TALLINN - Shareholders of Baltic Rail Services, the private company that owns and controls Estonian Railways, have apparently decided that the best defense is a strong offense and are demanding that the government pay some 1 billion kroons (64 million euros) in damages for violation of contract.
Baltic Rail Services is accusing the government of violating the privatization agreement, internationally recognized accountancy standards and standards of Estonian and EU law. As an example, the company said that the shortfall in tax access fees set by the Railway Board, the industry regulator, results in some 722 million kroons in damages to the company per year.
A spokeswoman for the Economic Affairs Ministry said the court of arbitration papers arrived at the ministry last week. She refused to disclose their content, citing classified information. She did say, however, that the government has answered the claims.
Relations between BRS and the government, which own 66 percent and 34 percent respectively in Estonian Railway, have deteriorated in recent months. Recently the government tagged BRS with a hefty fine for failing to meet investment obligations pursuant to the privatization agreement.
Fed up with the situation, BRS owners, who include a number of U.S. and Estonian nationals, have begun searching for a potential buyer of the stake. The government expressed interest, but the two sides were unable to agree upon a price.
In the meantime, private investors have begun due diligence while eyeing the sale, Estonian Railway officials said last week. Communications chief Priit Koff said that thoroughness was being carried out, but he refused to provide further details. According to earlier information, Baltic Rail Services is holding talks with three potential buyers.
CEO Edward Burkhardt, who has spearheaded BRS' efforts to revamp Estonian Railways since the firm took over in 2001, said earlier that, in addition to the three selected parties, there are others interested in joining if any of the three bidders drop out.
Germany's Deutsche Bahn has reportedly expressed some desire for the asset, as has the Russian investment company Prominvestors together with the Transcare AG consultation firm. Media reports indicate that Transgrupp Invest is also interested in the holding.
