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Arbitration

Overview
Including: Governing Law; Arbitrators' Limits; Reasoning for Rulings; Limits to Arbitration; Effect of Rulings.

The Supreme Court of Israel has rejected an application for the annulment of an arbitral award on the grounds that the arbitrator had incorrectly interpreted and implemented the law. As any such mistake was not contradictory to the basic norms of society, the court found no grounds to justify annulling the award.

The Supreme Court of Israel has ruled on the time limitations placed on arbitration proceedings. It confirmed that the Arbitration Act is intended to resolve conflicts out of court in order to lighten the heavy burden on the courts, and that procrastination in the course of arbitration is to be seen as undermining the entire process.

The Supreme Court recently ruled that although the district court has material jurisdiction over disputes that are litigated in court, in the case in question a magistrates court had approved the arbitration agreement and so that same court should govern the arbitration proceedings.

A recent case raised the issue of the validity of a special kind of arbitration. One of the parties involved was the Histadrut, the Israeli workers' union, and the case concerned elections to one of its regional councils. The arbitration in question was a ruling by the Histadrut Judgment Tribunal which affirmed a decision to annul the membership of nine individuals.

The Supreme Court recently held that a rabbinical court's refusal to apply Israeli secular law as stipulated in an arbitration clause precluded the resolution of the dispute in that forum. In another case, the Supreme Court held that an arbitrator's departure from the application of law in favour of his own judgment was not fatal to his final decision.

Aviation

The Magistrates Court of Tel Aviv recently stated that negligence did not constitute a cause of action under the Warsaw Convention and the Carriage by Air Law. The court accepted the argument that the "occurrence which caused the damage" took place while the shipment was no longer under the control and supervision of the carrier. The case centred on failure to store a shipment under refrigeration while awaiting collection.

The Tel Aviv District Court was recently requested to reconsider a case involving the application of the Warsaw Convention when interpreting the term 'for reward' in relation to the crash of a helicopter that had been leased. On hearing the additional evidence presented by the parties, the court concluded that the Warsaw Convention was indeed applicable to the flight and dismissed the claim as time barred.

The Supreme Court recently ruled that although a general sales agent agreement may include an arbitration clause, when the parties ignore the clause and take actions that indicate their unwillingness to apply it, this stipulation will be considered void. A general expression of willingness to satisfy an arbitration clause is insufficient if a party's actions reveal otherwise.

The Tel Aviv District Court recently reversed a 2010 magistrates court decision in which it had been decided that Maman Cargo (an airport warehouse) was the carrier's agent, in a case relating to shipments stolen in transit. The district court decided that it was sufficient that Maman's services were compulsory for aircraft companies in order for the Warsaw Convention not to apply thereto.

The Tel Aviv District Court, in an appeal, recently ordered Austrian Airlines to compensate plaintiffs following an unreasonable flight delay, which had been caused by damage to the pilot's cockpit window. The court concluded that the appellants had proved the delay and further ruled that the carrier had not proved its defence, as it had provided no proof relating to measures taken to trace the fault in advance.

In a recent case the Acre Magistrates Court considered whether, under the Warsaw Convention, an airline was liable for damage to a passenger's luggage during transit. After assessing the case the court applied Article 25 of the convention and determined that the claim under consideration was not subject to the limitation of indemnity provided for by Article 22 of the convention.

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Banking

The commissioner of banks recently issued a directive which demands that commercial banks take into consideration their exposure to environmental risks, particularly when granting credit to clients. The directive also opens up new opportunities for insurers in the environmental field.

A new law to combat money laundering has been enacted. The law follows the recommendations of the Financial Action Task Force and is as comprehensive as the EC Directive on Money Laundering.

Capital Markets

A draft law will allow companies to offer securities to the public after filing their draft prospectus with the Israeli Securities Authority. The law will also allow companies to offer securities that are not uniform.

New regulations govern transactions involving companies and their officers or controlling shareholders. The regulations also govern transactions that are deemed not to be in the ordinary course of business.

The new dual listing regulations amend the Israeli Securities Law 1968. Companies may now simultaneously trade on a US stock exchange and the Tel Aviv Stock Exchange without the need to submit reports and incur legal and accounting fees. The regulations provide significant benefits for Israeli, American and European companies and investors.

Company & Commercial

The legal and competitive implications of minority shareholdings between competitors are beginning to gain greater attention in Israel. In two recent cases, the court balanced the intentions of an amendment to the Companies Law that grants minority shareholders particular protection against concerns that when a minority shareholder is also a competitor of the company, it could use such power to harm competition.

The interpretation of agreements is a well-established phenomenon in any legal system. The Supreme Court has recently reinstated the policy that whenever parties' intentions are drafted through a written agreement, its literal meaning should prevail; only in cases where there is ambiguity in such meaning should extrinsic evidence be sought in an attempt to determine the parties' intention from potential literal meanings.

Since the enactment of the Israeli Companies Act in 1999, corporate governance principles have developed throughout the world. Recent amendments to the Companies Act are the result of the implementation of principles of corporate governance in Israeli legislation. The amendments contribute to the implementation of customary corporate governance principles in line with the rest of the world.

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Competition

Counselling on the appropriate bounds of information exchange and coordination between competing parties that wish to merge or act in a joint venture can be challenging for antitrust practitioners. Due to high levels of confusion, a lack of case law and the need for accurate advice, over the past few months the Antitrust Authority and the appellate court have provided some practical guidelines on this matter.

The food sector is facing radical new legislation aimed at increasing competition between food suppliers and among supermarkets. The proposed legislation will prohibit practices that could arguably be used by dominant suppliers to block expansion of smaller rivals, and empower the Antitrust Authority to order dominant retailers to divest existing supermarkets and ban their growth in certain locations.

The Antitrust Authority recently released its draft Antitrust Rules (Block Exemption for Non-horizontal Arrangements Without Price Restrictions). It is hoped that this draft exemption will herald a significant change in the way in which the Restrictive Trade Practices Law is enforced in relation to restrictive arrangements. At present, most restrictive arrangements require a specific exemption from the antitrust commissioner.

Parliament recently approved a legislative amendment to the 1988 Restrictive Trade Practices Act. The amendment will enable the antitrust commissioner to impose significant monetary payments unilaterally. This amendment is expected to increase the Antitrust Authority's enforcement powers significantly with regard to offences that are not hardcore cartel and bid-rigging violations.

During the past year, the Israeli antitrust regime has been undergoing near-constant change. Several governmental committees have been formed and a new antitrust commissioner has been appointed. There are early indications that the political, legal and personal changes that have occurred will lead to significant changes in the Israeli Antitrust Authority's enforcement policy.

The Israeli Parliament recently enacted a major reform of the Restrictive Trade Practices Law. The amendment provides the antitrust commissioner with new enforcement powers in an attempt to address the challenges posed by markets that demonstrate a tendency towards oligopolistic equilibrium. The amendment represents a major change in Israeli antitrust law and stands out from a global antitrust perspective.

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Corporate Finance/M&A

Overview
Including: Mergers; Acquisitions; Public Companies; Private Companies

In a recent judgment, an Israeli court decided that the rule of fairness and equity should prevail in mergers, and that all shareholders of a public company should be paid the same price for each share. The court ruled that deals in which one shareholder receives extra benefits have no sound background and therefore should not be approved. This bold decision may be a cornerstone for future mergers.

Corporate Tax

The Tel Aviv District Court recently ruled on the taxation of insurance compensation. The taxpayer's enterprise caught fire and a building and machinery were destroyed. The court held that the fire was tantamount to the realisation of the machinery and building, and where such a realisation gives rise to a gain, the latter is taxable. It therefore rejected the claim that the compensation should not be taxed.

In a recent case, the Tel-Aviv District Court held that a dividend paid exclusively on shares that were subsequently sold to the corporation constituted part of the consideration paid for the shares, and was therefore to be taxed as part of the capital gain achieved on the sale. The decision indicates that a preordained series of transactions designed to achieve a tax savings will not attain its ultimate aim.

The Value Added Tax (VAT) Law 1975 specifies a zero rate of tax for a number of transactions. Where such a rate applies, the taxpayer does not pay VAT on the transaction, but may offset the input tax incurred with respect to it against the transactional tax due on other transactions. An Israeli court recently ruled on what constitutes an Israeli asset for purposes of the zero VAT rate.

Summer 2011 saw widespread dissatisfaction with the government's social policy, resulting in the creation of a government-appointed commission in order to reset the state's social priorities. The commission submitted a report recommending social reforms in housing, education, consumer protection and taxation. The commission's fiscal recommendations were recently published and will come into force in 2012.

Judgment was recently delivered in a case in which a taxpayer had set up a company and claimed that it was the recipient of certain 'management fees' paid by another company. In its decision the assessing officer argued that as the company had never billed for services or paid the taxpayer for the services he rendered, it could not be considered a service company for the purposes of the law.

In computing a capital gain, the Income Tax Ordinance sets down strict rules. If declared before a sale, a dividend decreases the distributable profits and falls to be taxed by the seller as a regular dividend. Although in some cases this may be disadvantageous, it may be advantageous where a purchaser has net operating losses which may offset the dividend.

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E-commerce

The Tel Aviv Magistrates Court has ruled that the sending of abusive or threatening messages through the Internet constitutes criminal harassment under the Telecommunications Law 1982

In a case before the district court, a journalist seeks to hold the owner and operator of 'rotter.net' liable for defamatory statements posted by users of the site's chat room.

The Jerusalem family court has permitted a woman to serve her husband with court papers by electronic mail in accordance with Section 498 of the Civil Procedure Regulations, which authorizes a court to permit substituted service of court documents by any means deemed appropriate by the court.

The Electronic Signature Law recognizes a verified electronic signature as satisfying the legal requirements of a signature. However, the law will not apply to certain legislative acts to be determined by the minister of justice.

The first draft of the Electronic Signature Law recognizes secured and verified electronic signatures as satisfying the requirement of a signature in Israeli law. Such signatures must be authenticated by an electronic certificate.

Employment & Labour

One issue in collective labour law that has both legal and practical ramifications is the definition of the term 'bargaining unit' for the purposes of collective bargaining and the signing of a collective agreement. In a recent case, the National Labour Court ruled that policy considerations justify more flexible rules for defining the bargaining unit at the stage of breakthrough unionisation.

The National Labour Court recently overturned the commonly held opinion that once an employee had reached the age of 67, the employer was entitled to forcibly retire the employee without further consideration. However, while this ruling can be regarded as a breakthrough, according to its reasoning, the fact that an employee has reached the compulsory retirement age is still regarded as a relevant consideration.

The courts have debated the issue of age discrimination in the workplace in various contexts. In a recent case the Supreme Court of Justice ruled that the compulsory retirement arrangement that applied to Prison Authority employees, which effectively set a compulsory retirement age 10 years earlier than that of other state employees, was discriminatory, unjustifiable, null and void.

Israel has a wide array of anti-discrimination legislation in relation to the workplace. The two most prominent laws are the Employment (Equal Opportunities) Law and the Male and Female Workers Equal Pay Law. The Supreme Court recently addressed the issue of whether proof of entitlement to relief under the latter law is sufficient also to shift the burden of proof to the employer under the former law.

The 'rule of the repentant' reflects the moral and social obligation to help to rehabilitate a repentant criminal, without the crime being attached to him or her for the rest of his or her life. In the context of employment law, the rule governs an employer's access to the Crime Register. Apart from in defined cases, an employer cannot obtain information from the Crime Register or ask an employeee to give it permission to do so.

The Tel Aviv Regional Labour Court recently rejected a case brought by a waiter whose exposed skin was covered with tattoos, which he refused to cover while serving customers. The waiter had claimed for damages on the grounds that the employer's request that he cover his tattoos while serving customers was unlawfully discriminatory and that he had been dismissed in bad faith.

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Energy & Natural Resources

Overview
Including: Electricity sector; Natural gas sector; IPP regulation; Renewable energy regulation.

In the past few years the electricity market has undergone many regulatory reforms. A large portion of the regulation aims at promoting the renewable energy sector, which until recently was non-existent in Israel. This regulation stems from the government's policy to incentivise the renewable energy sector, while promoting independent power producers in general.

Since the discovery of the Tamar natural gas field offshore Israel in 2009, there has been a significant increase in the number of transactions connected to the acquisition of interests in petroleum rights in Israel. As a result, the relevant authorities have been taking steps aimed at tightening the degree of control that they have over such transactions and at imposing stricter requirements for acquiring petroleum rights.

Since the recent discovery of large natural gas reserves off the coast of Israel, the government has decided that the oil and gas fiscal regime requires significant change. With this in mind, a government-appointed committee proposed a new fiscal regime for the petroleum industry. This update examines the industry's existing tax regime before the new legislation and sets out the main principles of the proposed new tax regime.

Environment

The Israeli Parliament recently passed an amendment to the Traffic Order that will allow local authorities to take independent measures to tackle air pollution from traffic in their area. The amendment significantly expands the authority of municipalities and allows them to manage traffic in their jurisdiction in order to reduce pollution, as part of a multi-year plan for air pollution control.

Recently, new water treatment technologies that can increase the potential of water sources have been discussed in Israel. New technologies are not always included in routine methodologies due to the inconsistency between rapid technological development on the one hand and slow development of some regulatory systems on the other.

Traditionally in Israel, the issue of waste tyre recovery has not been regulated. However, the Tyre Disposal and Recycling Law 2007 has recently come into effect. The law aims to reduce the environmental nuisance caused by improper tyre disposal while promoting waste tyre recycling.

Israel tries to lead the way in alternative waste treatment, and on July 1 2007 the Maintenance of Cleanliness Law was amended to impose a landfill levy. The rate of the levy will be set according to the type of waste. The levy will be implemented gradually and incrementally over a period of five years.

The Prevention of Nuisance Law 1961 forbids the causing of unreasonable odours, noise or air pollution if this disturbs other parties in the surrounding area. However, no regulations have been passed under the law to prescribe quantitative values for the determination of odour nuisance. The Ministry of Environmental Protection has now issued draft procedures to remedy this omission.

Spurred on by an accident in 1997, when two Australian athletes died of severe lung inflammation caused by riverbed toxins, the Ministry of Environmental Protection has been considering measures to clean up Israeli riverbeds. However, due to the lack of national legislation on this issue, Israel is taking inspiration from Dutch and US law and practice on soil and sediment remediation.

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Healthcare & Life Sciences

Medical malpractice insurance can be characterised by both the lifespan of the risk and the increase in the number of claims in recent years, following the development of a number of new causes of action. Two causes of action have recently been encountered that increase insurers' exposure in relation to such claims - a lack of informed consent and so-called 'infringement of autonomy'.

Information Technology

In a recent landmark decision the Court for Administrative Affairs in Tel Aviv held that the police had no authority to order internet service providers to block access to gambling websites. The court argued that such internet censorship would amount to an infringement of the public's constitutional right to freedom of expression, and its derivative right of access to information.

Ten years after the enactment of the Electronic Signature Law 2001, electronic signatures are still poorly adopted in Israeli e-commerce. This slow adoption may be attributed to various factors, including the law and the regulation that followed. Clearing the way to a wider introduction of e-signatures and the benefits that they carry must therefore include amendments to the law and more flexible regulation.

Following long discussions over the past few months and after considering privacy and security concerns, the Justice Ministry - through the Law Technology and Information Authority - has released its conditional permit for Google to operate Street View in Israel. The authority has stated that permission to operate Street View is subject to certain conditions, aimed at maintaining the rights of the Israeli public.

New regulations and orders introduced by the Ministers' Committee for Biometric Applications have paved the way for a two-year trial period for the issuance of biometric identification documents (IDs). The IDs will contain encoded fingerprints and a facial image, and will be stored in a national database. A campaign led by privacy activists against the controversial database has thus far failed to yield a positive result.

A class action recently brought before the Tel Aviv District Court that claimed most auction websites in Israel adopted fraudulent practices has failed, leaving the plaintiffs to pay unprecedented sums to the defendants. The plaintiffs have already announced that they will appeal the ruling. Considering the damages they were made to pay and the harsh wording of the court's findings, they have nothing to lose by appealing.

In a 91-page opinion the National Labour Court recently laid down a clear set of rules regarding an employer's right to monitor its employees' email messages and other employee uses of workplace IT systems. The rules impose severe restrictions on employers' rights, subsequently calling for employers to consider modification and reform of their employee privacy policies.

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Insolvency & Restructuring

Overview
Including: Origins of Israeli Law; Liquidation; Reasons for Liquidation; Priority Ranking; Concealing Assets; Bankruptcy; Receivership

The Tel Aviv District Court recently handed down rulings concerning class actions against companies in liquidation, bankruptcy proceedings against non-Israeli residents and restitution of insolvency fund monies.

Insurance & Reinsurance

Overview
Including: Admitted Companies; Activities of Non-admitted Companies; Restrictions on Holdings of Means of Control; Solvency Control; Liquidation; Banking Organizations in the Insurance Industry; The Agent of the Insurer; The Formation of an Insurance Contract; The Effect of Non-disclosure; Special Elements in Insurance Contract Law; Reinsurance.

The Tel Aviv District Court recently handed down a guiding court decision regarding directors' and officers' policies, in which several important issues relating to the interpretation of liability insurance policies were decided on for the first time. Although the judgment is not a binding precedent, as it was not issued by the Supreme Court, it will act as a guiding decision for the lower courts (which deal with most insurance cases).

The Insurance Contract Law imposes a duty on insurers to highlight exclusions in insurance policies. Failure to act as required may abolish the exclusion. Questions of how an exclusion should be highlighted and whether it was in force were the focus of a recent Nazareth court judgment. The case concerned a council's failure to insure a 10-year-old pupil under a personal accident policy.

Disputes regarding the interpretation of the wording of bankers' blanket bond policies are rarely brought before the Israeli courts. In a recent case, after 23 years of wrangling, the Supreme Court finally issued its judgment on whether such a policy would apply when notification was given after the policy period had expired and a third party discovered the occurrence.

Reinsurers of Israeli insurance companies must put in place a deposit in order to ensure that claims will be paid even if the reinsurer experiences financial difficulties. This requirement poses various questions regarding the status of such deposit, especially in situations where the reinsured enters into liquidation, and whether the reinsurer may offset against a deposit any sums due to the reinsured.

A recent Supreme Court judgment that awarded damages to an insured for consequential loss due to late payment of insurance benefits beyond the policy limit has shaken up the Israeli insurance market. The court ruled for the first time that an insurer that paid the insured on a date later than that set by the Insurance Contract Law, and thus caused a loss of profits for the insured, should pay for said loss.

The acknowledgement by an insurer that the insured has a right to receive insurance benefits may extend the period of limitation. In a recent case before the Haifa Magistrates Court, the court ruled that the insurer's acts constituted an admission of the plaintiff's right to the claim. The limitation period was therefore revised to begin on the date on which the admission was made, instead of the date of the accident.

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Intellectual Property

The Israeli Trademarks Office recently found no misleading resemblance to exist between registered trademark MISS SIXTY (owned by Fronsac TM SA) and the trademark MISS SEXY (owned by Iris Line Ltd). The adjudicator therefore denied Fronsac's opposition to the registration of the latter mark. Had Fronsac's mark been registered in the same class in block letters and in Hebrew, the outcome might have been different.

A recent decision by the adjudicator for intellectual property at the Israeli Trademarks Office held that the registered trademark OF TENE should be cancelled and struck off the Israeli Trademarks Registry on account of non-use. The decision demonstrates the importance of registering a licence agreement with the office, particularly where the proprietor of a registered trademark has no intention of using the mark itself.

The Tel Aviv-Jaffa District Court recently held that the use of four stripes on sports shoes imported by the defendant did not infringe the registered and well-known three-stripe trademark owned by Adidas-Salomon. The court also noted that the use of four stripes on a sports shoe does not amount to passing off, unjust enrichment nor misappropriation or dilution of goodwill.

The IP adjudicator at the Israeli Patents Office has issued a decision dealing with the scope of amendments that may be made by an applicant to a patent or patent application once the patent application has been published. It was held that a new dependent claim does not derogate from the monopoly sought in other patent claims and therefore cannot be deemed to restrict the scope of the patent.

The Israeli deputy registrar of patents and trademarks has rejected an application to register a design mark on the grounds that the application constituted an attempt to protect the design of the product's packaging (a cigarette box) and to gain a monopoly on the manner of opening the cigarette box. It appears that in order to register the get-up of a product as a trademark, the mark should include a variety of visual elements.

The 'I'm lovin' it' slogan used by McDonald's Corporation has recently been accepted as a trademark in Israel. Although it is a descriptive slogan and therefore not registrable under ordinary conditions, it was accepted as a trademark as it was already registered in the United States.

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Product Liability

The Tel Aviv District Court recently ordered Israel's largest milk distributor to compensate its milk consumers for mixing silicon into its products and concealing this fact from the public. The sum awarded by the court is the highest compensation amount ever awarded in a class action in Israel.

Class actions against manufacturers of various products are filed for a number of reasons - for example, misrepresentation regarding the ingredients of the product, differences between actual weight and declared weight and poor product quality. In most cases manufacturers reach settlement agreements with the claimant and its lawyer. Now such settlements require court approval.

In a case involving a defective oil pipeline, the Tel Aviv District Court accepted that a product liability policy was intended to cover only physical damage to third-party property as a result of defects in the insured product. Therefore, damages to the product itself and/or costs and expenses relating to its replacement, including costs incurred to trace the defects in the product, were not covered.

Following Renata Kotwitz's allergic reaction to a newly purchased cosmetic product, the cosmetics company refused to cancel her deal for several hundred dollars' worth of cosmetic products. Several other customers had similar experiences and, following a criminal investigation, the directors of the company were tried and convicted of violating a series of provisions under the Consumer Protection Law.

The new Class Action Law has recently come into force. The new law includes no limits as to the identity of the claimant and the cause of action against the dealer. It provides the right to file a class action against a seller or manufacturer based on any cause of action that arises from its relationship with consumers.

The failure of a product may give rise to claims against various parties involved in its manufacture, maintenance, modification and sale. Product liability insurance policies are intended to provide protection against claims arising from the insured's liability for damage caused by the failure of the product.

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Projects & Procurement

Overview
Including: Background; Procedure; Comment.

Israel continues to embrace the concept of project finance and numerous projects are currently in development. In particular, the government looks favourably at developing Israel's infrastructure through the implementation of build-operate-transfer projects.

The build-operate-transfer (BOT) model has proved successful as a means of implementing large-scale infrastructure projects where state funds are unavailable and where the efficiencies of the private sector are beneficial. Recently, the lack of water in Israel and surrounding regions has led to some interesting BOT financing developments that have universal application.

The Cross-Israel Highway project is the first major privately financed project to be implemented in Israel. It serves as an important experience for the government, lending institutions and the private sector, and sets the standard for future projects in Israel.

Telecommunications

The Ministry of Industry, Trade and Labour recently published a memorandum of law that aims to combat unwanted charges in mobile phone bills attributed to either internet transactions or acquisitions of mobile content services, mostly by minors. The memorandum is awaiting public comment before being brought before the Israeli Parliament (the Knesset) as a government bill and voted into law.

An appeal committee of the Second Authority for Television and Radio (the authority regulating commercial television in Israel) recently ruled that an advertisement comparing ADSL internet broadband services to broadband services offered by cable companies was misleading. The ruling marks the first time that a regulatory agency has entered into the debate regarding the quality of service offered by these technologies.

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