Note 3. Contingent liability regarding the tariff risk

On 10^th October 2011 the Estonian Competition Authority (CA) issued a prescript for the Company to reduce the tariffs of water and sewerage services in Tallinn by 29%. The Company disagrees with the position of the CA and has turned to the Estonian Administrative Court disputing the prescription that seeks to break the privatization contract. Should the Court uphold the CA's position the privatization contract could cease to be the basis for the tariffs of water and sewerage services in Tallinn. On 5^th June 2015 Tallinn Administrative Court dismissed AS Tallinna Vesi’s complaint in tariff dispute. AS Tallinna Vesi appealed the decision in the Circuit Court. The length of the court process and the decision are not within the Company's control.

The management has evaluated the amount of the contingent liability as of 31 December 2015 arising from the potential claims against the Company if the Court ruling would support the CA’s position. As result of this, the outflow of economic benefits could be up to EUR 42.8 million (31 December 2014: EUR 40.1 million) the part that CA considers to be excessively charged from the clients going back three years, and which could be claimed within 10 years of the final judgement of the courts.