Two lawyers have been selected by Israel’s Finance Ministry and Israel Chemicals Ltd. to oversee an arbitration case regarding the level of royalties to be paid by the company for extracting potash from the Dead Sea. The next stage will be for the two lawyers to agree on an arbitrator of the dispute.
The two sides tried to resolve the dispute in the past through the appointment of a mediator. However, the mediation process was cancelled after the two sides failed to agree on a mediator. After this, both sides agreed to arbitration, with the arbitrator’s decision being final.
According to the 1995 agreement under which Israel Chemicals was privatized, the rate of royalties was fixed at 5 percent of its revenues from the sale of potash. The agreement specified that the royalty issue was subject to reevaluation in 2010 regarding potash production above the 3 million mt a year level, with a maximum rate of no more than 10 percent.
The Finance Ministry is demanding that a 10 percent royalty rate be implemented, to which ICL is opposed.
In a related development, the Ministry has ordered a second independent assessment on whether ICL paid the government the full royalties due for the years 2003-2005. The previous report found that due to a change in accounting methods, the government was owed $115 million. ICL rejected the findings, arguing that the matter was subject to the legal interpretation of its licenses.
In October 2010, Israel’s National Infrastructure Ministry raised the royalties it levies on phosphate mining to $0.443 per mt, an 84.5 percent increase. ICL produced 2.7 million mt of phosphate rock in 2009, most of which was used in the production of phosphate fertilizers and phosphoric acid. This compared to the rate of $0.24 per mt that was instituted five years ago.