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Tallinna Vesi loses tariff dispute against Competition Authority in top court

BC, Tallinn, 13.12.2017.Print version
The Administrative Law Chamber of the Supreme Court of Estonia to a larger extent left unsatisfied an appeal filed by the listed water company Tallinna Vesi against the Estonian Competition Authority and decided that the Competition Authority does not have to follow an agreement established between the water company and the City of Tallinn concerning the prices of water services, informs LETA/BNS.

The top court found that the Competition Authority does not have to follow the agreement of the city and the water company concerning the prices of water services. The amended law also does no longer enable basing price determination on the methodology used by the city. This is why the Competition Authority was unable to coordinate the price request of Tallinna Vesi and handing a precept to the water company to legally coordinate the price was justified, the Supreme Court said.


One clause of the appeal was satisfied. Namely, the precept said that it will be deemed fulfilled when the Competition Authority coordinates a new price request. The Supreme Court said that as the law enables the Competition Authority room for deliberation when coordinating the price request, the appellant will not have the possibility of ensuring coordination even if they eliminate the concrete violations highlighted in the precept.


The dispute concerns two decisions of the Competition Authority. With the first the Competition Authority refused to coordinate a water service price proposal, that is a price request, filed by Tallinna Vesi, and with the second the authority handed a precept to the water company to bring the price of the water service in accordance with the law. The dispute focused on the question whether in a situation, where in 2010 an amendment to the Public Water Supply and Sewerage Act was carried out, the Competition Authority must follow an agreement made by Tallinna Vesi and the City of Tallinn in 2001 when deciding over the price.


Surveillance of the prices of the water service also changed with the law amendment and while earlier, the local government set the prices, then now Tallinna Vesi must request price coordination from the Competition Authority.


In February 2017, AS Tallinna Vesi lodged an appeal in cassation with the Supreme Court against a decision made by the Tallinn Circuit Court on Jan. 26, 2017, in which the second tier court dismissed the company's claim against the Competition Authority as regards to the tariff dispute. On June 20, 2017, the Supreme Court accepted the appeal for proceedings.


Tallinna Vesi and the City of Tallinn entered on Jan. 12, 2001 into a service agreement that set down the conditions of providing the water supply and sewerage services, including the tariff regime of Tallinna Vesi for 15 years. The contract was extended until 2020 in 2007. Under the terms of the agreement, Tallinna Vesi had the right to raise tariffs each year by the change in the consumer price index.


The Public Water Supply and Sewerage Act that stepped into effect in November 2010 laid the task of endorsing tariff changes on the Competition Authority. Under the law the prices of water services must be based on justified costs and cost benefits, not the consumer price index. The competition watchdog refused to give the nod to the next tariff increase and ordered Tallinna Vesi in 2011 to bring its tariffs into keeping with the law. The water company did not comply and took legal action. The debate between the Competition Authority and the water company has been going on since then.


Tallinna Vesi has also started arbitration proceedings to claim compensation for potential damages of more than 90 million euros for total losses over the lifetime of the contract until 2020. The sum includes more than 50 million euros of damage already caused by the refusal to permit tariff increases in 2011-2013 and the ongoing impact of the refusal in 2014-2020.


Tallinna Vesi revalued its claim from 90 million to 73 million euros at the end of July, and size of the claim had decreased further to 67.5 million euros by November.

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