Background
The Pi-Gililot–Ashdod petroleum terminal (the “Ashdod Terminal”) was formerly owned by a mixed public-private company, partly held by the State and partly by major fuel companies including Delek. In the early 2000s the State began privatizing the terminal. As part of that process, the Ministry of Infrastructure issued an “interests document” on April 5, 2005, whose Section 2 required the future purchaser to continue operating the terminal’s infrastructure for a decade and to lease five designated “transition tanks” to Fuel Products Line Ltd. — a subsidiary of the state-owned Oil and Energy Industries Ltd. — on terms to be fixed later. The appellants completed the purchase on July 31, 2007.
Despite the interests document’s promise, the State never set those lease terms. The appellants instead billed Fuel Products Line under the “storage service” tariff in the Supervision of Commodity and Service Prices Order (Infrastructure Tariffs in the Fuel Sector), 5756-1995 (the “Original Supervision Order”). A billing dispute soon emerged: the appellants insisted on charging for the full volumetric capacity of each tank on the theory that any partial occupancy by the respondent precluded all other use; the respondent paid only for the volume of fuel it actually stored. The appellants filed a first lawsuit in 2011, but it was withdrawn by consent after the Ministry announced it would issue a new order. A new supervision order published on April 30, 2014 prospectively adopted full-capacity billing, and has governed payments since.
On May 26, 2015 the appellants filed the present action seeking back-payment at full-capacity rates for the period before the 2014 order, arguing that the new order retroactively confirmed their interpretation, that pre-privatization contracts had used global (non-usage-linked) payment, and that the interests document’s use of the word “lease” (החכרה) was decisive. They also alleged that the respondent had used the tanks for purposes beyond those permitted. The State was joined as a co-defendant but is no longer challenged in the appeal.
The Court’s Holding
The Tel Aviv-Jaffa District Court (Judge T. Avrahami) dismissed the claim on March 9, 2024. It held that the Original Supervision Order governed the parties’ relationship, relying on the order’s text, Service Standard 2 — “Storage of Fuel Products” (2006) — which explicitly classified the use of the Ashdod terminal’s tanks as a “storage service,” the regulator’s position stated in the first lawsuit, and the pattern of pre-privatization dealings. The court found that, notwithstanding the varied terminology employed over the years, both parties had a shared understanding that the arrangement was storage services rather than a lease of the tanks, and that full-capacity billing was therefore not mandated by the Original Supervision Order for the disputed period. The appellants’ excessive-use claim was rejected as inadequately pleaded and unproven.
The Supreme Court (Deputy President Sohlberg, Justices Barak-Erez and Mintz) dismissed the appeal summarily pursuant to Rule 148(b) of the Civil Procedure Regulations, 5779-2018. The court found no ground to disturb the District Court’s factual findings, noting that an appellate court consistently declines to interfere with findings based on witness testimony and evidence evaluated at first instance. New arguments raised by the appellants for the first time on appeal were not entertained, in keeping with established doctrine that issues not litigated below cannot be raised on appeal. The appellants were ordered to pay costs of NIS 20,000 to Respondent 1 and NIS 10,000 to Respondent 2.
Key Takeaways
- For the period before the 2014 supervision order, the applicable tariff for use of petroleum storage tanks at the Ashdod Terminal was the “storage service” rate under the Original Supervision Order, calculated on actual volume stored — not on full tank capacity.
- A subsequent regulatory change adopting full-capacity billing does not retroactively recharacterize the nature of the earlier arrangement or validate back-claims predicated on that new methodology.
- Factual findings of a trial court grounded in witness evidence and documentary record carry heavy appellate deference; the Supreme Court will not substitute its own assessment of the evidence absent clear legal error.
- Arguments not raised before the trial court are forfeit on appeal and will not be considered on their merits, even if potentially significant.
Why It Matters
This decision is significant for operators of privatized infrastructure in regulated industries: the mere use of lease-adjacent language in a privatization instrument, or in pre-privatization commercial arrangements, does not automatically displace an applicable regulatory tariff regime that characterizes the same activity differently. Parties seeking full-capacity or global billing for shared infrastructure must either secure an explicit regulatory mandate for that method or establish through contemporaneous conduct and documentation that the parties contracted around the default statutory tariff.
The ruling also reinforces the principle that a prospective regulatory reform — here, the 2014 order endorsing full-capacity billing — carries no retroactive interpretive force for disputes arising under the prior regime. Privatized infrastructure operators should therefore negotiate and formalize billing methodologies at the point of acquisition rather than relying on subsequent regulatory developments to vindicate retroactive claims.