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Sunday, 5 March 2017

ICSID rules against Egypt in natural gas dispute, Ampal says Egypt needs to pay up

Ampal says arbitrator’s decision means Egypt has to pay up: Ampal-American Israel Corporation, the Israeli company involved in the failed plan to import natural gas from Egypt through its 12% stake in Eastern Mediterranean Gas (EMG), says a decision by the International Centre for Settlement of Investment Disputes (ICSID) means that it is on track to receive compensation from Egypt. Globes says that “the arbitration panel has ruled that Egypt was responsible for confiscation and other violations” and was disclosed “after being submitted to New York Bankruptcy Court hearing the case of Ampal, which filed a lawsuit against the Egyptian government in 2013.” ICSID has yet to set the size of the award, but the ruling caps it at USD 174 mn. In 2013, Ampal was liquidated under Chapter 7 bankruptcy proceedings, but its bondholders, who expect to be the main beneficiaries of the ruling, have not been compensated. A partner at an Israeli law firm representing EMG told Haaretz: “The uniqueness of the arbitration panel is that its decisions can’t be appealed … Since you can’t appeal the verdict, the decision can be enforced and the property of Egyptians abroad, who aren’t entitled to any government protection, can be confiscated.” The Ampal case is unrelated to the EMG in 2015 where the International Chamber of Commerce court of arbitration in Geneva also ruled against Egypt.

Could there be a possible impact on current investment regulations? ICSID had found Egypt’s revocation of the tax exemption status of the EMG project until 2025 — afforded to it under the private free zones system — to be tantamount to expropriation and in breach of the bilateral investment treaty, according to IAReporter (paywall). Basically, by canceling private free zone status to companies, Egypt could be holding itself liable in international arbitration. We do not see this as being a problem, as we noted last week that the Investment Ministry plans to honor existing agreements with companies and allow them to extend their agreements under the new Investment Act.

On a related note, Yossi Abu, CEO of Delek Drilling and Avner Oil, said a new 500 km pipeline from the Leviathan gas field “could have gas flowing to Turkey by the end of 2020, about a year after it comes online for the Israeli market,” Reuters reports. “Additional export destinations being discussed are Egypt, Europe and the Palestinian territories, including power plants in the Gaza Strip and West Bank, Abu said.”

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