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Moshe Kahn, Advocate

 

 

Background

The Israeli law relating to enforcement of foreign judgments is the Foreign Judgments Enforcement Law, 1958 (the “Law”).

 

The crux of the Law can be found in Sections 2 and 10(a), which read as follows:

 

“2. A foreign judgment shall not be enforced in Israel save under this Law.”

“10(a): “A foreign judgment which has been declared enforceable shall, for the purposes of execution, have the effect of a judgment validly given in Israel.”

 

In other words, once a foreign judgment has been declared enforceable in accordance with the Law, it can be enforced with all the measures provided for enforcement of judgments issued by Israeli courts, including seizure and sale of all types of assets, appointment of a receiver, etc.

 

The Law defines the term “foreign judgment” as follows:

“1. In this Law –

 

“foreign judgment” means a judgment given by a court in a foreign state in a civil matter, and includes a judgment for the payment of compensation or damages to an injured party even though it may not have been given in a civil matter.”

 

Thus, the judgment, in a civil matter, of any court in a foreign state, may conceivably be enforced in Israel, if it meets with the conditions of the Law.

 

As an aside, it should be clarified that only “in personam” judgments can by their nature be “executed” and therefore only such judgments are enforceable under the Law; “in rem” and “quasi in rem” judgments are not “executed” but rather “recognized”, and the Law lists separate conditions for “execution” and “recognition” of foreign judgments. In any case, we will deal hereunder only with the rules pertaining to execution and enforceability of “in personam” judgments.

 

Conditions for Enforcement of Foreign Judgments Under the Law

 

Under Section 3 of the Law, the following cumulative conditions must be met in order for an Israeli court to enforce a foreign judgment:

 

“3.(1) the judgment was given by a court which – under the laws of the State of the court - was authorized to give the judgment;”

A local legal expert has opined that this requirement is concerned with the general domestic jurisdiction rather than the local or material one. Thus, the question is whether the judicial system of the foreign country was authorized by the State to deal with the claim in question, and not whether the specific court in that system had the authority to do the same.

 

“3.(2) the judgment is no longer appealable;”

A pending appeal or even the mere possibility of an appeal in the foreign country will rule out the enforcement of the judgment in Israel. However, it has been ruled that the requirement of finality does not include the possibility of an alteration or abatement of the judgment by the same foreign court which issued the judgment.

 

“3.(3) the obligation imposed by the judgment is enforceable according to the laws regarding the enforcement of judgments in Israel, and the tenor of the judgment is not repugnant to public policy;”

This condition is comprised of two distinct requirements. The first part seeks to prevent a situation whereby, although prima facie the judgment may be enforceable, it is impossible to execute it in Israel.

The second part excludes foreign judgments which are repugnant to public policy. The “public policy” standard is by its nature flexible, and cannot be precisely defined. The courts have construed this condition narrowly, and have rarely rejected foreign judgments on the grounds of public policy. The courts have clarified that the public policy at issue is that of international public policy, regarding “fundamental values of the State and society, morals, justice and decency”, as opposed to internal public policy particular to the State of Israel. It has been clearly ruled that “an assertion that the foreign judgment is erroneous or causes injustice will not suffice”.

 

“3.(4) the judgment is executory in the State in which it was given.”

This requirement should be considered with reference to the laws of the country of origin. It follows that a good defense would be to prove that the foreign judgment was altered or annulled in the country of origin.

 

(d) A further condition to enforcement appears in Section 4(a) of the Law:

 

4.(a) A foreign judgment shall not be declared enforceable if it was given in a State the laws of which do not provide for enforcement of judgments of Israeli courts.”

Obviously, the existence of a bilateral enforcement convention between Israel and the foreign country satisfies this requirement. However, the existence of a bilateral convention is in no way a sine qua none, and foreign judgments from countries which do not maintain bilateral conventions with Israel are regularly enforced in Israel; all that is required of the plaintiff is to bring evidence that the foreign country in question enforces judgments of Israeli courts.

 

Section 5 of the Law stipulates a statute of limitations:

“5. The court shall not entertain an application for the enforcement of a foreign judgment if such application is filed more than five years after the day on which the judgment was given, unless a different period has been agreed upon between Israel and the state in which the judgment was given, or unless the court considers that there are special circumstances justifying the delay.”

 

Defenses

 

The Law provides several defenses which, if argued successfully by the party opposing the enforcement of the foreign judgment, may, prevent the court from enforcing the foreign judgment even though the abovementioned conditions for enforcement are fulfilled.

 

An initial question is whether defects in the substance of a foreign judgment, which are not included in the following defenses, may serve as grounds for the rejection of an application for enforcement. Does the Israeli court, when deciding the question of enforceability, review the case and examine the substantive judgment?

In principle, the answer is negative. The Israeli Supreme Court has ruled that “when deciding the question of enforceability of a foreign judgment, we do not sit as an appeal instance, and tend to honor the judgment as it is without considering its merits”.

 

Courts have also ruled that the fact that the foreign judgment is based on norms which diverge from norms prevalent in Israel does not prevent the enforceability of the foreign judgment.

 

The defenses are set forth in Section 6 of the Law, as follows:

 

"6. A foreign judgment shall not be declared enforceable if it is proven to the court –

 

“6.(1) that the judgment was obtained by fraud;”

The court has held that an argument for fraud will only be entertained if based on events taking place after the judgment was given, or upon discovery of new evidence that was not known, and could not have been known, at the time of proceedings, or on external evidence which concerns an act of fraud which was performed during proceedings.

 

“6.(2) that the defense was not afforded a reasonable opportunity to present arguments and produce evidence before the judgment was given;”

 

The question is an objective one – whether the foreign court gave the defendant a reasonable opportunity to raise a defense. To invoke this defense the defendant must show that there is real concern that his rights were prejudiced.

 

“6.(3) that the judgment was given by a court not competent to give it in according to the rules of private international law applicable in Israel;”

Under the rules of private international law applicable in Israel, a foreign court is deemed authorized to give an “in personam” judgment upon satisfaction of one of the following conditions: (a) Residence of the defendant in the foreign country – temporary residence or even incidental presence is sufficient, as long as it existed at the commencement of the legal proceedings; (b) Submission of the defendant to the jurisdiction of the foreign court – e.g. by stipulation in a contract.

 

“6.(4) that the judgment is at variance with another judgment given in the same matter between the parties and still valid;”

 

“6.(5) that at the time the action was brought in the foreign court a suit in the same matter and between the same parties was pending before a court or tribunal in Israel;”

 

Effect of Bilateral Conventions

 

Israel has signed bilateral enforcement conventions with only four countries: the U.K., Germany, Spain, and Austria (the “Convention States”).

The bilateral enforcement convention between Israel and the U.K., entitled “Convention Between the Government of the United Kingdom of Great Britain and Northern Ireland Providing for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters”, was signed in 1970 and went into effect in 1971.

Over the years there have been two “Exchange of Notes” (in 1974 and 2002) between the governments of Israel and the U.K., each introducing slight amendments to the bilateral enforcement convention of 1970.  

 

As mentioned above, Israel regularly enforces judgments from countries with which it does not maintain bilateral enforcement conventions, insofar as the judgments satisfy the conditions stipulated in the Law.

Thus, the judgment of a French court, for instance (France being a country with which Israel does not have a bilateral convention), would be enforceable in Israel inasmuch as the conditions of the Law, explained above, were satisfied.

 

Unfortunately, the legal standing of the four bilateral conventions, which Israel has signed, is to date patently unclear. No provision of the law, nor court ruling to date, provides clear guidance on salient issues, such as: the relation between the conventions and the Law; does an applicant, for enforcement of a judgment from a Convention State, have the option to choose between enforcement under the Law and enforcement pursuant to the convention?; which rules prevail in case of conflicts between the Law and a convention? etc. These are all questions for which no authoritative answers have been provided. The main reason the courts have yet to grapple with such questions appears to be that applicants for enforcement of judgments from Convention States have not invoked special rights arising from the conventions, but rather have filed enforcement applications in accordance with the Law.    

 

The issue of the legal standing of bilateral enforcement conventions, and the interplay between the conventions and the Law, has however been addressed in legal scholarship. Dr. Celia Wasserstein-Fassberg, a professor of law specializing in this field, in her treatise, “Foreign Judgments in Israeli Law”, addresses the issues as follows:

 

Under Israel’s legal system, a treaty with a foreign country has no legal standing for purposes of internal Israeli law (meaning that courts do not consider the treaty as binding law), unless the treaty has been “adopted” into Israeli law by the legislature. Dr. Wasserstein-Fassberg points out that none of the four bilateral conventions has been adopted into Israeli law by way of an “authorizing law”. Thus, the four bilateral enforcement conventions signed by Israel ostensibly have no legal standing under internal Israeli law!

 

There is no substantive statutory directives regarding enforcement of foreign judgments from countries with which Israel has bilateral enforcement conventions. The Law addresses judgments from such countries only in Section 5 (quoted above) regarding statute of limitations, and in Section 13 – which authorizes the Justice Minister to enact regulations setting forth procedures for enforcement applications as shall be necessary for fulfillment of a treaty between Israel and a foreign country (it bears noting that, to date, procedure regulations have been enacted only with respect to the bilateral convention with Germany; i.e. no regulations have been enacted for the convention with the U.K).

 

Dr. Wasserstein-Fassberg infers that the Law allows only procedural adjustments to be made to accommodate a bilateral convention, but that no changes to the substantive conditions set forth in the Law are allowed as a result of the signing of a bilateral convention (save for the provisions of Section 5 with regard to statute of limitations). Support for such position is adduced from the wording of Section 2 of the Law (quoted above).

 

To sum, Dr. Wasserstein-Fassberg concludes that the existence of a bilateral convention with a foreign country does not affect the conditions for enforcement of a judgment from that country, and that the conditions for enforcement are those set forth in the Law.  Thus, the bilateral convention between Israel and the U.K. would not have a practical effect on the enforcement in Israel of “in personam” judgments of U.K. courts, and enforcement of such judgments is to be carried out in accordance with the provisions of the Law. We are not aware of a divergent opinion being held by any Israeli legal scholar. However, as we mentioned, there are no court rulings authoritatively resolving these issues.

Assuming Dr. Wasserstein-Fassberg’s position is accepted, would that mean that the four bilateral conventions Israel has signed are of no practical effect under internal Israeli law? Not necessarily since a bilateral convention obviates the need to prove the condition to enforcement stipulated in Section 4(a) of the Law (see above).

 

 

 

 

* Moshe Kahn is an Israeli lawyer specializing in Business Law. He is the founder of the Moshe Kahn Advocates law firm of Tel Aviv, Israel. Adv. Kahn is licensed to practice law both in Israel and in the U.S..

 

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Moshe Kahn, Advocates,
Beit Amot Hashkaot, 7th Fl. 2 Weizmann St. Tel Aviv, 6423902.
Phone: +972-3-6914775

Israeli Business Law משפט עסקי