Tallinn District Court confirmed that tariffs part of the Services Agreement is a public law agreement
On 31.05.2012 the Tallinn District Court issued a ruling, deeming the tariffs part of the Services Agreement signed in 2001 as part of AS Tallinna Vesi’s privatization package of agreements to be an administrative (public law) agreement. The District court has thereby ruled in favour of AS Tallina Vesi, overturning the Competition Authority’s claim that the tariff mechanism specified in the Services Agreement is allegedly a civil law agreement that the company cannot rely on in an administrative court.
The CEO of AS Tallinna Vesi, Ian Plenderleith, expressed his content with the issued ruling. „The ruling of the District Court extends more legal protection to the Services Agreement and the tariff mechanism established by the City of Tallinn at the time of privatization. This ruling is also very welcome in the interests of improved regulation and in order to ensure greater regulatory transparency and open communication with all stakeholders,“ he explained.
Tallinn District Court stated that the tariffs part of the Services Agreement was an administrative contract because the contract was concluded to provide a public (water and waste water) supply service securing which is a public law obligation of the City of Tallinn. The court concluded that when municipalities regulate the water and wastewater sector, this public law relationship involves imposing tariffs for the service, and the City of Tallinn was entitled to regulate pricing of the service via an administrative (public law) agreement instead of an administrative act.
The Competition Authority alleged that the tariffs charged by AS Tallinna Vesi are not in accordance with the law, and based solely on its own unsubstantiated opinion that the agreement stipulating the tariff model is an illegal civil agreement. The court has indicated that besides the law, also the Services Agreement as a public law agreement regulates the tariffs charged by AS Tallinna Vesi.
This now means that under the Administrative Procedure Act (APA) unilateral changes of administrative agreements may only happen if this is absolutely necessary to avoid severe damage to a predominant public interest. Public law agreements cannot be changed by virtue of simply changing a law (PWSSA). To date the Competition Authority has not presented any verifiable evidence to demonstrate that service quality standards would equal ASTV’s current standards for lower tariffs had it regulated the Company since 2001.
While the company has done nothing but fulfill a valid public law agreement, unilaterally discarding this agreement when issuing a negative tariff decision could potentially be construed as a gross breach of procedure. The ruling validates the company’s complaint to the courts, although the Tallinn District Court has still instructed the Tallinn Administrative Court to assess whether the Services Agreement is binding on the Competition Authority. Should the Competition Authority fail to prove that the Services Agreement was against a predominant public interest, then the Competition Authority will either have to follow the contract or the company will have a compensation claim against the state. Should the Competition Authority be able to prove that the Services Agreement severely damages a predominant public interest, the company will have to claim compensation.
Ian Plenderleith says that the Competition Authority cannot continue to ignore the Company’s tariff applications made on the basis of the long-term privatisation agreement. “The Competition Authority cannot discard this agreement from all the evidence submitted, whilst trying to force the Company to use the Competition Authority´s own unsubstantiated recommended internal guidelines,“ he added.
This latter point is further re-enforced by the Tallinn District Court ruling of 2nd March 2012 in which it clearly highlighted that the Competition Authority could not use its own recommended internal guidelines as a proxy for the PWSSA.
Tallinn District Court remanded the case back for the review of the Tallinn Administrative Court that now has to fully consider all evidence submitted in the tariffs dispute, including the public law agreement. However, under the APA, parties to a public law agreement that has been unilaterally amended are entitled to compensation of proprietary damages by the relevant public authority.
The Competition Authority has 15 calendar days until 15.06.2012 to appeal the ruling. Mariliis Mia Topp
Head of Communications
AS Tallinna Vesi
62 62 275
mariliis.topp@tvesi.ee
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