The Israeli Class Action Law was enacted in 2006.
Before its passing, various specific laws allowed the filing of class actions mainly in the fields of securities, antitrust, consumer protection and banking.
The Class Action Law of 2006 has dramatically broadened the legal fields in which class actions may be filed and created a comprehensive and detailed mechanism and procedure for filing and conducting such claims.
The Israeli Class Action Law was influenced by the US regime, and they are very similar, but there are also some notable nuances.
Major similarities include that:
Notable nuances in the Israeli model or departures from the US one include the following.
This regime is not applicable in Israel.
Class actions in Israel are regulated by the Class Actions Law of 2006 and by the Class Actions Regulations of 2010.
The second appendix of the Class Actions Law portrays a list of matters and legal fields in which class actions may be filed:
A class action is a procedural vehicle which allows a person or an organisation to file a claim on behalf of a large number of people who suffered similar damages as a result of an unlawful act or misconduct by businesses or government authorities.
Section 1 of the Class Action Law, defines the targets and goals of the class action as the following:
A class action in which the cumulative damage is lower than ILS2.5 million (approximately USD700,000) is filed with the Magistrates’ Court, and any class action exceeding this sum is filed with the District Court. Therefore, most class actions are filed with the District Court.
An appeal on any decision of the Magistrates’ Court is filed with the District Court and an appeal on any decision of the District Court is filed with the Supreme Court.
Class actions which deal with corporate and/or securities issues should be filed with the Financial Department of the District Court, and class actions in the field of labour law should be filed with a special Labour Court.
The court fees for filing a motion of certification of a class action in the Magistrates’ Court is ILS8,000 (out of which ILS3,000 is paid on the date of the filing of the claim and an additional ILS5,000 after the decision on that motion) and in the District Court is approximately ILS16,000 (out of which ILS5,500 is paid on the date of the filing of the claim and additional ILS10,500 after the decision on that motion).
The Israeli legal system is adversarial and does not have juries. Israeli judges are professional judges who are appointed by an independent judicial appointments committee consisting of Supreme Court judges, government ministers, members of the Israeli Parliament, and Bar association representatives.
The overall procedure for bringing a class action in Israel is set out below.
The Filing of the Certification Motion
The sending of a warning letter is not mandatory. However, in cases in which the plaintiff has a doubt with regard to their claims, it is sometimes advisable.
Prior to the filing of the certification motion, the plaintiff has to check the Class Action Registry to see whether a previous similar claim has already been filed, and in such cases, they must state that within the framework of the certification motion. In such cases the court will decide whether to dismiss one of the claims or to unite them.
The factual basis of the certification motion should be supported by an affidavit and in certain cases, in which professional or scientific questions are involved, an expert opinion may be required. The plaintiff has to specify the alleged causes of action and show that the motion meets all conditions for approving the claim as a class action.
The Parties’ Responses
The defendant is entitled to respond to the certification motion within 90 days. The defendant may also file a motion to dismiss the class action outright without a hearing, but as mentioned above, the court will give such an order only in very rare cases in which it is clear that there is no basis for the claim or that the claim is not suitable for the class action procedure.
The plaintiff then has the right to respond to the response of the defendant to the certification motion within 30 days.
Proceedings and Hearings
Preliminary proceedings – if the certification motion showed an “initial evidentiary basis” supporting the claim, the plaintiff is entitled to discovery and questionnaires with regard to the questions that should be decided within the framework of the certification motion.
Preliminary hearing – the court will hear and decide on the preliminary proceeding motions, and in most cases share its initial opinion on the case and advise the parties accordingly.
Cross-examinations hearing – the court will usually conduct a hearing in which the witnesses and experts are cross-examined. In cases which do not involve factual questions, the court might decide to skip the cross-examination stage.
Summaries – both parties file summaries.
The Ruling on the Certification Motion
The court decides whether to certify the lawsuit as a class action, or to dismiss it. At the certification stage, the plaintiff has to meet a prima facie burden of proof.
If the court certifies the motion, the class action will be heard on its merits on behalf of the class as defined in the ruling. In such cases, the defendant has a right to file a motion to appeal to a higher court (they do not have an absolute right to appeal, but need to receive permission to appeal).
If the court dismisses the certification motion, the plaintiff has the right to appeal to a higher court.
In the case of an approval of the motion, the plaintiff is entitled to demand further discovery with regard to the damages or unjust enrichment of the defendant. Subsequently, further cross-examination sessions will be conducted, the parties will file summaries and the court will give its final ruling. Both parties have the right to appeal the final judgment to a higher court.
If the parties reach a settlement prior to the ruling on the certification motion or afterwards, the settlement agreement should be filed with the court for its approval. Class members are entitled to opt out and/or to file objections to the motion to approve the settlement. The Attorney General of Israel is also entitled to file their opinion with regard to the settlement. If the court approves the settlement, it creates a res judicata on all class members who did not opt out.
Any person who has a personal cause of action, public authority or a non-governmental organisation (NGO) may file a class action. However, in cases in which the claim is filed by a public authority or an NGO, it should show that the issue of the claim meets its objectives and activities and that it would be difficult for the claim to be filed by an individual member of the class.
In cases in which the court decides that there is a ground for the claim, but where the plaintiff does not have a cause of action or is not suitable to represent the class members, the court might decide to certify the claim and to nominate another lead plaintiff, instead of the plaintiff who initiated the claim.
The class member and sub-class members are defined by the plaintiff in the certification motion. The court has a discretion to change the definition of the class within its judgment and also within the framework of the approval of a settlement agreement.
The Class Actions Law does not limit the size of the class. However, the class action instrument is mainly designated to cases in which the plaintiff cannot identify and find in advance all of the class members and to cases in which the class is comprised of a sufficient number of members to justify this unique procedure.
The court has the discretion to include in the class even individuals who suffered damage after the filing of the class action, until the date of the final judgment of the class action on its merits.
As mentioned in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, in Israel the default is for an opt-out mechanism, unless the court explicitly determines that an opt-in mechanism should be implemented in the specific circumstances.
As stated in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, in cases in which two or more certification motions are pending, the court might decide to dismiss one of them, or to unite them or to hear all of them together.
In cases in which the defendant claims that a third party should be held responsible, they might file a motion to add that third party as a side to the claim.
The law gives the court the discretion to handle the procedures as it sees fit and the higher court will usually refrain from intervening in such decisions. Within that framework, the court is entitled to:
The length of the proceedings changes and varies from case to case. However, the average estimated lifetime of a regular class action is between three and five years. In mega class actions, which involve extremely large amounts, the proceedings may be longer, and there are cases which are heard over a period of ten years and more.
The average period needed in order to approve a settlement agreement is about one year.
As mentioned in 1.2 Basis for the Legislative Regime, Including Analogous International Laws, in Israel there is no summary judgment procedure and only in very rare cases will the court dismiss a class action outright without a hearing. That is due to the importance the court places on the public interest in hearing claims that might be fruitful for a large group of people and due to the fact that the certification motion is itself an interim procedure.
In certain suitable cases in which the question brought by the plaintiff is legal and does not involve factual questions, the court may shorten the procedure by giving its ruling based on the certification motion or summaries without conducting preliminary proceedings and/or without conducting cross-examinations.
As mentioned in 4.1 Mechanisms for Bringing Collective Redress/Class Actions, the court fees which the plaintiff has to pay in Israel range from ILS8,000 to ILS16,000. There are a few areas that are exempted from court fees (such as: environmental and accessibility claims).
The main out-of-pocket expense of the plaintiff is the commissioning of an expert opinion and its cost varies from case to case in accordance with the complexity of the subject matter. However, in general, in comparison with the average costs in the USA and Europe, experts’ fees in Israel are substantially lower and are in the range of a few dozens of thousands up to a few hundreds of thousands of Israeli shekels.
If a claim is dismissed (or interim motions within the proceedings are) the court might impose expenses on the plaintiff. If the court is of the opinion that the claim was serious and it was not a misuse of the instrument of the class action, it sometimes waves the expenses or imposes minimal sums.
According to the Class Action Law, there is also a government fund that financially supports adequate class actions.
As mentioned in 4.2 Overview of Procedure, there are two stages of discovery. The first one during the certification process, and the second during the hearing of the class action on its merits after the certification.
At the first stage, the disclosure focuses on matters that are relevant for the certification stage and generally does not include information with regard to the damages. At the second stage, the disclosure is broadened to include the damages and unjust enrichment of the defendant.
Due to the built-in gap of information between the plaintiff and defendants in the field of class actions, discovery procedures are extremely important and, in some cases, crucial.
As to privilege, the court may protect trade secrets of the defendants or third parties’ information, by exposing the information to the plaintiff under a confidentiality order, and in some cases the information is exposed only to the court or to an expert nominated by the court who acts as an officer of the court.
The general remedies given in class actions are monetary relief for pecuniary and non-pecuniary damages and for the unjustified enrichment of the defendant, declaratory orders, injunctions and future regularisation. In cases in which it is not practical to locate the class members and compensate them directly, the court might impose compensation for the benefit of the public in accordance with its discretion.
As specified in 4.2 Overview of Procedure, at any time during the legal process the parties may reach a settlement agreement which should be filed with the court for its approval. Even in cases in which the plaintiff wishes to withdraw from the class action, such withdrawal should be approved by the court, which has the discretion to dismiss the withdrawal motion and to seek an alternative plaintiff in cases in which it is of the opinion that this is to the benefit of the public.
There are cases in which the court appoints an expert to examine the settlement.
The legal fees and the remuneration for the plaintiff are also subject to court approval and the court may decide to reduce the proposed amounts or to stipulate it on certain conditions. The average legal fees are calculated between 15% and 25% of the benefit to the public and the average remuneration for the plaintiff amounts 1% to 3% of this benefit.
Mediation procedures are very popular in the class action field and in cases in which the mediator is a former judge, the court tends to take these procedures into consideration.
As stated in 4.2 Overview of Procedure, the judgment creates res judicata with regard to all class members who did not opt out.
In general, at the completion of the execution of the settlement, the defendant is asked to file an affidavit with the court to show and declare how it fulfilled its duties under the agreement and the counsel of the plaintiff is generally asked to check the declaration and inform the court if the agreement was executed in a satisfactory manner.
The judgment is enforceable against the defendant and in case of a breach of the judgment by the defendant, it can be enforced via the execution bureau or through semi-criminal contempt of court orders.
The Class Action Law of 2006 created a very strong and efficient legal instrument to fight against unlawful abuse of power by large corporations. As a result, those corporations are investing significant efforts in limiting and decreasing the power of this vehicle, by using lobbyists to influence legislators to amend the law.
In some cases, the regulators are also intimidated by this instrument, since they fear that the success of a class action might be interpreted as their failure to prevent misconduct by the large corporations which are subject to their supervision.
Therefore, every once in a while, there are legislative initiatives trying to limit class actions in Israel.
See 5.1 Policy Development.
Brexit did not have an impact on class actions in Israel.
Numerous class actions were filed with regard to damages that occurred as a result of thwarting of contracts due to the pandemic. In general, the courts have tended to feel sympathy for the defendants, since they were also a victim of those circumstances. However, in cases in which the court was of the opinion that the defendant abused the pandemic in order to shirk its responsibility, rulings against such corporation were given.
Background on Israeli Class Action History
The Israeli Class Action Law was enacted only 16 years ago, in 2006. Beforehand, there were some very limited possibilities to file class actions in specific legal fields and the courts were very hesitant in certifying class actions. The Class Action Law brought about a revolution by providing the public with a strong and efficient legal instrument to fight against unlawful abuse of power by large corporations.
The law in Israel created a comprehensive and detailed regulation for the filing and managing of this unique and powerful legal instrument.
Since its legislation, a growing number of proceedings have been filed each year. At first, most of the claims were in the field of consumer protection, and, over the years, have expanded to include environmental protection, insurance, securities, banking, anti-trust and accessibility claims, as well as claims against government authorities with regard to unlawful charges or taxes.
Apart from solving and settling the specific cases in which the claims were filed, those claims have deterred large corporations and helped, on a prophylactic basis, to “educate” them in refraining from misconduct which causes damages to the public. As a result, those corporations are hiring lobbyists to influence legislators to initiate legislative amendments to limit the power of the class action vehicle in Israel.
A Bird’s Eye View of the Israeli Class Action Regime
The Israeli class action regime was imported from the USA and is largely based on that country’s regime.
The class action procedure in Israel is comprised of two stages: (i) the certification stage and (ii) the hearing of the claim on its merits. At the certification stage, the plaintiff has to meet a prima facie burden of proof.
The default is that class actions are conducted as an opt-out procedure.
Any person who has a personal cause of action, public authority or a non-governmental organisation may file a class action. The class actions are filed with only one plaintiff with no need to add additional class members as co-plaintiffs.
The plaintiff is entitled to discovery at the certification stage, if the certification motion showed an initial evidentiary basis supporting the claim. Due to the built-in gap of information between plaintiff and defendant, especially in this legal field, discovery is very important (in the eyes of the class) and sometimes crucial in order to successfully cross the first stage.
The general remedies given in class actions are monetary relief for pecuniary and non-pecuniary damages and for the unjust enrichment of the defendant, declaratory orders, injunctions and future regularisation.
The length of the proceedings changes and varies from case to case. However, the average estimated lifetime of a regular class action is between three to five years. In mega class actions it is longer and sometimes exceeds ten years. The main out-of-pocket expense of the plaintiff is the expert opinion.
In general, in comparison with the average costs in the US and Europe, the expert fees in Israel are substantially lower and are in the range of a few dozens of thousands up to a few hundreds of thousands of Israeli shekels.
The legal fees and the remuneration for the plaintiff are subject to court approval. The average legal fees are calculated between 15% and 25% of the benefit to the public and the average remuneration for the plaintiff amounts 1% to 3% of this benefit.
Class Actions With Regard to Overpricing
In a precedential ruling from July 2022 given within the framework of a class action filed against Coca Cola, the Israeli Supreme Court decided that the prohibition, under Section 29A(b)(1) of the Economic Competition Law, against a monopoly setting an unfair price for an asset or service, also includes a prohibition against setting an overprice.
The court ruled that the prohibition on monopolies abusing their power and setting overprices is necessary in order to fight the high (and continually rising) cost of living in Israel. However, due to the fact that the enforcement of such prohibition involves the retroactive intervention of the court into prices set within a free market, this should be done with caution.
Therefore, the court set the following tests:
The court will examine and decide on those matters at the certification stage, through which the plaintiff has to meet a prima facies burden of proof.
Class Actions in the Field of Environmental Protection
Several important claims have been filed in the last few years in cases of water and air pollution.
The State of Israel, intervened in a few of those actions and alleged that the State has the exclusive legal right to file those claims. The State based its opinion on the public trust doctrine and the parens patriae doctrine.
On the opposite side, the plaintiffs claimed that the Class Action Law explicitly allowed the public to file such claims, and that the law was intended to encourage the filing of environmental protection claims due to the importance and complexity of those cases, and their under-enforcement. Therefore, the law exempted class actions in this field from the court fees obligation. In addition to that, in many cases the State itself is the polluter. Furthermore, in cases of success of class actions in the environmental protection field, the compensation is contributed by the defendant to the benefit of the protection of the environment, whereas if the claim is filed by the State, the contribution will be “swallowed” by the State’s budget and will probably not assist in protecting the environment.
In most cases, the court ruled or recommended the State to withdraw from its position and join the class action as an additional plaintiff.
The Dieselgate Scandal Ruling
In a precedential and dramatic ruling given in September 2022, the District Court in Israel certified the class action filed against Volkswagen AG and Champion Motors (its exclusive importer in Israel), regarding the “Dieselgate” scandal. The class action was certified in Israel on behalf of two classes:
Volkswagen installed a defeat device software in at least 11 million diesel cars worldwide. The defeat device allows engines to sense the unique parameters of an emissions drive cycle set by the regulators in the USA and Europe and causes the engine to work during the test in a false mode, that stays within the emissions levels permitted by the regulation. However, when driving normally – out of the test mode – the engines’ emission of nitrogen oxides (NOx) is dramatically higher.
Unlike most other countries in the world, in which Volkswagen reached settlements in class actions filed with regard to the Dieselgate scandal, in Israel the case was handled and heard, and ruled on its merits. During the seven-year period in which the case was heard, numerous court sessions took place in which experts and witnesses from Germany and Israel were cross-examined.
Volkswagen claimed that its engines did not violate any European standard, but that in any case the suit should be limited only to cars with EA-189 engines which were designed to meet the Euro 5 standard. In contrast with Volkswagen’s claims, the plaintiffs argued that the class action should be approved also with regard to other engines which were manufactured in accordance with Euro 3, Euro 4 and Euro 6 standards and not only Euro 5. The Court did not accept Volkswagen claims and certified the class action with regard to all Volkswagen engines in which a defeat device was installed without limitation. The Court also ruled that the plaintiffs proved that prima facie Volkswagen had violated the European and Israeli emissions regulations.
The plaintiffs claimed that due to the physical trade-off between NOx emissions and engine performance (including an increase in fuel consumption, reduction in engine power, and a rise in engine noise), the recall executed by Volkswagen caused severe damages to the value of the cars. The Court ruled that the plaintiffs proved prima facie the damage to the value of their cars and that the Dieselgate scandal led to a loss of credibility for the Volkswagen brand and to its brand perception. According to the ruling, the car owners are now entitled, under the class action, to demand compensations for their pecuniary and non-pecuniary damages, as well as for unjust enrichment of the defendants.
In addition to that, with regard to the environmental damages, the Court ruled that the plaintiffs proved prima facie the infringement of the European regulation by Volkswagen, and that, therefore, there is a legal presumption that this violation caused danger to the public’s health. The Israeli public are therefore entitled to demand, under the class action compensation regime, pecuniary and non-pecuniary damages as well.
Class Actions Claims Against Multinational Corporations
In 2018 the Israeli Supreme Court ruled in the case of appeal request 5860/16 Facebook Inc. v Ben Hamo, that the jurisdiction clause in Facebook’s standard contract, which stated that the California courts will have sole jurisdiction, is a depriving condition in a standard contract since it deters injured parties from filing claim and class actions in particular. International corporations, such as Facebook, which handle business in countries around the globe should not be surprised that they might be sued in those countries. However, on the other hand, the Supreme Court decided that that plaintiff did not prove that the dépeçage clause was a depriving condition, since the California regime is similar to the Israeli regime and is one of the most advanced systems in the world, and therefore decided that the case will be heard by Israeli courts in accordance with the laws of California.
This ruling was criticised since it puts a high hurdle before the plaintiff, especially in class actions, to require them to conduct and handle the suit under a foreign law. In a new ruling given in February 2022, in the case of appeal request 8160/20 Google LLC. v Eshel et al, the Supreme Court has softened the attitude by interpreting the dépeçage clause in a way that allowed the Israeli court to conduct the trial based on Israeli law.
Violation of Autonomy as a Cause of Action in Class Actions
Since the class action held in the case of Rabi v Tnuva (Civil Appeal number 10085/08), which dealt with the non-pecuniary damages that consumers suffered when they were informed that Tnuva (Israel’s largest milk manufacturer) inserted silicon in some of its products, the cause of action of violation of autonomy has become very common in consumer class actions in Israel.
Within that framework, the class is entitled to receive compensation for the pain and suffering, the anger, the insult and the disgust it feels due to the misconduct of the plaintiff. Due to the fact that it is not practical to ask each of the class members of their feelings, it is common to conduct a statistical survey which determines the percentage of people who have suffered emotional distress out of the whole class and the intensity of those feelings. Compensation is then paid to all of the class on a pro rata basis, or paid to a public cause.
There is a controversy in the courts’ rulings on this issue. The expansive approach sees violation of autonomy as an independent and separate cause of action, whereas the restrictive approach sees it only as subsequent damage which might be the subject of a claim subject to and conditional upon showing another cause of action.
The Legal Weight of the Regulator’s Opinion in Class Actions
In 2018, the Supreme Court ruled that in general the court has to adopt the opinion of the regulator in class action cases, when the regulator chooses to stand and stress its opinion, particularly regarding its interpretation of instructions given by the regulator to the entities supervised by the regulator.
This ruling was criticised, and at the end of 2021, the Supreme Court, in a special panel of seven judges, reversed this ruling in a majority of four judges against three. In a second appeal (additional hearing procedure) number 4960/18 Seligman v Haphenix Insurance Company, the Supreme Court ruled that the adoption of the regulator’s opinion should not be the default, but that its opinion should be heard and measured in line with other evidence and claims.
The Supreme Court stipulated that sometimes regulators are subject to “regulatory capture” and/or “revolving door phenomenon”. Reputational considerations might influence the objectivity of the regulator and may create a conflict of interest.
In determining the legal weight given to such opinions, the court should examine whether the regulator’s opinion is based on generally accepted rules of interpretation, whether the question brought in the case is professional in its nature and hence whether the regulator’s opinion has an added value in the subject matter and whether the current regulator wrote the instructions or former regulators. In general, in this ruling, the court has strengthened its power to interpret and rule in class actions contrary to regulators’ opinions.