What are the chances of EMG getting $1b compensation?

Amir Witkon Photo: Rotem Shavit
Amir Witkon Photo: Rotem Shavit

"If EMG locates assets belonging to the gas companies that are not in Egypt, the chances of the award being implemented will increase significantly," says Adv. Amir Witkon.

Creditors of Ampal Investments, which had a 12.5% stake in Eastern Mediterranean Gas (EMG), learned that EMG was entitled to $1.033 billion in compensation, plus interest, according to an arbitration ruling made in Cairo. The ruling comes less than a year after the same arbitrator found that the Egyptian gas companies had illegally canceled their agreement with EMG.

EMG, which was to have supplied natural gas from Egypt to Israel Electric Corporation (IEC) (TASE: ELEC.B22), was hit by a series of explosions in its gas pipeline through Sinai following the 2011 revolution in Egypt. Egypt thereupon irrevocably terminated its gas contract with EMG, and the huge investments in the venture were lost.

Ampal, controlled by Josef Maiman, collapsed after the agreement for the supply of Egyptian gas to Israel was canceled, and has been in liquidation proceedings since 2013. EMG's lawsuit against the Egyptian gas companies all over the world are the main asset that Ampal can use to pay its debts to its creditors, after its collapse left an NIS 800 million debt to its bondholders in Israel.

Ampal's creditors are now pondering how to collect the enormous amount awarded in the arbitration, and what the chances are of actually getting any money from it. EMG was awarded $324 million in an international arbitration in Paris in 2015, but not a single dollar of this has been received from Egypt.

According to Advocate Amir Witkon, a partner in the Shavit Bar-On Gal-On Tzin Witkon law firm who specializes in international litigation and arbitration, "The first question that Ampal's creditors must clear up is where the assets of the respondents who lost in the arbitration, in this case the Egyptian gas companies, are located. If the winner, EMG in the current case, manages to locate assets belonging to the gas companies that are not in their home country (Egypt), the chances of the award being implemented will increase significantly."

Witkon adds, "The first step in this process will be recognition of the arbitration award's validity in the country in which the assets are located, in the US, for example. For this purpose, it is important to clarify whether the country, Egypt in this case, has acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards." Witkon explains that this convention, with its many members around the world, "sets conditions under which the convention's member countries are obligated to recognize arbitration rulings made in a member country.

"A basic rule of the convention is that a country is barred from imposing restrictions on the enforcement of foreign arbitration rulings beyond the restrictions applying to the enforcement of arbitration rulings made in that country. Each of the convention's signatory countries, however, sets its own procedure for recognizing the validity of a foreign arbitration ruling. Only at the end of this procedure can the arbitration ruling be enforced within the borders of that company, and assets owned by the loser in the arbitration can be seized in accordance with the liabilities imposed in the arbitration that was recognized and made valid in the country where the assets are located."

Witkon notes that even though the procedure sounds lengthy and complicated, "This is a simple case," since "If the relevant countries (the country in which the arbitration ruling was made and the country in which the assets are located) are not signatories of the New York Convention, it must be clarified according to the law of the country in which the assets are located and what local law says about the possibility (if it exists) of recognizing the validity and enforcing a foreign arbitration ruling.

"If local law does not allow this, the winner of the arbitration, EMG, may be asked to file a lawsuit in that country in accordance with the foreign arbitration ruling, or to try to gain validity for a ruling in the country in which it was given, and then to try to enforce the arbitration ruling in accordance with the rules applying to enforcement of foreign arbitration rulings."

Witkon also said, "Since the arbitration ruling in the current case was made in Egypt, if EMG seeks its enforcement in Egypt, this is likely to make the enforcement proceedings easier if the Egyptian courts recognize the validity of a ruling made by the Cairo Regional Centre for International Commercial Arbitration (CRCICA)."

Witkon added that in certain cases in which the party losing the arbitration is a "government agency," as it seems to be in this case, there are more difficulties. "In certain cases (depending on the circumstances and degree of the respondent's closeness to state institutions), the losing respondent is entitled to sovereign immunity in both the country in which the arbitration took place and in the foreign countries in which the assets are located, and their courts are likely to be reluctant to take legal measures likely to be considered by a judicial institution in one country as damaging to the sovereignty of another country."

Published by Globes [online], Israel Business News - www.globes-online.com - on February 21, 2018

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

Amir Witkon Photo: Rotem Shavit
Amir Witkon Photo: Rotem Shavit
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