Sources inform "Globes" that Israel Corp. (TASE:ILCO) unit Israel Chemicals Ltd. (TASE: ICL) will soon begin arbitration proceedings with the Ministry of Finance over the royalties it pays for state concessions. Talks will focus on the minerals that Israel Chemicals extracts from the Dead Sea and the phosphates mined from the Negev.
This follows a recent instruction by Minister of Finance Yuval Steinitz to his officials to examine the issue of royalty payments by Israel Chemicals.
Regarding the Dead Sea, arbitration will focus on government claims that royalties received for minerals from Israel Chemicals' subsidiaries are lower than those agreed. The claims are based on a report by accounting firm Bar-Lev in 2006. Last month "Globes" asked the Ministry of Finance why it was taking so long to handle this issue.
The Ministry of Finance said, "In the coming days arbitration proceedings will begin between the State and the Dead Sea Works. The subject of the arbitration is the royalties paid by the Dead Sea Works and Dead Sea Bromide to the government as part of its concessionary note.
Law firm Fischer Behar Chen Well Orion will represent the government in the arbitration led by Adv. Dr. Gil Orion.
There will also be an enquiry into the royalties taken by the government for phosphates mined in the Negev by Israel Chemicals.
Sources close to the issue say that Israel Chemicals will claim the government has reneged on its agreement to build an appropriate infrastructure for transporting the minerals including a rail link to Eilat.
The source said, "If the Ministry of Finance demands that Israel Chemicals pays the state royalties retroactively then Israel Chemicals can legitimately come and demand the state build the infrastructure it committed to as part of the concession note and must honor it by building a railway line from Eilat to the Dead Sea.
An Israel Chemicals spokesman declined to comment but told "Globes," "All activities are carried out according to the law."
On the TASE today, Israel Chemicals share price fell 2.55% to NIS 51.55, while Israel Corp.'s share price fell 1.3% to NIS 3,420.
Published by Globes, Israel business news - www.globes-online.com - on September 27, 2010
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