Netanyahu Signed Secrecy Order to Conceal Israel-Iran Legal Battle

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The oil terminal in Eilat that once carried Iranian oil to Ashkelon for export to European markets. Credit: Dr. Avishai Teicher/Wikimedia Commons

Prime Minister Benjamin Netanyahu strongly objects to revealing any information about the “oil arbitration” case that has been conducted between Israel and Iran in European courts for more than 20 years, the details of which were exposed on Haaretz.com this weekend. Netanyahu signed a secrecy order in November 2013 banning the publication of information on the arbitration, because it “could possibly bring about harm to national security and foreign relations.”

Israeli Prime Minister Benjamin Netanyahu.Credit: Reuters

Netanyahu intervened to head off a petition filed in Jerusalem District Court in June 2013 by attorney Nitsana Darshan-Leitner, head of Shurat Hadin – Israel Law Center, under the Freedom of Information Law. The petition was against the foreign and justice ministries, requesting information about the arbitration proceedings with Iran.

The ministries rejected the request completely, and that case is now being heard in the Supreme Court, under a confidentiality order, after the Jerusalem District Court ordered the state to provide a proper response. The plaintiffs filed an updated brief last week, and the court is now awaiting the state’s response.

The National Iranian Oil Company has been conducting a number of international arbitration proceedings against Israel. It has demanded compensation for its share of the joint Israeli-Iranian project for transporting and selling Iranian oil, via Israel to European customers, which was launched in 1968. At the heart of the deal stood the construction of a trans-Israel pipeline from Eilat to Ashkelon, as well as two oil storage facilities and a fleet of tankers.

The deal was hidden by a veil of secrecy, and Israel imposed censorship on any publication concerning the pipeline, its financing and operation.

A similar, smaller arbitration suit concerns a debt from the sale of Iranian oil to three Israeli fuel companies in 1979, on the eve of the Islamic Revolution. The arbitration suits are estimated to be for billions of dollars, given the interest and other costs that have accumulated over the decades.

After the Shah of Iran was deposed in January 1979, Tehran turned from being Israel’s ally to its enemy. Israel continued to operate the pipeline, after nationalizing it in practice using a legal trick, and Iran sued Israel in an international arbitration process to receive its share of the profits of the joint venture.

Israel has lost a number of rounds in the arbitration, first in France and more recently in Swiss courts, where it tried to stop the arbitration process and avoid paying any money.

Both the Israeli and Iranian governments have avoided discussing the legal battle publicly, even though the various legal decisions have been published openly in Europe and raised a lot of interest in international legal circles.

Under the terms of the agreement, whose full content has yet to be made public, the Israeli government agreed to grant the oil project a 49-year concession, exemption from taxes and planning, and building leeway. Censorship was imposed on press reports relating to the pipeline, its funding and sources of fuel. In those days of running roughshod by Mapai – the forerunner of Labor – and in the absence of green organizations and High Court of Justice petitions, the project was implemented in record time: by the end of 1969, oil was flowing through the pipeline. Israel built a second refinery in Ashdod and storage tanks at both ends of the pipeline.

Netanyahu’s exceptional intervention, in an attempt to prevent the exposure of information on the arbitration, was part of a growing effort during his term to disguise the Israeli government’s involvement in the Eilat-Ashkelon Pipeline Company (EAPC), as well as the company’s corporate structure and operations. But the legal proceedings in Israel and abroad, as well as historical research and the memories of many of those involved decades ago, have allowed the exposure of the legal and organizational means Israel has used to control EAPC.

Laying the final part of the Eilat-Ashkelon Pipeline, 1969. Photo by Daniel Rosenblum / Starfot

The government’s share of EAPC, and its numerous subsidiaries, is held via a shell company in Panama, the Eilat Corporation. In practice, special legislation allowed the state to control EAPC by nationalizing it. Eilat Corp. was registered in Panama in December 1967 and still operates. The State of Israel owns all of its shares and the finance minister is responsible for it, according to the corporate registrar in Panama and reports of the accountant general in Israel’s Finance Ministry. The documents show a great similarity in the holdings of EAPC and Eilat Corp., whose chairman is also the “special supervisor” on behalf of the finance minister for EAPC. They share the same corporate secretary, as well as having the same directors. The only exception is that the accountant general, who represents the state on the Panamanian corporation’s board, is not a member of the EAPC board.

In recent years, Eilat Corp. has not appeared on the list of government-owned companies included in the accountant general’s reports, although it appeared in them in the past. At first, the name “E. Corporation” appeared, but since Netanyahu became prime minister for a second time in 2009, even this mention has disappeared. Over the past three years, accountant general Michal Abadi-Boiangiu has avoided mentioning her participation on the company’s board of directors, which she previously listed openly.

Eilat Corp. holds a shareholder meeting in Tel Aviv at least once a year, its internal corporate documents state. At the meeting held on May 23, 2011, Abadi-Boiangiu was appointed to the board in place of her predecessor, Shuki Oren.

The Eilat Corp. and EAPC are also not mentioned in the lists of bodies under the purview of the State Comptroller’s Office, even though a report was prepared on the company, as revealed by Avi Bar-Eli in TheMarker.

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