Ampal, the Israeli company involved in the failed plan to import natural gas from Egypt, moved a major step closer to getting damages from Cairo for shutting down the pipeline that was to deliver the gas to Israel.
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Arbitrators for the International Center for Settlement of Investment Disputes ruled on February 21 that the Egyptian government was liable for closing the pipeline and had acted unlawfully in doing so. Although the panel has yet to set the size of the award, the ruling sets a ceiling of $174 million and Ampal’s lawyers said they were optimistic Egypt would pay up.
“The Egyptian government has failed to pay damages imposed by international courts. Avoiding payments risks deterring potential foreign investors and credit insurance companies are unlikely to provide coverage for future deals involving the Egyptian government,” said one source close to the arbitration, who asked not to be identified.
The Ampal decision is one of a clutch of lawsuits that arose in the months after Egyptian president Hosni Mubarak was toppled in 2011. The pipeline carrying the gas from Egypt across the Sinai Peninsula to Israel was firebombed several times in succession, forcing it to shut down. Ultimately, Egypt rescinded the contract to export gas, citing irregularities.
Ampal’s role in importing Egyptian gas to Israel was its 12% stake in Eastern Mediterranean Gas, the company that owned the pipeline. When the gas imports ended, Ampal, which was led by entrepreneur Yossi Maiman, was forced into receivership, with debts of about 1 billion shekels ($270 million) to bondholders, banks and the tax authority.
The banks have already been compensated by the sale of Ampal’s Gadot Chemical Tankers &Terminals, which leaves the bondholders, who are owed some 800 million shekels, the most likely beneficiaries of the damages awarded.
The Ampal decision follows two others brought against Egyptian companies or the government as a result of the abortive gas agreement.
In 2015, EMG itself won $325 million in damages from the Egyptian Natural Gas Holding Company and the Egyptian General Petroleum Corporation in arbitration conducted by the International Chamber of Commerce court of arbitration in Geneva. The same year Israel Electric Corporation, which was the ultimate recipient of the gas, won a $1.76 billion judgment.
The Egyptian companies have appealed both rulings and at the time froze all negotiations over importing Israeli gas to Egypt and a decision is expected to be handed down soon.
But Niv Sever, a partner at M. Firon & Company, the Haifa law firm that is representing the EMG shareholders, said he was confident Ampal’s creditors would see their money soon.
“The uniqueness of the arbitration panel is that its decisions can’t be appealed,” he said. “Since you can’t appeal the verdict, the decision can be enforced and the property of Egyptians abroad, who aren’t entitled to any government protection, can be confiscated.”
He said that constituted “effective sanctions” and that other countries have traditionally abided International Center for Settlement of Investment Disputes rulings. He added that failure to respect the panel’s ruling could also lower a country’s credit rating.