Choice of Arbitrator in Israel-Iran Oil Dispute Could Signal Progress

Appointment of Alex Hertman, one of Israel’s most prominent arbitration and commercial lawyers and a vocal Iran critic, can be interpreted as either the opening shot in a PR campaign, or as a sign of Israel's interest in practical discussion.

Alex Hertman.
Nir Keidar

Attorney Alex Hertman, who has been appointed as Israel’s arbitrator in the Iranian lawsuit claiming billions of dollars from the the Eilat-Ashkelon Pipeline Company partnership, has criticized Iran in the past and participated in public battles against it, when serving as president of the International Association of Jewish Lawyers and Jurists. In his present position, Hartman will act on Israel’s behalf via the only existing channel of communication, as far as we know, with the Islamic Republic.

Hertman was president of the lawyers’ association from 2004 to 2011. In his annual newsletter, which was published in the organization’s magazine Justice, he described his struggles against the "existential threat to Israel posed by Iran, a country whose leaders openly declare their desire to erase Israel from the map and to assist whoever wants to harm Israel and the Jewish people - first and foremost Hamas and Hezbollah."

The organization headed by Hertman helped to sue Iran in various countries on behalf of terror victims and participated in a call to prosecute former Iranian President Mahmoud Ahmadinejad for incitement to genocide - a campaign that was enthusiastically supported by Prime Minister Benjamin Netanyahu, as the head of the opposition. The organization worked in cooperation with the Jerusalem research institute headed by Dore Gold, Netanyahu’s confidant and today director general of the Foreign Ministry.

The appointment of Hertman, one of Israel’s most prominent arbitration and commercial lawyers, as the Israeli arbitrator in the Iranian lawsuit can be interpreted in two ways: The government wants to turn the arbitration process into a public relations campaign in which Israel will criticize Iran’s policies and denounce its leaders; or, with the signing of the nuclear agreement and the lifting of international sanctions on Iran, Israel is afraid of losing the arbitration – which would enable Iran to collect large sums of money from it – and has therefore decided to conduct a discussion on practical issues, and not only to gain time with procedural arguments, as it did in the past.

To date, Israel has lost in two secondary arbitrary procedures relating to the oil provided to it by Iran prior to the Islamic Revolution, though it never paid. Israel has refused to pay the money, arguing that Iran is an enemy country to which it is forbidden by law to transfer money. Instead, the law requires that Iranian assets be frozen.

In the principal procedure, which began in 1994 and is still being conducted in Geneva, the Iranian oil company is demanding to receive its share of the pipeline partnership and the fruits of the project. The Iranians have demanded $800 million plus interest, at 2003 rates.

According to the 1968 partnership agreement between the State of Israel and the Iranian oil company, in the event of a dispute between the partners each side will appoint an arbitrator and the president of the International Chamber of Commerce in Paris will appoint the third and deciding arbitrator. Israel refused to appoint an arbitrator, thus dragging out the process in French and Swiss courts for 20 years.

With the lifting of the sanctions, the U.S. State Department announced this week that it would pay Iran $1.7 billion, in terms of ruling by the Iran-United States Claims Tribunal, which has been operating in The Hague since 1981. The money was a down payment paid by the Iranians during the reign of the Shah to buy American weapons, plus interest.