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Can the Israeli gas phoenix rise again?

The decision by Israel’s Supreme Court against the gas framework may finally kill the gas industry and rebound on itself.

According to legend, the phoenix is a bird that regularly dies and then rises again. The closest things to a phoenix in Israel is the situation with the exploitation of the offshore natural gas reserves discovered years ago and subject to a seemingly never-ending series of near-death experiences.

The latest such experience is the Supreme Court ruling striking down one of the most important clauses of the agreement signed between the government and the companies performing the work of developing the fields, including the largest, Leviathan.

After more than a year of torturous negotiations with the companies made necessary by the decision of the then-director of the Anti-Trust Authority, David Gilo, to go back on his prior approval of the previous agreement, the government finally overcame obstruction by the then-minister of economy Aryeh Deri and signed a new agreement with the companies that was approved by the Knesset. Actually, Knesset approval was not required at that point, but the prime minister submitted it anyway to give it maximum legitimacy.

Enter the Supreme Court. After accepting a case brought by NGOs opposed to the agreement, or more accurately to the whole idea of natural gas development (or for that matter any other resource development, such as oil in the Golan), the court gave the government one year to renegotiate the clause in the agreement about regulatory stability during the period in which the companies would recover their initial investment.

The prime minister went to the unprecedented length of appearing before the court to defend the agreement, pointing out that failure to develop the Leviathan gas would have most pernicious effects not only on the royalties that would flow therefrom to the state and eventually to the benefit of the Israeli people, but also to Israeli foreign policy, since several deals have been signed with neighboring countries to supply gas in the future. A rejection of the deal and ultimate abandonment of the project by the companies would also do serious damage to Israel’s international business reputation.

The court’s decision, based upon ignorance of the gas market and the purpose of the regulatory stability clause, has resulted in a major controversy over the role of the Israeli supreme court as a branch of the state and the doctrine of the separation of powers. Most recently Justice Minister Ayelet Shaked bitterly attacked the court for exceeding its powers in this case. The court’s interference with the decisions of the other branches of the government has been just as enthusiastically supported by other public figures as the ultimate guarantor of Israeli democracy.

Thus the recent decision of the court has already had two consequences: in the first place it remains to be seen if the natural gas phoenix can rise yet again from its most recent near-death experience, and secondly what the court’s controversial decision may mean for the movement to legislate a reduction in its powers to strike down executive and legislative decisions and laws.

As to the first, it is likely that an alternative method of ensuring stability will be found in the coming months; but if it is not, the phoenix’s run of luck may be at an end. As to the second, judicial activism is a problem for many countries, particularly the United States, where the Supreme Court has arrogated to itself ultimate arbitral powers, often through tortured interpretations of provisions of the constitution (interstate commerce clause particularly) or the “discovery” of constitutional “rights” found nowhere in the written document or its many amendments.

How both of these situations play out will have very serious effects on both the economic and financial future of Israel, its foreign relations and its democracy. Stay tuned and pray for the phoenix.