Israel exposed to lawsuit from Noble Energy's Cypriot co | Globes

Israel exposed to lawsuit from Noble Energy's Cypriot co

The State Comptroller is probing whether Noble Energy asked to transfer ownership of its Israeli licenses to a Cypriot subsidiary.

15/12/2015, Hedy Cohen

The State Comptroller is probing the sequence of events that led to Israel being exposed to a huge lawsuit by Noble Energy Inc. (NYSE:NBL) in Cyprus, sources inform "Globes." Among other things, the State Comptroller will examine whether ownership of the natural gas reservoirs in Israel has been transferred to a Cypriot company, whether Noble Energy requested permission for a transfer of ownership, and if it did, whether the Ministry of National Infrastructures, Energy, and Water Resources approved it. A "Globes" inquiry shows that there are different versions of the required permits and processes.

Perpetual threat

Three months ago, Noble Energy president and CEO David Stover said, "Noble Energy remains fully prepared, and is well positioned, to take the actions necessary to protect the value of its assets." Indeed, Noble Energy is well prepared. As Deputy Attorney General Avi Licht said in a Knesset Economic Affairs Committee meeting two weeks ago, Noble Energy has established a subsidiary in Cyprus, which enables it to sue Israel if the gas plan is not approved, according to the bilateral convention for protection of investors.

The company in Cyprus was apparently founded after the Sheshinski Committee completed its work and substantially raised the tax rate on gas. "What is happening is that one of the companies in the Noble Energy ownership structure is a Cypriot company, and it is therefore utilizing our trade agreement with Cyprus. They argue that they have grounds for this - that it is not based on the Israeli law, but on international trade agreements - and we are exposed there," Licht explained.

In other words, even though the rights in Noble Energy's oil licenses are registered in the name of Noble Energy Mediterranean, incorporated in the Cayman Islands, Noble Energy is liable to institute legal proceedings against Israel through its Cypriot company, in accordance with a convention that went into effect in 2003.

Noble Energy will probably demand international arbitration with Israel if the gas plan is not approved, but that is not the end of the story. Even if the plan is approved, Israel will always be under the threat of such a claim. Under the stability clause inserted into the gas agreement, for example, Israel will not be entitled to change its regulation in the gas sector for the next 15 years, and if it does so, it will be exposed to an international lawsuit that will continue for years. Two questions now arise: was Noble Energy required to obtain approval from the relevant parties in Israel for recognition of the Cypriot company's rights, and if it did require such approval, was such approval legally granted?

Among other things, obtaining state approval for changes in the ownership structure of rights is required in order to prevent a company's oil rights from being transferred to a hostile company. For example, Prime Minister Benjamin Netanyahu recently told MK Stav Shaffir (Zionist Union) that such a transfer of ownership would not be possible without the consent of the Minister of National Infrastructures, Energy, and Water Resources.

A clarification of Article 76 of the Israeli Petroleum Law, published in October 2010, states that a change in the control of a corporation holding oil and gas rights, whether direct or indirect, as well as the granting of a benefit related to such control, requires approval from the Antitrust Authority director general, after consultation. A benefit in this context can be any economic benefit arising from the right, including through direct or indirect holdings, royalties, information, liens, etc.

"Globes" asked Noble Energy and the Ministry of National Infrastructures, Energy, and Water Resources whether approval for the transfer of ownership had been obtained, and received contradictory answers. Noble Energy said that it had "been operating in Israel since 1998, and had always complied with the legal regulations and obtained all the legally required approval for all of its activities." The Ministry of National Infrastructures, Energy, and Water Resources said, "The Ministry has received no request for a transfer of rights, and therefore none was approved."

The Ministry of Justice declined to respond, and referred the question back to the Ministry of National Infrastructures, Energy, and Water Resources. The Cypriot embassy in Israel was unable to answer the question.

"Grave failure"

A perusal of Noble Energy Mediterranean's deed of incorporation for the purpose of identifying the company's owners shows that it states only that the company is based overseas and has no board of directors or shareholders. A search for the Cypriot subsidiary that owns the company in Israel also turned up nothing. According to the Bloomberg news agency, Noble Energy has several subsidiaries in Cyprus.

Noble Energy International also owns the rights to the Aphrodite gas reservoir in Cyprus. "Someone has to answer for the opening of a company in Cyprus that can sue Israel. If the Ministry of National Infrastructures, Energy, and Water Resources allowed Noble Energy to transfer its rights to a Cypriot company, it is a grave failure. If, however, it turns out that Noble Energy transferred the ownership without obtaining such approval, the failure is even worse - it is gigantic," says Van Leer Institute Chazan Center for Social Justice and Democracy research fellow Amnon Portugali. "The Cypriot subsidiary was set up just after the Sheshinski Committee for a single obvious purpose - to sue Israel when necessary."

Indeed, sources inform "Globes" that the State Comptroller's Office intends to probe the matter. The State Comptroller's Office said, "Although the matter was not raised in the report published on the development of the natural gas sector, we plan to conduct an initial query in this matter as part of the State Comptroller's policy of continual monitoring of the natural gas sector."

Published by Globes [online], Israel business news - www.globes-online.com - on December 15, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Source

Israel Hires American Law Firm Should Noble Turn To Arbitration | Natural Gas Europe

October 07th, 2015

Israel's Ministry of Justice has hired the services of an American law firm to represent the state in the event that Noble Energy sues Israel for damages. The Ministry has also started collecting evidence and documents to defend Israel's legal position.

For the last few months there has been a concern among Israeli officials that the American energy company, who is part-owner and sole operator of the Tamar field and is part owner of the Leviathan field and other natural gas assets offshore Israel, and is the leading player of the monopole in the Israeli natural gas market, will sue Israel at the ICC International Court of Arbitration in Geneva and will seek damages of billions of dollars. It is now assumed that if the Natural Gas Framework will not be approved during the coming few weeks Noble Energy will freeze indefinitely the development of Leviathan field and will turn to arbitration. The arbitration at the ICC could last a few years.

According to reports in Israeli media, Noble Energy is considering that course of action because of regulatory hurdles that the company claims delayed the development of its natural gas assets, in particular the development of the Leviathan field.

As an American company, Noble Energy will not able to sue Israel at the ICC, since there is no bilateral agreement between Israel and the US that enables a private company to sue the state. However, Israel has such an agreement with Cyprus. Commentators have noticed that 3 years ago Noble established a Cypriot entity to deal with Israeli authorities and through this company, according to assessments, Noble is able to sue Israel for damages.

SOURCE

Noble Energy plans for potential suit against Israel | Globes

Noble Energy plans for potential suit against Israel

07/09/2015, Amiram Barkat, Globes

By registering in Cyprus, the US energy company prepared the groundwork for a case against the Israeli government in international courts.

What will Noble Energy do if the gas framework is never approved? The answer becomes more relevant each day as Prime Minister Benjamin Netanyahu keeps sinking deeper into the quicksand from which he has been trying to rescue the agreement.  

Even if the likelihood of an international arbitration suit continues to grow, it remains the measure of last resort for Noble.

Legal Option

Noble has been preparing in recent years for an unsavory outcome which pushes them to seek international arbitration. The decision to prepare a legal option was taken by Noble following an in-house process that occurred in the wake of the increased taxes recommended by the Sheshinski Committee. The central claim being that the state had reneged on a promise to the firm that the tax rates for the Tamar reservoir are not increased.

During the Knesset hearings over the legislation to raise the tax levels, Noble representatives made clear threats over the filing of a claim through international arbitration but it was never served.

Sources close to Noble previously claimed that certain voices regretted that decision and believed that if the US energy giant had served suit during the Sheshinski proceedings, Israel would be reluctant to amend its regulations like it has in the past for example, placing a limits on export levels.

Noble was formerly set on the notion that any legal proceeding would have

Members of the Knesset Finance Committee discuss the state budget, November 15, 2015 by Olivier Fitoussi

irreversible consequences for its ties to Israel, which are based in mutual interests and a long-term strategic partnership. However, Israeli sources in contact with Noble claim that they have felt the company toughened its position since its CEO was replaced at the end of last year.

Noble has two major advantages if it were to seek international arbitration.

First, Noble enjoys particularly powerful privileges as a foreign investor in the Israeli market. Noble Energy, it is widely known, is an American firm based in Houston. As such, the government recognized Noble as an American company.

The state's position, based on detailed opinions of highly-respected jurists, is that American investors in Israel are protected by a trade pact from 1951, which provides investors relatively weak legal protections.

But the Ministry of Justice slipped up and did not notice that, technically, Noble operates in Israel under its subsidiary Noble Energy Mediterranean listed in Cyprus.

The rights of Cypriot investors in Israel and Israeli investors in Cyprus are protected by a treaty signed between the states in 1998. That treaty provides investors with much more powerful protections than the pact with the US, like the MFN clause which promises each Cypriot investor in Israel the best possible defense that Israeli has agreed to in any international treaty.

The second advantage Noble carries is Israel's pathetic record in international courts. Much like the traditional charge at the Eurovision Song Content, Israelis are convinced that the "judges are against us" in arbitration procedures as well.

This concern is based partly on the fact that Israel has never won an international suit. So far, Israel has badly faced two major arbitration courts; the cases against Egypt and Iran show that, above all, Israel tries to avoid arriving at arbitration because it is deeply concerned it will lose.

If Noble does choose to press ahead with the court option, its suit will be based on the claim that the regulatory changes undertaken by the Israeli government severely damaged the financial value of the firm's holdings in the gas reservoirs.

An Israeli source that looked at the legal proceedings told "Globes" that Noble estimated the financial damage at "many billions of dollars."

It is tough to guess at the likelihood the suit would succeed. "You know how you'll enter the courthouse, but you can never tell how you'll be when you leave," said Adv. David Kornbluth, formerly of the Ministry of Foreign Affairs' legal department, in an interview today with Israel Army Radio.

Published by Globes [online], Israel business news - www.globes-online.com - on September 7, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Source: http://www.globes.co.il/en/article-noble-planned-ahead-for-potential-suit-against-israel-1001067271