Sources inform ''Globes'' that the Liberman and Abeles families of Australia, Zadik Bino's partners in the controlling core of Paz Oil Company Ltd. (TASE:PZOL) and First International Bank of Israel (TASE: FTIN) (the latter through FIBI Holdings Ltd. (TASE: FIBI)) are threatening to sue Israel in International Court of Justice in The Hague or the International Court of Arbitration in Paris if the government adopts the recommendations of the Committee on Concentration in the Economy at Sunday's cabinet meeting.
"The Liberman and Abeles families are consulting with advisors to review their options in Israel and abroad. They intend to fight to prevent the Israeli government from compelling them to sell their holdings in Paz or First International Bank," said an associate. The Concentration Committee recommendations, if adopted, will force Bino and the Liberman and Abeles families to sell either their financial holdings (First International Bank), or their non-financial holdings (Paz) within four years.
The Liberman and Abeles families have invested hundreds of millions of dollars in Israel, making them some of the biggest long-term foreign investors in the country. They own 12.84% of Paz (currently worth NIS 700 million), and 31.54% of FIBI Holdings (currently worth NIS 440 million). FIBI is the controlling shareholder of First International Bank, Israel's fifth largest bank, with a balance sheet total of NIS 102 billion, and a market cap of NIS 4.2 billion.
The cause for their claim will be that the Israeli government is in breach of international conventions to which it is a signatory. They will also claim that it is harming their property and rights, and discriminating against them, compared with other conglomerates, as implied by the Concentration Committee's recommendations.
Regulatory permits
During the committee's discussions, the lawyers for Bino and the Liberman and Abeles families argued, "Concern about harm to competition cannot exist in the view of our group, both in terms of the amount of credit granted by First International Bank, and in terms of the size of the holdings of the controlling shareholders in non-financial and financial corporations. A basic condition of the ability to divert credit and suppress competition is a small holding in the financial corporation and a high stake in the non-financial holding (this is the only way to have a financial advantage in blocking credit to competitors). Our group has substantial and similar stakes in two companies - a situation that does not create an incentive to block credit to non-financial competitors."
The Liberman and Abeles families contend that the holdings in Paz and First International Bank do not constitute a problem for the economy. There are no material business relations between the two companies. The controlling shareholders hold them separately, and meticulously maintain high shareholders' equity and low leverage. They contend that the principle of reliance is being harmed, since the families obtained permission from state regulators - the Bank of Israel, the Antitrust Authority, the Government Companies Authority, and even the Ministry of Defense - for each acquisition. For example, both Paz and the Ashdod oil refinery were acquired from the state. The Bank of Israel encouraged and approved the acquisition of First International Bank in 2003.
For a foreign investor to turn to an international court against the Israeli government is an extreme and unprecedented step. In 2005, following the Bachar Committee report, some US shareholders in Bank Hapoalim (TASE: POLI) threatened to turn to Congress, but nothing ever came of it.
Netanyahu is afraid of the social protest
It is impossible to sever the cabinet's approval of the Concentration Committee's recommendations from assessments by the Prime Minister's Bureau of a new wave of social protests this summer. Prime Minister Benjamin Netanyahu therefore ordered implementation of the committee's recommendations to be stepped up, and to put them on the agenda of next Sunday's cabinet meeting. After cabinet approval, the recommendations will be sent immediately to the ministerial legislative committee for approval.
The Prime Minister's Office reportedly greatly fears that protest organizers will hold the first demonstrations after Independence Day next week, which is why Netanyahu is seeking to preempt them by expediting approval of the Concentration Committee's recommendations. He intends to complete the legislative process by the end of the summer session at the end of July.
Political sources believe that since the Knesset's summer session, which begins in May, may be the last session before the next elections, Netanyahu is seeking achievements, but it is doubtful whether approval of the Concentration Committee's recommendations will be enough to prevent mass public demonstrations.
Published by Globes [online], Israel business news - www.globes-online.com - on April 19, 2012
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