Netanyahu loses gas battle but wins war

Why the High Court ruling cleared the last legal hoops to making the natural gas deal a reality.

By
April 2, 2016 14:46
gas deal

Prime Minister Benjamin Netanyahu addresses the High Court on the gas deal. (photo credit: GIL YOCHANAN/POOL)

 
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Listening to the rhetoric of the critics and the supporters of the High Court of Justice’s landmark decision striking down the government’s natural gas policy, one would imagine that it was a low point of Prime Minister Benjamin Netanyahu’s premiership and a high point for opponents of the policy.

Nothing could be further from the truth.

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To understand why, it is important to look not just at the overall result. Admittedly the High Court did strike down, or at least suspend for around a year, the gas policy.

But break down the disparate, multiple decisions and votes the High Court made on several extraordinary issues beforehand, and you will find that while opponents of the deal won the battle and will probably achieve some changes they want in the industry framework, Netanyahu won on a vast majority of the issues – and many of his wins were not obvious ones.

So let’s look at the votes, starting with the votes against the deal.

On one hand, the High Court’s 4-1 decision, with Deputy Supreme Court President Elyakim Rubinstein and justices Esther Hayut, Uzi Vogelman and Salim Joubran voting in the majority against Justice Noam Sohlberg, invalidated the 10-year rule, which means that the gas reservoir developers cannot freeze their desired price and cap on liability.

Also, Rubinstein, Vogelman and Joubran voted 3-2 against Hayut and Sohlberg to strike down the policy, or at least suspend it for a year while the government adjusts it.



Yes, the 10-year freeze of terms such as price and liability was a major aspect of the framework. But it is already evident, only days after the decision, that alternate solutions can be found to give the developers and their lenders their main interest behind the 10-year rule: stability to take a multi-year risk in developing offshore reservoirs.

Stability can be achieved without the 10-year rule. Ideas already being thrown around include the state promising to buy a certain amount of gas if developers cannot sell it at a set price on the free market, committing to cover certain expenses, loan guarantees or incentives for gas buyers abroad.

This has been the focus of celebration and declarations that the country’s democracy has been saved, and of virulent criticism and calls to circumvent the court’s authority.

And that is how almost every High Court’s striking down of a law or policy is greeted in this country.

But again, the real story is in the remaining and less discussed votes.

By a 4-1 majority, with only Joubran dissenting, the justices upheld most of the other aspects of the gas deal, including Netanyahu’s power to override and circumvent objections of the Antitrust Authority on the grounds of national security.

This is huge.

The prime minister – acting as his own economy minister, after getting the previous one, Arye Deri, to resign – can override the Antitrust Authority on a question of economics, using national security as the grounds.

Technically, as the government, and eventually the court majority, pointed out, this power has existed for decades. It simply had not been used until now.

But the same arguments the court made for dropping the 10-year rule – that there is serious policy disagreement over these issues, and future governments may feel differently – could have led the court to block the prime minister from overriding the Antitrust Authority.

The High Court could have said only the Antitrust Authority is truly nonpolitical, and if it will not approve the deal, then the prime minister should respect that nonpolitical judgment.

The court did not say that, and its reasoning for letting Netanyahu use the override authority has massive consequences going forward.

First, the court said that it would not second- guess any of the economic judgments made by the government. That means that a range of highly debated aspects of the deal are now off the legal table and beyond being challenged. Technically, the current deal may have been struck down, but the High Court has already said that it will give a passing grade to virtually the whole thing other than the 10-year rule.

Second, the citing of national security as the reason for overriding antitrust concerns, and without establishing a more solid criteria, could reverberate in future cases, weakening the Antitrust Authority in disputes with the political echelon.

But what may be most important is that by a 3-2 vote, with Rubinstein and Joubran in the minority, the justices ruled that Netanyahu is not obligated to redo the entire policy in the Knesset.

This means that if Netanyahu either finds an agreement with the gas developers which the cabinet endorses or passes a limited change in the Knesset, adjusting the 10-year rule, he should be able to get past any further High Court objections without refighting prior battles.

He could decide for political reasons to undertake a new and broader Knesset process and battle, but he does not need to, and not doing so would save him loads of controversy and debate.

So on a judicial scorecard, the prime minister cleaned up on almost all issues.

If all of this is true, why did Netanyahu and his allies cry foul, and why did the Zionist Union’s Shelly Yacimovich and those opposing the deal declare a “dramatic and historic decision”? First, in the short term, Netanyahu did lose an awfully big battle.

Until he asked it for support on the deal in a dramatic hearing in February, no prime minister had ever personally appeared before the High Court to ask it for anything.

One reason prime ministers have not directly confronted the High Court is to avoid the appearance of pressure and a constitutional crisis. But another is to avoid putting so much personally at stake when they do not have their normal political tools to gain leverage to get the answer they want.

Netanyahu went out on a limb and got busted in a very public way. The High Court treated him very politely, but the appearance may also have cost him some political capital.

So why did he do it? The truth is, going on the High Court’s recent record, Netanyahu made a fair bet.

The last time the High Court weighed in on the gas deal, it ruled in his favor, 5-2, dealing a major blow to opponents of the deal.

In October 2013, the court rejected the request of Yacimovich and a range of rightwing and left-wing MKs to have the Knesset decide the issue of what percentage of the natural gas would be required to be sold domestically versus exported.

That dispute also involved asking the High Court to interpret a very old law in a new way with profound consequences.

That decision will affect the distribution of hundreds of billions of shekels in the economy and will have massive social impact in terms of what funds will be used for domestic social issues.

In that decision, five justices, including then-Supreme Court president Asher D. Grunis, then-deputy president Miriam Naor and justices Hayut, Edna Arbel and Sohlberg, made up the majority in favor of the state, while Joubran and Rubinstein made up the dissent.

So Netanyahu was used to winning in the High Court on gas deal issues.

Also, in recent months the High Court finally ended its multi-year battle with Netanyahu over migrant policy, essentially confirming the government’s fourth version of its policy to detain illegal migrants and deter them from remaining in Israel, after having vetoed the first three versions.

Further, it took a pass on vetoing the appointments of Yoav Galant and Arye Deri as ministers, and endorsed Avichai Mandelblit for attorney-general – all results Netanyahu wanted, but which were not foregone conclusions.

These decisions also seemed to signal that the High Court was looking to avoid banging heads with the prime minister on higher profile issues with political sides to them.

So why did he lose this time? Curiously, four of the justices on the current panel were on the 5-2 panel from October 2013, and they all mostly voted the same way.

The main difference was Vogelman being added to the panel, who voted against Netanyahu (and who has voted against him on many issues). Other changes included Grunis and Arbel retiring, Naor being off the panel and Hayut switching sides on the 10-year rule issue.

There was a decent chance that if the same October 2013 panel had heard the current petition, Netanyahu would have won again.

So in that sense, the timing may have just been off for him, or his legal advisers may not have properly sized up the changed panel.

Alternatively, reading Hayut’s zigzagging opinion alternately supporting and striking aspects of the law, it may be that the gas deal could have survived if the freeze conditions had been slightly watered down.

Hayut writes as if she wants to do what she can to make the deal happen. But once the deal includes provisions obligating the government to actively fight even any private MKs legislative attempt to change the deal or to seek greater damages against the developers in a given scenario, she felt compelled to rule against.

In this narrative, Netanyahu correctly sized up that he had “fans” on the High Court, but failed to see he had pushed them just a bit too far.

Why did deal opponents celebrate a decision where they lost on a range of issues? Because they had expected to get slamdunked and the game to be over, and now they live to fight the deal another day, or rather for another year.

And so, as surprising as the High Court’s rejection of Netanyahu’s personal plea was, it turns out that he will still likely win the war on one of his flagship issues.

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