This issue is significant in that it highlights a critical delay in Estonia's adoption of the EU competition directive, which was due in 2021. The delay has already resulted in a €600 daily fine for the state, with the potential for this to increase tenfold as the European Court reviews the case.

Originally, the government proposed a novel administrative process for handling competition violations, but Justice Minister Liisa-Ly Pakosta (Eesti 200) has shifted the focus onto simpler misdemeanor proceedings, citing efficiency and alignment with existing systems. The controversy highlights the challenges of legal reform, institutional coordination, and the broader economic and political impacts of unmet EU obligations.

While the current Reform-SDE-Eesti 200 coalition partners initially agreed to introduce a new administrative procedure for handling violations, a cabinet reshuffle following the change in prime minister earlier this year, and differing opinions on legal aspects, have stalled progress.

All at the same time, Estonia continues to have to pay a €600 daily fine for failing to adopt the EU's directive on competition law—with the risk of this penalty rising.

Riigikogu committee chair: Delay was inevitable

Earlier this year, the coalition partners came up with an administrative procedure to handle Competition Act violations, aiming to create a new process under Estonian law. In February, following years of debate, the government submitted a bill to the Riigikogu which would allow administrative courts to impose fines. The bill passed its first reading in April but has since stalled.

Jaak Aab (SDE), Chair of the Riigikogu's Economic Affairs Committee and a former government minister, noted that this delay was foreseeable given the need for substantial changes to administrative court procedures.

The original proposal aimed to empower the Competition Authority to impose administrative fines. However, the government opted for a more complex solution, involving the first-tier administrative courts, and requiring procedural reforms. Ministry of Justice officials confirmed in May that clarifications would be proposed by autumn.

New justice minister critical of duplication

The July government reshuffle brought significant changes. While the coalition partners remained the same, the Ministry of Justice portfolio passed to Eesti 200's Liisa-Ly Pakosta (along with the digital affairs portfolio).

Pakosta has been skeptical about administrative fines and critical of the duplication of processes under the current bill, saying: "If we want to have another court in addition to the [second-tier] circuit court, which has so far protected individuals from excessive state overreach but would now impose fines on behalf of said state, we would need to establish a separate court procedure which fully duplicates the existing process of imposing fines at the circuit courts."

In August, Minister Pakosta presented two alternative versions of the bill. One mirrored the current proposal but redirected fine decisions to district courts. The other suggested handling competition violations through misdemeanor proceedings, which she called "the most economical and efficient way to achieve fairness for Estonian consumers."

Business also prefers competition violations be misdemeanors

Stakeholders are now divided on how to proceed. Jaak Aab stressed that substantive changes to a government-initiated bill require government approval, while MP Mario Kadastik (Reform) acknowledged that if a new bill ensues as a result of Pakosta's amendments, "the entire corresponding procedure must be followed, along with all the coordination."

Kadastik is steering the proceedings of the bill through the economic affairs committee.

Pakosta defended the misdemeanor approach noted above, stating it aligns with EU practices on data protection and financial supervision. She argued: "The misdemeanor procedure is an appropriate method," citing the European Commission's support due to its non-criminal nature, which complies with the competition law directive.

Business lobby groups and the Supreme Court have deemed both misdemeanor and administrative procedures suitable, though businesses favor misdemeanor proceedings due to their claimed simplicity and efficiency.

EU fines could rise tenfold

The Riigikogu Economic Affairs Committee continues to debate the bill's future.

Kadastik noted that implementing acts could be introduced during the bill's second reading, adding consensus among coalition partners remains nonetheless essential. Pakosta expressed confidence in her amendments, saying: "All the necessary consultations can be handled by the Riigikogu Economic Affairs Committee."

However, some officials warn that procedural changes could require at least a year of preparation. Aab stressed the urgency, highlighting the potential for Estonia's daily fines to increase tenfold if the European Court rules against the government.

Estonia's competition law reform faces delays due to political and procedural hurdles, with mounting penalties urging swift resolution despite legal and political challenges.

In 2014, the European Parliament and European Council issued a joint directive on "certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union." EU competition law aims to promote fair competition in the Single Market by, for instance, preventing cartels, excessive monopolies, and unlawful state aid.

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