Center to challenge illicit donation ruling in Supreme Court

The Tallinn Circuit Court decided in late October that the coalition Center Party needs to return what has been deemed an illicit donation by the party’s former campaign chief Paavo Pettai. Photo: Tairo Lutter

Yes, we will be turning to the Supreme Court in this matter, Center Party leader Jüri Ratas said. The Tallinn Circuit Court decided in late October that the coalition Center Party needs to return what has been deemed an illicit donation by the party’s former campaign chief Paavo Pettai. The ruling obligates Center to return €1.02 million minus VAT.

The new calculation will need to come from the Political Parties Financing Supervision Committee (ERJK). While no sum has been announced, Postimees’ sources suggest the amount is in the vicinity of €850,000. Center Secretary General Andre Hanimägi has admitted that the party does not have the money. Challenging the ruling in the Supreme Court buys Center time as failure to do so would have seen the circuit court ruling enter into force in five days and the party obligated to return the sum immediately.

But the years-long dispute has reached the home stretch one way or another. There are very few options still left on the table. The first is that the Supreme Court will not enter the complaint into proceedings, the circuit court ruling will take effect and Center will be obligated to return €850,000 to Pettai straight away. Should the Supreme Court decide to process the complaint, Center can either walk away without having to pay anything or still be ordered to pay Pettai the money.

It is also possible that the Supreme Court will reduce the amount that needs to be returned or find that the donation needs to be returned in full and with VAT after all.

Much-needed grace period

Turning to the Supreme Court has two major aspects for Center. First, that heads of the party really feel the circuit court made a mistake. “The case is a precedent, and I believe it could be of real interest to the Supreme Court,” Hanimägi said. The second and more tactical consideration is that the move buys Center time despite creating some additional expenses. The longer this matter is dragged out, the more time the party has to find the money.

Even though the final beneficiary is Paavo Pettai – provided Center will lose its appeal – the businessman no longer plays a role in the case. “I’m merely an onlooker by this stage. All I can do is wait,” Pettai admitted in court. The Center Party’s adversary in court is the ERJK.

This does nothing to make life easier for the party. Where Center merely up against Pettai, it could be theorized that a payment plan or some other concessions could be made. Pettai said that he offered to meet the party halfway when the dispute started a few years back but Center refused.

Compromises are off the table now. Losing in the Supreme Court would see Center obligated to return the sum immediately. The question is what will happen if Center is unable to pay.

Because the precept came from the ERJK, it is the committee’s business to monitor compliance. “If Center refuses to pay, we will fine them,” ERJK deputy head Kaarel Tarand explained. The maximum fine is €15,000 and it can be charged monthly. The committee can turn to the executive power to demand payment of the fine. “Bailiffs and corresponding procedures,” Tarand said. In other words, there is no way for Center to avoid paying the fines.

Things are more complicated when it comes to the principal debt of what is believed to be €850,000. Fines do nothing to reduce the principal amount in the case of which turning to enforcement agents is not an option for the ERJK. It is hoped that monthly fines of €15,000 will eventually motivate the party to return the sum to Pettai.

Bankruptcy avoided

The Center Party’s financial situation has improved over the last two years. Even though the party had just €86,000 to its name at the end of 2020, it managed to pay back a lot of old debts. Center has shaken the aftermath of the Savisaar era when the party owed money to virtually everyone and was basically bankrupt. Hanimägi fired half of the party’s office staff in early 2021, saving Center over €200,000 a year in salaries alone.

While Center could probably return the money in installments over a few years, the option being off the table means it would have to take out a loan or find sponsors should its appeal fail.

However, newspaper articles asking whether Center is looking at bankruptcy have been exaggerated. The party’s finances have improved. Besides, political party bankruptcies simply do not happen in Estonia. Kaarel Tarand gave examples of how difficult it is to liquidate even microscopic parties that have long since ceased to exist. How registrars are afraid to make sudden moves when an NGO has the word “party” somewhere in its name despite the latter filing no reports, holding no meetings of members or having any actual activity.

It is relatively rare for the Supreme Court to overturn circuit court rulings. A gambling man would bet against the Center Party also in this case. But while that would constitute a blow to Center, it would not be fatal. The Pettai debt is from the Savisaar era and can easily be pinned on the former chairman. But mistakes made going forward will be the responsibility of current leaders.