The Egyptian government froze negotiations between companies to import gas from Israeli fields or grant import approvals until the legal position of the arbitration ruling against Egypt and the results of its appeal are clear.
The Egyptian General Petroleum Corporation (EGPC) and the Holding Company for Natural Gas (EGAS) announced the arbitration ruling by the International Chamber of Commerce (ICC) in Geneva in the conflict between the East Mediterranean Gas Company (EMG) and Israel Electric Corporation (IEC). The ruling imposes compensation on EGPC and EGAS worth $288m, out of the $1.5bn demanded by EMG, which represents 19.2% of the total compensation demanded.
Egyptian businessman Alaa Arafa, one of the founders and partners in the Egyptian Delphinus Holdings that negotiates to import Israeli gas, said they were told it is necessary to freeze the negotiations with Israel after the ruling of the international arbitration, fining Egypt with $1.7bn.
“Egypt behaved as a country with sovereignty and dignity when it reacted to the fine of the international arbitration,” Arafa said in a statement to Daily News Egypt.
“Each country works on protecting its interests. If Egypt has a right according to an international arbitration against Israel, would it have stayed silent?” he asked.
According to Arafa, his company’s negotiations involving the importing of Israeli gas were very confidential, refusing to comment on statements regarding Egypt completing import procedures to drop the international arbitration.
The EGPC explained that the ICC also obliged Egypt to pay $1.7bn in compensation to the IEC, out of the $3.8bn IEC demanded, which represents about 39.5% of the demanded compensation. After that, the arbitration tribunal rejected other compensations that were deemed unwarranted.
EGPC, EGAS, and the Shearman & Sterling law firm said they are taking all necessary legal proceedings to invalidate this ruling and appeal it in front of the Swiss courts, according to litigation procedures.
It is of note that during the month of February 2012, the IEC board agreed to file a lawsuit as part of an international arbitration process against EGPC and EGAS by EMG, which is controlled by Israeli businessman Josef Maiman and Egyptian partners.
The IEC said the tripartite agreement signed in 2009 between the parties was breached, while Egypt said halting the flow of gas was a result of a “force majeure”. Egypt sold natural gas to Israel under a 20-year agreement but the deal ended in 2012 when the gas pipeline was repeatedly attacked for months by gunmen in Sinai.
Rumours spread that the IEC is willing to waive the arbitration, provided Egypt gets involved in a broader operation marketing the newly found gas on the shores of Israel. Such involvement would include the approval for Egyptian companies to import Israeli gas through the pipeline operated by EMG.
The IEC said in an official statement that it received an international ruling, obliging Egyptian gas companies to pay $1.76bn in compensation for halting gas supply. It also said the verdict issued against EGPC and EGAS is due to the significant damage caused by their failure to deliver the gas to the IEC.