Class Actions Under the Israeli Companies Act, 1999: A Critical Re-Assessment

Posted: 23 Feb 2004

See all articles by Arad Reisberg

Arad Reisberg

Brunel University London ; Brunel University London - Brunel Law School

Date Written: June 2000

Abstract

The class action procedure is relatively a new tool in the Israeli law in general, and in Securities in particular. The Israeli legislator has chosen to incorporate the class action procedure initially in specific areas. In the last few years, we have witnessed a substantial increase in the number of class actions, which seek the approval of the court. At the same time, only a small percentage of these actions are approved at the end of the day. A partial explanation may be the certificate conditions set in the Israeli law, while another cause may lie in the tendency of courts to block the way for those who wish to champion a class action. An additional reasoning typically put forward is the tendency of courts to put an emphasis on the costs of the class action procedure, while minimizing the importance of developing a tool which will efficiently impose and police the laws governing public companies.

The decision to incorporate the class action procedure within the new Companies Act,1999 seems to be an appropriate opportunity to re-visit the rationales behind class actions, and to re-examine whether there is a need to revise the new arrangement in this area.

The paper finds that the new arrangement in the Companies Act reflects the tendency of the legislator to extend the cases where class actions can be brought. It addresses three main issues in turn. In the first part, it discusses how the set of criteria, which is part of the new Act should be interpreted by the courts. The proposed interpretation is based on a comparative research, on the objectives of the class action procedures and on the wide experience found in this field, both in Israel and elsewhere, particularly in the US. The second part of the analysis then turns to evaluate whether these conditions assist the court in determining whether to certify the class action. As part of this, the paper tries to evaluate the question whether the revised arrangement would entail a significant effect on the practice of class action, and whether it promotes efficiency, both by means of procedures and justice. The main theoretical argument is that the class action procedure in its current form is a highly incoherent procedure. At the end of the day, this approach would lead to an inefficient use of the procedure and would put in doubt the proper development of the procedure in the future.

The final part of the research highlights the main obstacles in the new arrangement. Six core issues are examined. The argument is that the composition of all of these parameters collectively builds an unhealthy environment. The paper in turn suggests some possible ways to tackle these problems in the future. It sets out a detailed proposal for amendments in future Bills.

Keywords: Class actions, Israel, litigation, fees

Suggested Citation

Reisberg, Arad, Class Actions Under the Israeli Companies Act, 1999: A Critical Re-Assessment (June 2000). Available at SSRN: https://ssrn.com/abstract=502883

Arad Reisberg (Contact Author)

Brunel University London ( email )

Kingston Lane
Elliott Jaques Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

HOME PAGE: http://www.brunel.ac.uk/people/arad-reisberg

Brunel University London - Brunel Law School ( email )

Kingston Lane
Elliott Jaques Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

HOME PAGE: http://www.brunel.ac.uk/people/arad-reisberg

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