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07 February 2019
In the world of online commerce, product manufacturers are not always aware of their products final destination. For example, a machine originally purchased by a plant in Arizona may find its way to another country after many years of operation.
In the current litigious climate, damage caused by such a product will undoubtedly result in a claim being made in the country where the damage occurred.
Under an amendment to the Civil Procedure Regulations, which came into force on 21 November 2018, manufacturers that produce products outside Israel can still be sued in Israel.
According to the Civil Procedure Regulations, claims against a foreign defendant can be heard and dealt with by an Israeli court following a service of suit issued by a court outside Israel. This service applies Israeli jurisdiction on the foreign defendant, thus obliging them to file a defence to the claim in an Israeli court and attend the proceeding as a defendant.
Until recently, where damage was caused to an Israeli plaintiff through the use of a product in Israel, the courts would grant leave to serve a court claim to a foreign defendant via an out-of-jurisdiction order on proof that the negligent act or omission of the foreign defendant occurred in Israel.
In other words, where there is an allegation of faulty production, the failure to take reasonable care must have occurred in Israel for an out-of-jurisdiction order to be served on a foreign defendant.
The above test is applied in a flexible manner with regard to the Internet. In Booking.com BV v Shapira (Tel Aviv District Court), the plaintiff alleged that Booking.com had misled consumers by failing to inform them that the price listed on its website is not final and a commission for foreign currency will be added. On this basis, a request to approve a class action against Booking.com was instigated in court. The court issued, ex parte, an out-of-jurisdiction order to Booking.com based on the Civil Procedure Regulations' provisions concerning contractual causes of action and the option of an act or omission carried out in Israel.
The court emphasised that it is not enough that damage occurred in Israel; it should also be proven that the negligent act or omission took place in Israel. However, websites have no fixed boundaries and wherever they can be accessed should be seen as where they conduct business. Therefore, the failure to inform consumers of additional commission took place in Israel (the same conclusion concerning online business was reached in Hotels.com v Silis).
However, when dealing with physical products the approach has been more limited. In Success – Consumers Association v AU Optronic Corporation, the plaintiff argued that the defendants had coordinated the prices of LCD screens and therefore filed a request to certify a class action claim and applied for an out-of-jurisdiction order. The court declined the request and this decision was approved by the Supreme Court, whose judgments are binding on all lower instances.
In July 2017 the Supreme Court found that where a claim is based on damages allegedly caused in Israel by an act carried out overseas, there is no ground for an out-of-jurisdiction order. The fact that the damage was caused in Israel prevents the issuance of such an order. In this case, Judge Hayut (currently the Supreme Court president) commented that in the context of globalisation, the legislature should address the fact that Israeli consumers cannot find redress in Israeli courts after sustaining damage caused by an overseas manufacturer.
The recent amendment to the Civil Procedure Regulations is a response to this request. Under the amendment, a negligent act or omission attributed to a manufacturer does not need to have been carried out in Israel. It is sufficient that damage caused by a product took place in Israel. However, the amendment sets out the following conditions for its application:
Manufacturers or service providers that are aware of the global use of their products should consider any potential damage that could be caused anywhere by their failure to take reasonable care in their profession. They may be sued for any such damage wherever their products or services are being used. Such companies should take out product liability insurance that is not limited to the country in which their products are manufactured, but rather that has a global scope.
For further information on this topic please contact Peggy Sharon at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email (firstname.lastname@example.org). The Levitan, Sharon & Co website can be accessed at www.israelinsurancelaw.com.
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