The Republic of Estonia is the northernmost of the three Baltic States, situated directly south of Finland. Estonia regained its independence peacefully in 1991. The period between 1918 and 1940 is often referred to as the first period of independence, because during that period Estonia was a free and democratic republic. During the period that lasted from 1944 to 1991, the Soviet Union forcibly annexed, and exercised control and authority over the territory. However, based upon the principle of legal continuity of the original Estonian state, Independence Day is still celebrated on February 24th, the date of initial independence from Russia in 1918.
Economic reforms and growth pave way to EU membership Estonia’s political system has served it well and the pace of legal reform in Estonia has been quite rapid. The strong political system and expeditious legal reforms have paid significant dividends. Growth of the Estonian economy has generally been positive since 1995. Real growth was approximately 10.4 percent in 1997. As a result of the Southeast Asian crisis in the last quarter of 1997 and the Russian crash soon thereafter, economic growth slowed to 5 percent in 1998 and dipped to a negative growth rate of 0.7 percent in 1999. However, recovery was relatively rapid, with 6.9% growth rate in 2000 and approximately 4.9% in 2001. As of November 2001, Standard & Poor’s has upgraded Estonia’s sovereign rating to A-. The short-term foreign currency rating and local currency rating were affirmed at A-2, and the long-term currency rating at A-. The outlook of long-term local currency rating was upgraded to positive and the outlook of other ratings is stable.
Estonia has experienced huge amounts of foreign investment for a small country. According to the Bank of Estonia, the country received over $2.9 billion USD in foreign direct investment between 1993 and the end of 1999, making Estonia one of the leading recipients of foreign direct investment per capita in Central and Eastern Europe. It should be emphasized that these figures refer to investment, not aid. This large amount of investment and rapid growth has been due, in no small part, to the significant legal reforms which have taken place in Estonia since regaining independence in 1991. In addition to its quantifiable economic progress, Estonia has made significant international political gains. In 1997, the European Union chose Estonia for placement on the so-called „short list“ of aspirant members to the European Union. This list included only Poland, Hungary, the Czech Republic, Slovenia and Cyprus in addition to Estonia. Accordingly, Estonia is among the frontrunners as a candidate for accession. Negotiations for accession commenced in March 1998 and are now well underway. There are 31 chapters of acquis under discussion in the negotiation process. As of the beginning of 2002, Estonia had closed 20 chapters, 9 are under discussion and 2 have not yet been discussed (Information from the Ministry of Foreign Affairs press release December 3, 2001).
On February 1, 1998 a Europe Agreement (Association Agreement) between Estonia and the European Union came into force. This agreement represented a significant step towards Estonia becoming a member of the European Union. The aim of the agreement is stated as “Recognizing the fact that Estonia’s ultimate objective is to become a member of the European Union and that association through this Agreement will, in the view of the Parties, help to achieve this objective.” The purpose of the Europe agreement is also “to provide an appropriate framework for the gradual integration of Estonia into the European Union.” The Europe Agreement has affected and will continue to affect many fields of Estonian law. These areas include the laws of international trade, business organizations, labour, transport, commerce, telecommunications, energy, the environment and many other fields. Estonian law will continue to change in significant ways during the next few years in order to comply with the agreement. As a result, this brochure will both discuss the current state of Estonian law and highlight, when appropriate, the sections of Estonian law that are likely to change in the very near future.