The Manufacturer may be Summoned to Legal Proceedings in Israel

The Global World of Commerce which enables orders through the Internet creates a situation where the manufacturer of the product does not always know the destination of his product. In addition, a machine that was originally purchased by a plant  in Arizona, may find its way to another country, after many years of operation.

Damage caused by the product will no doubt, in the current litigious world, bring about a claim in the country where the damage occurred.

Where a manufacturer produces his products outside of Israel, according to a new amendment to the procedural Regulations which came into force on 21 November 2018, the manufacturer may be sued in Israel.

According to the Civil Procedure Regulations, a claim against a foreign defendant may be heard and dealt with by an Israeli Court, upon a Service of Suit which may be issued by the Court outside of the jurisdiction. This service applies the Israeli jurisdiction of the Court on the foreign defendant, thus obliging the foreign defendant to file a defence to the claim in the Israeli Court and attend the proceeding as a defendant.

Until recently, where a damage was caused to an Israeli Plaintiff by the use in Israel of a product, the Court would grant a leave to serve the Court claim to the foreign defendant, by issuing an Out of Jurisdiction Service order only upon proof that the negligent act or omission of the foreign defendant occurred in Israel.

In other words, where a faulty production of the product is alleged, the failure to take reasonable care should have been carried out in Israel in order to obtain the leave for an out of jurisdiction service to the foreign defendant.

The test is applied in a flexible manner when dealing with the internet. In the matter of BV v. Shapira (in the Tel Aviv District Court) Plaintiff alleged that Booking misleads the consumers in that it fails to inform them that the price is not final and a commission for foreign currency will be added. On this basis a request to approve a class action against was instigated in Court. At the first round, the Court issued, ex parte, an order for an Out of Jurisdiction Service to  based on the Regulation under the option of contractual cause of action and the option of an act or omission carried out in Israel.

The Court emphasizes that it is not enough that the damage may occur in Israel and it should be proven that the negligent act or omission was done in Israel. However, the publication on the internet has no boundaries and any place where this publication arrives should be seen as a place where the publication is actually made. Therefore, the publication and the failure to inform about the additional commission have been done in Israel (same conclusion concerning the internet, see v. Silis).

However, when dealing with physical products the approach has been more limited.

In the case of Success – Consumers Association v. AU Optronic Corporation; LG Display Co. Ltd.; Samsung Electronics Co. Ltd. and Others, Plaintiff argued that the defendants coordinated the prices of LCD Screens and therefore filed a request to certify a class action claim and applied for a leave for an Out of Jurisdiction Service. The Court declined the request and this declination was approved by the Supreme Court the  judgements  of which are binding on all lower instances.

In July 2017, the Supreme Court determined that the claim is based on damage allegedly caused in Israel by an act which was done abroad therefore, there is no ground for an Out of Jurisdiction Service order. The fact that only the damage was caused in Israel prevents the issuance of such a service order. In this case, Judge Hayut (currently the President of the Supreme Court) commented that in view of the globalization , this result  that the Israeli consumer cannot find a redress in the Israeli Court when sustaining damage by a cartel of manufacturers abroad is a situation which should be changed by the legislator [1].

As we can see, the current amendment of the Regulations responded to this call of the Supreme Court.

By the recent amendment of the Regulations, it is not required that the negligent act or omission attributed to the manufacturer be carried out in Israel and it is sufficient that the damage by the product was caused in Israel. The new Regulation however sets two conditions for it application:

  • The defendant could have anticipated that the damage will be caused in Israel and
  • Where the defendant or any person connected to the defendant is engaged in an international trade or in the supply services at an international level in a considerable extent. “A connected person” where the defendant is a corporate, a person controlling the corporate or other legal entity which controls the defendant.

Manufacturers or service providers being  aware of the worldwide use of their procucts, should take into account that, damage may be caused anywhere in the world by their failure to take reasonable care in their profession and therefore may be sued for such a damage wherever their products or services are being used.

The Insurance Solution for these types of claims is Product Liability Insurance.

In view of the legal development, it is recommended that the territorial scope of Product Liability Policy will not be limited to the country where the product is manufactured, but rather will have a worldwide scope.

[1] The Court noted that the English Procedure Regulation which was the basis of the Israeli Regulation has already been amended in the past.