Israel's High Court Hints It May Nix Crucial Clause in Gas Deal

Clause promising no further regulatory changes for the next 10 to 15 years may be impossible without primary legislation, justice says; in unprecedented High Court appearance PM defends pact with gas monopoly.

Prime Minister Benjamin Netanyahu at the High Court hearing on February 14, 2016.
Uriah Tadmor

The High Court of Justice hinted on Sunday that it might overturn one section of the government’s deal with the natural gas monopoly – the one promising no further regulatory changes for the next 10 to 15 years.

At a hearing in which Prime Minister Benjamin Netanyahu appeared before the court to defend the accord, Justice Elyakim Rubinstein raised the possibility that the government might have to pass legislation in order to enact the controversial stability clause in the deal.

“We’re currently focusing on the stability clause – and wondering whether the provisions of the deal on this issue are possible without primary legislation,” said Rubinstein, head of the bench hearing several petitions against the deal, at the end of Sunday’s hearing. “The question is whether, to remove any doubts and prevent a risk that must be taken into account, you shouldn’t go with primary legislation.”

Rubinstein said the government should consider enacting this clause via legislation and give the court its answer within a week. If it decides against legislation, the court will issue a ruling.

Rubinstein’s suggestion seemed to surprise everyone present, as it indicates that the justices are leaning toward overturning the clause. That would force the government to pass legislation if it wanted to reinstate the clause as part of the deal.

Government’s attorney Aner Helman said he didn’t know whether it was possible to get the Knesset to enact this clause. Justice Uzi Vogelman responded, “To avoid a ruling, it seems to us the public interest requires at least considering it.”

Offshore Leviathan natural gas drilling site.
Albatross

The stability clause states that for the next decade, the government will make no further changes in tax policy or export regulations affecting the natural gas companies, nor will it dictate any further structural changes in the industry, beyond those included in the current agreement and in the so-called Sheshinski Law of 2013. It can still make changes in fiscal policy that affect the economy as a whole, but not changes that target the gas industry specifically.

The clause also promises that for the next 15 years, the government won’t force any changes in the ownership structure of the Leviathan field, currently controlled jointly by two companies, or force those companies to compete against each other by making each market its gas independently. The accord explicitly bars the antitrust commissioner from overruling this provision and promises that the government will work to defeat any private member’s bill submitted to the Knesset that would violate this provision.

Attorney Efi Michaeli of the College of Law and Business, one of the petitioners, welcomed Rubinstein’s suggestion. “We thought the stability clause couldn’t be guaranteed through an administrative decision, without any authorization in law, and we’re happy the court suggested that this is the right way even before issuing its ruling,” he said. “This is an important sign that the rule of law is standing in all its honor and glory against the pressure the prime minister sought to exert, as is proper for a democratic state.”

MK Shelly Yacimovich (Zionist Union), another petitioner, said the court’s suggestion constituted a “harsh denunciation of the enormously problematic nature of the stability clause – a clause that doesn’t exist in any democratic country.”

At the start of the hearing, Netanyahu appeared in person to argue in favor of the gas deal.

“This is the first time I’ve asked to appear before the High Court, and to the best of my knowledge, this is the first time in Israel’s history that any prime minister has asked to do so,” he said. “I asked to appear before you because of the enormous importance I ascribe to developing the gas fields, and because of my assessment that we’re at a critical point in time ... We’re at the eleventh hour from the standpoint of our ability to realize our gas potential. Any further delay, any step backward will lead to grave consequences that it’s doubtful we can overcome.”

A demonstration against the gas deal held in front of the Supreme Court in Jerusalem.
Emil Salman

Asked about the cabinet’s decision to override the antitrust commissioner’s veto of the agreement, and especially the stability clause, he replied, “I’m aware that this is an unusual move, but regulation is supposed to regulate the market – not to strangle it.” He stressed that this is the first time he has exercised this authority in 10 years as premier, and said it was necessary under the circumstances, because “I’m convinced it wasn’t possible to reach an agreement with the companies without the regulatory stability clause.”

“The deal that was approved has no real alternative, and I fear any additional delay will cause serious, long-term damage to Israel,” Netanyahu continued. “Without the deal, there will be no competition and no investments and no development of existing and new gas fields Out of an excess of good intentions, we’re liable to miss a historic golden opportunity.”

Currently, he noted, Israel relies on a single gas field, Tamar, which has already been attacked once, during the 2014 Gaza war.

“The situation of a single field endangers the country and its energy security,” Netanyahu argued. “More than half of Israel’s electricity is produced from natural gas. Our enemies know very well that we have only one field. I’m speaking of enemies to the north, the south and the east, far and near, and they aren’t treading water.”

Netanyahu also stressed the deal’s diplomatic importance. “I want to harness natural gas for the sake of regional cooperation,” he said, warning that if the deal isn’t approved promptly, allowing Leviathan’s development to begin, “We’re liable to lose our cooperation with Jordan, the Palestinians, Cyprus, Egypt and the European Union. The deal is a diplomatic lever of the highest order that will change the face of the region.”

He left immediately after finishing his speech, without the justices asking him any questions.