Recent Developments in Israeli Law

Case Law:

HCJ 4113/13 Financial Organizations Coordinating Agency v. Minister of the Interior at al. – Outsourcing Tax and Debt Collection

In a decision delivered on March 26, 2018, the Supreme Court held that outsourcing tax and debt collection by municipalities constituted an unlawful delegation of authority as it was not expressly permitted by law and involved the delegation of discretion and granting the right to employ coercive force to a private body that is not subject to the principles of administrative law.

CA 7138/16 Paraxis Energy Agents GMBH v. The Ship M/V Captain Harry – Recognition of a foreign judgment as res judicata barring proceedings in Israel

In a decision delivered on May 7, 2018, the Supreme Court (sitting as Court of Civil Appeals) held that the Haifa Maritime Court was correct in holding that the recognition of a foreign judgment in regard to a maritime lien constituted res judicata that barred the court from considering the suit on the merits.

Legislation:

Amendment to Basic Law: The Government – War Powers

On April 30, 2018, the Knesset adopted an amendment to Basic Law: The Government. Basic Law: The Government (Amendment No. 6) amends sec. 40 of the Basic Law in regard to the Government’s authority to declare war or to initiate a significant military operation, allowing the Government to delegate its authority to a ministerial committee.

Amendment to Foundations of Law, 1980 – The status of Jewish law as a source of Israeli law

On May 1, 2018, the Knesset adopted an amendment to Foundations of Law, 1980 (34 L.S.I. 181), adding the words “Jewish law” as a source of law when the courts are confronted by lacunae.

Bill to Expand the Extraterritorial Jurisdiction of the Rabbinical Courts passes First Reading

The amendment is primarily intended to addresses the problem posed by recalcitrant husbands who refuse to grant a Jewish bill of divorce (get) by expanding the international jurisdiction of the Israeli rabbinical courts under certain circumstances so as to include persons who lack a material connection to the State of Israel.

Recently Published:

Benny Porat, The Contribution of Jewish Law (Mishpat Ivri) to the Case Law of the Israeli Supreme Court (ICON-S-Il Blog of the International Society of Public Law - Israel)

Dan Efroni, Is it Time to Regulate Cyber Conflicts? (Lawfare Blog)

HCJ 4113/13 Financial Organizations Coordinating Agency v. Minister of the Interior at al. – Outsourcing Tax and Debt Collection

Facts: The Petitioner challenged the practice of municipal councils that outsource the collection of property taxes and other obligatory payments to private collection agencies. The matter had originally come before the Court in 2000 and remained pending for a number of years. In 2003, pursuant to that petition, the Ministry of the Interior instituted procedures for employing collection agencies and prepared a draft bill to regulate the matter. As a result, the Court held that the petition had run its course.

The current petition court was filed eight years later to challenge both the methods employed by the private collection agencies and the continued lack of a statutory arrangement. The Respondents argued that the petition should be denied inasmuch as the case law permitted an administrative agency to seek the assistance of private contractors in technical matters, and because the government was advancing a bill to address the matter.

Although the Court held several hearings in the matter, and the petition had been pending for a prolonged period, as of May 2016 the legislation had not been completed. At that time, the Ministry of the Interior informed the Court that the Minister had decided to continue to push for the legislation but that the inter-ministerial discussions of the matter had not concluded. In view of the lack of progress, the Court issued an order nisi requiring the Respondents to explain why the Court should not order the cessation of the outsourcing. The Respondents again argued that the matter was “technical”, and further argued that sec. 249(31) of the Municipalities Ordinance permitted municipalities to act in partnership with other bodies or persons, that the Tax (Collection) Ordinance recognized the possibility of appointing a “tax collector” who was not a civil servant, and that the municipalities were acting in accordance with the 2003 procedures, which – in their opinion – set out the criteria for employing private collection agencies. Ultimately, after several updates on the progress of the legislation, on March 4, 2018 the Respondents informed the Court that they could not provide an update as to any foreseeable progress in the legislative process. The Respondents therefore argued that the petition had run its course. The Petitioner argued that the Respondent’s notice to the Court constituted sufficient reason for the order to be made absolute.

Held: In granting the petition, the High Court of Justice held (per Justice D. Barak-Erez, Justices I. Amit and A. Baron concurring):

1. Municipal councils may not delegate their authorities in regard to collection in the absence of express enabling legislation. The prohibition upon delegating authority in the absence of authorization by law is a fundamental principle for the conduct of administrative agencies.
2. This is particularly so where authority is delegated to private actors in view of the fact that the exercise of authority often involves the exercise of discretion. Discretion must be exercised subject to and in conformance with the rules of administrative law. Those rules fully apply to governmental agencies and their employees, as opposed to private actors.
3. The problem of the discretionary exercise of authority does not arise in regard to actions of a “technical” nature whose consequences are not influenced by the identity of the actor.
4. It would be difficult to conclude that the exercise of collection authority on the basis of legislation like the Tax (Collection) Ordinance is technical. Collection actions involve the exercise of discretion. Such actions also involve employing coercive governmental power against a citizen.
5. The existing legislation does not enable the delegation of collection authority. The extended legislative process itself demonstrates that the argument lacks merit.
6. It is insufficient that legislation comprises authority to employ external bodies. The question is whether it comprises express authority to grant them discretion in regard to collection. There is no basis for that in the existing law.  
7. While a municipality is authorized to act “together or in partnership” with other bodies, that does not permit the delegation of discretion. This also holds true in regard to the appointment of a tax collector appointed under the Tax (Collection) Ordinance for the purpose of carrying out concrete actions, as opposed to operating an entire collection system.

In the absence of legislation, the Court refrained from expressing an opinion as to the lawfulness of enabling legislation that would authorize outsourcing tax and debt collection, and limited itself to the lawfulness of the current collection procedures in the absence of such legislation. The Court did note that collection procedures involve not only the exercise of discretion, but also such actions as imposing liens and entry upon private property. This may be a cautionary note by the Court in light of its decision in HCJ 2605/05 Academic Center of Law and Business v. Minister of Finance (the “Prison Privatization case”). In that case, the Court invalidated the Prisons Ordinance (Amendment No. 28) Law, 5764-2004, which enabled the establishing of a privately operated prison. The Court held that delegating authority to operate a prison to a private concessionaire was unconstitutional, inter alia, because of the delegation of invasive powers that infringed individual rights to a private actor. The Court held that the amendment “departs from the ordinary and accepted outlook of privatizing government activities in that it gives a private concessionaire various powers that, when exercised, necessarily involve a serious violation of human rights”. While the powers involved in operating a prison center upon deprivation of liberty, the principle addressed by the Court was that of the privatization of sovereign powers and “the constitutional principle regarding the monopoly given to the state to use force in general”. This may suggest that if the Knesset seeks to enable municipalities to outsource collection, careful attention would have to be given both to issues of accountability under administrative law and to limiting delegation of discretion and the use of coercive measures that might infringe protected rights in a manner repugnant to the Limitations Clause of Basic Law: Human Dignity and Liberty.

CA 7138/16 Paraxis Energy Agents GMBH v. The Ship M/V Captain Harry – Recognition of a foreign judgment as res judicata barring proceedings in Israel

The Appellant filed an in rem action in the Haifa Maritime Court against the ship Captain Harry, asking that the court find that the Appellant had the right to collect a debt from the ship for the supply fuel products, and that if the debt not be paid, that it may collect the debt by means of realizing a maritime lien.

The Respondent – the owners of the ship at the time – asked that the suit be dismissed in limine due to a judgment by a German court that found that it was not responsible for payment of the debt, and further holding that German law was the proper law applicable to the lien, and that German law does not recognize the validity of the maritime lien for the purpose of a collecting a debt for fuel.

The case addressed the question of whether the Haifa Maritime Court was correct in holding that the recognition of the foreign judgment constituted res judicata that barred the court from considering the suit on the merits.

Facts:

The Respondent (hereinafter also “the Owner”) was the owner of the ship Captain Harry. It leased the ship to Tramp Maritime Enterprises Ltd., which in turn leased the ship to Denmar Chartering & Trading GMBH (the Lessee). The Appellant claimed that the Lessee had purchased various fuel products that the Appellant supplied to it in Lome, Togo. The Lessee agreed to pay $315,763.14 for the fuel but did not pay. The Appellant then demanded payment from the Lessee and the Owner. The Owner denied any responsibility for the debt incurred by the Lessee. The Appellant then notified the Owner that it would institute proceedings for collection of the debt and would act to seize the ship. In response, the Owner filed an action in the Hamburg court for a declaration that it was not responsible for the debt and that the Appellant did not hold a maritime lien against the ship.

After the above action was instituted, but before the beginning of proceedings on the merits, the ship docked in the Israeli port of Ashdod. The Appellant filed suit in the Haifa maritime Court and demanded that the ship be seized. The ship was seized by the court and later released upon the posting of bond. The Respondent then applied for a stay of proceedings in view of the pending proceedings in Germany. Although the parties in both cases and causes were identical, the request was denied inasmuch as the Respondent had not proved the German choice-of-law rules. The Haifa court further ruled that the matter could be reconsidered after the German court ruled upon the proper law.

The Owners sought leave to appeal to the Supreme Court, but before the request was addressed, the German court handed down its judgment in favor of the Owner. The German court held that no contract was proved to exist between the Appellant and the Owner for the purchase of fuel, that the Appellant had only been in contact with the Lessee, and the invoices had been sent only to the Lessee. The German court further held that the Appellant had not met the burden of proving that  American law applied to the case. The court therefore turned to German law and found that the conditions of German law for imposing a maritime lien had not been met. The Appellant withdrew its appeal of the German decision and the judgment became final.

In light of the German court’s decision, the Haifa court recommended that the Appellant reconsider its suit. The Supreme Court ruled that under the circumstances, the Owner should request that the Haifa court reconsider its original decision, which the Owner did. In view of the German court’s decision becoming final, the Owner requested that the Haifa court dismiss the Appellant’s suit in limine.

The Haifa court held that the German judgment should be recognized under the Foreign Judgments Enforcement Law, 5718-1958, and that the German judgment constituted res judicata that barred the Appellant’s action. It therefore dismissed the suit in limine. The Appellant appealed the decision to the Supreme Court.

Held:

In denying the appeal the Supreme Court (per Justice N. Hendel, Justices N. Sohlberg and Y. Elron concurring) first briefly reviewed maritime law and the distinction between in rem and in personam in regard to maritime law and maritime liens, and the considerations applicable to recognition of a foreign judgment. The Court then held:

1. A maritime lien is an in rem right. The holder of  a maritime lien may bring an in rem action against the ship in any forum in which the ship is located and can be seized. They will thus acquire a right in accordance with the priorities of in rem actions in accordance with the law of the forum in which the action is instituted.
2. In an in rem action, the plaintiff’s real opponent is the owner of the ship. In other words, the purpose of seizing the ship is to collect the debt from the owner. That is what the Maritime Court correctly held, in view of the fact that its authority is drawn from English law under which a maritime lien is intended for the procedural purpose of bringing the owner to court, after which the owner will post bond to release the ship, and the case will then generally proceed as an in personam action. It has been held that in order to prevail in the in rem action, the plaintiff must show a recognized cause of action against the owner, its crew or captain. “The maritime lien is a means for enforcing the material right created by the cause of action” (CA 352/87 Grayfin Corp. v. Koor Industries Ltd., IsrSC 44(3) 45, 54 (1990) per Shamgar, P.). This differs from American law in which a maritime lien is viewed as a substantive rather than a procedural right, although the case law is not uniform.
3. A foreign judgment is not automatically recognized in Israel. The various methods for the recognition of foreign judgments are addressed by the Foreign Judgments Enforcement Law, 5718-1958. It has been held that indirect recognition under sec. 11(b) of that Law is the appropriate path for recognition of a litigant’s claim of res judicata on the basis of a foreign judgment. The test for indirect recognition is discretionary and the criteria for deciding whether it is just and proper to recognize a foreign judgment have been established in the case law. As a rule, recognition is based upon whether the foreign court had jurisdiction, that the judgment was not fraudulently obtained, and that proceedings were proper. Reasons of public policy may affect the recognition of a foreign judgment. The identity of the litigants is not a condition for recognition.
4. Once it has been found that the foreign judgment should be recognized, the next question is whether it creates res judicata barring an action in Israel. This is a twofold test: Does the foreign judgment give rise to res judicata under the law of the forum in which it was given? Does the judgment give rise to res judicata under the rules of Israeli law?
5. The German judgment was found to be a final judgment recognized in Israel. It established that the Appellant does not have a maritime lien under German law. The Appellant cannot, therefore, bring an action in Israel for the realization of the lien against the ship. The Maritime court was therefore correct in dismissing the in rem action in limine by reason of res judicata.
6. (Justice Y. Elron concurring): In concurring with the result, Justice Elron added that he was of the opinion that the Maritime Court erred in dismissing the action by reason of issue estoppel and that it should have dismissed the action in limine for conflict estoppel. This inasmuch as issue estoppel, by definition, applies only to a plaintiff who seeks to sue on the same cause of action. The fact that the roles of the litigants were reversed in this case and the respondent in the original case became the plaintiff is sufficient to prevent issue estoppel.
7. The lower court should have addressed the issue of conflict estoppel inasmuch as the issues – whether there was privity of contract between the Appellant and the Respondent, and whether American law was the proper law of the contract between the Appellant and the Lessee – were decided by the German court and were essential to the result.
8. (Justice N. Sohlberg concurring): The conclusion that issue estoppel does not apply in a case of role-reversal is premised upon a rule of Israeli law. Israeli law does not require a defendant to countersue, and he can pursue a countersuit for the same events even at a later time. American federal law requires such a countersuit. A party that fails to do so is estopped in the future and a reversal of roles will not save him.
9. In the case at bar, the Appellant did not argue role-reversal. That issue was raised by Justice Elron. This is no minor procedural matter inasmuch as Justice Elron seeks to apply a principle of Israeli procedure to a German judgment, although no argument or evidence was presented in regard to German procedure and whether or not it would require filing a countersuit.

Amendment to Basic Law: The Government – War Powers

On April 30, 2018, the Knesset adopted an amendment to Basic Law: The Government. Basic Law: The Government (Amendment No. 6) amends sec. 40 of the Basic Law. The law adds the words “and will not undertake a significant military action that is likely to lead to war with a near certain degree of probability” to sec. 40(a) such that it now reads:

40(a).   The state will  not begin a war and will not undertake a significant military action that is likely to lead to war with a near certain degree of probability except pursuant to a Government decision.

In addition, the amendment adds sec. (a1) to the Basic Law, as follows:

40(a1). Notwithstanding what is stated in subsection (a) and in sec. 33(a), the Government may decide to delegate its authority under subsection (a), in general or in a specific case, to a ministerial committee established by law. Should the Government decide to delegate its power to the ministerial committee, the ministerial committee will exercise its authority only if the Prime Minister finds that such exercise of authority by the ministerial committee, instead of by the Government, is required under the circumstances for reasons of the State’s national security or foreign relations, including reasons of secrecy comprised therein.

The following day, May 1, 2018, the Knesset adopted the Government (Amendment No. 12) Law, 5778-2018, amending sec. 6 of the Government Law, 5761-2001, concerning the Ministerial Committee for National Security. The amendment establishes that the Ministerial Committee for National Security will serve as the “ministerial committee” under sec. 40(a1) of Basic Law: The Government.

A brief English discussion of the amendment to the Basic Law, by Amichai Cohen, can be found on the Israel Democracy Institute’s website: https://en.idi.org.il/articles/23444.

According to a report in The Times of Israel (May 6, 2018), the cabinet has decided to reevaluate the amendment to the Basic Law amid fears that the new law may be overturned by the Supreme Court for overreach.

Amendment to Foundations of Law, 1980 – The status of Jewish law as a source of Israeli law.

On May 1, 2018, the Knesset adopted an amendment to Foundations of Law, 1980 (34 L.S.I. 181), adding the words “Jewish law” to sec.1. The law now reads:

1. Where the court, faced with a legal question requiring decision, finds no answer to it in statute law or case-law or by analogy, it shall decide it in the light of the principles of freedom, justice, equity and peace of Jewish law and Israel's heritage.

Foundations of Law was originally enacted in 1980 to replace art. 46 of the Palestine Order-in-Council, 1922, which required, inter alia, that the courts make recourse to English law in cases of lacunae. The Order-in-Council stated:

46. The jurisdiction of the Civil Courts shall be exercised in conformity with the Ottoman Law in force in Palestine on November 1st, 1914, and such later Ottoman Laws as have been or may be declared to be in force by Public Notice, and such Orders in Council, Ordinances and regulations as are in force in Palestine at the date of the commencement of this Order, or may hereafter be applied or enacted; and subject thereto and so far as the same shall not extend or apply, shall be exercised in conformity with the substance of the common law, and the doctrines of equity in force in England, and with the powers vested in and according to the procedure and practice observed by or before Courts of Justice and Justices of the Peace in England, according to their respective jurisdictions and authorities at that date, save in so far as the said powers, procedure and practice may have been or may hereafter be modified, amended or replaced by any other provisions. Provided always that the said common law and doctrines of equity shall be in force in Palestine so far only as the circumstances of Palestine and its inhabitants and the limits of His Majesty's jurisdiction permit and subject to such qualification as local circumstances render necessary.

It should be noted that the term employed by the amendment for “Jewish law” is “mishpat ivri”, as opposed to halakha. On mishpat ivri and the distinction between mishpat ivri and halakha, see: Menachem Elon, Jewish Law: History, Sources, Principles; Menachem Elon (ed.), The Principles of Jewish Law; and see: Shmuel Shilo, The Contrast between Mishpat Ivri and Halakha, 20(2) Tradition 91 (1982) (available on JSTOR).

Bill to Expand the Extraterritorial Jurisdiction of the Rabbinical Courts passes First Reading

The Rabbinical Courts Jurisdiction (Marriage and Divorce) (Amendment No. 4) (International Jurisdiction in Divorce Proceedings) Bill, 5778-2018 passed it first reading in the Knesset and has been referred to the Knesset Constitution, Law and Justice Committee for preparation for second and third readings. According to the Explanatory Notes of the bill, the amendment is primarily intended to expand the jurisdiction of the Israeli rabbinical courts in matters of Jewish divorce to include persons who are neither citizens nor residents of Israel. The bill addresses the problem posed by recalcitrant husbands who refuses to grant a Jewish bill of divorce (get).

Under the current law, the Rabbinical Courts only have jurisdiction in divorce cases when at least one of the spouses has a connection to the State of Israel of a type similar to those established under the Hague Convention on the Recognition of Divorces and Legal Separations. However, the Rabbinical Courts do not have jurisdiction in regard to couples that are not Israeli citizens or residents and that lack the required connections as stated in the current law. In such cases, a woman whose husband refuses and cannot be compelled to grant a get in their country of origin has no recourse. The bill would, under certain conditions, permit divorce proceedings to be instituted in Israel.

The bill also seeks to resolve the problem of Jewish men and women (primarily from the FSU) who were married civilly and who are unable to obtain a divorce because their spouse lives abroad and cannot be located. Until now, such civil marriages could be dissolved by the Family Court only when at least one of the parties was not Jewish. Under the bill, the Rabbinical Courts would be granted the power to dissolve such foreign civil marriages between Jewish partners in cases where there are connections similar to those under the Hague Convention.

It is worth noting the Explanatory Notes’ justification for the proposal in regard to the issue of Jewish divorce: “The centrality of the State of Israel as the national home of the Jewish People and its importance to the lives of Jews throughout the world, as opposed to the inability of Jewish women throughout the world to find a solution to the problems of get recalcitrance and aginut [rendering a woman unable to marry due  to lack of a get – ed.], justify granting this authority to the Israeli Rabbinical Court.” This explanation would seem to be directed at the thorny constitutional issues that may arise from extending the jurisdiction of the Rabbinical Courts to a person lacking any material connection to Israel other than physical presence in Israel at the time of service of process. This would particularly be the case in regard to the court’s authority to employ coercive measures against a recalcitrant spouse,  and see, e.g: Yechiel S. Kaplan, Enforcement of Divorce Judgments in Jewish Courts in Israel: The Interaction between Religious and Constitutional Law (4 Middle East law and Governance 1 (2012). Other issues of concern may include arguable deviation from international law, and the apparent underlying assumption that persons married in a Jewish marriage ceremony implicitly agree to adjudication of their divorce before a Rabbinical Court. While this assumption may have merit in regard to couples married in Israel (and see: Michael Wigoda’s opinion for the Jewish Law Section of the Ministry of Justice on the Rabbinical Courts Jurisdiction (Marriage and Divorce) (Amendment – Agunot who are not Citizens or Residents of Israel) Bill, 5765-2004 (in Hebrew)), applying this assumption may be more problematic in regard to granting exclusive jurisdiction to an Orthodox Rabbinical Court in Israel over a person who was married abroad (and not necessarily in an Orthodox ceremony) and who has no material connection to the State of Israel.

The Contribution of Jewish Law (Mishpat Ivri) to the Case Law of the Israeli Supreme Court

In a note (in Hebrew) on the ICON-S-IL Blog, Benny Porat discusses three recent cases – two of which were translated by the Israel Supreme Court Project – in which the Supreme Court turned to Jewish law in support of the right of minorities to participate in the decision-making process of administrative bodies. The first case, AAA 1207/15 Ruchamkin v. Bnei Brak Municipal Council concerned an apparent attempt to prevent minority representation on one of a municipality’s standing committees. The second case, HCJ 9029/16 Aviram v. Minister of Justice, concerned the lack of an opposition member on the Judicial Appointments Committee when the party of the opposition representative joined the coalition. The third case, Quintinsky v. Knesset, addressed defects in a legislative process. Here the matter was not the absence of minority representation, but rather a lack of adequate time to debate and reach an informed position on the matter concerned. In this case, the Court relied upon  HCJ 4885/03 Israel Poultry Farmers Association v. Government of Israel in holding that the participation principle requires that it is not sufficient that members of Knesset have the practical possibility to know what they are voting on, but must also ensure that the legislative proceedings allow the Knesset members to form a substantive position.

While the cases addressed different aspects of participation, all three made recourse to Jewish law sources in addressing the importance of the principle of participation. In his brief note, Prof. Porat explains why Jewish law served as an important source of inspiration in these cases, discusses the Jewish law sources employed, and also points to an overlooked responsum by Rashba (R. Solomon ben Abraham ibn Aderet, 1235-1310) that may have more accurately reflected the majority’s opinion in the Quintinsky case.

Is it Time to Regulate Cyber Conflicts?

Former IDF Military Advocate General Dan Efroni published an article on regulating cyberspace on the Lawfare blog: [https://www.lawfareblog.com/it-time-regulate-cyber-conflicts].