Written by: Avraham Morel
Recently, a significant and fundamental judgment was given by the Supreme Court, which considered (once again) the issue of litigating lawsuits in which one of the parties is a foreign corporation that operates globally, including in Israel [Motion for Leave for Civil Appeal 6992/22 Agoda Company Pte. Ltd. v. Shay Zvia, dated May 27, 2024].
When a foreign corporation operating around the world is sued in Israeli courts, questions arise about the hearing of the lawsuit in Israel (the question of the proper forum), as well as about the substantive law according to which the lawsuit will be decided (the question of conflict of laws). These questions arise particularly because in the contract or Terms and Conditions that the corporation drafted (a ‘standard contract’), it is usually stated that disputes between the parties will be decided in the place of domicile of the foreign corporation according to the substantive law in force in that place.
In practice, the present judgment constitutes another judgment – the third – in which the Supreme Court has been called upon to determine how the conflict of laws should be resolved in cases involving Israeli users and global corporations that operate through online platforms.
The first judgment on this question was in the Ben Hamo case (Civil Appeal 5860/16), which considered a motion for certification of a class action against Facebook filed by users of the social network it operates, because of alleged violations of user privacy and database management. The judgment focused on terms that appeared in the platform’s ‘Terms and Conditions’ document, according to which any dispute between users and Facebook would be decided by a Californian court (foreign jurisdiction clause) according to Californian law (conflict of law clause). After recognizing the ‘Terms and Conditions’ document as a standard contract, the Supreme Court rejected Facebook’s argument about the foreign jurisdiction clause, but accepted its argument about the conflict of law clause, and held that it had not been proven that it was a prejudicial term that should be declared void. The reasons for this were that the Californian legal system is regarded as advanced and accessible and class action litigation gives the user (the potential plaintiff) power against the global company. Therefore, the court ruled that the motion for certification should be heard in Israel, but according to the substantive law of the State of California. We will return below to the Ben-Hamo case.
The second judgment on this question arose four years later in the judgment in the Troim Miller case, in which the defendant was also Facebook (Motion for Leave for Civil Appeal 1901/20). Unlike in the judgment in the Ben-Hamo case, this time the court held that where a small business is concerned, the clause in question according to which Facebook sought to apply Californian law to the dispute was a prejudicial term in a standard contract and therefore should be declared void.
In the present case, the foreign company (‘Agoda’) is incorporated under Singaporean law and operates a website that serves as a platform for ordering accommodation services worldwide. When making transactions for accommodation services, users have the option of browsing the site in Hebrew (among other languages) and paying in new shekels (as well as in many other currencies). The consumer (the class plaintiff) filed a motion against Agoda for certification of a class action, based on the claim that the prices of accommodation in hotels and aparthotels in Israel displayed on the website do not include VAT, contrary to Israeli law.
In the present judgment, it was held that in a tort claim relating to the display of information by the foreign corporation to its Israeli customers, the conflict of law rule results in Israeli law being applied to the dispute between the parties. It was also held that the foreign corporation should assume that when the marketing information is displayed in the configuration of an Israeli site, where, inter alia, the site can be viewed in Hebrew and payment can be made in Israeli currency, it will very likely be subject to Israeli law. This implies that in the converse situation, when browsing the site is not done ‘in the configuration of an Israeli site,’ the global corporation may assume that Israeli law does not apply to the information displayed to the user, even if it is a global corporation that operates in Israel.
The judgment also addressed the question of the validity of the applicable law determined in the jurisdiction clause by the global corporation. The Supreme Court held that the conflict of law clause determined by Agoda, which requires its customers (whether private consumers or small businesses) to litigate under Singapore law, is not valid under Israeli law in cases where Israeli law applies to the dispute according to Israeli conflict of law rules, both because it is a term that seeks to contract out of a binding provision of law in the field of consumer protection and because it is a prejudicial term in a standard contract.
Finally, the court sought to restrict the scope of application of the Ben-Hamo judgment and held that it should be limited to cases in which it is proved that there is a uniform global policy of a global corporation, which does not directly violate the concrete right of the small customer and where there is substantive justification for adopting it. In other words, one may not apply foreign law across the board to the relationship between a global corporation and the Israeli customer, but one may apply a uniform law in a specific case when there is a special need to prevent conflicts between legal systems (and there is no direct violation of concrete rights).
As can be seen, this is a substantive and significant ruling in the field of relations between consumers and global corporations, which applies to a significant proportion of transactions that are currently being made, especially on the Internet. The court went one step further in helping the Israeli consumer to resolve disputes between him and global corporations in Israel according to the law applicable in Israel. However, the court allowed global corporations, in certain cases, to apply a uniform foreign law to their business. This is a dynamic and evolving field, and only time will tell whether this ruling has given consumers greater access to the consumer courts in Israel and whether it has dissuaded global corporations from operating ‘in the configuration of an Israeli site’ in their dealings with Israeli consumers.
