ISRAEL Legal Business April 2015
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ISRAEL Legal Business April 2015 November 2010 Legal Business 3 ISRAEL 80 Legal Business April 2015 Illustration/Photograph ARTIST’S NAME ISRAEL International opportunities are emerging for lawyers in Tel Aviv, as Israel becomes less reliant on its traditional trading partners of the US and Europe, and diversifies into Asia-Pacific and other growth economies CHRIS CROWE himon Peres, the 91-year-old former Israeli This symbolises a wider cultural and economic shift. For president, may not be the most obvious social decades, Israel’s political elite has made much of the nation’s media fanatic. Yet in 2014 he opened an account on natural affinity with the US and the influential Jewish Weibo, China’s equivalent of Facebook, expressing community there. That umbilical cord to the world’s most his desire to interact directly with the Chinese powerful nation that has fertilised Israel’s tech and start-up Speople, including its younger generation. The nonagenarian community remains intact. But in recent years, as western quickly received over 50 million ‘likes’ on his Weibo page. pressure and sanctions have been exerted on Israel u April 2015 Legal Business 81 ISRAEL MONOPOLY PLAY: ANTITRUST CONCERNS LEAVE NATURAL GAS SECTOR IN LIMBO Ever since the sizeable Tamar and Leviathan natural gas fields were discovered in 2009 and 2010, Israel has been coming to terms with its energy wealth. Israeli energy company Delek and US-based Noble Energy have become the most powerful players in the industry. Many would have expected Israel to still be celebrating its good fortune, but its antitrust authority has had persistent concerns about Delek and Noble’s perceived dominance. Tamar, which is understood to hold 10.8 trillion cubic feet of natural gas, started flowing in 2013. Leviathan holds 22 trillion cubic feet and is not yet in production. ‘Noble and Delek have been brave enough to spend considerable amounts of money on Tamar gas field © Albatross/Israel Sun/Rex exploration and they have hit the jackpot,’ comments Simon Jaffa of Barnea & Co. were remaining concerns that these measures ‘Until the matter has been finally settled, As the big players in the market, the would still not defeat the alleged monopoly. investment and projects in the upstream oil antitrust commissioner has concerns that they With all this regulatory uncertainty, and gas sector are in limbo,’ says Renelle hold a de facto monopoly to supply natural gas efforts to promote foreign investment Joffe, the head of the energy group at to the Israeli market. A previous attempt to into Israel’s natural gas industry are now Meitar Liquornik Geva Leshem Tal. As such, reach a satisfactory arrangement with Delek uncertain. In May 2014, Australia’s Woodside she is downbeat about the short-term and Noble was cancelled at the end of 2014, with Petroleum withdrew its $2.7bn bid to buy a outlook for the energy practice: ‘Following the antitrust authority director general David 25% stake in Leviathan. ‘All this uncertainty the recent antitrust decision, the practice Gilo stating that the natural gas monopoly of puts off foreign companies coming into Israel has been focused more on regulatory issues Delek and Noble should be broken up. and investing,’ Jaffa comments. and less on projects, which in my opinion is How this is to be achieved is still unclear. He has concerns about how fast the gas a great pity.’ Noble and Delek own 85% of the Leviathan industry is moving in Israel and that the longer However, Dan Hacohen, head of the field and control the Tamar site as well. There it takes to get Leviathan into production the energy practice at Agmon & Co Rosenberg had been proposals that the gas from Tamar more it will depreciate the field’s long-term Hacohen & Co, who has worked on all the reserved for Israeli consumers, as well as the value. He believes that neighbouring states major gas discoveries in Israel, is more smaller Tanin and Karish gas fields, be sold that commercialise their gas reserves first will upbeat: ‘Proceedings will probably bring to a third party. Yet with Leviathan being the have a natural advantage on the regional and about divestitures and assets will change most significant of the various fields, there international stage. hands bringing in international investment.’ 82 Legal Business April 2015 ISRAEL April 2015 Legal Business 83 ISRAEL FAVOURABLE CONDITIONS: US REAL ESTATE INVESTORS ACCESS ISRAELI BOND MARKET While Israel is increasingly turning its sights at a historic low, investors are desperate to to Asia-Pacific and other emerging markets, put money into something that is going to the US, its closest long-term trading partner, generate a sufficient return. Clifford Davis has identified Israel’s capital markets as an of S. Horowitz & Co says: ‘Israel has this u over its conflict attractive location to raise money. confluence of money, demand and supply. It with Palestine, it has Much of the interest is coming from really is a win-win situation at the moment.’ turned its sights to the East, New York-based Jews who happen to run Israel’s pension and mutual funds where Asian jurisdictions have some of the biggest real estate investment are obligated to invest on behalf of their taken a less judgemental line on companies in the stakeholders and its political and military stance. country. Gary currently the Simon Jaffa, a partner at Barnett, the ‘Israel has this bond markets Barnea & Co, says that trade and president and are an attractive investment coming from Asia is founder of Extell confluence of money, option. With making a fundamental difference Development these real estate to economic stability in Israel, and Company, raised demand and supply. developers given is a welcome boost to the local some $300m on high credit ratings legal profession: ‘The Chinese are the Israeli bond It really is a win-win by the Israeli interested in doing business and they markets in 2014. authorities, it are not going to be prevented from Dudi Berland, situation at the moment.’ makes them all the doing business simply because of the a partner at more compelling. political environment.’ corporate finance Clifford Davis, ‘Mutual funds are And the Israelis and the Chinese have firmShimonov & only allowed to an enduring mutual appreciation. Amit Co, says he has S. Horowitz & Co invest in Israeli Ben-Yehoshua, an Israeli consultant at the been working for securities. There Shanghai office of Dacheng Law Offices 50-hours straight at times as more US real is lots of public money to invest,’ remarks (the Chinese firm that recently announced estate investors look to tap into the Israeli Shirel Guttman-Amira, head of the corporate a merger with Dentons), says he is still debt markets. department at Agmon & Co Rosenberg routinely surprised by the Chinese people’s This phenomenon derives from US Hacohen & Co. respect for his country. ‘If you take a taxi cab real estate investors traditionally avoiding The US real estate issuers have also in China and say you are from Israel, they the US corporate bond market. As many filled a gap left by a limited domestic bond will think that you are very smart,’ he argues. of these companies are seen as small- market. This is largely linked to a series Daniel Green, a partner at Yigal Arnon & to-medium sized in the US context, they of Israel’s tycoons running into financial Co, says there is no history of anti-Semitism often attract lower ratings than larger distress recently. in China: ‘They see a little scrappy country US bluechips, unlike in Israel where they Berland believes market fundamentals of immigrants and refugees, which against are regarded as much more sizeable mean that the Israeli securities market all odds has transformed itself into a organisations. ‘Small-to-medium sized will not necessarily remain a niche route technology superpower.’ companies in the US are considered to be explored only by US real estate investors giants here,’ Berland remarks. that have personal or business links to the CAPITAL FLOWS In addition, Israel currently has lower nation. He says that other industries and History and traditions aside, market data interest rates than in the US, making it other jurisdictions, such as the UK, are likely illustrates the growing importance of attractive for issuers. With interest rates to tap the local debt markets. Israel’s trading relationship with China and Asia. According to Mergermarket, four of the top ten Israeli M&A transactions in 2014 involved a Chinese or Asian party while China’s Global Law Office and Israel have traditionally sought their funds from (see ‘Israel: deals in 2014’, page 86). The firm Herzog Fox & Neeman advised Apax American institutional investors, family largest was Shanghai-headquartered Partners. Tel Aviv-based Meitar Liquornik offices and corporates. But he says there has Bright Food’s $1.75bn acquisition of Tnuva Geva Leshem Tal represented Tnuva. been a notable shift in capital coming from Food Industries, Israel’s largest food Koby Simana, chief executive at IVC- China, Japan and Korea. manufacturer and distributor, from Apax Online – a resource centre for data and While the deals involving Chinese and Partners. Freshfields Bruckhaus Deringer information on Israeli hi-tech and venture Asian investors have been comparatively and Israel practice Fischer, Behar, Chen, capital investments – says that local hi- large by Israel’s standards, buyers are lured Well, Orion & Co advised Bright Food, tech companies and venture capital funds to Israel by not only the pioneering spirit, 84 Legal Business April 2015 ISRAEL Makhteshim Agan Industries for $2.4bn process of bringing products to the market in 2011. Herzog Fox advised Makhteshim generally requires more long-term vision Agan, with fellow domestic firm GKH Law and is more capital intensive.