Precedent-Setting Israeli Supreme Court Ruling Limits Possibilities of Service of Process to a Foreign Company

The Israeli Supreme Court has ruled, for the first time, that service of a statement of claim against a foreign company to the parent company’s offices located in Israel is not due service of process.

The ruling came in response to a motion for leave to appeal filed by Taro Pharmaceutical Industry Ltd. against Haight and Shenhav, two shareholders of Taro Israel. Taro was appealing the Israeli district court’s ruling, which held that the service of the motion documents to Taro Israel constituted due service of process to Taro USA. As stated, the Israeli Supreme Court, in a panel of three justices, granted permission to appeal, thoroughly deliberated the legal issue, and ultimately accepted the appeal.

According to the ruling, a service of process intended for a foreign company with no activities whatsoever in Israel (i.e., a company incorporated outside of Israel and not registered as a foreign company) to the offices of its Israeli parent company, even if it holds absolute control over the foreign company and naturally has close ties with it, is not deemed due service of process.

It is important to note that the Israeli courts’ acquisition of jurisdiction in general, and of the court where the lawsuit was filed in particular, to adjudicate the case of any defendant is contingent upon the initial pleading in the proceeding being duly served to the defendant. That being the case, the question of service of process also involves the Israeli court acquiring international jurisdiction to adjudicate the proceeding.