Local Civil Litigation in Israel

Israeli civil courts have a three-tiered system comprised of trial courts, known as Magistrate Courts; intermediate appellate courts, known as District Courts; and a final court of appeal and the highest court – Israel's Supreme Court.

Magistrate courts serve as courts of first instance for most civil disputes, with subject matter jurisdiction of claims in which the sum claimed is not higher than 2.5 million NIS and some real estate cases. Cases that begin in the Magistrate courts can be appealed as of right to the District courts.

The district courts sit as an appellate court of judgments rendered by the Magistrate courts and act as a court of first instance for disputes over land ownership and monetary claims exceeding 2.5 million NIS. District courts have residual jurisdiction over civil matters that are not under the jurisdiction of Magistrate courts. The Tel Aviv and Haifa District courts each have a specialized economic division. These economic courts have exclusive jurisdiction over financial matters (such as derivatives disputes). Decisions by the District courts can be appealed to the Supreme Court.

The Supreme Court is the final court of appeals and a High Court of Justice (HCJ). As the High Court of Justice (Bagatz), the Supreme Court is hearing primarily administrative and constitutional petitions for judicial review of executive action and legislation.  When sitting as an appellate court, the Supreme Court hears appeals as of right and applications for leave to appeal. It primarily hears appeals from final judgments of District courts sitting as trial courts and appeals on leave from final decisions of District courts sitting as appellate courts. Leave to appeal is granted when the question at issue carries general implications for the public, beyond the applicant's case; or when a substantial injustice has occurred.

The President of the Supreme Court heads the Israeli judicial system. The Supreme Court consists of 15 Justices and two Registrars. Generally, the Supreme Court sits in panels of three. However, a single Justice may hear certain matters, such as interlocutory applications, temporary orders, and applications for leave to appeal.

Under the binding precedent principle, a precedent ruled by the Supreme Court binds every court except the Supreme Court. A ruling by a District court guides the Magistrate courts.

Professional judges comprise Israeli civil courts, and there is no jury system. The Israeli legal system is adversarial. The passive role of the judge in the adversarial system grants the parties significant control over litigation management. Yet, in practice, Israeli judges have a more active role.

Where a civil claim is brought in the court, the procedural rules are found in the civil procedure regulations. Recently, these rules of procedure underwent a massive reform. The new regulations came into effect in 2021, detailing the rules for conducting court proceedings. The new Israeli rules of civil procedure formally express the trend toward more robust judicial activism and reflect the managerial role of judges. Under the new civil procedure rules, judges have formally received broadened authority to conduct legal proceedings efficiently and justly to resolve the conflict between the parties quickly. For instance, the pretrial stage allows the judge significant involvement in the process. During pretrial, the judge can cross-examine witnesses or the parties themselves to resolve the case at that stage. Also, during cross-examination of witnesses in the trial, the judge may ask witnesses questions. The rules formalize the common practice of judges who offer settlement proposals to the parties.

The new regulations aim to help the court conduct the trial while maintaining a proper and fair judicial system. The rules seek to achieve the following goals: to bring about the simplification and unification of legal procedures; to root out barriers that cause prolonged court hearings; to bring about mutual disclosure and complete transparency between the parties before and during the filing of a claim; to bring about a balance between the needs of the litigants and the consideration of unrepresented litigants; to promote accessibility to the judicial process; and to ensure a proper and fair procedure and prevent the waste of valuable judicial time. The rules of civil procedure emphasize fair trials, public access, and prompt dispute resolution time.

Generally, civil claims have a seven-year statute of limitations; in a case of a claim relating to land – 25 years. The parties may contractually agree on a more extended or shorter limitations period for matters other than real property, but at least six months.

Generally, there are no pre-action conduct requirements before commencing a commercial lawsuit. Civil proceedings commence with the filing of a complaint with the court. The statement of claim, along with a summons to court, is served to the defendant. Generally, the defendant must serve an answer within 60 days, and the plaintiff may serve a reply to the answer within 14 days. After the last pleading is submitted to court, the parties exchange demands for disclosure and questionnaires. Following this, motions are submitted concerning the preliminary proceedings under a strict timetable before the first pretrial hearing. The parties have limited control over procedures and timetables. Generally, the timetable is set by the regulations and the court's orders. Nonetheless, the courts tend to grant time extensions liberally when the parties reach procedural agreements concerning time extensions.

Parties are bound to full mutual disclosure of the documents that are part of their claim. During discovery, each party discloses to the other party the relevant records and correspondence in its possession, custody, or control. Privileged documents, such as attorney-client correspondences or materials prepared in anticipation of litigation, are not presented to the other party. Yet, in the discovery affidavit, it is customary to furnish their existence and indicate that these documents are privileged.

Instead of oral testimony, the witnesses (including experts) often submit their testimony in a written affidavit (or a written expert opinion). The witnesses and experts are subject to cross-examination in court. Following the recent civil procedure reform, preference is given to hearing oral summations and evidence and direct examinations. The court decides whether witnesses shall give oral evidence or file affidavits. In most cases, witnesses submit affidavits that serve instead of oral testimony.

Remedies may include enforcement of contracts, damages, and declaratory relief. Generally, prevailing parties may recover court costs and attorney’s fees from the opposing side. Interim remedies are available for parties, including temporary restraining orders, preliminary injunctions, and prejudgment seizures. Typically, an interim remedy is issued to maintain the status quo when the lawsuit is filed until a final decision is made on the merits to ensure the implementation of the judgment if the permanent remedies are granted.

Generally, court hearings are open to the public. In certain circumstances, court hearings are held behind closed doors (e.g., where concerns about disclosure of trade secrets or other sensitive information exist or to maintain national security, etc.).

The Foreign Judgments Enforcement Act (FJEA) governs the recognition and enforcement of foreign judgments in Israel. The FJEA provides for separate procedures for recognition of a foreign judgment: declaration of the foreign judgment as an enforceable judgment, direct recognition, and indirect (incidental) recognition.  Under the FJEA, a foreign judgment is eligible for enforcement if the following requirements are met: the foreign judgment must be rendered by a court of competent jurisdiction according to the laws of the state of origin; the judgment must be final; the obligation imposed by the judgment must be enforceable according to Israeli law; the content of the judgment must be compatible with public policy; and the judgment must be enforceable in the state of origin.

The enforcement of foreign judgments is subject to reciprocity. This means that a foreign judgment shall not be declared enforceable if entered in a state under the laws of which judgments entered by Israel courts are not enforceable. This requirement has been interpreted by Israeli courts as 'potential of enforcement’. The court may, however, on application by the Israeli Attorney General, enforce a foreign judgment even where there is no reciprocity.

The defendant may raise defenses against the enforcement of a foreign judgment, including: the judgment was obtained by fraud; the defendant was not given a reasonable chance to bring a defense before the foreign court; the judgment was given by a court with no jurisdiction over the case according to Israeli private international law; the existence of inconsistent judgments on the same subject-matter and between the same parties; or at the time that the action was brought in the foreign court, a lawsuit on the same subject-matter between the same parties was pending before an Israeli court.

It is worth noting that pleadings have a strict page limit under the new civil procedure rules. Also, courts can dismiss an appeal without hearing the other party. The new civil procedure rules have made the legal process more strategic and structured. On top of this, essential substantive principles that judges employ such as good faith and reasonableness – allow them broad discretion. This broad judicial discretion, manifested in both substance and procedure, reinforces the importance of clear, precise, and robust legal pleadings and a high-quality legal representation of the parties.

Arbitration and Alternative Dispute Resolution

The Arbitration Act requires an arbitration agreement to be in writing. If the arbitration clause is silent on the arbitrator’s identity, and the parties disagree, they can request the competent court to appoint an arbitrator. Courts will often appoint a retired judge or an esteemed lawyer with the qualifications to adjudicate on the matter as arbitrator. Israeli Arbitration establishments have “pools” of arbitrators, and the establishment's president typically appoints an arbitrator from the arbitrators’ list.

The court may remove an arbitrator if the arbitrator is unworthy of trust (e.g., due to conflict of interests); the arbitrator's conduct during the arbitration distorts justice, or the arbitrator cannot fulfil the role. The Arbitration Act sets default rules which exempt the arbitrator from the civil procedure rules, substantive law, and evidence rules. The arbitrator should detail his reasoning. It is customary to require the arbitrator to adhere to the substantive law in the arbitration clause. The arbitration award must be in writing and signed by the arbitrator.

An arbitration award can be cancelled as follows: Ten statutory grounds allow the court to revoke an arbitration award, including lack of authority, lack of reasoning (when applicable), the award contradicts public policy, the arbitrator was not lawfully appointed and due process considerations. The parties may also agree that an appellate arbitrator will hear an appeal. If the arbitration agreement or clause stipulated a right to appeal to court, the parties might request it where a fundamental error in applying the law caused grave injustice. A domestic award can be enforced when submitted by the winning party to the competent court for approval and the other party does not submit a leave for cancellation or an appeal. A foreign award may be approved according to the New York Convention, which was incorporated into domestic law.

The Israeli rules of civil procedure incorporate alternative dispute-resolution procedures into the legal process. The referral of cases from the court system reflects the judicial attempt to decrease case load and minimize litigation costs. The most common ADR processes in Israel are mediation and arbitration. Commonly, the court asks the parties to consider ADR. In most cases, the civil procedure regulations set forth a mandatory mediation meeting by a court-appointed mediator before the first hearing; if the meeting is unsuccessful, the court cannot compel the parties to continue participating in the ADR process.

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