WE REPORTED last month that investors in Baltic Rail Services, the majority shareholder in Eesti Raudtee, had sent a Notice of Dispute to the Estonian government claiming a breach of bilateral investment treaties (RG 7.05 p394).
BRS was seeking to initiate negotiations with the government, and failing this, it intended to take the dispute to arbitration by the International Centre for the Settlement of Investment Disputes.
All looked promising when BRS closed the deal to take over Estonian Railways in 2001, and the outlook was entirely positive as EVR’s motive power fleet was replaced with GE-built C36-7s and investments were made to raise capacity (RG 3.02 p141). Trouble started when a law was passed in November 2003 requiring 100% of track capacity, other than that needed for passenger services, to be made available to third-party operators; it had previously been 20%.
Worse was to follow. On April 25 2005 new track access charges were announced by the Estonian Railway Inspectorate which BRS says are ’substantially less than the tariffs that are required to cover EVR’s costs’. The charges not only ’deny the investors any return on their investment, they threaten the financial viability of EVR’. As an example, charges proposed for passenger services contribute only about 1% of total infrastructure costs, although they account for 25% of total train-km.
