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Personal Jurisdiction over a Foreign Company
The service of suit to a salesman visiting Israel
does not create jurisdiction over the foreign company
By Sharon Shefer, Adv. and Yael Navon, Adv.
Background
According to the common law principles which were adopted by the Israeli law, personal jurisdiction over a foreign citizen is gained by the service of suit to the defendant. The personal service is the foundation of jurisdiction and requires the defendant to respond to the claim.
The service of suit can be made to any person who is present within the Israeli territory. The presence of a foreign defendant in Israel enables the State to exercise judicial jurisdiction over the defendant.
Service through an Israeli representative
Under certain circumstances, Regulation 482 of the Civil Procedure Regulations - 1984 enables the service of a claim against a foreign defendant to its Israeli representative. Regulation 482(a) is commonly used as a way to gain jurisdiction over a foreign company. The regulation sets:
"In a claim in a matter of business or work against a person not residing within the jurisdiction of the Court, service may be made to the manager or to a representative, who at the time is engaged on behalf of that person in the management of the business or work within the jurisdiction."
The leading precedent which dealt with this regulation is C.A. 39/89 General Electric Corp. v. Migdal Insurance Co. Ltd. PD 42(4) 762. In this judgement the Supreme Court ruled that service to a representative creates personal jurisdiction only if the representative has an intensive relationship with the potential defendant in that it may be assumed that the representative will bring to the attention of potential defendant the fact that proceedings have been filed against it. The Court stated:
"The question of the intensity of the connection between the representative and the defendant is a matter of degree ... Not every "sales agent" who purchases goods from a foreign company and sells them in Israel on his own account is "a representative who at the time is engaged on behalf of that person in the management of the business. On the other hand, as may be ascertained from the facts of the matter, the more signs of a business cooperation between the defendant and the manager of the business, the more the Court will be inclined to deem the "salesman" as a "representative."
C.M. 13292/08 Vestel Foreign Trade v. Ampa
On 24 March 2009 the District Court of Tel Aviv handed down its decision in the case of Vestel v. Ampa, in which it referred to the interpretation of Regulation 482.
Plaintiff, Ampa, was an Israeli company which marketed and distributed electrical products which were manufactured by a Turkish company, Vestel Foreign Trade. Due to allegations raised by Ampa against the quality of Vestel's products, Vestel sent Mr. Omut, one of its salesmen, to Israel in order to examine complaints against Vestel.
During a meeting with Mr. Omut, Ampa's representatives handed him a Statement of Claim against Vestel. Mr. Omut refused to accept the claim, clarifying that he is not authorized to accept legal pleadings on behalf of Vestel. Later that day, when Mr. Omut returned to his hotel, he discovered that the Statement of Claim was left in the hotel over his suitcase.
Vestel filed a motion to Court to declare that Mr. Omut should not be considered as Vestel's "representative" and thus the service of suit to Mr. Omut does not subject Vestel to the jurisdiction of the Israeli Court.
The Tel Aviv District Court accepted Vestel's motion. The Court ruled that service of suit through a representative creates personal jurisdiction against a defendant only if there is an "intensive connection" between the defendant and the representative's activities in Israel. Under the circumstances, the Court found that since Mr. Omut does not stay in Israel often, but rather only came for a short visit, his activity in Israel is not "intensively connected" with Vestel and thus, he cannot be considered as Vestel's representative.
In addition, since Mr. Omut has no managerial authority in Vestel, he cannot be considered a representative "in the management of the business or work" as required by Regulation 482.
Furthermore, the Court stated that due to judicial policy considerations, the Court should not enable service of suit to a representative of a foreign defendant who came to Israel in order to try and resolve a dispute between the parties.
Comment
It appears that the District Court adopted a narrow interpretation to Regulation 482 in order to prevent potential plaintiffs from taking advantage of the willingness of foreign companies to resolve disputes between the parties in order to subject them to the jurisdiction of the Israeli Court system. The Court wished to encourage foreign defendants to come to Israel in order to try and settle their disputes with Israeli parties without exposing themselves to legal proceeding in the Israeli Courts.
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