A New Trend in Israeli Case Law: Choice of Law Provisions in Consumer Contracts with Global Corporations Are Declared Invalid
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Several recent decisions of Israeli Courts reflect a growing unwillingness to recognize the validity of choice of law provisions which apply foreign law in standard form contracts of global corporations which target the Israeli market. In recent judgements, it was ruled that such provisions are invalid, either because they constitute an indirect attempt to deviate from Israeli mandatory statutory provisions, or because they are found to be oppressive to Israeli consumers.
In a recent Supreme Court ruling in the matter of Troim Miller Ltd. v. Facebook Ireland Limited (July 26, 2022), the Supreme Court denied Facebook’s argument that the claim (in which the plaintiff alleged a breach of the agreement by Facebook) must be litigated according to California state law due to a provision in its Terms & Conditions. It was ruled that consumers or small businesses in Israel have an interest that Israeli law would regulate the relationship between them and a global corporation that provides its services in Israel.
Therefore, a global corporation, which has chosen to conduct business in Israel, cannot avoid the application of Israeli law to its disputes with consumers or small businesses by stipulating a foreign law provision in its standard form contract. Such provision is deemed as a depriving condition according to the Israeli Standard Contracts Law and thus declared null and void.
Soon thereafter, the Supreme Court’s ruling in Troim Miller was applied by the District Court in a class action filed against Amazon (Barak v. Amazon.com Inc (August 3, 2022)). The plaintiff claimed that in some transactions the price displayed by Amazon to the Israeli consumer is in US dollars rather than in Israeli Shekels, and the consumer is charged with an exchange rate which is higher than the representative exchange rate as required under the Israeli Consumer Protection Law. In a preliminary motion Amazon argued that its Terms & Conditions stipulate that claims are subject to the laws of Washington.
The District Court applied the Supreme Court’s ruling in the matter of Troim Miller and dismissed Amazon’s argument. The Court held that in view of the significant power imbalance between a global corporation such as Amazon and an Israeli consumer, as well as the nature of the transactions between the parties, the protections granted to the Israeli consumer by Israeli law cannot be circumvented with a choice of foreign law provision. The Court ruled that when a global corporation intentionally targets the Israeli public, as Amazon did through its website in Hebrew, denying the applicability of Israeli law constitutes a depriving provision which should therefore be annulled.
The above decisions join the decision of the District Court in the matter of Zvia v. Agoda (June 28, 2022). In this decision the Court certified a class action against Agoda, a company incorporated in Singapore which provides an online platform for booking hotel rooms worldwide, including in Israel. The representative plaintiff argued that on its website, Agoda displays the prices of rooms in Israel without VAT, a practice which violates the Israeli Consumer Protection Law.
In this case, too, the Court ruled that when a foreign company targets the Israeli consumers, such as through an internet platform in Hebrew with payments made in Israeli currency, it is subject to the mandatory provisions of the Israeli Consumer Protection Law and cannot evade their application through a choice of foreign law provision.
These rulings by Israeli Courts indicate a new emerging trend, whereby Israeli law will govern the relationship between Israeli consumers and foreign corporations which provide services in Israel and target the Israeli market, even if the standard form contract contains a provision to the contrary.
This trend deviates from the precedent set in the case of Facebook Inc v. Ben Hamo (May 31, 2018), in which the Supreme Court enforced a California choice of law clause in a class action filed against Facebook, reasoning that it is a legitimate business interest for a global business to be subject to a single set of laws. While the new rulings by the Israeli Courts, and particularly the Troim Miller case, appear to considerably narrow the scope of Ben Hamo (though it was not expressly overturned), it is yet to be seen how the case law will develop.
For more information, please contact Adv. Ran Sprinzak or Adv. Tomer Weissman, managers of our litigation practice, or Adv. Hadas Bekel, a partner in the litigation department who specializes in class actions.
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| Hadas Bekel
Partner in the litigation department, specializes in class actions
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| Ran Sprinzak
Partner, Co-Manager of the Litigation Department
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About Our Litigation Department
EBN is one of the leading law firms in Israel in commercial litigation.
The firm’s litigation department is consistently ranked as a top tier practice by local (DUNS100, BDI) and international (Chambers, Legal 500) ranking guides.
The firm has handled some of the largest and most significant cases in the commercial arena in Israel, including complex commercial disputes, class actions and derivative suits, administrative proceedings of economic and public
consequence, and more.
The firm’s Litigation Department counts among its clients many of Israel’s largest corporations as well as global corporations such as Bezeq, Israel Aerospace Industries, Bank Hapoalim, Bank Mizrahi, Israel Electric Corporation, Blue Square Group, DBS Satellite Services (‘yes’), Taavura, Nesher, IDI Insurance Company (‘Direct Insurance’), PwC Israel, Yellin-Lapidot, TENE Investment Funds, Sano, Qualcomm, Goldman Sachs, PrivatBank, Boiron, Seagate and many more.
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