This week the governments of the United States, Israel, and Lebanon announced that they had reached an agreement concerning drilling and related activities in the territorial waters of Israel and Lebanon (the “Border Arrangement”).
This blog post addresses various issues arising under the very lean dispute resolution provision of the Border Arrangement. So far, the dispute resolution aspect of the arrangement has received very little attention – which is surprising in light of the fact that the main participants in this arrangement have never been at peace.
We start with two observations that are well known to all international dispute resolution professionals – (a) the issue of dispute resolution is very often left for the eleventh hour, and (b) the late treatment of the issue of disputes often results in a dispute resolution provision that is inadequate. It appears that the Border Arrangement is a classic example of these two (related) rules.
An initial question is: Does the documentation that was issued in connection with the Border Arrangement constitute an “agreement”? Agreements are usually signed directly between two or more parties. In this case, the government of Lebanon refused to sign any document that would be signed by Israel, and the three countries decided to make do with an exchange of communications under which Israel made a written commitment to the United States and Lebanon made a parallel, written commitment to the United States.
Such an arrangement is unusual – both when examined under the lens of diplomacy and when examined under the lens of international commercial agreements.
The fact that this arrangement was announced less than three weeks before a national election in Israel (not to mention the early November midterm election in the United States) only serves to heighten the uniqueness of the tripartite arrangement.
Section 1, Para E of the Border Arrangement provides:
The Parties agree that this Agreement, including as described in Section 1(B), establishes a permanent and equitable resolution of their maritime dispute.
The use of the term “parties” is a liberal one, in light of the fact that Lebanon and Israel did not jointly sign any document. Yet because the US decided to treat the participants as “parties,” this post refers to them as “parties.”
Although it is common in international agreements to include a reasonably detailed mechanism for resolving future disputes, the Border Arrangement has an extremely thin provision (Section 4, paragraph A) for the resolution of disputes:
The Parties intend to resolve any differences concerning the interpretation and implementation of this Agreement through discussion facilitated by the United States. The Parties understand that the United States intends to exert its best efforts working with the Parties to help establish and maintain a positive and constructive atmosphere for conducting discussions and successfully resolving any differences as rapidly as possible.
That’s it. Israel and Lebanon “intend” to resolve differences concerning the agreement “through discussions facilitated by the United States.” Because the United States is not granted the authority under the Border Arrangement to act as an arbitrator, the American role will be only to “facilitate” discussions intended to resolve any disputes.
How does this arrangement compare with other treaties to which Israel is a party? Under the 1979 Egypt and Israel Treaty of Peace (Article VII, section 2), the two countries agreed as follows:
Any . . . disputes which cannot be settled by negotiations shall be resolved by conciliation or submitted to arbitration.
The Egyptian Israeli treaty clearly established an arbitration mechanism, and when the treaty was signed, it was expected that the two countries would promptly go to arbitration regarding Taba in the Sinai. In fact, the Taba dispute took almost a decade to resolve.
Like the peace treaty with Egypt, the 1994 treaty between Israel and Jordan provides (Article 29, section 2):
Any . . . disputes which cannot be settled by negotiations shall be resolved by conciliation or submitted to arbitration.
It seems clear that, with respect to Israel and her neighbors that sign agreements with her, there is an accepted custom of using arbitration to resolve treaty-related disputes.
The Border Arrangement obviously differs significantly from any peace treaty. But the use of arbitration is even more common in bilateral international commercial agreements, and the Border Arrangement clearly was incentivized by the commercial interests of Israel and Lebanon. Therefore, it would have been even more natural for the Border Arrangement to have included an arbitration provision.
And in this context, it is noteworthy that, although the United States will be facilitating “discussion,” the Border Arrangement does not even include the term conciliation.
For Israel, perhaps the most important reason for entering into the Border Arrangement was to ensure the safety of the Israeli rigs and their crew members. Yet there are countless issues that are not directly related to physical security but which could give rise to disputes regarding the Border Arrangement. For example, Section 2, paragraph C provides:
. . . the relevant legal entity to hold any Lebanese rights to exploration and exploitation of hydrocarbon resources in Lebanon’s Block 9 . . . shall consist of one or more reputable, international corporations that are not subject to international sanctions, that would not hinder U.S. continued facilitation, and that are not Israeli or Lebanese corporations. These criteria shall also apply to the selection of any successors or replacements of those corporations.
A dispute could arise regarding the term “not subject to international sanctions.” Does that phrase refer only to companies that are the subject of multilateral international sanctions? Although the imposition of sanctions on companies that trade with Iran and North Korea has often been carried out swiftly, the same cannot be said for companies that cooperate with countries that engage in industrial espionage.
If the company that holds the Lebanese rights to exploration and exploitation were engaged in industrial espionage, it is hard to imagine that such an arrangement would sit well with Israel.
Similarly, the exploitation of natural gas does not take place overnight, and the term of the typical natural gas concession is well in excess of a decade. Therefore, it is entirely conceivable that the Lebanese rights to exploration and exploitation could be granted to a company that is not initially suspected of having engaged in sanctionable activity yet, with the passage of time, is later suspected of having engaged in sanctionable conduct. In other words, an initially “valid” concessionaire might not remain a valid one.
If the Border Arrangement had included a conventional arbitration provision, then the arbitral panel (presumably) would have jurisdiction to adjudicate such issues, and the scope of the jurisdiction of the arbitral panel could have included the jurisdiction to grant an injunction against further exploitation, subject to an adjudication as to whether the concessionaire is a valid one under the arrangement.
Under the bare-bones, “facilitation” provision of the Border Arrangement, the United States would have to engage in the process of attempting to determine whether the concessionaire is an appropriate one, and then the US would have to engage with Israel and Lebanon (presumably separately) to share its (nonbinding) findings on that issue.
That process could take years – with zero guarantee of success.
During that process, would the suspicion of illegal activities by the concessionaire be a sufficient grounds for halting further exploitation? The answer to that question is far from clear. In light of the fact that the scenario outlined above is not far-fetched, the lack of clarity in the Border Arrangement is a cause for concern.
Politicians on the right, on the left, and in the center will debate the merits of the Border Arrangement. Yet even assuming that there is currently a consensus that the deal is overall a good one for Israel, the lack of an effective dispute resolution mechanism is a flaw that might be felt years after the political “verdict” is rendered.