The High Court of Justice today dismissed petitions by small oil and gas exploration investors against the Sheshinski Committee recommendations, ruling that the government has the right to increase its take of oil and gas discoveries. Investors in Tamar and Shimshon licensee Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) led the petitions. After the Knesset passed the recommendations, small investors in exploration partnerships opened a legal fight, claiming discrimination because of the policy changes in royalties and tax policy following the Tamar discovery. They claimed that they had taken great risks during exploration with dry holes in the years preceding the discovery.
The claimants contended that the Sheshinski law was unconstitutional because it disproportionately harmed their property rights and because the law was applied retroactively.
High Court Judges Miriam Naor, Uzi Vogelman, and Zvi Zylbertal dismissed the claims, ruling that the application of the Sheshinski law was not retroactive. "The new law that was legislated raises the tax rate on profits that will be produced from oil and gas after its legislation. It does not apply on revenue previously produced. This alone is enough to dismiss the retroactive tax argument. Although the petitioners invested in discoveries at a certain tax rate, but the law and the cancellation of the deduction resulted in a higher tax rate. The future income of the petitioners is subject to the tax regime that will apply when the profits are produced. Therefore, the law that sets the new tax rate does not apply retroactively. This is a common legislative situation," they wrote.
Judge Vogelman ruled that the Oil and Gas Profits Law met the condition of limited legislation because "it meets the values of the State of Israel as a Jewish and democratic state, it is intended for the worthy intention of distributive justice and its harm to the petitioners' property rights is proportionate."
The High Court of Justice ordered the petitioners to pay over NIS 250,000 in court costs.
Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2012
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