Nearly a month after the Egyptian government entered arbitration proceedings with investors who own the Egypt-to-Israel gas pipeline, the case of one of the country’s most controversial business deals of the past decade remains shrouded in secrecy and complexity.
Since Ampal, an American-Israeli-held company and partial owner of Eastern Mediterranean Gas Company (EMG), announced on 9 October that EMG would be filing suit against the Egyptian Natural Gas Holding Company (EGPC/EGAS) and the Israel Electric Corporation, any progress or legal maneuvers made have been kept under wraps.
Arbitration is the practice by which two parties agree on a professional, third-party arbitration judge to rule on the merits of a dispute. In the case of Egypt’s gas deal, the International Chamber of Commerce will preside and act as the third party.
There are several arbitration proceedings surrounding the controversial gas deal. In September, EMG filed another case against the Israel Electric Corporation over a related contractual dispute.
Ampal, along with other EMG shareholders, has also prepared to begin arbitration procedures against the government of Egypt under bilateral investment treaties of several countries. Bilateral treaties guarantee foreign investors rights over their property in a foreign country.
In the latest proceedings, EMG alleges that Egypt failed to supply gas it was contractually required to supply. Since February, the pipeline has not delivered a steady supply of gas due to intermittent attacks on it.
Thanks to repairs made to the line, gas began to flow again through the pipeline during October. But after another attack on 10 November, the flow has once again ceased. Any further interruptions in flow will probably result in additional charges, complicating the arbitration proceedings.
In an attempt to protect the pipeline, the Egyptian government is organizing patrols of the pipeline by local Bedouin tribes.
The attackers remain unknown, but after the most recent sabotage they left a message expressing their anger at the politics of the deal.
“We will not allow gas to be exported to Israel,” was found written in the sand not far from the location of the explosion.
These interruptions in flow are what investors are trying to seek reparation for.
Both sides have readied their lawyers.
Emmanuel Gaillard and Yas Banifatemi of the law firm Shearman & Sterling LLP will represent Egypt’s gas company, lawyers have confirmed to Al-Masry Al-Youm.
Shearman & Sterling is an international firm specializing in commercial disputes, considered by many in the legal profession to be a heavyweight when it comes to corporate business law. The firm has worked on other cases including Kraft’s acquisition of Cadbury, the Panama Canal Authority’s refinancing plan, as well as a power project in the Middle East that was part financed by Islamic banks, the first of its kind.
Freshfields Bruckhaus Deringer LLP, M. Firon & Co. and Baker Botts LLP will serve as counsel for Eastern Mediterranean Gas.
And all parties, it seems, are adhering to an information lockdown.
Banifatemi stated in an email that her firm did not intend to provide any comments.
A visit to the EGAS office in Cairo proved the company to be equally tight-lipped about the arbitration proceedings. Any communication would first have to be sanctioned by the Petroleum Ministry, representatives said.
The gas pipeline, built in 2008, is part of a 20-year-long deal that guarantees the Israel Electric Corporation natural gas from Egypt at a below-market price. The deal was negotiated under Mubarak by former Petroleum Minister Sameh Fahmi and notorious businessman Hussein Salem, who is now facing trial on corruption charges. All of the parties are believed to have profited from selling gas to Israel at the rigged lower prices.
Many Egyptians also believe there are political conditions that accompany the deal and the protest movement and Egyptian government officials have called for it to be revised.
The case could result in the payment of billions from the Egyptian government to EMG.
First, though, EMG will have to prove that the Egyptian side did not hold up its end of the contract in delivering gas to Israel. Or alternately, the Egyptian counsel will have to prove that they have ample reason for the stalling in gas flow.
It’s possible the ruling could fall either way, experts say.
“Force majeure justifies not delivering it,” said Ahmed El-Kosheri of the Kosheri, Rashed & Riad law firm in Cairo, who is familiar with the case, explaining the legal term for such a forced stoppage.
At any rate, the case’s secrecy, prestige and consequences has many awaiting the verdict.
“It is a very interesting case,” said Kosheri. “Every lawyer is watching to see how it will end.”
