Israel Pressed for Anonymous Ruling in Long-running Iran Oil Dispute

Israel may have won right to confidentiality but it's losing the arbitration case so far, being ordered to pay tens of millions to Islamic Republic.

Eliyahu Hershkovitz

Israel sought to keep its name out of a decision by arbitrators in Switzerland ruling on an Iranian claim for tens of millions of dollars of compensation from the state.

The arbitrators were surprised by the request, which came after two decades of arbitration between the two countries over Iranian losses from a joint oil pipeline business, after Iran cut ties with Israel following the 1979 Islamic Revolution.

As revealed in TheMarker last week, Tehran has so far won the arbitration, with the Swiss panel ordering – in a preliminary ruling made quietly about a year ago – that Israel pay National Iranian Oil Company as much as $100 million compensation.

The decision is far from final, and in any case the award is far less than the $800 million the Iranians had valued their losses at from the breakup of the joint venture.

Nevertheless, the decision itself was cloaked in anonymity, as per the Israeli request.

The decision opens with the panel recounting the long history of the dispute.

“On November 29, 1968, country “X” (the plaintiff) and company “Y” (the respondent) entered into an agreement to build, maintain and operate a pipeline in the territory of the plaintiff.”

The arbitration followed a lengthy effort by Israel to have the arbitration proceeding dismissed altogether, going back to 1994, when Iran asked Israel to name its representative to the arbitration panel.

At issue is the Eilat-Ashkelon Pipeline Company, which has more recently been in the news for a huge oil spill in Israel’s Evrona nature reserve, north of Eilat, when five million liters of crude oil leaked from pipelines.

The joint venture company was formed in 1968, when Israel and Iran were business allies, to transport Iranian oil from Eilat to the Mediterranean coast for re-export to Europe.

When Iran severed relations, it sought compensation for its stake in EAPC, as well as the oil in the company’s pipeline when the revolution broke out.

Israel refused Iran’s 1994 demand, on the grounds that the agreement did not sufficiently spell out the terms for arbitration but required the two sides to try to resolve any disagreements via negotiations – something that never happened.

A year later, the Islamic Republic asked a Paris court to order Israel to appoint an arbitrator.

In 2001, it issued a deadline for Israel to name an arbitrator. Israel’s appeal was turned down on the grounds that it refused to recognize the authority of the ICC in the matter.

As a result, the two sides agreed on Geneva as the site for arbitration. Israel again sought to stop the process in a Swiss court, but its petition was again turned down in 2012.

Meantime, Israel’s request in March of that year to have the Swiss panel’s ruling kept anonymous was met with surprise by the five arbitrators, among other reasons because Israel didn’t explain why it wanted confidentiality.

They expressed wonder that Israel thought a decision involving such a sensitive issue between two bitter enemy states would somehow stay out of the media limelight, saying its demand was not “realistic” and that the arbitration would be a “cause célèbre.”