Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) is threatening an $8 billion lawsuit against the Egyptian government unless gas supplies from Egypt to Israel are resumed. Ampal, which owns 12.5% of Egyptian company East Mediterranean Gas S.A.E. (EMG), the company that exports Egyptian gas to Israel, announced today that it had joined EGI-Fund (08-10) Investors, L.L.C., PTT International Company Limited and other international EMG's shareholders, in taking the formal steps required to initiate an international arbitration process against the government of Egypt under the US-Egypt bilateral treaty for the protection of investments.
The process was launched when EMG and other international shareholders gave formal notice to the relevant Egyptian ministries demanding consultations on breaches under the Gas Supply and Purchase Agreement between EMG and the Egyptian General Petroleum Corporation and the Egyptian Natural Gas Holding Company. Ampal said the breaches included failure to deliver the contractually required amounts of gas to EMG, and claims that these violations of the gas contract constitute violations of the Treaty between the United States of America and the Arab Republic of Egypt Concerning the Reciprocal Encouragement and Protection of Investments. In the event that the current dispute is not resolved through consultations, EMG's shareholders intend to submit the dispute to the International Centre for the Settlement of Investment Disputes in Washington DC.
Ampal reiterated that the technical repair work to the gas valve station that was damaged by an attack on April 27, 2011 and is owned and operated by the Egyptian government owned gas transport company, has been completed and that the site is technically ready for gas transmission.
Ampal chairman, president, and CEO Yosef (Yossi) Maiman said, "Ampal, as well as EMG's other international shareholders, are determined to pursue every available avenue to secure the smooth operation of EMG and meeting its contractual obligations to our downstream clients, including by demanding that EMG's gas supplier performs and honors its obligations under the gas contract, as would be expected from a national company seeking to maintain a reputation as a reliable supplier."
Maiman added that "EMG is the only company to increase the price it paid for Egyptian gas in 2009; which is the highest price paid to the Egyptian government by any exporter of Egyptian gas (through pipeline and/or LNG). The price paid by EMG is also higher than the net price paid to the government of Qatar for its gas as well as the net price received by Russia for selling gas to Germany.
"Consequently, now that the gas pipeline of the government of Egypt is technically ready for gas deliveries and all security measures taken by the government of Egypt are about to be completed, the EMG shareholders shall accept nothing less than adherence to the letter of the Gas Supply and Purchase Agreement. Failing that, and if gas supply is not restored expeditiously and at the precise contracted quantities, the EMG international shareholders shall resort to any and all legal remedies available to them in any relevant jurisdiction to protect their investment.
"It is important to recall that the international investors have invested a very substantial amount of money in EMG through direct investments and in EMG's shares. Furthermore, EMG's various clients with whom EMG has signed contracts have also invested a substantial amount of money in power and industrial plants, all based upon agreements with EMG which are backed by a corresponding agreement between EMG and the Egyptian upstream gas supplier as well as by the MOU between the government of Egypt and the Israeli Government. I know that we, in EMG, hope that we do not have to pursue litigation against the government of Egypt which could be in excess of $8 billion, at the Washington court of arbitration and other international courts in order to protect our rights under the gas contract," Maiman concluded.
Published by Globes [online], Israel business news - www.globes-online.com - on May 31, 2011
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