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Estonia: Challenges of Large-Scale Construction Projects in Estonia

Estonia: Challenges of Large-Scale Construction Projects in Estonia

Issue 11.2
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In a compact nation like Estonia, the prominence of construction projects can swiftly transcend local interests and become matters of national interest. The escalation of public attention toward large-scale construction projects invites heightened scrutiny by different interest groups. Notably, several recent projects have become entangled in legal disputes, profoundly impacting anticipated timelines and financial forecasts. This article aims to delineate emerging patterns from recent cases and offer recommendations aimed at preventing and avoiding legal contentions.

In 2020, the Supreme Court partially upheld appeals by environmental groups against the Rail Baltic route’s spatial plans in Parnu County, annulling sections impacting the Luitemaa bird area due to a lack of adequate environmental impact assessment. It emphasized that a specific environmental assessment procedure for Natura 2000 areas is necessary when the impact on protected areas cannot be ruled out. The Supreme Court also referred to a possibility that when overriding public interests prevails, either the Government of the Republic of Estonia or the European Commission (depending on the decision-making authority, contingent upon the priority of the affected species or habitats) may, under exceptional circumstances, authorize activities that would impact such areas by implementing compensation measures.

Planning procedures continued and initial results were published at the end of 2023. As a result, the initial route was changed, giving confirmation that deficiencies pointed out by the Supreme Court were not merely formal, and more in-depth analysis confirmed the need to change the initial route. It was concluded that the negative effects of constructing a new railway corridor on species protected at a pan-European level have not been ruled out, but that does not necessarily preclude the implementation of the project as negative impacts can be compensated.

Under Estonian law, in order to actually start construction, in addition to relevant planning documentation, a construction permit is required. Until recent years, the overall approach has been that key environmental aspects are covered in the course of planning procedures and, once relevant planning documentation is enacted, the construction is more or less considered to have received a green light.

When a construction permit is challenged in court, it is rare for its validity to be suspended during a court dispute. As time plays a key role in large-scale construction projects and due to the feeling that enacted planning documentation provides sufficient guarantees for the project to come to life, developers often take the risk of starting construction during ongoing court disputes.

However, environmental matters do not necessarily arise only in the course of planning procedures. At the end of 2023, another large-scale construction project was put on hold when the Supreme Court annulled the construction permit for a shale oil plant. Regardless of the fact that potential environmental impacts were assessed in the course of planning procedures, the Supreme Court concluded that the Estonian Building Code requires that the potential environmental impacts of the construction work must also be assessed in the course of building permit proceedings. Since the construction permit was annulled, the proceedings were reinstated. The annulment means that building of the plant cannot continue. Since the construction of the plant is underway and the future of the incomplete construction is uncertain, the Supreme Court has set a two-month deadline during which exceptional construction work may be carried out to ensure the safety and preservation of the incomplete construction, which is a precedent in itself – previously, the preservation period was not separately regulated.

Both of these examples indicate that during planning and construction permit proceedings, environmental aspects are not to be taken lightly. The tendency for large-scale construction projects was to avoid or downplay environmental issues as much as possible. Now, both projects face at least two to three years of delay in development.

As key takeaways from these experiences, firstly, unlike previous understandings, planning procedures are not the only stage where environmental matters must be considered – even if a planning document along with relevant environmental impact assessment is enacted and in place, it does not necessarily mean the project has received a green light.

Secondly, these examples show that in cases where there are environmentally sensitive topics, it might be more feasible to tackle these issues head-on from the start. As the experience of the Rail Baltic project implies, it can also sometimes be more feasible to acknowledge the environmental impacts and foresee mitigative measures from the very beginning.

By Aivar Taro, Partner, and Sandra Sillaots, Senior Associate, Cobalt Estonia

This article was originally published in Issue 11.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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