Estonia

Estonia Corruption Report

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Snapshot

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Corruption is generally not a significant 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. Adequate 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 are characterized by high levels of integrity and transparency. 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: May 2018
GAN Integrity

Judicial System

European_Commission.svg.pngThere is a very low risk of corruption when dealing with Estonia’s judiciary. The judiciary is independent (ICS 2017). Only around one in ten businesses perceive the independence of the judiciary as fairly or very bad (JS 2017). Only about one in seven Estonians perceive the judiciary as corrupt (Eurobarometer 2017). Bribery in return for favorable judicial decisions is described as rare (GCR 2015-2016). Nevertheless, companies do not express sufficient confidence in the efficiency of the legal framework pertaining to settling disputes and challenging regulations (GCR 2017-2018). Investment disputes involving foreign companies are rare (ICS 2017). Enforcing a contract in Estonia takes less time than the average among OECD high income countries (DB 2018).

The Arbitration Court of the Estonian Chamber of Commerce and Industry is responsible for settling commercial disputes. Estonia is a 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 2017-2018). A fifth of Estonians believe corruption is widespread in the police force (Eurobarometer 2017). The government of Estonia has established effective mechanisms to detect and punish abuse of office and corruption within the police force (HRR 2017).

Public Services

Estonia’s public services sector carries a moderate risk of corruption. No companies expect to give gifts in order to obtain a license, and irregular payments are reportedly rare (GCR 2015-2016). Notwithstanding, another survey indicates that two out of five companies agree that bribery and the use of connections is the easiest way to obtain public services (Flash Eurobarometer 2017). Likewise, two out of five Estonians believe corruption is common among officials issuing business permits (Eurobarometer 2017). Only one in five businesses indicate they consider the complexity of administrative procedures a problem (Flash Eurobarometer 2017). The regulatory framework in Estonia is transparent (ICS 2017; SGI 2017). Starting a business is less costly and less time consuming than the regional average, as is dealing with construction permits (DB 2018).

Most corruption cases discovered in Estonia pertain to state agencies (including inspectorates, boards, and other government functions), while corruption cases at the municipal level appear to be declining (SGI 2017). In one corruption case, the Tallinn Mayor Edgar Savisaar was accused of accepting several bribes, gifts, and favors for himself and on behalf of his party, adding up to a total value of EUR hundreds of thousands. 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). Savisaar’s trial has been postponed on several occasions as the defendant’s health condition has prevented him from appearing in court (ERR News, Oct. 2017, ERR News, Feb. 2018).

Land Administration

There is a low corruption risk for companies dealing with the land administration. No businesses report having been asked for a bribe in the process of obtaining a building permit (Flash Eurobaromter 2017). However, half of all Estonians consider officials issuing building permits to be corrupt (Eurobarometer 2017). Companies’ property is protected by Estonian law, and the system of property rights is stable and equitable (ICS 2017). Accordingly, companies have expressed trust in the ability of the government to uphold property rights (GCR 2017-2018). Registering property is less costly and less time-consuming than the regional average (DB 2018).

In one 2014 corruption 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 it available for development. They received suspended sentences 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). Reiljan was also found guilty of arranging a bribe to facilitate a construction permit in a separate case; he was fined EUR 33,000, but his earlier conditional prison sentence remains unenforced since he cooperated with the prosecutor (ERR News, Oct. 2017).

Tax Administration

The tax administration in Estonia carries a low risk of corruption for businesses. Companies report that demands for bribes and irregular payments when paying taxes are very uncommon (GCR 2015-2016). A quarter of businesses considers tax fraud or non-payment of VAT a problem in Estonia (Flash Eurobarometer 2017). Roughly one in seven Estonians consider the tax authorities to be corrupt, but no respondents reported paying a bribe (Eurobarometer 2017). The Estonian tax regime is considered to be among the simplest in the world (ICS 2017; SGI 2017).

Paying taxes is more costly on average compared to other OECD countries, but the number of procedures and time required is lower (DB 2018).

Customs Administration

There is a moderate risk of corruption when interacting with the Estonian customs administration. Companies indicate that bribes and irregular payments during customs processes are very uncommon (GETR 2016). Companies express satisfaction with the efficiency and time-predictability of customs processes (GETR 2016). The time required to import to and export from Estonia is lower compared to OECD countries (DB 2018).

Public Procurement

Companies may contend with moderate risks when venturing into Estonia’s public procurement sector. Instances of favoritism by public officials are not uncommon due to the small size of Estonia’s business and commercial community (GCR 2017-2018, ICS 2017). Diversion of public funds is seen as fairly uncommon (GCR 2017-2018). About a third of companies indicate that they perceive corruption as common in public procurement processes managed by national, regional, and local authorities (Flash Eurobarometer 2017). Also about a third of surveyed companies believe that corruption has prevented them from winning a contract (Flash Eurobarometer 2017). Other corruption risks in procurement include conflict of interest in the evaluation of bids, collusive bidding and tailor-made specifications for particular companies, but it should be noted that within the European Union, Estonian companies perceive these practices to be less common than most of their European peers (Flash Eurobarometer 2017). 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). Companies are, nonetheless, recommended to use a specialized public procurement due diligence tool to mitigate the corruption risks related to public procurement in Estonia.

Some of the main problems with public procurement identified by the Estonian Public Procurement and State Aid Department are failure to organize procurement procedures, using preconditions without prior publication of contract notice, and using award criteria designed to limit the number of tenderers (EPPSAD, Jun. 2017). Opentender’s data set shows that a large share of tenders only receive a single bid, and tenders are frequently advertised for only a short period of time (Opentender 2017).

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. Ossinovski will stand trial in Estonia in 2018 (ERR News, Jan. 2018).

Legislation

According to the Anti-Corruption Act and the Penal Code of Estonia, bribery, influence peddling, abuse of office and bribery of foreign officials are criminal offenses. The government effectively applies these laws in practice (HRR 2017). Bribery and abuse are punishable by imprisonment of up to five years and ten years for repeat offenders. Facilitation payments are also a criminal offense in Estonia. Companies caught committing acts of bribery face fines and possible dissolution. Giving and receiving gifts in connection with services is criminalized under the Penal Code and can incur a fine and/or imprisonment of up to 5 years (ICS 2017). Private bribery is criminalized (ICS 2017). 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), and there are no sanctions specified for violations of the regulations, nor is there a monitoring body in place (EUROPAM 2016). Estonia has strict rules on political donations and financing (EUROPAM 2016). Public officials and civil servants are subject to asset disclosure, and there are criminal and administrative sanctions available for non-compliance with the requirements (HRR 2017; EUROPAM 2016).

The Estonian government approved the Anti-Corruption Strategy 2013-2020. 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. Estonia is a signatory to the OECD Anti-Bribery Convention and the United Nations Convention Against Corruption.

Civil Society

The constitution of Estonia provides for freedom of speech and of the press, and the government respects these rights in practice (HRR 2017). The media express a great variety of opinions without any government interference or influence (FotP 2017). Internet freedom is not restricted (HRR 2017), and the media environment is considered ‘free’ (FotP 2017).

Estonia has an active civil society (SGI 2017; FitW 2016) and the government generally respects the rights to assembly and association (HRR 2017). Civil society organizations (CSOs) have increased their capacity to draft sound policy proposals (SGI 2017). However, most CSOs are small and have limited financial and human resources (SGI 2017).

Sources

The site provides a wealth of practical anti-corruption resources to support a solid preventative approach, covering subject such as processes, due diligence, practical tools to support compliance program implementation and also compliance and integrity training.

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