In a historic ruling, the High Court of Justice ruled Sunday afternoon that a controversial deal to extract natural gas from massive offshore fields will be canceled within a year unless a central tenet of the agreement is significantly changed or canceled.
The ruling puts a major damper on efforts by the state to approve the agreement with an Israeli-US consortium and override opposition by the state regulator, putting the brakes on a deal touted by the government as having the potential to bring hundreds of millions into state coffers and transform the country into a regional energy powerhouse.
“We have decided to cancel the gas deal because of the stability clause” that would have barred future governments from altering the deal, the justices said, explaining the 4-1 ruling.
The court, however, suspended the ruling for a year to enable the Knesset to amend the agreement.
Prime Minister Benjamin Netanyahu had made the gas deal a centerpiece of his agenda, saying the discovery of large reserves would bring energy self-sufficiency and billions of dollars in tax revenues. But critics said the deal gave excessively favorable terms to the government’s corporate partners.
“The High Court of Justice’s decision threatens the development of Israel’s gas reserves,” Netanyahu said in a statement shortly after the ruling. “Israel is regarded as a state with excessive judicial intervention, which makes it difficult to do business.”
Activists have been furious with the gas deal’s lack of transparency, including the so-called “stability clause,” which meant that the government could not impose regulatory changes, such as breaking up suspected monopolies, on the consortium for a full 10 years.
“I congratulate the High Court of Justice on canceling the stability clause in the gas deal. This is a happy day for the citizens of Israel,” said Zionist Union Knesset Member Yael Cohen-Paran, an outspoken environmental activist.
Netanyahu signed the gas deal on December 17, 2015, paving the way for a consortium of Noble Energy and the Delek Group to begin work on extracting gas from the massive Leviathan gas field off Israel’s coast, which is thought to contain some 22 trillion cubic feet of gas.
The deal came after a year of performing political cartwheels to override Knesset and public opposition to the deal, which, critics claim, will create a monopoly in the gas market and lead to higher prices for Israeli consumers.
Energy Minister Yuval Steinitz said the court’s ruling was “miserable” and its “negative consequences for developing the gas market, for energy security, for the Israeli economy, and for lost income for the state of Israel and its citizens, are liable to be even more difficult — and potentially irreversible.”
The stability clause, one of the central parts of the gas deal, had ensured there would be no regulatory changes, regardless of changes in the government or changing discoveries of the amount of gas as the drilling progresses, drawing the support of the consortium.
Activists want the gas deal regulations to remain dynamic, and argued that the stability clause was too favorable for the gas companies.
“The public regards the stability clause as though the state surrendered to the gas companies. The state needs stability, perhaps even more than we do. Without stability, there can be no development of the Leviathan reserve or other gas reserves. And if there’s no development of the gas reserves, it’s the state that loses,” a senior gas company executive told Globes.
In February, Netanyahu went before the court and urged that the deal be approved, saying it was critical to ensuring Israel’s security and economic position in the Middle East.
If the current deal isn’t approved, he told the panel of five justices, “we will lose our export potential to Jordan, Turkey, Egypt, the Palestinians and also the European Union.”
The appearance by the prime minister at the High Court to defend the deal was nearly unheard of in the annals of the court, and came after Netanyahu, in his capacity as economy minister, requested permission to testify in person in response to a court challenge against the draft agreement.
The court did not strike down another controversial part of the ruling, Clause 52, which is the antitrust law that enables the Economy Ministry to overrule the antitrust issues if national security is at stake.
Netanyahu was forced to pursue the use of Clause 52 after then-antitrust commissioner David Gilo ruled last year that the Delek-Noble conglomerate that is developing Leviathan may constitute a monopoly, sparking a vociferous national debate on the terms given to the energy companies.
Gilo resigned in May over Netanyahu’s decision to push the current deal through.
Former economy minister Aryeh Deri, not wanting to pay a political price for the gas deal but also not wanting to stand in its way, resigned his post last month, allowing Netanyahu to take over the ministry and to sign the deal himself.
Netanyahu previously failed at several attempts to pass a Knesset vote transferring Deri’s “Article 52 authority,” as it is known, to the broader cabinet.
Under the terms of the now-suspended outline, the Delek Group would sell its holdings in the Tamar gas field, as well as two smaller, as-yet-undeveloped fields about 120 kilometers (75 miles) off the Haifa coast called Karish and Tanin, within six years and Noble Energy will gradually reduce its holdings in Tamar to no more than 25 percent within the same time frame.
“We welcome this historic ruling by the High Court of Justice for this brave and necessary decision for the protection of democracy,” said environmental organization Adam, Teva, V’Din in a statement. “The court has defended the system of checks and balances, without which the rule of law is at risk.”
Raoul Wootliff, Ilan Ben Zion, AFP and AP contributed to this report.