There have been serious arbitration findings in Israel against James Richardson duty free stores, approved by Tel Aviv District Court Judge Yehudi Shevach, which makes harsh claims against the duty free store operator at Ben Gurion airport and German company Heinemann, which operates duty free stores around the world.
Since 1988, James Richardson has won all the tenders published by the Israel Airports Authority (IAA) for franchises for duty free stores at Ben Gurion airport. Towards the expiration of the tender in 2013, the IAA published a new tender. The German corporation Heinemann asked to bid for the tender but due to concerns that the historical baggage of Germany with the Jewish people might harm its chances, Heinemann sought a local partner that might increase its chances of winning. Heinemann located Dr. Alexander Mashkevich, the owner of Alfa as a partner. In December 2012, Heinemann and Mashkevich signed a declaration of intent to set up a joint venture for the tenders that would be published by the IAA, with Alfa holding 60% and Heinemann 40%.
In July 2013, Heinemann and Alfa submitted a joint bid for the tender of $167.1 million per year, while James Richardson bid $169.3 million and was declared the winner.
After the loss of Heinemann and Alfa, it became clear that several months before the deadline for the tender, a meeting was held in Hamburg, Germany between the owners of Heinemann and James Richardson. The two companies also held telephone conversations close to the final date for submitting the bid for the tender.
In 2017, the IAA published another new tender in which Heinemann did not submit a bid with Alfa, its previous partner but with its former rival James Richardson. The joint bid won, and since then and until today they operate the duty free stores at Ben Gurion airport.
Alfa felt betrayed and defrauded. The company believes that Heinemann violated its agreement and caused the joint bid to fail after consulting with James Richardson with the intention of cooperating with it in the future. Alfa filed a lawsuit as part of international arbitration and it can now be published that its lawsuit was accepted with harsh findings against James Richardson.
The majority opinion in the arbitration was that James Richardson conspired against Alfa. The arbitration ruling said, "The tribunal finds that on the balance of probability Heinemann violated the agreement by exchanging confidential information with James Richardson and coordinating their bids for the tender. There is convincing circumstantial evidence that Gunnar Heinemann and Gary Stock (of James Richardson) spoke about the tender in Tel Aviv in 2013 and formed a conspiracy."
The arbitrators also found that much convincing evidence shows that the James Richardson senior executive revealed that their bid would be $169 million and that Heinemann agreed that their joint bid with Alfa would be lower in order to held James Richardson keep the franchise without a more expensive bid.
The arbitrators ruled that Heinemann must pay compensation of more than $23 million.
Judge Yehudit Shevach dismissed Heinemann's request for the arbitration ruling to be canceled and said that, 'The arbitration ruling brought a wide range of circumstantial evidence and the reasoning in its combined and cumulative force properly establishes the facts of a conspiracy between Heinemann and James Richardson."
Judge Shevach added that, "Even if we were dealing with an appeals procedure, the factual determination regarding the existence of a conspiracy would have remained intact. In any case, the reference to the ground for annulment which is concerned 'that the content of the judgment is contrary to public policy' is somewhat jarring, in light of the law according to which this is a rare ground for annulment that will only be applied when it comes to a violation of fundamental 'principles and values', and especially when it is heard precisely from the mouth of a party who has been determined to have conspired on prices with another bidder in the tender, and thus harmed not only his partner in the tender offer, but also the purity of conduct required by tender laws."
Judge Shevach approved the arbitration ruling of the international Chamber of Commerce.
The affair has not been published until now due to a gag order requested by Heinemann. However, the court has now ruled that this is an issue beyond the interest of the litigants - a very important public tender, and that there is a public interest in the publication of these proceedings.
Alfa was represented by Advs. Yoav Razin, Gil Brandes, Ram Pardes and Matan Kovacs of the Naschitz Brandes Amir Co. law firm. Heinemann was represented by Erdinast Ben Nathan Toledano & Co.
Naschitz Brandes Amir Co. law firm said, 'The ruling handed down today ends a complex international proceeding that has continued for more than five years, and finally approves Alfa's claim of many years that the duty free tender at Ben Gurion airport in 2013 was rigged. Alfa has been forced to fight all the way so that the truth will be revealed and it thanks the arbitration tribunal and the Tel Aviv District Court that justice has seen the light."
Published by Globes, Israel business news - en.globes.co.il - on July 24 2022.
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