In Dramatic Gas Deal Ruling, High Court Tells Stubborn Netanyahu He Went Too Far

The court ruling against the gas plan reveals a readiness to take a stand against the government.

Courtesy Albatross

The High Court ruling Sunday against the deal the government struck with the companies that operate the country’s offshore natural gas fields spell everything out: The government had no right to agree that it would not change regulations regarding Israeli gas for 10 years (as part of the so-called stability clause). That was illegal, said a majority of four justices to one.

Three to one agreed that the gas plan should be thrown out, though they gave the state a year to regroup before the scheme is canceled in practice.

At a closer look, it emerges that the majority on the bench would have accepted the gas plan if it had been the result of legislation in Knesset, not a cabinet resolution. Perhaps the stability clause would have passed the test of the court system if it had been legislated. The failure of the plan lies, therefore, in a big mistake by the prime minister: his stubborn refusal to bring it up for discussion before the Knesset.

Looking back, regulation of the country's gas economy should have been subject to a legislative process from the very first moment, which was the moment at which the deputy attorney general at the time, Avi Licht, wrote a letter titled, “There is a Leviathan in the room”.

In any case, the High Court ruling is of dramatic importance because it reveals a readiness to take a stand against the government and, no less, against the prime minister, who personally applied heavy pressure on the bench. Which did not blink and maintained its independence.

Justice Elyakim Rubinstein, vice president of the Israeli Supreme Court.
Daniel Bar-On

The judge who led his colleagues in this ruling, one of the most dramatic in court history, was Elyakim Rubinstein, vice president of the Supreme Court. The High Court was not discussing economic or social questions in this case, Rubinstein wrote in the beginning of his judgement, but rather just one, simple issue: “the boundaries of the government’s power in a democratic regime.”

Unsurprisingly, Justices Rubinstein and Salim Joubran were the keenest in their ruling that the gas scheme touches on a wide range of dramatic issues, and that their combination together turns the plan into a “primary arrangement” – such a broad, sweeping regulation that it absolutely had to be brought before the Knesset for debate. Rubinstein and Joubran had already expressed that opinion, as a minority, during the hearing on a motion against allowing the gas to be exported.

Joubran also rejected the state’s attempt to present the plan as a collection of regulatory issues, each of which was addressed by law. In any case, he and Rubinstein gave the government a year to regulate the gas economy properly, via the Knesset; after that year, the gas plan would be canceled.

The two share the view that the stability clause, which would prevent the state from making changes to the gas scheme for a decade, unlawfully tied the state’s own hands and could not be permitted. Put otherwise, assurance of regulation stability in that fashion was illegal.

If anything, the entire gas plan should be subject to proper regulation, Rubinstein and Joubran stated in a minority opinion. The other three justices felt otherwise, but following a complicated explanation by Justice Uzi Fogelman, that’s what they decided, and they gave the government a year to do it.

Fogelman does not share the opinion that the whole scheme is illegal. He feels the government has the legal authority to make most of the decisions therein without legislation. He isn’t in that “primary arrangement” camp. But he does feel that the 10-year suspension of regulations on such a broad issue – in light of the heavy penalty of international lawsuits should there be violations – is unthinkable.

What Fogelman did is give the government a way out. He did not rule out the possibility of the Knesset anchoring the stability clause in law, or explicitly empowering the government to undertake such an effort. Yet, he did join Rubinstein and Joubran in giving the government a year to legislate, after which the gas plan would be annulled.

As of this writing, only the abstract of the ruling had been published, not the whole document, and it does not shed enough light on Fogelman’s views. But it seems they are related to the government’s belligerent statement in court that without regulatory stability, there is no gas plan.

Justice Esther Hayut also felt that the stability clause should die, but agreed that the rest of the scheme was legal and could stand. She tended to support regulation through a “regulatory contract” between the supervisor and supervisee, even suggesting that in the case of such an accord, there might be room to relax administrative law. However, she lashed out at the government’s attempts to frustrate (through the stability clause) any future legislative moves that could contravene the plan, saying the government had “crossed all boundaries of parliamentary democracy.”

For his part, Justice Noam Solberg was in the government’s corner. He did not agree that the clause in question limited the government’s discretion absolutely; he thought it reasonable and not binding on the Knesset. Others on the bench noted the price that violation of the promise could cost the gas companies in an international court, but Solberg thought that wasn’t enough to change the fact that the state is entitled to shake off a governmental promise.

Solberg did admit that if the government broke its word on the gas plan, a heavy price would be paid in international courts, but if the circumstances warranted it, the word could be broken. The government would make the right decision if needed, he said, adding that the government is the one that's in the best position to consolidate a solution for the gas found in Israel's territorial waters.

Solberg, it seems, shudders at the idea of the fate of a complex, “multi-issue” problem like Israeli gas being left to the Knesset, in contrast to his colleagues Rubinstein and Joubran.

As an aside, the High Court ruling touches on the issue of the intervention by the economy minister (who happens also to be the prime minister) in the powers wielded by the antitrust commissioner. Netanyahu tried to bypass the commissioner, citing reasons of national security and foreign relations, and in order to relieve the gas companies of competitive pressure.

Most of the justices thought Netanyahu had the power to override the antitrust commissioner. Rubinstein wrote that the damage to competition had to be balanced with national security and foreign relations considerations, which should prevail. Joubran was coolest on this point, saying the economy minister should have received an expert opinion as to the degree of damage the gas scheme caused to competition. Without an expert opinion, he wrote, there is no way to clarify the balance vis-a-vis security and foreign relations issues.

Hayut had an interesting take. In court, representatives of the government attacked the former antitrust commissioner, David Gilo, for protracted negotiations with the gas companies and finally rejecting the final draft agreement on the grounds that it was anti-competition. The economy minister is permitted to override the antitrust commissioner’s powers, Hayut wrote – but if the state hadn’t let the commissioner drag out the negotiations for three years, it could have reached a better arrangement, she suggested. One could read her words as criticism of the government for falling asleep on the job.