Cross-Border Pre-Judgment Relief in Israel
Is an Israeli court authorized to grant temporary pre-judgment relief in connection with an action initiated and pending in a foreign country? For example, a plaintiff files a complaint alleging breach of contract in a U.S court, seeking money damages. The defendant has an Israeli bank account and may even reside in Israel for part of the year. Can the plaintiff file a motion for a preliminary attachment on the defendant’s property in Israel in aid of the U.S. litigation before the American case has gone to judgment?
The answer is not at all clear.
While in the past, Israel courts have been reluctant to grant such relief, recent court decisions suggest that plaintiffs who demonstrate that they have a viable cause of action pending in a foreign court, supported with evidence and a sound legal argument, may be able to attach the defendant’s Israeli assets even though the dispute has no other connection to the Israeli forum.
Under the older/outdated Israel Rules of Civil Procedure, 5744-1984 (the “1984 IRCP”) such “cross-border temporary relief” is admittedly problematic.
[Update to post: On January 1, 2021, the New Israeli Civil Procedure Regulations went into effect (the "New Regulations"). Because most -- if not all -- the case law discussing pre-judgment cross-border relief relates to the 1984 IRCP, we will focus on those rules. Moreover, while the language of the new regulation is somewhat different when it comes to pre-judgment relief, it does not appear that this distinction would lead to a different conclusion].
Under the 1984 IRCP, once a Statement of Complaint is filed or simultaneously with the filing of a Complaint, a plaintiff may seek temporary relief, like prejudgment attachments and preliminary injunctions, either by way of an ex parte or adversary proceeding. A common example is a motion to attach/encumber the defendant’s bank account or other financial assets such as pension and other insurance funds or real-property. Such an attachment is a powerful weapon for plaintiffs, since it will effectively prevent the defendant from concealing or transferring the property pending the issuance of a final judgment which can take months or years.
IRCP Rule 362 (and Rule 95 of the New Regulations) which governs the issuance of temporary relief would seem to imply that courts may only grant temporary relief if the motion is filed “within the framework of a lawsuit.” This rule was traditionally interpreted to bar an Israeli court from granting temporary relief, where the principal lawsuit was pending outside the state. Roth v. International Credit Corporation of New York, Civ. App. 5805/90 [Nevo Database, Isr. S.Ct., March 7, 1991]. In Roth, the plaintiffs, who had commenced an action in New York, moved the Israeli court to appoint a temporary receiver over the Israeli properties of the defendant. The plaintiffs also requested a temporary injunction preventing any disposition of defendant’s property. While the district court granted the relief, the Supreme Court vacated the temporary relief orders for lack of subject matter jurisdiction.
In the last decade or so, however, lower courts have been willing to circumvent the procedural obstacle imposed by the Supreme Court’s decision in Roth. In a series of decisions, lower courts have granted various types of temporary relief – such as injunctions and attachments – to plaintiffs whose claims were being litigated in foreign courts. For example, in Eli Lilly Expory S.A. v. Luxembourg Medicines, Ltd. Civ. App. 1829/02 (Tel-Aviv. Dist. Ct., June 24, 2002), a district court, sitting as an intermediate appellate court, overturned a magistrate court’s decision denying the plaintiff’s motion for temporary relief in the form of an attachment in connection with a pending Swiss legal proceeding.
Other trial courts have come to similar conclusions, while others have held the opposite. All in all, trial courts are split on the issue whether the Roth decision constitutes a blanket restriction on granting “cross-border temporary relief.”
Properly pled and supported by affidavit and other evidence, a petition for temporary relief in aid of a foreign proceeding may well succeed in Israel. However, there are risks.
If, despite the risks, a party still elects to seek such cross-border relief, here are some tips to make the application all the more convincing:
Here are some practical pointers, based on our experience, that may increase the chances that a motion for temporary relief may succeed, while making sure that a plaintiff is properly apprised of the risks.
1. The motion for temporary relief must, first, describe the foreign claim and proceedings in detail. The facts underlying the allegations in the foreign complaint should probably be supported by a duly authenticated affidavit/declaration by a person with firsthand knowledge of the facts. Second, the motion must elucidate the legal basis for plaintiff’s right to recovery under foreign law. The plaintiff should provide the Israeli court with an expert opinion on the foreign law in support of the motion, translated into Hebrew. All declarants must be prepared to appear personally for cross-examination by the opposing party in the Israeli court. Third, the motion must demonstrate that failure to grant the temporary relief would cause irreparable harm or will make the enforcement of the judgment, if and when granted, difficult or impossible.
2. Unlike American practice, as a general rule, a party instituting a civil action must pay a filing fee equal to 2.5% of the amount claimed. One-half of this amount must be paid at the time the case is filed and the remainder is due prior to the commencement of hearing on the evidence (analogous to the trial stage of an American proceeding). Usually, a motion for temporary relief is filed alongside a civil complaint and the plaintiff pays for the filing fee based on the amount of the claim, in addition to a nominal fee for the motion. However, it is still unclear how the filing should be computed when the plaintiff files a motion for temporary relief in connection with a foreign proceeding without an Israeli statement of claim In our experience, trial courts have permitted the plaintiff to pay the lower, nominal amount, but the matter remains undecided until the Supreme Court weighs in or the ICRP are amended.
3. Plaintiffs and their counsel should also be aware that temporary relief will be conditioned on the plaintiff posting security for costs and possible damages incurred by the defendant should the temporary relief ultimately be dissolved or withdrawn or should the plaintiff’s claim fail for any reason in the foreign proceeding. Israel does not recognized surety or fidelity bonds. Thus, a plaintiff will either have to deposit the amount of the security in the court’s registry or obtain a bank guaranty from an Israeli financial institution. For cross-border temporary relief motions, this amount can be significant and, depending on the amount being claimed, range anywhere from U.S. $50,000 to U.S. $400,000 or more depending on the value of the Israeli assets encumbered.