State to Reveal Secret Protocols as It Seeks Billions From Israel Chemicals

The state is due to publish three confidential protocols tomorrow from its arbitration process with Israel Chemicals, regarding the company’s debts over unpaid royalties for mining natural resources.

The state believes ICL owes as much as NIS 1 billion. The arbitration included negotiations over future royalties.

But that’s small money compared to the debate over ICL’s future royalties, said a source close to the discussions.

Based on figures presented in court, the state believes the debt totals $291 million.

“It would be wrong to think that the arbitration is just about this amount,” said the source over the weekend. “The past debt is small change. The arbitration addresses both the past and the future, and the big money is in future payments, through the end of ICL’s license in 2029.”

During the arbitration process, which began two years ago, the state decided last month to appoint a second Sheshinski committee in order to set ICL’s future royalties for mining potash and phosphates.

The first Sheshinski committee drafted recommendations for increasing the state’s take from natural resource exploitation, namely natural gas, following Israel’s major offshore gas finds.

The new Sheshinski committee, which was supposed to start work last week but was delayed due to a High Court of Justice petition over a lack of women members, is expected to recommend significantly increasing the state’s take.

The arbitration process began after the state claimed that ICL was making only partial payments on its royalties. ICL argued that it was paying in full. The arbitration was held in keeping with the terms delineated in ICL’s mining license. The parties held 19 meetings and heard testimony from 25 sources.

The three protocols are being published due to a petition filed by the Movement for Quality Government and Adam Teva V’din with the High Court of Justice. These protocols are from meetings held before the petition was filed, in August 2012.

Protocols for the remaining 16 meetings – held after that date – will not be published.

Jerusalem District Court Judge Yigal Mersel ordered the protocols published two weeks ago, and gave an extension to file objections. That extension expires tomorrow.

ICL wants the protocols to remain confidential, arguing they contain corporate secrets.

Should ICL decide to edit out only corporate secrets, the protocols will be published tomorrow. But should it edit out more than that in an attempt to delay publication, it may arouse Finance Ministry objections.

A disagreement between the treasury and ICL over what should be published may also cause a delay in publication.

Last week, the state submitted its summary regarding its claims that ICL hadn’t paid royalties in full between 2000 and 2010. ICL is due to submit its summary in September.

While the arbitration process was supposed to address future royalties, the creation of Sheshinski 2 apparently obviates this.

“Sheshinski 2 was created due to the arbitration process, because the state understood just how much it was being harmed by the whole royalty issue, not just in potash but also bromine and other forms of mining,” said the source. “The Finance Ministry believes that the state’s profit from mining is very low.”

Part of the issue is what products should be subject to royalty payments. The state believes payments need to be made on all by-products by all ICL subsidiaries, while ICL argues that only products it mines directly are subject to royalties.

In response, Israel Chemicals said: "Our company is the state's top provider of revenues, amounting to 41% of pre-tax earnings. In 2012, Israel Chemicals paid the state NIS 1.2 billion, much more than any other company in Israel. Regarding the arbitration underway with the state concerning royalties for downstream products, Israel Chemicals has and will continue to act as required by law and court rulings."