ICL lost in the arbitration proceedings it filed against the Ethiopian government which it demanded compensation of $ 181 million

ICL (ACC) lost in the arbitration proceedings it filed against the Ethiopian government in May 2017, in which it demanded compensation from the government of $ 181 million plus interest. This is due to the claim that the Ethiopian government conducted itself in an arbitrary, discriminatory and illegal manner when it imposed - without a legal basis - a tax assessment on its granddaughter Allana Potash Affar, which was held by a Dutch subsidiary of ICL.
As part of the lawsuit, ICL claimed that the Ethiopian government had violated the agreement to encourage investment and mutual protection of investments under the agreement between Ethiopia and the Netherlands. The Ethiopian Tax Authority demanded the tax, claiming that the transaction in which ICL acquired the Canadian subsidiary Alana, recently generated a taxable capital gain in Ethiopia.
The Ethiopian government also argued in the arbitration that ECL Europe - the company through which Alana was held - did not make its investment in accordance with Ethiopian law, and therefore the Arbitration Tribunal, which conducted the arbitration, lacked jurisdiction under the Ethiopia-Netherlands Investment Treaty. Ethiopia further argued that the tax was lawfully imposed and did not constitute a basis for filing a claim under the agreement between Ethiopia and the Netherlands; And that ICL has discontinued its investment for reasons unrelated to the alleged illegal actions and omissions on the part of Ethiopia.
ICL accepted the arbitration award. Although there are indications that there were flaws in the tax assessment imposed by Ethiopia, the arbitrator gave a narrow interpretation to the investment treaty between Ethiopia and the Netherlands - and rejected ECL Europe's claims. Not only was ICL's claim for compensation of $ 181 million rejected, the Arbitration Court even ordered ICL to pay Ethiopia $ 2.5 million for reimbursement of arbitration expenses.
ICL noted that the payment would not have a material effect on its financial results, emphasizing that since the fourth quarter of 2017, Alana has not been included in its financial statements.
Alana held the Ethiopian government's concession to mine potash in the Dankil Desert, and the purchase was made as an alternative in case the Israeli government did not renew the concession that ICL had to produce potash in the Dead Sea when it expired in May 2030. Alana in February 2013. However, the price of potash in the Chinese market - which is the benchmark for prices in the Asian market, and which the mine was supposed to serve - fell from the price of $ 310 per tonne in early 2015.
To cope with the decline in the economic viability of the investment, ICL planned to produce 600,000 tons per year of the potassium sulfate fertilizer, which is sold at a premium of $ 250 per ton in relation to the price of potash, and 1.4 million tons per year of potash. ICL allegedly benefited from Ethiopian government support for the project, but the government did not live up to its commitment to pave a road from the mine to the port of Djibouti - where ICL planned to load potash on ships to China and India and set up a power grid and water supply infrastructure; Nor did it determine the price of electricity and water that ICL will purchase for the purpose of operating the mine.