Derivative Claim (Haifa) 64048-07-24 Amit Gnessin Law Firm v. Oil Refineries Ltd.

This decision deals with a number of motions filed by the Respondents for the summary dismissal of a motion to certify a derivative action filed by the Applicant, who is a shareholder in Respondent 1, claiming the liability of directors and officers for expenses and damages caused to Respondent 1 and its subsidiaries due to a violation of the Environmental Protection Laws, for which criminal fines and financial sanctions were imposed.

Summary of the Request for Approval

1. The Applicant is a shareholder in Respondent 1, the Oil Refineries Company Ltd. (hereinafter: BAZAN).  Respondent No.  2, Carmel Olefins Ltd.  (hereinafter: Carmel) is a subsidiary of Bazan and the latter holds all of its shares.  Respondent 3 is Gadiv Petrochemical Industries Ltd.  (hereinafter: Gadiv), whose full shares are also held by BAZAN (Respondents 1-3 will be collectively referred to as the Companies).  Respondents 4-31 are present and former officers of the Bazan Group (hereinafter will be referred to as Respondents 4-31, to the extent not otherwise stated – the officers).
2. The focus of the application for approval was the claim that the officers of the companies knowingly and deliberately led them, and alternatively, negligently, indifferently and turning a blind eye, to commit a series of serious, systematic and ongoing violations of environmental protection laws, including repeated violations of the terms of various permits issued to companies – emission permits under the Clean Air Law, 5768-2008 (hereinafter: the Clean Air Law); permits to discharge into the sea under the Prevention of Marine Pollution from Land Sources Law, 5748-1988; and poison permits under the Hazardous Substances Law, 5753-1993 (hereinafter: the Hazardous Substances Law) – which even amount to criminal offenses. It was argued that the permits set concrete conditions for the companies' activities, including the manner in which the factories operate, requirements for future development, practical obligations to prevent pollution, management and supervision obligations, and more.  It was also claimed that the terms of the permits are determined in accordance with the agreement and preliminary dialogue between the companies and the Ministry of Environmental Protection.
3. According to the claim, over the years, many enforcement actions have been carried out against the companies by the Ministry of Environmental Protection for violating the provisions of the law and the conditions of the permits. The application presented the enforcement proceedings during the years 2017-2024, which related to violations starting in 2016.
4. It was argued that for the violations committed by the companies, they were liable to fines and financial sanctions (for convenience only, and unless otherwise noted, the fines and sanctions will be referred to hereinafter, without ignoring the differences between them – the sanctions). The Applicant is of the opinion that the companies should have filed a lawsuit against the officers for the damages caused to them as a result of the violation of the law and the imposition of sanctions, but they did not do so , hence the request for approval.
5. In the application for approval, the Applicant detailed the sanctions imposed on the companies –

Financial sanctions – It was noted in the application that in the past seven years, financial sanctions in the amount of ILS 25,268,760 were imposed on the companies, as follows: 1) On November 5, 2017, Carmel was imposed a financial sanction in the amount of ILS 2,174,640, for violations of the Clean Air Law; 2) On November 5, 2020, a financial sanction in the amount of ILS 643,790 was imposed on Gadiv , for violating the conditions of the emission permit granted under the Clean Air Law; 3) On September 5, 2021, a ILS 895,450 sanction was imposed against BAZAN for violations of the Hazardous Substances Law; 4) On May 28, 2023, a sanction was imposed against Gadiv in the amount of ILS 2,895,990, following an incident of marine and land pollution; 5) On May 8, 2024, a financial sanction was imposed on Carmel in the amount of ILS 18,658,920, for exceeding the emission values set for the company in the permit by virtue of the Clean Air Law (see Appendix 6 to the application for approval).