws in practice (HRR 2014). Estonia has strict rules on political donations and financing (NiT 2015). Public officials and civil servants are subject to asset disclosure, and almost every official fulfilled the obligation in 2014 (HRR 2014; NiT 2015). Estonia is a signatory to the OECD Anti-Bribery Convention and the United Nations Convention Against Corruption. Access the Lexadin World Law Guide for a collection of legislation in Estonia.

The Estonian government approved the Anti-Corruption Strategy 2013-2020, which is coordinated by the Ministry of Justice and is to be implemented by all ministries and local governments (ICS 2015). Among other initiatives, the strategy provides for training courses to all members of Estonia's councils and parliaments to help identify potential conflicts of interest (EACS 2013-2020).

Civil Society

The constitution of Estonia provides for freedom of speech and of the press, and the government respects these rights in practice (HRR 2014). All major media channels cover the issue of corruption, and investigative journalists have managed to uncover various important corruption cases (NISA, June 2012). The media express a great variety of opinions without any government interference or influence (FotP 2015). Internet freedom is not restricted (HRR 2014), and the media environment is considered 'free' (FotP 2015).

The role of Estonia's civil society is modest in promoting anti-corruption practices, but there has been an increase in civil society's involvement in political life (NISA, June 2012). The Ministry of Justice, also responsible for fighting and preventing corruption and policy development, collaborates actively and effectively with civil society organisations (HRR 2014).

Sources

Topics: Europe & Central Asia