The Little-known Government Lawyers Who Have Israelis’ Backs

Justice Ministry attorneys fight economic concentration, cap executives' pay and increase natural-gas royalties. They're often the people's only recourse.

Olivier Fitoussi

“It seems we’re one of the most influential government offices in Israel, and the public isn’t aware of the extent of our influence. We’re no less influential than the State Prosecutor’s Office, maybe more.”

That’s how a senior lawyer at the Justice Ministry’s Counseling and Legislation Department describes the place, and he’s right.

The attorney general has six deputies, each heading a group of lawyers. A few deputy attorney generals are known to the public, but the few dozen lawyers in the Counseling and Legislation Department are all but unknown.

Only Knesset members know them. The department designs, blocks, promotes, approves or freezes a huge variety of legislation and regulations.

At any give time, these attorneys are busy with matters such as the conflict of interest of a retired government official who went to work for a tycoon, an OECD report on the government’s efforts to quell bribery, a constitutional examination of the Holot detention center for asylum seekers, legal supervision of an Israeli offensive in Gaza, a splitting of the ownership of the offshore natural-gas fields, or a rescue of Channel 10 television and the Israel Broadcasting Authority.

“Sometimes we sit next to the driver, but sometimes we are the driver,” an employee quoted Avi Licht, the head of the Economic-Fiscal Law Department. Licht is the deputy attorney general for economic and fiscal affairs.

Members of his department strive to stay out of the spotlight. In many cases, they push through initiatives started by other ministries.

Even though their influence may be great in such matters, they prefer to let the sponsors take the credit. This seems to be the reason Licht declined to be interviewed for this article; he let his staff do the talking. Almost everything Licht does can become controversial, or as he puts it: “It can create a mess.”

Licht has 12 lawyers under him — four men and eight women. Actually, for a Justice Ministry department, this is a high number of men.

Cabinet members need the department’s services to advance their legislation. The lawyers say that when a minister wants to reform something, the attorneys “buy in totally.”

But as a member of the department put it, “when someone wants to run too fast and doesn’t see all the angles, we stop. When you run that way you’re going to crash in the Knesset, or after that crash in the real world.”

A bevy of reforms

The Economic- Fiscal Law Department was a partner in the reform of Israel’s cellular telephone industry — legislation that was pushed through by Moshe Kahlon when he was communications minister from 2009 to 2013. The department also helped produce the reforms embodied in the economic concentration law, the food law, the dismantling of the Israel Broadcasting Authority, the taxation of natural resources such as gas and oil, and efforts to cap executive pay.

Licht was the one who sent the letter to the cabinet on regulating the natural-gas monopoly. This missive buoyed the chief of the Israel Antitrust Authority, David Gilo.

Licht is well aware of his ability to veto initiatives for legal reasons. But because he has such power, he uses it sparingly.

He opts for more innovative methods. In many cases, Licht was the one who convinced ministries to risk borderline legal actions at the High Court of Justice.

The best example is the department’s legal opinion on the Sheshinski Committee, which made recommendations on taxing the exploitation of natural resources, in particular profits accrued on oil and natural gas reserves. The department felt it was taking a serious legal risk in its opinion, which stated that the law increasing taxes on oil and gas revenues could be applied to existing fields, not just those discovered in the future.

Licht gave the department the green light to take the risk, assuming it would prevail at the High Court of Justice. It did.

It seems that because of his willingness to take risks in favor of the public interest, Licht is careful to listen to the side that will suffer the fallout — usually people with money.

According to lawyers at his department, he has said he regrets that, when the economic concentration law was being considered in the special committee and in the Knesset, the rich didn’t get a sufficient voice. They were afraid to attend meetings and speak out on the issue.

“In the end, if you take away someone’s life work, the most basic thing is to let him try to convince you that you’re making a mistake”, Licht was quoted as saying.

Comes the revolution

Corporate governance is an area that has undergone a revolution in recent years; now the Justice Ministry wants to slow things down and give the market time to catch up to the changes.

One change to the Companies Law that the department is expected to put out soon concerns a test for paying dividends. The ministry wants to prevent the paying of dividends from profits that stem from accounting maneuvers, not cash flow.

The next big project is the law to regulate the operations of state-owned companies. There are 60 such entities in Israel such as the Israel Airports Authority, the Israel Antiquities Authority, the Magen David Adom ambulance service and the new public broadcasting corporation — institutions that together generate annual revenues of around 9 billion shekels ($2.25 billion). The idea is to build a corporate model for their activities.

Another project is the law to regulate nonprofit organizations. The ministry is working directly with people from the organizations, and the Knesset recently passed a law that applies the rules of corporate governance to partnerships — an initiative of the Economic-Fiscal Law Department.

“I’ve been at the Justice Ministry for many more years than I thought I would be,” says Ronnie Talmore, who arrived over two years ago from the legal department at the Government Companies Authority.

Talmore did her apprenticeship at the Bank of Israel. For nearly three years she has coordinated corporate governance at the department; before that she worked on communications and environmental protection.

Licht’s department is responsible for improving Israel’s corporate governance and making it a beacon internationally. As part of this effort, the department was responsible for the amendments to the Companies Law.

Led by Licht, Amendment 20 was passed requiring publicly traded firms to adopt a mechanism for determining senior executives’ compensation. These companies had to publish this information and update their procedures occasionally to let shareholders express their opinions. The idea was to strengthen the link between executive pay and company performance.

Putting pyramids in their place

As part of her job, Talmore keeps track of the implementation of this law. She says this legislation is not unique to Israel.

“The issue of executive pay has come up all over the world and has been dealt with at various levels,” she says. “We didn’t make this law up in a vacuum; on the contrary. Our comparative research showed that in many countries they’re doing a lot of these things. We gathered what was necessary and implemented it.”

Licht was also a member of the committee to increase competition in the economy – to fight economic concentration in a country where much of the economy is in the hands of a dozen or more tycoons. His department helped craft the section of the law under which corporate pyramids are limited to two levels.

The pyramids law shows how the department pushes the public interest when there is no one else to do so.

“The pyramids law deals with pyramids traded in Israel, but it’s not really a corporate law; it’s not part of the Companies Law, it simply has corporate elements,” Talmore says. “Pyramids can be dealt with in a number of ways. From all sorts of considerations we chose to deal with them by limiting the number of levels.”

The criticism was that this law was unique around the world — an experiment — but Talmore contests this.

“It’s just as east to say the opposite — that when this law is implemented, the economy will look the way businesses around the world look.”