* Investors move to keep dispute diplomatic, not commercial
* Shareholders seeking up to $8 billion in damages
By Ari Rabinovitch
JERUSALEM, May 3 International shareholders in
East Mediterranean Gas (EMG), the company that oversaw the now
defunct Egyptian-Israeli natural gas deal, said on Thursday they
were suing the government of Egypt for violating three bilateral
The decision to take legal action against the Egyptian
government under treaties with the United States, Poland and
Germany is the strongest move so far by the group, ensuring the
dispute is handled diplomatically and not just commercially.
Egyptian state-owned oil and gas companies announced on
April 22 the termination of gas sales to Israel, which were part
of a 20-year deal, following a year of sabotage and pipeline
attacks that had already disrupted supplies.
Israeli and Egyptian officials have tried to play down the
ending of the 2005 deal, saying the cancellation of the contract
supplying Israel with 40 percent of its gas needs resulted from
a business dispute.
However, there have been growing public calls within Egypt
to review ties with Israel since the overthrow of President
Hosni Mubarak, for whom a peace treaty with Israel was a
cornerstone of regional policy.
Thursday's announcement came after months of unsuccessful
attempts to resolve the issue through negotiation, one of the
shareholders, Ampal-American Israel Corp, said.
Egypt's Foreign Ministry could not immediately be reached
The investors, who include Thai energy giant PTT,
U.S. businessman Sam Zell and Israel's Merhav, are also suing
the Egyptian oil and gas companies. Together they are seeking up
to $8 billion in damages.
"The investors' disputes with Egypt arise out of a series of
acts and failures by the government of Egypt that have seriously
undermined the value of the investors' investments in EMG,"
Ampal said in a statement.
The underwater pipeline, which EMG spent about $500 million
on building, had been targeted by militants in Egypt's unruly
Sinai peninsula numerous times, halting the flow of gas for most
of the past year.
In 2010, prior to the attacks, EMG provided 2.5 billion
cubic meters (BCM) of gas to Israeli customers. But that number
was expected to more than double throughout the 20-year deal.
Israel's energy sector will likely be hurt in the short
term, but the country has been weaning itself off the
once-crucial supplies and has a number of contingency plans that
will lessen the impact.
U.S.-based Ampal said it had submitted a request for
arbitration to the World Bank's International Center for
Settlement of Investment Disputes in accordance with the
Egyptian-U.S. bilateral treaty.
Ampal's chairman, Israeli magnate Yossi Maiman, is also a
Polish national, and a German citizen is invested in EMG as
well, allowing the group to seek compensation under the Polish
and German treaties, the statement said.
Egypt Natural Gas Co is a also a shareholder in EMG.
(Editing by Mark Potter)