Transparency of the Regulatory System
Israel promotes open governance and has joined the International Open Government Partnership. The government’s policy is to pursue the goals of transparency and active reporting to the public, public participation, and accountability.
Israel’s regulatory system is transparent. Ministries and regulatory agencies give notice of proposed regulations to the public on a government web site: http://www.knesset.gov.il. The text of proposed regulations is also published on this web site. The government requests comments from the general public about proposed regulations.
Israel is a signatory to the WTO Agreement on Government Procurement (GPA), which covers most Israeli government entities and government-owned corporations. Most of the country’s open international public tenders are published in the local press. However, government-owned corporations make extensive use of selective tendering procedures. In addition, the lack of transparency in the public procurement process discourages U.S. companies from participating in major projects and disadvantages those that choose to compete. Enforcement of the public procurement laws and regulations is not consistent.
Israel is a member of UNCTAD’s international network of transparent investment procedures. (http://unctad.org/en/pages/home.aspx). Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.
International Regulatory Considerations
Israel is not a member of any major economic bloc but maintains strong economic relations with other economic blocs. For example, the EU is Israel’s largest trade partner and this partnership is codified in their bilateral free trade agreement, the EU-Israel Association Agreement, signed in 2000. Israel has a bilateral agreement with four members of the European Free Trade Association Agreement, a group of non-EU European countries. In recent years, Israel has actively sought bilateral trade agreements with its international trade partners throughout the world principally in Asia and in the Americas.
Israeli regulatory bodies, such as the Ministry of Economy (Standards Institute of Israel), Ministry of Health (Food Control Services), and the Ministry of Agriculture (Veterinary Services and the Plant Protection Service), often adopt standards developed by European standards organizations rather than international standards, which results in the market exclusion of certain U.S. products and added costs to U.S. exports to Israel.
Israel became a WTO member in 1995. The Ministry of Economy and Industry Standardization Administration are responsible for notifying the WTO Committee on Technical Barriers to Trade, and they regularly do so.
Legal System and Judicial Independence
Israel has a modern legal system based on British common law that provides effective means for enforcing property and contractual rights. This system operates inside Green Line Israel (i.e., within Israel’s pre-1967 borders), but not in the Occupied Territories. Courts are independent, though businesses complain about the length of time required to obtain judgments. Israeli civil procedures provide that judgments of foreign courts may be accepted and enforced by local courts.
Israel has a written and consistently applied commercial law based on the British Companies Act of 1948 as amended. The Supreme Court is an appellate court which also functions as the High Court of Justice. Israel does not employ a jury system. Other tribunals have been established to regulate specific issues and disputes in a specific area of law including labor courts, antitrust issues, and intellectual property related issues.
Laws and Regulations on Foreign Direct Investment
There are few restrictions on foreign investors, except for parts of defense or other industries closed to outside investors on national security grounds. Foreign investors are welcome to participate in Israel's privatization program.
Israeli courts exercise authority in cases within the jurisdiction of Israel. However, if an agreement between involved parties contains an exclusively foreign jurisdiction, the Israeli courts will generally decline to exercise their authority.
Israel’s Ministry of Economy sponsors the web site “Invest in Israel” at www.investinisrael.gov.il.
The Investment Promotion Center of the Ministry of Economy seeks to encourage investment in Israel. The Center stresses Israel’s developed infrastructure, educated work force, open economy, and ties to the United States and Europe, and additionally provides information about investment incentives available in Israel.
Competition and Anti-Trust Laws
Israel adopted its comprehensive competition law in 1988. The Israel Antitrust Authority (IAA) was created in 1994 to enforce the competition law. After a protracted public debate and the High Court’s intervention in the Noble Energy case centered on the IAA’s finding that Noble and its Israel partner’s original investment plan was anti-competitive, the Israeli Cabinet agreed on a revised Gas Framework in May 2016 paving the way for Noble Energy’s development of the Leviathan gas field.
Expropriation and Compensation
There have been no expropriations of U.S.-owned businesses in Israel in the recent past. Israeli law requires adequate payment, with interest from the day of expropriation until final payment, in cases of expropriation.
ICSID Convention and New York Convention
The Israeli government accepts binding international arbitration of investment disputes between foreign investors and the state. Israel is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Israel’s arbitration law is governed and enforced primarily via the Arbitration Law of 1968, which was most recently amended by the Israeli Knesset in 2008.
Investor-State Dispute Settlement
Israel’s arbitration law is governed primarily by the Arbitration Law of 1968. The Arbitration Law governs both domestic and international arbitration proceedings. The law was most recently amended by the Israeli Knesset in 2008. Israel ratified the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 in 1959. There is no known extrajudicial action against foreign investors. There is little case law concerning the enforcement of foreign arbitral awards, including awards issued against the government, but the attitude of Israeli courts towards the enforcement of foreign arbitral awards is to adhere strictly to the provisions of the Convention and not to interpret the grounds for refusal of enforcement widely.
International Commercial Arbitration and Foreign Courts
Mediation was formally institutionalized in Israel in 1992 with the amendment of the Courts Law of 1984. The amendment granted courts the authority to refer civil disputes to mediation or arbitration with party consent. The Israeli courts tend to uphold and enforce arbitration agreements. Israel’s Arbitration Law predates the UNCITRAL model law.
Israeli Law is based on several layers, some of them based on the Common Law and in particular the laws of England, as Palestine was under the British mandate in 1917-1948. Bankruptcy Law in Israel is mostly based on English Law, as enacted in Palestine in 1936 during the British mandate.
Bankruptcy proceedings are based on the bankruptcy ordinance (1980), which replaced the mandatory ordinance that was enacted in 1936. Therefore, the bankruptcy law in Israel resembles the English law as it was more or less in 1936. Israel is 31st in the World Bank’s 2017 Doing Business Report’s “resolving insolvency” category.