ISRAEL: An Introduction to Dispute Resolution: Class Action (Plaintiff)

Class actions in Israel are a central tool in the Israeli legal landscape, playing a crucial role in consumer protection, competition law, environmental law and corporate accountability. In recent years, Israeli courts have faced a growing number of complex and high-profile class actions, particularly in the fields of financial services, antitrust, digital platforms and mass consumer litigation. Class actions are considered a key factor in private enforcement.

In 2024, Israel saw significant legislative and judicial developments shaping the class action landscape. The proposed Amendment No 16 to the Class Actions Law seeks to refine the legal mechanisms governing class actions, while several landmark rulings of the Supreme Court have clarified critical issues, including attorneys' fees, consumer rights in cross-border transactions and antitrust damages claims.

Legislative Developments: Amendment No 16

On 21 April 2024, the Class Actions Law (Amendment No 16) Bill was published for public comments. The Bill aims to incorporate recommendations from the inter-ministerial committee for improving and streamlining the Class Actions Law, 2006, addressing challenges that have emerged since its enactment. However, the proposed amendment drew criticism from plaintiff counsels and consumer groups.

The proposed amendments:

• introduce a requirement for prior notice to defendants in certain cases;
• eliminate compensated withdrawal;
• limit the number of class action certification requests an individual plaintiff can file per calendar year to five; and
• enhance judicial discretion on costs by allowing courts to impose litigation expenses on plaintiffs and their attorneys when actions are found to be filed in bad faith.

Beyond these procedural measures, the Bill introduces substantive legal changes, including expanding consumer protection by adding privacy-related claims as a recognised ground for class actions under the Privacy Protection Law. It also changes the structure of attorneys' fees by introducing a fixed percentage-based system while allowing courts to deviate based on case complexity and public significance. It is important to note that as of now, the Bill has not yet been enacted into law and remains under discussion in the Israeli Parliament (Knesset).

Key Supreme Court Rulings in 2024

Agoda – Cross-border consumer protection

In CA 6992/22 AGODA COMPANY Pte. Ltd. v Shai Tzvia, the Supreme Court addressed the applicability of Israeli consumer protection laws to international e-commerce platforms. The Court ruled that Israeli law applies when an online business targets Israeli consumers, including cases where the website is available in Hebrew, prices are displayed in Israeli shekels (ILS) or transactions originate from an Israeli IP address. The Court emphasised that businesses seeking to operate in the Israeli market must comply with local consumer laws and cannot evade liability through contractual choice of law clauses.

Additionally, the Court determined that a foreign choice of law clause in consumer contracts is inherently unfair and therefore void. This precedent reinforces consumer rights in the digital economy, limiting the ability of global corporations to circumvent local consumer protection laws through contractual terms. The decision is particularly significant as it sets a clear legal precedent for global online platforms operating in Israel, ensuring they are subject to Israeli consumer protection regulations even if their headquarters are based abroad.

Hatzlacha – LIBOR manipulation case

One of the most notable Supreme Court rulings in 2024 was CA 7125/20 Hatzlacha – For the Advancement of a Fair Society et al. v UBS AG et al., where the Court reviewed an appeal challenging the dismissal of a class action against foreign banks accused of manipulating the LIBOR rate, allegedly causing financial harm to Israeli institutional investors and savers. The Court ruled that indirect victims, such as savers, may file claims if an anti-competitive arrangement caused indirect harm to their assets. The decision also established that financial instruments need not retain their original form for a plaintiff to assert damages under competition law. However, the Court ultimately dismissed the case, holding that institutional investors were in a better position to bring claims of this type.

Supergaz – Attorneys' fees in class actions

Another key ruling was CA 2957/17 Supergaz Israeli Gas Distribution Company Ltd. v Yael Schwarzman, where the Supreme Court clarified the guiding principles for awarding attorneys' fees and compensation to class representatives in class actions. The Court reaffirmed that the percentage method should be preferred over the hourly method, meaning attorneys' fees should be calculated as a percentage of the actual compensation awarded to the class. Courts should apply decreasing percentage tiers as the total awarded compensation increases and the settlement value should be assessed realistically, considering the actual realisation rate, the cost to the defendant and the benefit to class members.

The Court also ruled that the net method (calculating fees based on actual benefits received) is preferable to the gross method (calculating fees from the total settlement sum). Importantly, the Court emphasised that it is not bound by parties' agreements on fees and may modify or redirect unclaimed compensation back to class members. This ruling strengthens judicial oversight over attorneys' fees, ensuring they remain proportional to the real impact of a class action.

The Future of Class Actions in Israel

Looking ahead, the answers to several key questions will shape the future of class actions in Israel. The impact of Amendment No 16 remains uncertain. While supporters argue it will prevent abuse, critics warn it may deter legitimate claims. Courts may continue expanding consumer rights, as demonstrated in the Agoda case, but global corporations may challenge this. The regulation of attorneys' fees is also an evolving issue. While the Supergaz ruling may reduce incentives for excessive litigation, disputes over fee structures are likely to persist. Additionally, class actions in financial markets are expected to grow, particularly in the wake of cases like Hatzlacha, which signal increased scrutiny of anti-competitive practices in banking and investments.

Overall, 2024 has been a transformative year for class actions in Israel, with major legislative proposals and landmark court decisions shaping the future of this critical legal tool. As Israeli courts continue to refine their approach, class actions will remain an essential mechanism for consumer protection, regulatory enforcement and corporate accountability.