Ehud Olmert to mediate Georgian defense deals dispute

Ehud Olmert Photo; Noam Moskovich
Ehud Olmert Photo; Noam Moskovich

The former Israeli prime minister will mediate in a dispute between former Tel Aviv Mayor Roni Milo and a Georgian company.

Former Israeli Prime Minister Ehud Olmert will mediate a dispute between former Tel Aviv Mayor Roni Milo and a Georgian company that alleges that Milo owes it money from sensitive defense deals worth millions of shekels between Israeli defense industries and the Georgian government, sources inform "Globes."

The dispute between the Georgian company, Chindze, and Milo has been heard in the Tel Aviv District Court before Judge Michal Amit-Anisman. During the hearing of the case, the judge recently encouraged Milo and the Georgian company to halt the court case and try to reach agreements without presentation of evidence and a trial verdict. It is believed that one of the reasons for referring the parties to mediation was the sensitivity of the deals underlying the dispute. The judge wrote on May 1, 2018, "It is proposed that the parties conduct talks aimed at ending the dispute out of court in the spirit of what was said during the hearing."

Difficult task

The Georgian company, represented by Adv. Ilan Sofer, and Milo, represented by Adv. Ram Caspi, got the Court's message and agreed to mediation and chose the most senior figure available to undertake the difficult task.

Olmert was released from Maasiyahu Prison on July 2, 2017 after serving 16 months for bribery, fraud, breach of trust, and other offenses in the Holyland Hotel and Talansky (envelopes of money) affairs. This did not prevent both sides from agreeing to accept Olmert as a mediator between them, in view of their acquaintance with him and his abilities and experience.

Olmert and Milo are former political allies and members of the group referred as the "Likud princes" - the generation that arose in the Likud during the 1970s and attained positions of influence in the party and the state. Milo served as minister of police and minister of environmental protection, while Olmert became prime minister. They were both mayors: Olmert in Jerusalem and Milo in Tel Aviv. Their paths crossed many times afterwards. Among other things, as prime minister, Olmert supported Milo's candidacy for chairperson of the Israel Electric Corporation (IEC) (TASE: ELEC.B22) board of directors.

Olmert has no formal experience as a legal mediator, but he is a lawyer and jurist and obviously has a great deal of experience in negotiation. He is also regarded as someone who understands other people and is able to reconcile people and mediate between them. In addition, as prime minister Olmert dealt with many security matters and is familiar with these issues.

After resigning as prime minister, Olmert was a partner of late Mossad chief Meir Dagan and former IDF Chief of Staff Dan Halutz in a commercial company. He also took part in mediating a defense deal between an Israeli company owned by a US fund and the government of Kazakhstan. Following Olmert's 2014 conviction, however, he was barred from mediating the deal by the US.

The lawsuit against Milo was filed by the Georgian company at the Tel Aviv District Court in January 2017. The Georgian company provided consultative services to a company owned by Milo in the weapons and civil defense sector starting in 2008.

Cooperation ended

In the lawsuit the Georgian company alleged that after years of successful cooperation with Milo, Milo's company decided in 2015 to terminate the cooperation between the two companies and to stop promoting deals through it. The statement of claim asserts, "Unfortunately, it turned out that not only did Roni Milo's company terminate its cooperation with Chindze, but it also refrained from paying Chindze the full amount it owed."

Chindze alleges that Milo's company disavowed the agreements and obligations between the two companies pertaining to payment for projects in Georgia. Chindze alleged that Milo owed it several million shekels in commissions on deals worth tens of millions of shekels. The Georgian company asserted in its statement of claim that Milo's company had taken action to obtain work contracts for defense companies in Georgia and to obtain commissions from them, 33.3% of which it was to have given the Georgian companies. According to the statement by one of the Georgian company's representatives, the deals also included projects of Israeli companies Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) and Rafael Advanced Defense Systems Ltd..

Milo denies Chindze's allegations against him, saying that he owes no money to the Georgian company and acted only in accordance with his agreements with it. According to Milo, Chindze changed its ownership without informing him of it. In a statement to the Court in response to the allegations against him, Milo wrote, "By the nature of things, I do not intend to relate in this statement the substance of the transactions carried out by the defense industries in Israel with the Georgian government. Let it be emphasized in this context that all of the defense transactions by Elbit Systems were terminated unilaterally by the Georgian government in 2008, and no new transactions were actually conducted for which the company allegedly provide consultation services. From this standpoint, the claimant can have no grounds whatsoever for a claim."

According to information possessed by "Globes," on June 4, before the parties turned to mediation by Olmert, Elbit Systems sought access to the Court statements by the parties, due to its involvement in the case. Milo and the Georgian company did not oppose Elbit Systems' request and the company obtained the requested documents.

How much will Olmert earn for the mediation proceeding between Chindze and Roni Milo? It is believed that he is likely to receive hundreds of dollars per hour from each of the two opposing sides for conducting the out-of-court mediation proceeding, similar to what leading mediators and arbitrators in Israel receive. At the same time, Olmert's salary as a mediator has not been finally determined.

A mediation proceeding like the one Olmert will conduct between Chindze and Milo is a voluntary proceeding in which the mediator, in contrast to an arbitrator, does not force his views on the parties; he tries to help them reach agreement. He can propose a compromise solution for ending the dispute, but the choice of whether to accept the proposal or reject it and return to court is in the hands of the parties.

Published by Globes [online], Israel business news - - on July 2, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Ehud Olmert Photo; Noam Moskovich
Ehud Olmert Photo; Noam Moskovich
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