A blow for Ortam Sahar: Its claim for payment of 43 million shekels for the construction of Royal Beach Hotel in Tel Aviv was rejected

The District Court ruled that Ortam did not meet the terms of the arbitration agreement with the project’s developers, Electra Real Estate and Oranim, and accordingly its path to file a lawsuit in the court was blocked

17.02.2019 | Shlomit Tsur

The Tel Aviv District Court rejected outright a claim for ILS 43 million filed by construction company Ortam Sahar against Electra Real Estate and Oranim, developers of the Sea One project in Tel Aviv, for works performed. The reason: According to an agreement between the parties, financial disputes were to be resolved  within the framework of an arbitration process, but Ortam’s request to the Court in the past to appoint an arbitrator was also rejected.

The court that dealt at that time with the request to appoint an arbitrator ruled then in its decision that Ortam and the developers had concluded an agreement between them for a special and specific mechanism to resolve disputes, which included preconditions that had to be met before filing a claim for arbitration. One of the conditions was that if and when disputes were to arise between the parties, Ortam would have to alert the construction supervisor of a dispute and bring its details, together with all the required material, to Electra Real Estate and Oranim. It was determined that Ortam had not done so and had not fulfilled substantive conditions set out in the arbitration agreement, even though the matter depended only on it and its conduct, and that therefore its request to appoint an arbitrator should not be granted.

Ortam, as mentioned, filed a claim with the District Court, demanding payment of ILS 43 million from the project developers. In recent days, Judge Naftali Shilo ruled that Ortam is also prevented from filing its claim to the Court, and from once again avoiding the agreed mechanism set out in the agreement. According to the Court, nothing prevented Ortam from assessing its claims in accordance with the mechanism rooted in the agreement between the parties. However, when Ortam chose not to meet the conditions that would have allowed it to hold an arbitration process, this should be seen as a renunciation on its part of the possibility of filing a claim, and the plaintiff is the author of its own loss. Electra Real Estate and Oranim were represented by Adv. Gabi Moyal, Eleanor Stark and Shaked Nissan of law firm Hamburger Evron & Co.

Ortam Sahar was engaged by the developers in 2008 to build the luxury tower Sea One on Hayarkon Street in Tel Aviv, which today includes the Royal Beach Hotel which is operated by the Isrotel chain, and the prestigious residential tower. In 2015, approximately two years after completion of the project, Ortam requested to activate the arbitration mechanism and filed an application with the Tel Aviv District Court for the appointment of an arbitrator. The company’s application was at the time rejected by Judge Yehudit Shevach, who ruled that Ortam had not fulfilled the preconditions set forth in the agreement, even though these were material conditions, on which there was no impediment to meeting them in real time. Ortam did not contest this decision, and it therefore became a final and conclusive judgment.

In October 2016, Ortam Sahar entered into a stay of proceedings for debts of about ILS 1 billion and in December 2016, the Tel Aviv District Court approved the sale of Ortam Sahar to the Aloni-Assayag Group, which is headed by entrepreneurs Raanan Aloni and Hanan Assayag.

Six months ago, in August 2018, the new Ortam filed to the Court the financial claim it had wanted to submit to arbitration and been prevented from doing. In the claim, Ortam claimed it had sustained cumulative damage of ILS 43.6 million, consisting of non-payment of performance invoices, compensation for loss of contractor profit in the project, payment for extraordinary work, and more.

Ortam claimed it had performed works for the project of approximately ILS 150 million, of which it had only been paid ILS 107 million, and therefore demanded the difference.

Sea One Tower is a prestigious project that has captured many headlines in reviews of prestigious projects in the past decade. In October 2010, an agreement was signed to lease 230 units to the Isrotel chain, which opened the Royal Beach Hotel on the site in 2013. At the same time, the developers marketed 57 luxury apartments on the upper floors of the building, one of which is a penthouse sold to the oligarch Valery Kogan for ILS 110 million.