Israel

This briefing has been prepared by Gornitsky & Co which has agreed to Simmons & Simmons making it available on elexica. Please contact Noam Ronen if you have any questions regarding this briefing.

In Israel, about 1400 class actions are brought before the Israeli courts each year. The numbers are rising constantly every year, with the vast majority focusing on consumer protection issues. New and recent trends in this field include environmental class actions and class actions against office holders and accountants of public companies which have been through debt arrangements and settlements which aim to topple the "safe harbour" doctrine.

In Israel, a prospective collective action must fall within the restrictive list of permissible grounds for a class action, as found in the second addition to The Class Actions Law, 5756-2006. The primary grounds for class actions are consumer issues, banking law, insurance, securities, environmental concerns, public health care laws, municipal fees, disabled persons rights, amongst others.

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General features
  • Class Actions Law 5756-2006 regulates the different aspects of the procedure and defines who may bring a collective action and on what grounds: the rights of the members of the group represented; the duties of the plaintiff; the involvement of other parties to the procedure, etc. This law embraces, almost word for word, the American Federal model of class action procedures, yet with certain "local" elements.

    The plaintiff who brings the class action before the competent court must state which relief he seeks for the group he intends to represent. The class actions law recognizes several potential, and sometimes alternative, types of relief that may be requested and ordered:

    • Monetary compensation - a class action may lead to individual reimbursement and/or damages payments to each member of the represented group. This is the "natural" relief sought in such cases where it is easily possible to identify each group member and each individual loss, for example in banking, securities or insurance class actions.
    • Remedies granted as compensation for the general public - the law recognizes the possibility, especially when it seems unreasonable or impossible to identify each group member, that the compensation will be given to the general public and not to the group members themselves, such as through charity donations, erecting of public buildings or playgrounds, etc. This is a familiar concept when discussing compensation in consumer class actions or social discrimination class actions.
    • Injunctive relief - a class action may lead to warrants given against the defendant on behalf of the group to cease any wrongdoing or correct an omission. Such is the case, for example, with labelling omissions in consumer class actions and in certain environmental cases.
    • Declaratory relief- which may serve each member of the group if he seeks a further individual claim.

    It may be noted that Israeli law does not allow punitive damages.

    Procedural overview

    The class action procedures in Israel have two main stages.

    First, the plaintiff files a motion to get court approval to manage the case as a class action. The request will be heard by a judge who considers whether the plaintiff satisfies the evidential burden required for a class action (There is no use of juries in the Israeli legal system). In ruling on the request, the court determines whether there is prima-facie evidence that (1) the legal claim was filed by a plaintiff with personal grounds for his claim (2) there is a breach or tort, (2) the plaintiff is appropriate; (3) a homogenous group can be identified, and (4) class action is the appropriate procedure to remedy the damage.

    In the second stage, if the request is approved, the procedure will be similar to other types of civil procedures.

    Judgment and settlement procedures

    Once a class action is brought before the court it can end in only one of 3 ways:

    • (i) With a final judgment given by the court - not to allow the case to be heard as a class action in the "first stage" or, if the approval is given and after the case is fully heard on its merits, to accept or dismiss the claim and detail the relevant relief if the decision is favourable to the plaintiff and the group.
    • (ii) By way of a settlement between the parties – i.e. between the entire group and the defendant. Such settlement must be presented to the court with full disclosure, and also the fact that a settlement proposal was presented to the court must be published in the Israeli media. The law sets out a mechanism by which group members and NGO's may object to the suggested settlement, and in addition the Attorney General is also asked to present his view on the matter. The court has full discretion whether to adopt the settlement after the objections are heard in full or to suggest alterations to the settlement.
      About 20% of the collective proceedings which were resolved recent years reached their end by way of a settlement agreement.
    • (iii) By way of a withdrawal of the claim by the plaintiff - The withdrawal form may include compensation, and must also be allowed by the court with full disclosure of whether the plaintiff has gained from the withdrawal. About half of the collective proceedings which were resolved recent years, reached their end by way of withdrawal.

    By default, according to the mechanism provided by the law, all members of the group are seen as having agreed to the representation, unless they give notice that they are not interested in participating, within 45 days of the publishing of the approval of the class action. So the default position is opt out rather than opt in. However, there is an exception to the law that allows joining the group (opt in) where it is likely to be submitted to a large class of individuals and/or the amount of the claim is substantial in relation to each member of the group, or when the claim is due to bodily injury.

Types of collective redress
  • The Class Actions Law defines who may bring a collective action and on what grounds. For that, the law defines a rather long list of legal matters and specific Israeli laws and regulations which may form the basis of a class action suit, such as consumer issues, banking law, insurance, securities, environment and public health care laws, disabled persons rights and more.

    Every person, public authority or organization that has a cause of action based upon these issues or statutes, as well as having a question of law or a fact that is shared with all of the members of the group, may bring a collective action.

    Usually, class actions are brought before the civil District courts, which hear cases in which the monetary relief claimed exceeds 2.5m NIS, although labour law class action suits are brought before the labour court, and in certain environmental class action suits, the matter is brought before the local magistrates court in the region where the relevant omission occurred.

    In the past year, there has been a trend of referring class actions to the Magistrates Court, usually in cases were the plaintiff assess that the entire monetary claim is not significant.

Funding and costs
  • As always, the main incentive to bringing a class action to court is the chance that the court may order payment of attorney's fees and a reward for the plaintiffs if the class action is successful, in the sense that the group is compensated. This is true whether the achievement is through final judgment or settlement and withdrawal procedures. The attorney's fee and plaintiff's reward are at the full discretion of the court, yet the parties to a settlement may suggest a relevant arrangement to the court, usually the customary amount of 15-20% of the cumulative reimbursement to the group.

    In 2010, Israel's Ministry of Justice established a Class Action Fund to assist in the financing of class action suits. This venture is viewed as a major social contribution, promoting precisely those values which the action seeks to protect. It is important to note that funding is not unconditional and is dependent on approval of the Fund Manager, weighed individually in each and every case. In 2016 about 124 requests were submitted to the fund, 51 of them were approved.

    Third-party Litigation Funders are not commonly used in Israel.

Recent developments, trends and predictions
  • Up until March 2006, class action proceedings in Israel were governed by various laws. In March 2006, Class Actions Law 5756-2006 was enacted, which codified new ways for filing and managing class actions procedures. This legislative shift has led to a vast increase in class action lawsuits and settlements in Israel, and more than 1300 new class actions are brought each year before the Israeli courts.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.