What will Noble Energy do if the gas framework is never approved? The answer becomes more relevant each day as Prime Minister Benjamin Netanyahu keeps sinking deeper into the quicksand from which he has been trying to rescue the agreement.
Even if the likelihood of an international arbitration suit continues to grow, it remains the measure of last resort for Noble.
Noble has been preparing in recent years for an unsavory outcome which pushes them to seek international arbitration. The decision to prepare a legal option was taken by Noble following an in-house process that occurred in the wake of the increased taxes recommended by the Sheshinski Committee. The central claim being that the state had reneged on a promise to the firm that the tax rates for the Tamar reservoir are not increased.
During the Knesset hearings over the legislation to raise the tax levels, Noble representatives made clear threats over the filing of a claim through international arbitration but it was never served.
Sources close to Noble previously claimed that certain voices regretted that decision and believed that if the US energy company had served suit during the Sheshinski proceedings, Israel would be reluctant to amend its regulations like it has in the past for example, placing a limits on export levels.
Noble was formerly set on the notion that any legal proceeding would have irreversible consequences for its ties to Israel, which are based in mutual interests and a long-term strategic partnership. However, Israeli sources in contact with Noble claim that they have felt the company toughened its position since its CEO was replaced at the end of last year.
Noble has two major advantages if it were to seek international arbitration.
First, Noble enjoys particularly powerful privileges as a foreign investor in the Israeli market. Noble Energy, it is widely known, is an American firm based in Houston. As such, the government recognized Noble as an American company.
The state's position, based on detailed opinions of highly-respected jurists, is that American investors in Israel are protected by a trade pact from 1951, which provides investors relatively weak legal protections.
But the Ministry of Justice slipped up and did not notice that, technically, Noble operates in Israel under its subsidiary Noble Energy Mediterranean listed in Cyprus.
The rights of Cypriot investors in Israel and Israeli investors in Cyprus are protected by a treaty signed between the states in 1998. That treaty provides investors with much more powerful protections than the pact with the US, like the MFN clause which promises each Cypriot investor in Israel the best possible defense that Israeli has agreed to in any international treaty.
The second advantage Noble carries is Israel's pathetic record in international courts. Much like the traditional charge at the Eurovision Song Content, Israelis are convinced that the "judges are against us" in arbitration procedures as well.
This concern is based partly on the fact that Israel has never won an international suit. So far, Israel has badly fared in two major arbitration courts; the cases against Egypt and Iran show that, above all, Israel tries to avoid arriving at arbitration because it is deeply concerned it will lose.
If Noble does choose to press ahead with the court option, its suit will be based on the claim that the regulatory changes undertaken by the Israeli government severely damaged the financial value of the firm's holdings in the gas reservoirs.
An Israeli source that looked at the legal proceedings told "Globes" that Noble estimated the financial damage at "many billions of dollars."
It is tough to guess at the likelihood the suit would succeed. "You know how you'll enter the courthouse, but you can never tell how you'll be when you leave," said Adv. David Kornbluth, formerly of the Ministry of Foreign Affairs' legal department, in an interview today with Israel Army Radio.
Published by Globes [online], Israel business news - www.globes-online.com - on September 7, 2015
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