Court rejects energy cos NIS 100m royalties overpayment claim

Tamar rig credit: PR
Tamar rig credit: PR

"Globes" asks why there was a blanket ban on publication of the case's proceedings despite the huge interest to the public.

The question of how much money Israel would earn from the discovery of natural gas in its economic waters was at the center of a heated public debate. The royalties were indeed only one part of the story, but the price tag of this part is not insignificant. In 2022 the state earned NIS 1.7 billion from natural gas royalties and the overall amount since the discovery of the gas reserves is NIS 20 billion. This money, naturally, is public money.

Yet, despite the importance of the matter, legal proceedings concerning the level of the royalties in question and the mechanism of their calculation was conducted entirely under a blanket publication ban. The ruling was also withheld and was permitted to be published only 14 months after it was handed down.

The principle practiced in Israel is that of public discussion and that everything is open, unless there is a good reason to deviate from it. In practice, there is a long distance between that statement and reality, and many procedures are conducted behind closed doors. The State Comptroller's report from March 2022 indicated that in one third of the cases opened in 2017-2019, a blanket publication ban was imposed, including in relation to their very management. In only one third of the cases that were kept confidential, the report revealed, the confidentiality was granted in accordance with the obligation imposed by the court. More often than not, the permit was completely hidden due to a concrete detail that needed to be hidden.

As a confidential file, it cannot be viewed at all. A search for it on the "Net Law" system brings up the result "error," which means that it is not even possible to know that it is a case that exists but has been protected. The decision on the publication ban is also confidential and the case does not appear on the discussion board either. If an appeal is filed to the Supreme Court in a confidential case, it automatically becomes confidential there as well, and the parties are marked "anonymous."

The reason for this is precisely to allow publicity. Unlike court hearings, Supreme Court rulings are also published in confidential issues, so the preference is often not to risk revealing personal details. The problem, of course, is that discretion is not exercised when the case is opened, and that's how it happens that even corporations, in purely commercial disputes, become anonymous. For it to change, someone has to trigger it. In most cases this does not happen.

In order for a case to be confidential, it must be counted among the exceptions to the principle of public hearing that appear in the law, and in most cases the court has the discretion to decide whether to protect and how much to protect. The exceptions include, for example, state security, foreign relations, sexual offenses and also "trade secret protection", as in the gas royalties' case

They asked for closed doors

In 2015, the gas exploration and production companies filed a lawsuit against the Ministry of Energy requesting the return of royalties that they claimed they had overpaid for the years 2013-2015. During the preliminary proceedings in the case, Chevron Mediterranean Ltd., NewMed Energy and Avner Oil submitted a request to conduct the proceedings behind closed doors, claiming that otherwise their commercial secrets would be exposed.

The Jerusalem District Attorney's Office, which represented the state through Advs. Sharon Avni and Meni Menachem, objected. Among its reasons were arguments of principle. it was claimed that this is an issue of distinct public importance, and that conducting the hearing in a confidential manner would prevent exposure to the public.

Judge Rafael Yaakobi, went with the companies and ruled the case would be conducted under a publication ban, and it would be possible to apply for its removal at the end of the procedure. The attorney's office did not give up and petitioned the Supreme Court but Justice David Mintz rejected the request.

At the same time, he made it clear that "even if the entire hearing will take place behind closed doors, this does not necessarily mean that the publication ban will continue even after the verdict is handed down." He later added: "There is no doubt that when the time comes, the court will be required to give its opinion on this matter as well."

This decision was made in December 2017. Until the verdict, in November 2022, seven years after the procedure began, the case remained confidential, and was still kept secret over a year later.

Judge Yaakobi retired a short while after the ruling was handed down. In December 2022 the Jerusalem District Attorney filed a request to remove the publication ban, which was heard by Judge Nimrod Felix, who did not know the case. He ruled that in February the ruling would be published and the sides should agree on a text to release but they struggled to agree.

The companies wanted to reveal a lot; The Jerusalem Attorney's office, which initially wanted to allow publication of the entire proceedings, agreed to only a limited publication of the ruling only.

When the case was finally scheduled for hearing, the war broke out, and in the end the parties reached an agreed on a text, which was the one published to the public. The procedure itself and the decisions made in it remain confidential.

Lawyers not involved in the matter told "Globes" that even in relation to cases that are completely closed and in which the parties are fighting over the wording, a period of time of over a year when no one knows that a verdict has been given is extremely unusual, even in circumstances where the judge hearing the case has changed.

Meanwhile, an appeal against the verdict has been pending in the Supreme Court since February 2022 - confidential of course. The companies are referred to anonymously. What trade secrets would be revealed by the very knowledge that there is a debate about royalties?

The energy exploration and production companies, through their lawyers, preferred not to comment on the matter.

The Israeli Judicial Authority said, "The Judicial Authority takes very seriously the State Comptroller's report regarding the non-publication of court cases due to a confidential detail that affects the confidentiality of the entire case, and is working in several ways to improve the system and bring about as much publication as possible of rulings and decisions by completing the confidential details in advance.

"This is a complex and wide-ranging case in which a claim for financial and declaratory easing was discussed that several gas companies had filed against the state to recover royalties for natural gas production. The procedure was conducted under secrecy for about eight years, during which the publication ban issue was discussed both by the District Court and Supreme Court.

"The state's request to publish the ruling was filed after the judicial proceedings ended, and the judge hearing the case retired. The request was forwarded to a new judge who, after about two months, gave a decision according to which a copy of the verdict should be published omitting confidential details, including trade secrets, and also ordered that an appropriate version be submitted to the court within 20 days. In the absence of agreement between the parties, a date was set for the hearing, which was canceled due to the war, and before it was rescheduled, the parties announced that they had reached an agreed version. As mentioned, the delay in publishing a permissible version of the judgment was mainly due to the lack of agreement between the parties.

"Regarding the petition pending in the Supreme Court: at the time of the opening of the proceedings in the Supreme Court (February 6, 2023), the case was classified in the District Court as 'confidential to the public and open to the parties'. Accordingly, the classification of the case was adjusted in the Supreme Court as well. Despite this, and as is the case according to most Supreme Court decisions and rulings on cases conducted under confidentiality in the courts are published on the website of the Supreme Court, while keeping the names of the parties confidential, and this for reasons of publicity and transparency. This is also done in the current case."

Published by Globes, Israel business news - - on February 5, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Tamar rig credit: PR
Tamar rig credit: PR
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