Client: Technical Regulatory Authority

Period: 2015

Rail Baltic is an entirely new railway (the so-called Green Field project), which in the Baltic States has a total length of about 700 km, of which more than 200 km run on Estonian territory. It is therefore a very extensive construction of a new railway line. During the planning of this railway and in the course of public discussions, a legitimate question has arisen as to the obligations and possibilities of the developer (i.e., the state as the infrastructure builder) to compensate the persons affected by the restriction of the rights related to the immovables covered by the project and the occurrence of the tolerance obligation, and to compensate the accompanying effects. This analysis was carried out by Britta Pärk, Heili Püümann, Mari Haamer, Olivia Kranich, Veiko Vaske, Kaupo Lepasepp and Urmas Volens (leader of the work group) from law office SORAINEN and Janno Järve from Eesti Rakendusuuringute Keskus CentAR.

The Rail Baltic project has both direct and indirect effects on a number of immovable properties, infringing on the fundamental property rights of immovable property owners and restricting the use of land plots. Such effects may be related to the need to transfer the immovable property partially or completely from the person affected. Impacts may also include the need to tolerate infrastructure facilities or the resulting impacts/restrictions on an immovable property or in the protection zone of facilities.

The aim of the study was to analyze the obligations of the state related to the implementation of the project in compensating the negative effects on the affected persons and additional possibilities to meet the public expectation related to this compensation. Consequently, the analysis dealt with the rules applicable to the transfer of immovable property necessary for the implementation of infrastructure projects in Estonia and the international practice from the perspective of the Rail Baltic railway project.

According to the study, in order to realize a project of national importance, an immovable belonging to another person or a part thereof can be acquired in the course of a voluntary sale, expropriation procedure, or even reallotment. The study also found out what rights landowners or other people involved in the project have to claim compensation: (i) the obligation to pay damages is prescribed by law; (ii) there is an expropriation situation; and (iii) the rights of the person have been exceptionally restricted. The right to transfer property without the will of the owner can only be done for fair and immediate compensation. Compensation may not be lower than the normal value of the immovable property (market price) at the time of the decision to expropriate.

Compensation may also consist of providing other benefits to the landowner (in particular mitigation in the form of noise barriers or reallotment, etc.). The issue of compensatory measures is one of the most important issues raised in the Rail Baltic project, although compared to the previously built line objects, even fewer real properties are affected. At the same time, it must be taken into consideration that Rail Baltic is an object that will generally be built in a completely new location. As a result of the analysis, it was concluded that the current regulation does not usually provide for the compensation of the so-called subjective damages referred to by the public, and the obligation to compensate in similar situations does not arise on the basis of the Constitution or other superior acts.

Within the framework of the Rail Baltic project, the financing of additional compensatory measures and the payment of additional compensation is permitted from the state budget funds. The rules governing the use of European Union funds do not allow for one-off or long-term compensation that is not directly linked to the implementation of a project. Interviews with representatives of the administrative authorities revealed that in many cases the authorities are not aware of the possibilities offered by the law or are too involved in the current internal administrative practice – for example, the compensation often corresponds only to the market value of the real property and the loss of ownership is compensated only in cash.

The authors of the analysis consider that in a situation where only the compensation to be paid in case of expropriation or the building provided for in a plan that has already entered into force (Immovables Expropriation Act paragraph 3 section 4) is disputed, the dispute should not prevent taking possession of the property from the landowner, nor should the result of the dispute make it possible to annul the decisions in the expropriation proceedings for reasons other than a breach of procedure.

In particular, it should not be possible to annul decisions because the expropriation fee or compensation has been set too low. Such a rule is also common in the other legal systems analyzed, and in order to carry out a project comparable to Rail Baltic within a reasonable time, the authors consider that the law should be clarified in this matter.