Legislative Amendment Enables Filing Claims against Foreign Entities in Israel

A recently promulgated memorandum of law to amend judicial procedures proposes to add the possibility of filing claims against foreign entities in Israel for damage they caused in Israel as a result of acts or omissions performed outside of Israel.

Under the current legislation, it is possible to sue a corporation located outside of Israel for damages only if the act or omission that caused the damage was performed within Israel’s borders.

In today’s global village, in which we consume products and services of entities domiciled abroad, the existing regulations restrict our ability to sue in Israel those foreign entities whose products or services have caused us damage.

The new amendment addresses this issue and expands the possibility of filing lawsuits in Israel to situations in which a plaintiff was caused damage in Israel as a result of a defendant’s product, service, or conduct. The possibility to sue for damages in Israel will also be possible if the defendant’s act or omission was performed abroad, provided that the following two conditions have been cumulatively fulfilled:

1. The defendant could have anticipated that damage would be caused in Israel. For example, an entity providing services in Israel, selling products to Israel, or providing customer service to customers in Israel should expect that damage could be caused in Israel.

2. The defendant, or an entity related to the defendant, engages in international trade or in the provision of international services at a significant scale. The language of the regulation expands the definition of “related entity” to also encompass whoever controls the corporation, those entities controlled by the corporation, and other corporations controlled by the party that controls the corporation being sued.

On the other hand, the regulation restricts the types of corporations that can be sued solely to those engaging in international trade and services at a significant scale, in order to not include small businesses.

It should be noted that this regulation does not permit filing a lawsuit in Israel against a seller who offers its goods through an e-commerce website, since such a seller does not meet the regulation’s definition of a seller who engages in international trade or in the provision of international services at a significant scale.

It should be noted that this new regulation is already included in the civil procedure regulations expected to come into effect in September 2019. Nevertheless, once this memorandum of law is approved, the new regulation can be expected to take effect immediately.

Naturally, this regulation will have an effect on foreign companies who offer their products and services to Israeli residents, so such companies should prepare for the legal exposure that may soon apply to them.