Doing Business In The Ever-Changing Israeli Legal System

Author:Yigal Arnon & Co
Profession:Yigal Arnon & Co
 
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A good lawyer knows the law but a great lawyer knows the judge". While this famous phrase is usually quoted, humorously, with a negative connotation, the "great lawyer" is in fact the expert who, not only knows the law, but also understands and is intimately familiar with its background, accepted interpretations and applicability by the local market, judges and relevant authorities.

The intention of this article is to focus on several areas which should not be overlooked by U.S. and other foreign lawyers when engaging Israeli law firms for specialist advice in the context of investments and M&A transactions involving Israeli targets.

This article will also highlight certain important new legislative changes which demonstrate the fluidity of the Israeli legislature and then refer to other aspects generally relevant for transactions in Israel.

ANTITRUST

In any substantial acquisition, it is necessary to obtain antitrust advice both in connection with obtaining merger approval for the contemplated transaction as well as with respect to the legality and enforceability of non-competition provisions. Effective as of January 1, 2019, there have been significant amendments to the Economic Competition Law (formerly known as the Antitrust Law) which include increasing the threshold which requires the transacting parties to apply for approval, to an aggregate joint sales turnover of NIS 360 million (equivalent to approximately US $94 million) in place of the previous threshold of NIS 150 million. Other standards, such as the minimum NIS 10 million (equivalent to approximately US $2.6 million) threshold for each of the merger parties remain unchanged but it is, of course, important to be aware of all aspects that can affect the deal.

Aside from the approval process for transactions, the Israeli Competition Authority (formerly known as the Antitrust Authority) is active in enforcing against companies and their officers for various offences such as cartels, insider trading and abuses of a monopoly position. Incidentally, a monopoly is now defined by "significant market power" with the respect to the supply or purchase of goods or services, and not just by virtue of its holding more than 50% of a particular market.

It is particularly important to note that laws have recently become more stringent in terms of directors' responsibility for compliance, not just with antitrust laws and regulations, but also with respect to compliance with other areas of the...

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