A legal dispute in Jerusalem District Court over alleged corruption involving construction and operation of a port in Liberia offers a rare look at a major business dealing by an Israeli-owned company in the African country.
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The government of Liberia asserts that the agreement over the port was tainted by corruption and that the Israeli company paid bribes to port officials. The company, meanwhile, lost a petition to enforce a payment of more than $44 million that a London arbitrator awarded to the company.
The case goes back to a 2005 agreement to build and operate a container terminal in Monrovia, Liberia’s capital. GSS, a company registered in the British Virgin Islands that specializes in maritime projects, signed the contract with the board of the Liberian Port Authority and received all the necessary approvals under the law.
However, shortly after the construction work began, democratic elections produced a new government led by President Ellen Johnson Sirleaf. Early in 2006, the new government ordered the port authority to cancel the contract and cease all construction work on the container terminal.
In defense of its decision, the Liberian government told the Jerusalem court that the “basis of the agreement is official corruption, which prevailed in Liberia at the time,” and that GSS plaid the CEO of the port authority and certain directors bribes amounting to tens of thousands of dollars. “The contract had no economic value to the Liberian Port Authority,” it asserted.
For its part, GSS said the cancellation had no legal basis and demanded a clause that in the event of a dispute the two would resolve it through arbitration in London. GSS named a lawyer to conduct the process, but the port authority didn’t. Under English law, the GSS side became the sole arbitrator and awarded the company the $44 million in damages.
The port authority neither filed to cancel the arbitration nor did it pay it, prompting GSS to turn to the Jerusalem District Court to enforce the judgment. GSS said the Israeli court had the authority to enforce the payment because GSS is managed by Israelis and that much of the equipment used in the construction came from Israel.
The Liberian government and the port authority both argue that the Jerusalem court has no authority in the matter and, in any case, contended that it was an improper forum because none of the parties to the dispute are Israeli. GSS is registered abroad and the contract was signed there.
Judge Ben-Zion Greenberg ruled that since the Liberian government wasn’t a party to the original contract – only the ports authority was – it therefore couldn’t be a party to the arbitration process, thus the court couldn’t order that the penalty GSS was awarded be paid.
The judge also rejected the petition against the authority because GSS never legally informed it, ordering GSS to pay Liberia court costs of 30,000 shekels ($8,500)
“The court unanimously adopted the justifications that led to the rejection of the GSS request to approve the arbitration ruling in Israel, thus blocking the attempt to execute an arbitrator’s award for an astronomical sum in Israel. That’s an unusual result, since arbitrators’ decisions are generally approved and enforced in Israel, in an arbitration award given by a distinguished arbitration tribunal in London,” said attorney Gad Ticho and Orit Almozlino-Rize of the Tel Aviv firm Caspi & Co., who represented the Liberians.