Israel's High Court of Justice declined government's natural gas outline agreement with energy companies on Sunday and sent it back to the national parliament for review.
According to the Court, the agreement for the development of natural gas fields in East Mediterranean, which was signed with American Noble Energy and Israeli Delek Group has contradictory clauses.
The stability clause is the most controversial section of the agreement, the court said, under which the state promises to make no substantial regulatory changes in the gas industry for the next 10 years, in particular for taxation, exports and ownership of the fields.
The clause is approved by the Knesset despite the assembly's lack of entitlement to do that, thus, the agreement is not legal, according to four judges of all five in High Court.
"The stability clause has been set without authority and its legality is repealed. This is because it has been passed in contradiction to the basic rules of administrative law in a way that prohibits restricting the considerations of the (Antitrust) Authority," judges wrote in their ruling.
The significance of the ruling is that the gas outline agreement will now be delayed by at least two months and may never come into effect at all, the Israeli newspaper Globes reported on Sunday.
Israel Prime Minister Benjamin Netanyahu, who is also the economy minister, signed the agreement without an approval by the Israel Anti-trust Authority.
The Israeli Antitrust Authority has not authorized the activities of U.S.-based Noble Energy and its Israeli partner Delek Group - a merger of Delek Drilling and Avner Oil Exploration in the Leviathan gas field, prompting doubts over the project.
The decision of Israel's High Court of Justice is binding on the grounds that the court is the highest legal authority in Israel.