The C&NCO Act is extremely comprehensive, in keeping with the civil law principle, whereby law is codified to the greatest possible extent ( as opposed to common law systems like the US, where status tend to be more general and courts “make law” through statutory interpretation).

The C&NCO covers how parties must behave in creating an obligation, in fulfilment of the obligation, and upon its breach or if there is an impediment to fulfilment. It also governs compensation for damages, collateral obligations, transfers of claims/obligations, and the end of an obligation. These requirements will be fundamental to future business activity.

With respect to contractual obligations, the C&NCO Act defines and regulates contracts in general and how they are to be formed and concluded. It also specifically regulates most of the contracts encountered in day-to-day life and business endeavours.

For non-contractual obligations, the C&NCO governs issues such as payments where a promise has been made in the presence of others (including public contests), unauthorized dealings, unjust enrichment, wrongful damages and damages caused by defective products. Again, the impact of the legislation promises to be significant.

Even after the act is in force, it will take some time to fully understand how it will operate and the extent of the change to the legal system in Estonia. In addition to the usual tradition experienced when implementing major legislation, the Act also has a new emphasis, focusing on three principles.

a. The principle of freedom of contract - Unless specifically forbidden by statute, the parties to an agreement may agree that the C&NCO does not apply.

b. The principle of good faith - The obligor and obligee are generally required to base their behaviour toward one another on the principle of good faith. rovisions of law or custom that conflict with this principle will not be applied.

c. The principle of reasonableness - This introduces a new yardstick for assessment of the parties’ behaviour (and when assessing the circumstances, what a “reasonable person” would believe to be reasonable in the same situation will be taken into account.)

The third principle is familiar to those from common law jurisdictions but an entirely new element for the courts in Estonia.

COMPETITION LAW

The new competition Act entered into force on 1 October 2001 and brings Estonia’s competition law into conformity with EU legislation. The new Act gives the Competition Board more powers, especially its new power to prohibit mergers that restrict competition.

Prohibition on Agreements, Concerted Practices and Decisions which Restrict Competition

The Competitions Act prohibits agreements between undertakings, concerted practices and decisions by associations of undertakings which have as their object or effect the restriction of competition. Exemptions may be permitted by decision of the director General of the Competition Board or his or her deputy. Such permission will only be granted if the activity will contribute to improving the production or distribution of goods; to promoting technical or economic progress; or to protecting the environment, while allowing consumers a fair share of the resulting benefit. Further such activities must not afford the participating undertakings the possibility to eliminate competition in respect of a substantial part of the goods market.

Also, block exemptions have been pased together with the new Competition Act, respecting agreements/activities which are excluded from the strict terms of the Competition Act. They are either in respect of specific types of agreements:

- franchise agreements, - exclusive distribution agrements, - exclusive purchasing agrements and - agreements in respect of motor vehicle distribution and servicing agrements or in respect of agreements relating to specific industries/types of activity: - insurance -technology transfer agreements, - specialisation agreements and - research and development agreements.

(To be continued)

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