Recent Developments in Israeli Law

The Israeli Supreme Court Blog

This issue of the Israeli Supreme Court Blog presents summaries of the recent decisions in LAA 7216/18 Lara Alqasem v. Ministry of the Interior and LCA 5860/16 Facebook v. Ben Hamu, as well as links to the Decisions of the IDF Military Advocate General Regarding Exceptional Incidents During Operation “Protective Edge” and two critiques of the decisions, and abstracts of two recent articles in the Israel Law Review.

Avinoam Sharon

Editor-in-Chief

 

 

LAA 7216/18 Lara Alqasem v. Ministry of the Interior – Barring entry into Israel under the Entry into Israel Law, 5712-1952, for BDS activity

On Oct. 18, 2018, the Supreme Court accepted the appeal of Lara Alqasem against the judgment of the Tel Aviv District Court’s decision upholding the decision of the Minister of the Interior to revoke the Petitioner’s visa and prevent her entry into Israel due to her alleged BDS activity, in accordance with the Entry into Israel Law. Abstract below.

 

LCA 5860/16 Facebook v. Ben Hamu – Validity of the Forum Selection and Choice of Law clauses under the Standard Contracts Law, 5743-1982

The Supreme Court addressed the question of whether a class action could be brought against Facebook in Israel in view of the forum selection and choice-of-law clauses in Facebook’s Terms of Service. The Terms of Service required that any claim be resolved “exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County”, and that the “laws of the State of California will govern this statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions”.

In its decision of May 31, 2018, the Court held that the forum-selection clause constituted an “unduly disadvantageous condition” under Israel’s Standard Contracts Law, 5743-1982, but that the choice-of-law clause was valid. Therefore, the suit could proceed in the Tel Aviv District Court in accordance with California law. Abstract below.

 

Decisions of the IDF Military Advocate General Regarding Exceptional Incidents During Operation “Protective Edge”

The IDF Military Advocate General has published an update with regard to the examination and investigation of exceptional incidents during Operation “Protective Edge” (7 July – 26 August 2014; 

For a critique of the examination, see: Amichai Cohen &Yuval Shany, “Israel’s Military Advocate General Terminates ‘Black Friday’ and Other Investigations: Initial Observations” 

For a critique of the above article by Cohen & Shany, see: Geoffrey S. Corn & Peter Margulies, “The IDF MAG’s Gaza Report and Its Critics: Context, Compliance, and Credibility”

 

New articles of interest in the Israel Law Review:

Michal Luft, “Living in a Legal Vacuum: The Case of Israel's Legal Position and Policy towards Gaza Residents”  

https://doi.org/10.1017/S0021223718000110

Abstract:

The legal status of the Gaza Strip following the 2005 Israeli ‘Disengagement’, as well as the applicability of the laws of belligerent occupation with regard to this territory, have sparked, and continue to generate, a lively academic debate, involving states, organisations and legal scholars. Nevertheless, this debate has seldom included an examination of the de facto policy exercised by Israel vis-à-vis Gaza residents themselves.

This article seeks to fill the gap by providing a thorough examination of Israel's legal position towards the residents of Gaza, and a critical analysis of its policy and practice with regard to their movement as well as the movement of goods. This review, based on dozens of policy papers, regulations and procedures, as well as numerous judgments handed down by Israeli courts, reveals that Israel maintains a deliberately deficient and ambiguous legal position with regard to the status of Gaza residents. Under this position, the residents are merely ‘foreign residents’ who have no particular rights in relation to Israel. I argue that this position establishes a major legal vacuum in the protection afforded to Gaza residents and is therefore incompatible with both the reality of Israel's continuous control over Gaza as well as the objects and norms of international humanitarian law.

 

Nadav Dishon, “Temporary Constitutional Amendments as a Means to Undermine the Democratic Order: Insights from the Israeli Experience”

 https://doi.org/10.1017/S002122371800016X

Abstract:

This article focuses on the adoption of temporary measures within the generally rigid constitutional sphere. Commentators frequently contemplate the extent to which temporary constitutional measures are adequate and necessary within a constitution that is meant to be perpetuated. Some writers are in favour of temporary constitutionalism, claiming that it allows flexibility and relieves the counter-majoritarian problem. Others emphasise the devastating impact of intense implementation of temporary measures on the status and legitimacy of the constitution.

The article contends that as beneficial as temporary constitutionalism may be in some circumstances, its use should be scrutinised with great suspicion, especially when it is employed in weak constitutional regimes. In outlining the history of temporary constitutionalism in the State of Israel, the article illustrates how temporary constitutional amendments can be harnessed to undermine the democratic order. The Israeli use of temporary constitutionalism since 2009 reveals a new under-explored manifestation of ‘abusive constitutionalism’, referred to here as ‘abusive temporary constitutionalism’. With abusive temporary constitutionalism, incumbents can entrench their power against their opponents while avoiding both public accountability and judicial review of their actions. Drawing on the Israeli experience, the article outlines several signifiers (i.e. distinctive markers) which will allow judges in the future to monitor and suppress the development of the abusive employment of temporary constitutional amendments.

 

Case Abstracts

LAA 7216/18 Lara Alqasem v. Ministry of the Interior and The Hebrew University – Barring entry into Israel under the Entry into Israel Law, 5712-1952, for BDS activity

Facts:

This was a request for leave to appeal the judgment of the Tel Aviv-Jaffa District Court sitting as an Administrative Affairs Court denying the Petitioner’s appeal against the judgment of the Tel Aviv Appeals Tribunal that denied the her appeal of the decision of the Minister of the Interior to cancel the her visa and prevent her entrance into Israel due to her activities in support of boycotting the State of Israel.

The Petitioner had recently completed her studies toward a B.A. at the University of Florida and was accepted into a graduate program in human rights and transitional justice by the Faculty of Law of The Hebrew University of Jerusalem, for which she was also awarded a scholarship. The Petitioner, who had recently visited Israel as a tourist, was granted a one-year student visa by the Israeli Consulate in Miami. The Petitioner arrived at Ben Gurion Airport at the beginning of the school year, but following questioning at the airport – and after the representatives of the Department of Strategic Affairs and Information of the Ministry of the Interior found that the Petitioner had been involved in activities in support of a boycott of the State of Israel – the Minister of Interior decided to prevent her entry.

In her appeal before the Appeals Tribunal, the Petitioner argued that she had not been a member of Students for Justice in Palestine since April 2017, and that even during her tenure as president of the organization, she had not been involved in any real way in BDS (Boycott, Divestment and Sanctions) activity. She further declared that the did not presently support the boycott movement, and undertook not to call for a boycott or take part in BDS activity during her stay in Israel. The Tribunal ordered the Ministry to reconsider its decision, and to consider a letter from the Rector of the Hebrew University that argued that the decision might inflict serious harm upon the efforts of Israeli academia to promote its academic image in the world. The Ministry reaffirmed its decision. The Tribunal denied the appeal, holding that it had not been shown that the decision deviated from the margin of reasonableness to an extent that would justify intervention, inasmuch as the Minister of Interior enjoys broad discretion in regard to entry into Israel, and inasmuch as no arguments had been made in regard to the status of sec. 2(d) of the Entry into Israel Law, 5712-1952 (hereinafter: the Entry Law) and the tests that had been established in that regard.

The Petitioner’s appeal to the District Court was denied. The District Court held that in view of the fear that the Petitioner might exploit her stay in Israel to promote the imposition of a boycott, the discretion of the Minister of the Interior, as exercised, was consistent with the purposes of sec. 2(d).

 

Held:

Justice N. Hendel:

This request for leave to appeal raises fundamental questions in regard to the nature and scope of the Minister of Interior’s discretion to prevent the entry of a person if he, or the organization or body on behalf of which he acts, knowingly published a public call for imposing a boycott on the State of Israel. It raises, for example, the question of the relationship between the Minister’s general authority under sec. 2(a) and his authority under the specific arrangement in sec. 2(d), and whether the Minister’s authority is limited to persons currently active, or extends to those active in the past.

Section 2(a) of the Entry Law states:

The Minister of the Interior may grant:

(1) a visa and permit of transitory residence, up to 5 days;

(2) a visa and visitor's permit of residence, up to 3 months;

(3) a visa and permit of temporary residence, up to 3 years;

(4) a visa and permit of permanent residence;

(5) a permit of temporary residence for a person present in Israel without a residence permit who has been issued a deportation order, until his exit from Israel or his deportation therefrom.

The Entry Law and regulations do not establish criteria for granting a permit, and leave the Minister broad discretion. However, the Minister may only take account of considerations that are consistent with the purposes of the Entry Law, and the exercise of his authority is subject to the accepted standards of review of administrative law.

Sections 2(d) and 2(e) state:

(d)       A visa or residence permit of any kind will not be granted to a person who does not hold Israeli citizenship or a permit for permanent residence in Israel if he, or the organization or body on behalf of which he acts, knowingly published a public call for imposing a boycott on the State of Israel, as defined in the Prevention of Harm to the State of Israel by means of Boycott Law, 5711-2011, or has undertaken to participate in a boycott as aforesaid.

(e)        Notwithstanding the aforesaid in subsection (d), the Minister of Interior may grant a visa and residence permit as stated in that subsection for special reasons stated in writing.

Both sides agree that the arrangement is preventative and not punitive. The rationale of the Law, as stated in its Explanatory Notes and in the plenum debate emphasizes the fight against the boycott movement and the desire to prevent its activists from exploiting their stay in Israel. The concrete purpose of sec. 2(d) is to serve the state’s just fight against the boycott movement, in reliance upon the defensive democracy doctrine and the state’s right to defend itself and its citizens against discrimination (see, e.g., paras. 29-34 of HCJ 5239/11 Avneri v. Knesset , per H. Melcer, D.P.). As stated in the Avneri case: “Thus, a call for boycott falls within the category referred to in constitutional literature as ‘the democratic paradox’, in which it is permissible to limit the rights of those who seek to benefit from democracy in order to harm it” (para. 30).

In view of the purposes the Law, the authority to deny entry is clearly restricted to persons who threaten Israeli democracy and seek to subjugate it by means of a coercive, aggressive boycott. That is also reflected in the criteria established for denying entry of boycott activists, which state that the authority under sec. 2(d) will be exercised only against activists of organizations who “actively, continually and persistently” support boycotts against Israel, or “independent” activists who act persistently and prominently to promote boycotts, and who meet one of the following criteria:

Holders of senior or significant positions in organizations – serving senior, official positions in prominent organizations (such as, chair or board members). The definition of positions is subject to change in accordance with the character of each organization.

Central activists – persons involved in real, consistent and continuing activity to promote boycotts in the framework of prominent delegitimization organizations or independently.

Institutional actors (such as mayors) who promote boycotts actively and continuingly.

“Actors on behalf” – activists who arrive in Israel on behalf of one of the prominent delegitimization organizations. For example, an activist who arrives as a participant in a delegation of a prominent delegitimization organization [emphasis original].

These criteria show that even the ministers responsible for implementing the arrangement in secs. 2(d) and (e) are of the opinion that it is applicable only to activists who consistently and continuingly act to promote the boycott. Therefore, a severance between the activist and the organization, or a disruption in the activist’s activity may remove him from the scope of this arrangement.

Therefore, the arrangement adopted by the legislature directs the Minister of Interior to close the gates before prominent activists who seek to exploit the state as a base of current activity, unless there are special reasons for permitting entry. However, the arrangement does not apply to persons who were formerly active in boycott organizations who clearly and persuasively show that they have ceased such activity and are not likely to exploit their presence in Israel in order to undermine it.

It should be noted that no arguments were made against the constitutionality of the authority of the Minister of Interior to deny visas to boycott activists – a matter that is pending before the High Court of Justice in HCJ 3965/17. The assumption is that the Law and the criteria are in force, and we are concerned with whether the evidence before the Minister sufficed to justify his decision. The answer to that is no.

The most salient fact before the Court is the Petitioner’s desire to find a place in Israeli academia. This was not a hasty decision, but rather the culmination of a lengthy process initiated by the Petitioner. It began with seminars at the Center for Jewish Studies at the University of Florida that included Holocaust studies, and her acquaintance with lecturers who had studied at the Hebrew University and who recommended her. She applied to study at the Hebrew University, and was awarded a scholarship. She applied for a student visa and arrived in Israel just prior to the beginning of the school year. Despite the obstacles placed in her path, she insists upon her right to study at the Hebrew University. Her conduct is not consistent with the view that she is an undercover boycott activist who might exploit her presence in the state to promote the BDS movement. The term “boycott” is defined in sec. 1 of the Boycott Law as “deliberately refraining from economic, cultural or academic ties with another person or body solely because of its connection with the State of Israel” – i.e., the opposite of the Petitioner’s conduct.

The Ministry of Interior admits that it has no evidence of boycott activity by the Petitioner since April 2017. In principle, the absence of current BDS activity does not absolutely deny the Minister’s authority to refuse entry to boycott activists. However, in view of the significant time that has elapsed since participating in such activity, and the Petitioner’s relatively minor involvement, her decision to study in Israel is sufficient to tip the scales and refute the fear of exploitation of her presence in Israel.

Justice Hendel then described the Petitioner’s past participation in boycott activities, and went on to note the opinions of her instructors, inter alia, the opinion of Prof. Eric Kligerman of the Center for Jewish Studies, according to which: “Far from being an advocate of BDS or a proponent of suppressing dialogue and the intellectual exchange between peoples, Lara is one of the most engaging and thoughtful students I have had in my seminars on Jewish culture and thought.” Justice Hendel concluded that the data, taken as a whole, was not consistent with the argument that preventing the Petitioner’s entry would serve the purposes of the Entry Law.

The Minister’s decision revoked a visa that had already been granted, as opposed to refusing to grant one. While the difference is not significant in view of the Minister’s discretion to cancel a visa under sec. 11(a)(1) of the Entry Law, there is, nevertheless, some weight to the Petitioner’s actual reliance upon the visa. This would not itself be sufficient were it not for her conduct since April 2017. But given that, the reliance consideration is significant under the circumstances.

In the present case, preventing the Petitioner’s entry does not advance the purpose of the Law. Fighting against the boycott is desirable and necessary, as are the steps adopted by the state in that regard. But the concrete act in the matter before the Court clearly deviates from the margin of reasonableness, and is unacceptable.

 

Justice A. Baron (concurring):

Freedom of expression, like any other constitutional right, is not absolute and can be limited. In sec. 2(d), the legislature established a balance between the right of the State of Israel to defend itself against a boycott and the principle of freedom of expression. While the authority of the Minister of Interior in the matter of entry into Israel is broad, sec. 2(d) establishes the criteria for the exercise of that discretion in regard to preventing the entry of a person due to calling for a boycott or undertaking to participate in a boycott. Those criteria are the also the basis for judicial review of the exercise of that discretion.

The language of sec. 2(d) clearly treats of the present. Its plain meaning is that denial of entry applies to those who (presently) act to impose a boycott; is (presently) a member of a body or organization calling for a boycott; or has undertaken to take part in such a boycott. This interpretation is also clear from the criteria for refusing entry published by the Respondent in July 2017.

The Petitioner has not been a member of an organization promoting a boycott since April 2017, and there is no claim that she acted in any way to boycott Israel over the last year and a half. The Petitioner also declared before the Tribunal that she would not take part in calls for boycott while in Israel, and her attorney repeated that undertaking before the Court. Under the circumstances, and in accordance with the criteria established in sec. 2(d), there was no foundation for revoking the Petitioner’s visa, as she clearly is not currently involved in boycott activity and has not been for some time, and is certainly not involved in activity that is “active”, “continuing” and “substantial”. The Minister’s decision is therefore unreasonable to a degree that justifies this Court’s intervention.

It should be noted that since the Petitioner’s actions are insufficient to deny her entry, the unavoidable impression is that she was denied entry for her political opinions. If that is, indeed, the case, then we are concerned with an extremely dangerous act that could lead to the undermining of the pillars that support Israeli democracy. That is not the purpose of sec. 2(d).

 

Justice U. Vogelman (concurring):

Section 2(d) authorizes the Respondent to refrain from granting a visa to a person if “if he, or the organization or body on behalf of which he acts, knowingly published a public call for imposing a boycott on the State of Israel, as defined in the Prevention of Harm to the State of Israel by means of Boycott Law, 5711-2011, or has undertaken to participate in a boycott as aforesaid.”

The relevant part of the section in the matter before the Court is knowingly publishing a public call for imposing a boycott on the State of Israel, and the relevant fact is that such a call was published by SJP, of which the Petitioner was a member, and not by the Petitioner herself. The point of contention in the District Court and before us is the word “acts”, and it alone. The Petitioner argues that this shows that the authority under sec. 2(d) arises only in regard to a person who at the time of requesting the visa acts on behalf of a body or organization calling for a boycott. The Respondent is of the view that the language can be understood in a broader sense, and that it is sufficient that there be a significant fear that a person is likely to exploit his presence in Israel to promote a boycott.

The Petitioner’s view is more consistent with the language of the section. Moreover, the term “acts” also testifies to the nature of the involvement of a person requesting a visa in the organization that supports a boycott. The section does not refer to a “member” of the organization, which might arguably reflect a conceptual or ideological relationship, but rather “on behalf of which he acts”, which refers to taking active steps that serve the organization or its purposes.

Moreover, the protocols of the debates on the bill in committee show that the legislative intent was to prevent the entry of “authentic representatives” of boycott organizations who represent their ideas. That is also reflected by the change in the language of the bill from “representative” to “on behalf of which he acts”.

 

LCA 5860/16 Facebook v. Ben Hamu – Validity of the Forum Selection and Choice of Law clauses under the Standard Contracts Law, 5743-1982

The Supreme Court addressed the question of whether a class action could be brought against Facebook in Israel in view of the forum selection and choice-of-law clauses in Facebook’s Terms of Service. The Terms of Service required that any claim be resolved “exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County”, and the “laws of the State of California will govern this statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions”.

Facts:

This was a request for leave to appeal a decision of the District Court (Central – Lod District) that denied the Petitioners’ request for a dismissal in limine of a request for the certification of a class action.

Petitioner 1 – Facebook (hereinafter: Facebook USA) – is incorporated in the United States and its head office is in Menlo Park, California. Petitioner 2 – Facebook Ireland – is incorporated in Ireland and its main office is in Dublin. The Petitioners require that anyone wishing to register to use Facebook agree to its “Statement of Rights and Responsibilities” (hereinafter: Terms of Service). The Terms of Service are published in a number of languages, including Hebrew, but note that in a case of conflict, the English version will prevail.

Section 15(1) of the Terms of Service states:

You will resolve any claim, cause of action or dispute (claim) you have with us arising out of or relating to this Statement or Facebook exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County, and you agree to submit to the personal jurisdiction of such courts for the purpose of litigating all such claims. The laws of the State of California will govern this statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions

In Sept. 2014, the Respondent filed a request for certification of a class action against the Petitioners. The Respondent claimed that the Petitioners read private messages sent by users without their permission and make commercial use of those messages. He further argued that the Petitioners acted in breach of the Privacy Protection Law, 5741-1981, in regard to the maintaining and registering of databases, and infringed the rights of minors who use Facebook. He also argued that sec. 15(1) of the Terms of Service constituted an “unduly disadvantageous condition” in a standard contract. The Petitioners asked for dismissal on the ground that the agreement between them and the Respondent requires that Israeli courts refrain from hearing the case, and in the alternative, that Israel is a forum non conveniens, and alternatively, that the request for certification did not demonstrate the existence of a cause of action. The Petitioners abandoned the alternative arguments for the purpose of requesting leave to appeal.

The District Court denied the request for dismissal. The Court held that the Terms of Use constituted a standard contract, and that sec. 15(1) constituted an unduly disadvantageous condition under sec. 3 of the Standard Contracts Law, 5743-1982. The court distinguished between the forum selection condition requiring adjudication in California, and the choice-of-law condition requiring adjudication under California law. The court held that the forum selection condition is presumed disadvantageous under sec. 4(9) of the Standard Contracts Law, while the choice-of-law condition was deemed disadvantageous under sec. 4(8) of that Law because it limited a user’s right to raise certain arguments. The court further held that although the Respondent had not shown that he was unable to pursue a class action in California, the above presumptions were not rebutted. The court also held that the purpose of sec. 15(1) of the Terms of Service was to deter Facebook users from taking legal action against the Petitioners, which also showed that the condition was disadvantageous. The court therefore ruled that sec. 15(1) of the Terms of Service should be voided. Lastly, the court held that inasmuch as the Terms of Service stated that they constituted a contract with Facebook USA if the user was from the United States or Canada, and a contract with Facebook Ireland if the user was from another country, sec. 15(1) applies only to the Respondent’s relationship with Facebook Ireland, and does not prevent him from suing Facebook USA.

The Petitioners requested leave to appeal the above decision. Just prior to the delivery of the Court’s decision, the Petitioners informed the Court that they intended to amend the Terms of Use such that a Facebook user who is a “consumer” would be permitted to litigate in his place of residence and under the law of that place. In view of the late date of that submission and the fact the Terms of Service had not yet been amended, the Court proceeded to issue its decision upon the Terms of Service as they were at the time.

Arguments of the Parties

The Petitioners argued that the trial court’s decision to void the forum selection clause contradicted the rule established in LCA 188/02 Mifal Hapais v. Cohen, IsrSC 57(4) 473 (2003) (hereinafter: the Mifal Hapais case), according to which a forum selection clause in a standard form contract would be voided only if it was found to deter the filing of suits and substantively infringed the right to litigate. Moreover, given that the suit was for 400 million dollars, it made economic sense to litigate the case in California. In addition, the lower court should not have ignored the amount of the suit and the fact that the Respondent received the services for free, and should also have considered the scope of the Petitioners’ activity in Israel and the number of Israeli users.

The Petitioners further argued that the lower court’s decision effectively voided all forum selection clauses in standard contracts between foreign corporations and Israeli residents, and was contrary to established law in favor of respecting such clauses except in exceptional cases. The Petitioners further noted that the court’s decision was incompatible with American precedent that uniformly enforces the forum selection clause. The Petitioners added that the clause protected a legitimate business interest. There are over 1.65 billion Facebook users worldwide, and Facebook cannot litigate with every user in his own country. Therefore, the Petitioners argued that voiding the clause caused them significant harm. They further argued that the California legal system is one of the most advanced in the world, particularly in the field of class actions, such that the requirement that litigation be conducted in California did not disadvantage users. Moreover, the clause is not one-sided, as it also required that Facebook litigate in California.

As for the choice-of-law clause, the Petitioners argued that it was not disadvantageous under sec. 4(8) as it did not prevent the Respondent from raising claims or infringe his procedural or substantive rights. They further argued that the clause did not meet the deterrence test in the Mifal Hapais case. Moreover, in view of the number of Facebook users, the Petitioners had a legitimate interest in being subject to a single legal system. Lastly, they argued that the lower court erred in holding that sec. 15(1) did not apply to the relationship between Israeli users and Facebook USA.

 

Arguments of the Respondent

The Respondent argued that sec. 15(1) of the Terms of Service limited the users’ right to access the courts contrary of sec. 5(a) of the Standard Contracts Law, and that the forum selection clause is contrary to the legal provisions governing the choice of forum and prevents the raising of certain arguments, thus constituting an unduly disadvantageous condition under secs. 4(8) and 4(9) of the Standard Contracts Law. The Respondent further argued that sec. 15(1) deters users from instituting legal proceedings and should therefore be voided under the Mifal Hapais rule. It was further argued that the principle of respecting choice-of-law clauses is intended to apply to commercial contracts between parties of equal strength and is therefore inapplicable to the instant case. Moreover, inasmuch as the Petitioners operate in dozens of countries and are subject to municipal and international regulation, they cannot expect to be able to litigate in only one country and be subject to only one legal regime. In addition, even if the Respondents have a legitimate interest in litigating in California, that cannot outweigh the right of millions of Israeli users to litigate in their home country. The Respondent further argued that sec. 15(1) does not apply to his relationship with Facebook USA, such that even if it be decided that its provisions apply, that would not suffice to deny certification of the class action in limine.

 

The Position of the Attorney General

The Attorney General was of the view that sec. 15(1) of the terms of service constituted an unduly disadvantageous condition in regard to forum selection, and that the Court must consider whether that presumption is negated in accordance with the deterrence test established in Mifal Hapais in view of the specific circumstances of the contract, such as the identity of the parties, their relative strength, and the need to protect consumers who enter into standard contracts with foreign companies.  The Attorney General was also of the opinion that companies that conduct business of broad scope in a country assume the risk of litigating in that country. It was further noted that weight should be given to the fact that the forum selection clause was one sided in obliging users to litigate in California, while permitting the Petitioners to bring suit in any place they desired. In the view of the Attorney General, the circumstances, taken as a whole, lead to the conclusion that the foreign jurisdiction clause under sec. 15(1) of the Terms of Service is likely to deter users from instituting legal proceedings against the Petitioners and therefore, the presumption that it is unduly disadvantageous under sec, 4(9) of the Standard Contracts Law was not rebutted.

The Attorney General added that the sum of the class action does not change that result, as neither the sum nor the type of action instituted shows that the Respondent is not deterred or that he has the wherewithal to litigate in California.  Further, the fact that the service is provided for free does not make sec. 15(1) fair, inter alia, as the Petitioners profit from the use of Facebook. Moreover, the forum clause grants the Petitioners and unfair advantage, thus constituting a disadvantageous term under sec. 3 of the Standard Contracts Law, and there are grounds for believing that it is also contrary to sec. 5(a) of that law.

 

Held

President E. Hayut:

Do the Terms of Service apply to the relationship between the Respondent and Facebook USA?

Section 18 of the Terms of Service state:

If you are a resident of or have your principal place of business in the US or Canada, this Statement is an agreement between you and Facebook, Inc. Otherwise, this Statement is an agreement between you and Facebook Ireland Limited. References to “us,” “we,” and “our” mean either Facebook, Inc. or Facebook Ireland Limited, as appropriate.

The provisions of secs. 15(1) and 18(1) of the Terms of Service speak for themselves. Section 15(1) establishes that the laws of the State of California will apply to any disagreement between “you” (the user) and “us”. Section 18(1) makes it unambiguously clear that “us” refers exclusively to Facebook Ireland when the user’s residence is outside of the United States and Canada. Thus, the Terms of Service, and thus sec. 15(1), do not apply to the relations between Facebook USA and users who reside outside of those countries. The Petitioners’ arguments as to this leading to an illogical result are unconvincing. Various factors may have led the Petitioners to adopt this arrangement, among them tax planning and regulatory issues. In any case, the arguments do not support adopting an interpretation contrary to the plain meaning of sec. 18(1), and if there is any doubt in this regard, the provision should be interpreted against the Petitioners, who drafted it.

Therefore, the Terms of Service apply only to the relations between the Respondent and Facebook Ireland.

 

The normative framework for deciding upon the request for dismissal in limine

The Terms of Service are clearly a standard contract, and the normative framework for deciding upon the request for dismissal is the Standard Contracts Law. That law is intended “to protect customers against unduly disadvantageous conditions of standard contracts” (sec. 1), and “to balance the inequality between the supplier and the customer” (Standard Contracts Law Bill). In order to achieve these ends, the legislature established a list of conditions that may not be included in a Standard Contract, and that would be deemed void ab initio if included, as well as a list of common conditions in standard contracts that will be presumed unduly disadvantageous unless proven otherwise. That question will be examined under the criteria established by sec. 3. In other words, regardless of whether a condition appears in sec. 4 or not, it will be examined under sec. 3, and the difference between a condition enumerated in sec. 4 and one not enumerated is a matter of who bears the burden of proof.

The term “disadvantageous condition” is not defined by the law, but the Court has held that it is a crystallization of public policy in the field of standard contracts, and that the test for whether a particular condition in a standard contract is disadvantageous is that of fairness and reasonableness.

Section 19 of the Standard Contracts Law instructs the court to change or annul disadvantageous conditions as follows:

19. (a) When, in a proceeding between a supplier and a customer, a Court finds that a condition is unduly disadvantageous, it will annul it in the contract between them or change it to the extent necessary in order to eliminate the undue disadvantage.

(b) In exercising its power under subsection (b), the Court will take the totality of the contract's conditions into account, as well as the special circumstances of the matter before it.

This represents a two-stage process. In the first stage, the court must decide whether the condition is disadvantageous under the criteria of secs. 5, or 3 and 4 of the Law. In the second step, the court must decide what to do in regard to the disadvantageous condition in accordance with secs. 5 and 19 of the Law.

The case law has established that a decision as to whether a forum selection condition is disadvantageous requires weighing whether the condition might deter customers from taking legal action. Inasmuch as a class action is a powerful procedural tool that can change the power relationship (see: CFH 5712/01 Barazani v. Bezeq, IsrSC 57(6) 385, 406 (2003) [http://versa.cardozo.yu.edu/opinions/barazani-v-bezeq], and that such a proceeding may often yield significant economic advantage to the party that institutes it despite forum and choice-of law obstacles, the deterrence test should distinguish between class action plaintiffs and plaintiffs who do not pursue a class action. This is consistent with the rule that the court should consider, inter alia, the power differentials between the parties to a standard contract in deciding the question of deterrence.

Is the forum selection condition disadvantageous?

Section 5(a) of the Law states: “A condition in a standard contract, which denies or limits the customer's right to apply to judicial authorities, will be void.” The Court was not convinced that sec. 5(a) applies to restricting application to a single court – e.g., California in the matter at bar – as opposed to a term denying or generally restricting the right to apply to courts as such. However, sec. 15(1) does fall within the scope of sec. 9(4) of the Law in “stipulating in regard to a provision of law in regard to the place of adjudication or granting the supplier an exclusive right to choose the place of adjudication”. Facebook Ireland argues that the Terms of Use do not deter the Respondent from pursuing a class action in California. While the deterrence may be less in the case of a class action, the fact that the Respondent filed a class action does not itself demonstrate that he and his attorneys would not have been deterred had they been required to file in California, in view of the resources that would be required. Indeed, Facebook was unable to present a single example of an Israeli pursuing a class action outside of Israel. An examination of the forum selection clause in the context of the terms of the contract as a whole and the external circumstances leads to the conclusion that Facebook Ireland did not succeed in negating the presumption of disadvantage under sec. 4(9) of the Standard Contracts Law.

Facebook further argues that in view of the fact that the Respondent enjoys its services for free, he should not be permitted to argue that the terms under which he is provided that free service are unenforceable. There may be cases in which a term may be disadvantageous in and of itself, yet reasonable in the general context of the contract. This would be the case where the standard contract comprises terms that “balance” the detrimental ones and compensate the consumer for the risk imposed. However, this is not a case in which a supplier acts to the detriment of the consumer in one area in order to benefit the consumer in another area. Facebook did not show that its ability to provide free services is contingent upon it not being required to litigate outside of California. We are not concerned here with a situation in which a supplier acts to the detriment of the consumer in one area in order to provide a benefit elsewhere, but rather with disadvantageous terms entirely intended to benefit the supplier and disproportionately protect its interests. Even were it assumed that the provision of free services is contingent upon litigating in California, it cannot be said that the benefit justifies the assumed risk. Therefore, there is no rational connection or proportionate relationship between the forum selection clause and the possibility of using Facebook for free, and thus, it does not rebut the presumption that the term is disadvantageous.

The argument that because Facebook serves billions of users, it cannot litigate in every user’s country was not supported by any evidence, and is inconsistent with the fact that Facebook Ireland exempts some of its users from the forum selection clause. Thus, sec. 16(3) of the Terms of Use refers to “Certain specific terms that apply only for German users.” Those specific terms include sec 5 which states: “This declaration is subject to German law”. In other words, Facebook Ireland permits German users to litigate in Germany in accordance with German law.

Facebook Ireland argues that American courts have uniformly enforced the forum selection clause. While the fact that a particular term is enforced by foreign courts does not bind Israeli courts, that fact may show that the term is not disadvantageous. However, Canadian and French courts have ruled that the term is disadvantageous and therefore unenforceable. Austrian courts have also allowed suits against the Petitioners to proceed in Austria.

 

Is the Choice of Law Clause in Sec. 15(1) Disadvantageous?

The trial court held that the choice-of-law clause “denies or limits the customer's right to make certain pleas before judicial authorities…” as stated in sec. 4(8) of the Law. California law shares similar characteristics with Israeli law, and is deemed among the most progressive in the field of class actions. The precedents and laws are in English, which is a language widely understood by Israelis, and are accessible on the Internet. Under the circumstances, it may be assumed that a person seeking to pursue a 400-million-dollar class action will not be deterred by a term in a standard contract that requires that the case be determined in accordance with the law of the State of California. This, as opposed to cases like that decided in the Klinghoffer case (Class Action (Central District) 39292-04-13 Klinghoffer v. Paypal Pte. Ltd (31 May 2015)) which concerned a standard contract that required that all litigation be subject to the laws of Singapore. Moreover, Facebook Ireland understandably argues that the choice of law clause is intended to protect a legitimate business interest, and that its ability to properly conduct its affairs depends upon its being subject to only legal system, especially in view of the tremendous scope of users around the world. Under the circumstances, balancing the interest of Israeli Facebook users in having class actions decided under Israeli law and the interest of Facebook Ireland in conducting itself in a manner that will not expose it to class actions under a countless number of laws leads to the conclusion that the interest of Facebook Ireland should be preferred, and the choice-of-law clause does not represent an excessive protection of its interest.

Conclusion

The appeal was granted in part. The Terms of Use were held not to apply to the relationship between the Respondent and Facebook USA, and the decision of the trial court voiding the choice-of-law clause was overturned. Thus, the request to certify a class action against Facebook Ireland could proceed in Israel in accordance with the substantive law of California, whereas the request to certify a class action against Facebook USA could proceed in Israel and in accordance with Israeli law.