Precedent-Setting Ruling Awards Actual Litigation Costs

An Israeli court recently handed down a precedent-setting ruling in a case we litigated and won. This ruling marks a game changer in terms of the costs awarded in proceedings in Israel. In its ruling, the court granted our client an award of actual costs (i.e., the actual sums the client expended to litigate the proceeding).

The new Civil Procedure Regulations, which came into effect on January 1, 2021, were designed to bring a meaningful change to the way civil litigation proceedings are run in Israel. However, the real test is that of conduct, i.e., how courts will interpret and apply the regulations.

One of the issues occupying clients undertaking litigation is that of the expenses and fees awarded upon culmination of the legal proceeding. The expectation is that when one initiates a legal proceeding and ultimately prevails (i.e., the court finds in favor of that party and its claims), the opposing party shall bear the burden of the prevailing party’s litigation costs.

However, until now, Israeli courts did not operate in this manner. Although from time to time court dicta acknowledged the need to award actual litigation costs, in reality, and routinely, the costs awarded did not reflect, or even come close to reflecting, the prevailing party’s actual expenses.

In the case we won, the court addressed the new regulations and wrote that their implementation is a good opportunity to give proper weight to the prevailing party’s property rights, even if the actual litigation costs seem high.

We note that in this case the court awarded exceedingly high costs of about NIS 2.6 million (with the remedy rewarded to our client being over NIS 50 million). However, the large sum did not deter the court, which insisted on the principle of awarding actual costs in order to prevent a financial hit to the prevailing party.

It seems we are on the verge of a sea change in terms of the costs courts award. This change is important for anyone entering into litigation proceedings. Parties should be aware and add this to their other considerations and risk allocation when undertaking a litigation proceeding.

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Advs. Zohar Lande, Gal Livshits, Adi Shoham, and Liron Dahan represented the winning side. For more information, please contact a member of out litigation team.