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Majority investors of Baltic Rail Services (BRS) recently notified the government of Estonia that the country is violating bilateral investment treaties with the Netherlands and United States. In 2001, BRS purchased of a majority stake in Estonian national railway Eesti Raudtee.

Officials at the Emerging Europe Infrastructure Fund, Rail World Estonia and Railroad Development Corp. claim Estonian officials are violating privatization agreements and understandings, internationally accepted principals of accounting, regulated utility ratemaking, and Estonian and European Union laws.

"The track access charges promulgated by the Railway Inspectorate are far below the sustainable long-term costs of accommodating passenger and freight traffic," investors said in a letter sent to the Estonian government.

Unless the government negotiates a resolution to the disputes, the investors plan to seek binding arbitration through which they will submit a claim for monetary damages against Estonia.

"I am disappointed in this turn of events occurring in a country where much progress has been made in the last 15 years in adopting international standards of protection of private property, free markets and liberal economic institutions," said Edward Burkhardt, chairman of BRS’ supervisory board, in a prepared statement. "Estonia will unfortunately have to prove its adherence to the basic rights of investors under the law, which may make other international investors cautious about the local business environment."