A Swiss arbitration panel has issued a ruling whereby an Israeli oil company is mandated to pay more than $1.1 billion in compensation to the National Iranian Oil Company (NIOC) concerning a decades-old dispute over assets of a jointly-owned oil pipeline, Fars news agency reported, citing a source with close knowledge of the matter as saying.
In 1968, Israel and Iran launched a project for selling Iranian oil to Europe via Israel. At the heart of the deal was the construction of the Trans-Israel Pipeline from Eilat to Ashkelon, under the responsibility of the Eilat Ashkelon Pipeline Company (EAPC).
In essence, the EAPC is part of a legal entity known as Trans Asiatic Oil, (TAO) a partnership of the Israeli government (under the auspices of the Finance Ministry) and the NIOC. TAO was established under equal and joint ownership of the Israeli government and the NIOC. The Israeli government gave the company an exclusive franchise to transport and store oil. The owners of TAO, as they appear in the Israeli Registrar of Companies, were called the Eilat Corporation and Sea Marco — both registered in Panama. After the Islamic Revolution in 1979, Israel de facto nationalized the pipeline and continued to operate it. In 1985, Iran used a shell company, Fimarco Anstalt, which had been registered in Liechtenstein since 1959, to file a claim against TAO in international arbitration to receive its share, estimated to be worth in the billions of dollars.
The direct debt of TAO, for transporting oil in the pipeline on credit for three months, was estimated then to be $400 million – a sum that has since inflated to an estimated $4 billion. NIOC said in its arbitration suit that Israel has taken over EAPC and ousted its Iranian partners.
Since 1994, arbitration services and litigations were carried out in Switzerland, in the International Court of Commerce in Paris, as well as in another European state, apparently Holland. The arbitration has been going on for years in Switzerland, and Israel under Prime Minister Benjamin Netanyahu has suffered legal defeats to the Iranians — after changing its strategy and claiming that its refusal to pay was designed to hinder the Iranian nuclear program.
In 2013, after 19 years of arbitration, Switzerland’s Federal Supreme Court rejected these claims and forced Israel to stick with the arbitration — and pay its debt. It reached a partial ruling that Israel must pay around $500 million to Fimarco, and also cover all the suit's legal fees, amounting to 450,000 Swiss francs ($468,700). Still, Israel appealed the ruling, claiming that there was no legal basis to force it to pay the sums at this time. The Swiss arbitration, however, has ruled in its latest award in May that TAO should pay the NIOC $1.1billion in compensation for previous oil delivery, plus $7million for arbitration costs, Fars news agency reported, citing an unspecified source in international legal department of the Presidency as saying. NIOC is currently in the process of three arbitration actions against Israel or Israeli-owned companies, in a suit demanding billions of dollars’ worth of compensation. It has also filed a complaint in Panama for recognition and enforcement of the Swiss arbitral ruling in order to prevent expiration of the limitation period, beyond which point the party pursuing stale claims would not be allowed to enforce its rights, the source added.
