Baltic States – CIS, Estonia, Financial Services, Funds, Investments, Legislation

The companies wanted courts to strike down a decision made by Parliament in February to liquidate the VEB Fund, set up in 1993 to compensate depositors for money frozen in the bank, and pay creditors from the proceeds, writes LETA.

The Parliament and the central bank created the state-insured compensation plan after Russia froze Estonian accounts in the bank. Over the last two decades the government has not been able to unfreeze the accounts – it was reported in a separate story last month that much of the money in the Russian bank disappeared into a shady holding company in the 1990s.

The companies wanted their claims paid at face value, plus compensation for the period when their funds were unavailable to them.

However, the general chamber of the Supreme court said today that the companies in the suit had right of claim only against the VEB Fund itself. Other claims – against the state or the central bank, for example – could not be linked to Parliament's decision, the court said.

The Supreme Court also said the state had no constitutional obligation to pay the companies for the claims in the VEB Fund at a higher than market rate.

It also said it was up to the courts to decide whether the state was liable for damages, and this could not have been done by Parliament.

As reported, Estonian State Prosecutor's Office said this year that it has no intention to initiate a criminal investigation in connection with suspicions raised in the press that officials of Estonia's central bank Eesti Pank have forged documents connected to VEB Foundation.

The current head of the VEB Foundation, that aims to get back funds of Estonian residents from the bank that were frozen there years ago, is of the position that actually claims that belonged to the government and Eesti Pank were behind the claim indicated as the claimant TSL International, and that via a series of such transactions, realization of claims guaranteed with 360 million kroons worth of certificates that initially belonged to the government and Eesti Pank took place.

The foundation VEB Fund was created with the parliament's decision in 1993 with the aim of consolidating claims of Estonian banks and companies concerning accounts frozen in the former Soviet Foreign Economy Bank (Vnesheconombank). The state has not managed to get anything back from the bank over the years and decided at the beginning of this year to liquidate the fund, sell its assets and use the proceeds to pay the certificate holders of the fund.