Recently, an Israeli District Court addressed the jurisdiction
of Israeli courts over foreign companies accused of being part of a
prohibited cartel that acted outside of Israel but had an impact on
market prices – and caused damages to consumers in Israel.
The Court held that if the cartel arrangement was effected outside
of Israel, and the cartelists took no actions to implement the
cartel in Israel, Israeli courts have no jurisdiction over the
The issue arose in a class action proceeding brought against
foreign defendants alleged to have participated in a cartel that
coordinated the prices of LCD panels. The plaintiffs claimed that
the impact of the cartel was also felt in the Israeli market where
products that included the panels were sold.
The District Court Registrar granted the plaintiffs' motion
for leave to serve the non-Israeli respondents, and the defendants
appealed to the District Court.
Since the defendants were non-Israeli, the question before the
Court of whether service of process abroad should be allowed turned
on whether an act or omission by the defendants took place within
the State of Israel, which would be a condition for an Israeli
court to have jurisdiction over the non-Israeli defendants.
The plaintiffs' principal argument was that while the
defendants did not carry out any act with the State – neither
coordination of prices nor sale of panels or of end-products
– their end-products were sold in Israel by third parties;
hence, the plaintiffs argued, it is possible to attribute to the
defendants the "act" of the third parties that was
carried out in the State. Moreover, the plaintiffs claimed that the
alleged cartel was a restrictive arrangement that influenced the
Israeli market and thus was an "act" carried out in
On December 29, 2016, the District Court cancelled the leave for
service that the Registrar had granted against the defendants. The
Court held that it was not possible to attribute to them any act or
omission that took place within the State of Israel.
The Court established that the cartelists did not sell products
in Israel, as none of the third parties that sold the
companies' endproducts in Israel were connected in any way to
the defendants, whether as their representatives, agents or
Furthermore, the Court adopted the position of the
DirectorGeneral of the Israeli Antitrust Authority, to the effect
that a foreign company that does not have a legal presence in
Israel is deemed to act in Israel only if a clear connection exists
between the company's conduct outside Israel and its impact in
the local market. Where a restrictive arrangement is formed outside
Israel and is not directed "entirely" to the Israeli
market, and the foreign participants did not take an active role in
implementing the arrangement in Israel, then there will not be a
sufficient connection to the Israeli market to support a
jurisdictional claim against the foreign parties.
In the matter at hand, the defendants did not direct the alleged
cartel "entirely" to the Israeli market, but rather, as
the court found, directed the cartel to markets around the world;
in practice, the cartelists did not sell the alleged cartelized
products – or carry out cartelistic activity – in
Israel, and thus no act or omission was carried out in Israel.
This decision provides some measure of comfort for companies
alleged to have engaged in cartelistic practices outside Israel,
but not in specific cartelistic activities in Israel. While cases
such as this are inevitably very fact-sensitive, this decision
indicates that in appropriate circumstances, companies in the
position of the defendants may not be drawn into the Israeli
[Case no. 57451-03-16 Hatzlacha v. AU Optronic
Corporation and others (Published in the Nevo Law
Repository, December 29, 2016)]
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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