The government won a hands-down victory in an arbitration case with Israel Chemicals on Monday, when a three-member panel headed by retired Supreme Court Justice Tova Strasberg-Cohen voted 2-1 to accept all of the state’s claims against the company.
The panel ruled that ICL was required to pay royalties on so-called downstream products produced from minerals mined in Israel and not just on the basic, meaning the rate would be set on prices to the buyer. It said the company is liable for royalties on products produced at plants not located in the Dead Sea license area.
The panel said it would not rule on the amount ICL owes until a second round of arbitration. But it is likely the government will win something in the area of the 2.5 billion shekels ($720 million) the state maintained that it is owed.
The ruling was the second blow to ICL in two days, after the government’s Sheshinksi committee on Sunday recommended the government impose a 42% windfall profit tax on companies exploiting Israel’s natural resources, not including oil and gas.
ICL said in response that the requirement to pay royalties on downstream products would increase the costs of ICL’s bromine factories in China, Europe and mainly Israel.
“The arbitrator’s decision will make it difficult to justify new investment in Israel or to avoid stepping up cost-cutting in Israel in order to offset the new costs arising from the arbitration,” ICL said.
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