Articles

By Adv. Shachar Welner and Amir Altshuler

Introduction

Our “global village” keeps getting smaller and smaller. Meanwhile commerce and legal transactions across borders keep getting more and more frequent. This new reality has created a need to hold legal proceedings with parties from different countries. In order to obtain jurisdiction over a foreign entity in an Israeli court, one must effect a service of process on that entity and then the Israeli Court will hold a hearing to determine the proper forum for the legal proceedings to take place. 

This article shall discuss the criteria for the service of process outside the jurisdiction and the question of the proper forum to hear claims pursuant to such service of process, while presenting the courts' opinions on these matters.

Service Outside the Jurisdiction

The plaintiff's objective when requesting service of process outside the jurisdiction, is to cause the defendant to appear and hold the legal proceedings in an Israeli court.

Service outside the jurisdiction allows the Israeli court to acquire, inter alia, jurisdictional authority over the defendant outside of Israel and therefore extend its zone of jurisdiction. This fact requires the court to examine carefully, when ruling on such matters, whether an extension of the zone of jurisdiction is indeed justified.

Prior to discussing the tests the court must apply when analyzing if the request to serve outside the territory is justified, correct and has a basis, it must be noted that as a rule, the court will first determine whether there is a local and/or foreign jurisdiction stipulation in the contract between the parties and whether such stipulation is exclusive and limits the jurisdiction to a specific forum^[1].

Insofar as there is no jurisdictional stipulation in the contract between the parties, or in the event these is no contract and/or the stipulation is not exclusive, the court shall turn to the tests detailed in regulation 500 of the Civil Procedure Regulations 1984, while the common denominator to all is the existence of some legal nexus to Israel. For example, the court is permitted to order service outside the jurisdiction when the defendant's residence is in Israel, when the real estate in question is in Israel, or when the lawsuit is based on a document made in Israel or to which Israeli law applies, etc. (a definitive list appears in regulation 500 of the Civil Procedure Regulations^[2]).

Proper Forum- Court's Discretion  

Fulfillment of one of the tests delineated in the regulation 500 is not dispositive of the issue of service of process outside the jurisdiction, since the court is entitled to invoke its discretion whether or not to permit said service. When deliberating, the court must weigh whether Israel is the proper forum to hear the suit, and if it determines that it is not, cancel the permit to serve, despite there being one of the conditions listed in regulation 500^[3].

In general, the proper and natural locus is the forum to which most of the relevant linkages point towards and has the "significant and real connection"^[4] to the matter in question. Put another way, the court will examine the extent of the connections of the parties as well as the circumstances of the dispute- to Israel.

In this regard, the court must weigh two factors: The first, convenience considerations- the ease in which the parties can access the source of evidence, the witnesses can be obliged to testify in court, the expenses to be incurred by bringing the witnesses to court, the ability to see the physical evidence as well as the difficulty in enforcing the verdict given. The second, substantive considerations- such as the parties' expectations and the legal system to most suited clarify the dispute.^[5]

As a rule, only if the balance between the linkages to the Israeli forum and the linkages to the foreign forum is clearly and significantly in favor of the foreign forum, will the Israeli court determine that it is not the proper forum to hear the suit^[6].

Claim of Improper Forum

The starting point is that the matter should be heard by the authorized court to which the complaint was submitted, and therefore in a proceeding to obtain permission to serve outside the jurisdiction, the plaintiff must prove that the Israeli court is the proper forum. On the other hand, the burden of proof to dismiss the jurisdiction of a court due to "improper forum" rests on the party raising such claim^[7].

In order to dismiss the local court's authority, one must prove that the balance is clearly and significantly in favor of the foreign forum. 

"… The improper forum doctrine shall not be applied in a routine manner, on the contrary: the doctrine shall be applied only in cases in which there is a significant inferiority of the forum hearing the case as opposed to the alternative forum".^[8]

The Courts' Approach to the Improper Forum Claim

In recent years due to technology advancements, and the availability of modern inexpensive transportation, the situation in which the courts in Israel can incoke the improper forum claim have been narrowed.

The court does not easily accept the improper forum claim and as The Honorable Judge Beinish wrote^[9]:   

"The purpose of the improper forum doctrine is to prevent the plaintiff and the court from proceedings that are remarkably inefficient due to hearing the claim in a local forum… however, the courts' approach is that the Israeli courts will not tend to easily agree to the improper forum claim. The reason for that is two fold: Firstly, as already mentioned, the rule is that when a court in Israel has accepted jurisdiction, it must activate its authority. Deviating from this rule will not be done routinely. Secondly, due to technology and transportation advancements in the modern world, less emphasis will be given to the defendant's difficulty to go to a different country with his witnesses. Therefore, the tendency to accept the improper forum claim is minimized." 

The technological advancements have also led to a reduction in the volume of improper forum claims, as The Honorable Judge Rubinstein wrote^[10]:

"As globalization penetrates to the daily business and legal world, while various parties in various continents are using electronic communication channels and the internet fluently to operate their businesses, and while businessmen handle their businesses via these channels and their fortress is spread out beyond their residence and over various continents, which travel can take a day or two at a time, it is reasonable to lessen the significance of the improper forum claim."

However, the Supreme Court opined that despite the reduction in the volume of improper forum claims, it has yet to become extinct:

"This is not a doctrine which has become extinct and it seems that when one of the competing courts is requested to broaden its authority and apply it to a defendant who is not in Israel, it is appropriate that additional willingness is shown towards the defendant raising claims regarding the properness of the forum."^[11]

In this specific case it was ruled that despite the considerations for granting permission to serve outside the jurisdiction being fulfilled, the proper forum to hear the case was in America and therefore the permission and the complaint were rejected. 

It is important to emphasize that there are exceptions in which the judicial discretion to dismiss an improper forum claim is minimized, while the considerations weighed by the court on this matter are derived mainly from the nature of the procedure. For example, there is a difference between a regular civil procedure and one pertaining to family law and specifically child custody, in which the choice of proper forum is directly influenced by the child's best interest which is integrated within the test of most linkages to the proper forum.^[12] 

Foreign Jurisdiction Stipulation

In cases in which there is a contractual stipulation between the parties granting authority to a foreign court, it must be examined whether it is an exclusive or parallel stipulation. An exclusive jurisdiction stipulation grants exclusivity to a specific court, while a parallel stipulation grants authority to a specific court but does not revoke the possibility of other courts hearing the case.^[13] 

The courts' policy is to respect foreign jurisdiction stipulations in light of the principle of contractual freedom, however the authorized court may choose not to enforce a foreign jurisdiction stipulation and instruct holding the hearing in an Israel court despite the parties' agreement when there are special circumstances which justify. For example, if the plaintiff would not be able to receive a fair trial in the country to which jurisdiction was given in the contract. 

Classifying the stipulation as exclusive or parallel shall be done in accordance with the wording of the contract and the parties' intent.  It has been ruled that even if the stipulation does not specifically revoke the authority of other courts, that shall not be enough to prevent the court from concluding it is an exclusive stipulation^[14].

Clean Hands, Integrity and Good Faith in Raising the Improper Forum Claim

An additional aspect of raising the improper forum claim is the integrity of the party making the claim. 

In a ruling of the Magistrate's Court in Tel Aviv^[15], the claim of improper forum was rejected after accepting the claim made by the plaintiff (represented by one of the authors' partners, Adv. Amir Altshuler) that the defendants did not act in good faith when, on the one hand, they raised the claim of Israeli courts being the improper forum but, on the other hand, avoided giving their consent to hold the proceeding in the foreign forum. 

The defendants requested the claim be dismissed for various reasons including Israeli courts not being the proper forum to hear the case and that simultaneously a legal proceeding was being held in Romania, where they claimed the deal was executed, based on the same claims and facts.

The plaintiff on the other hand claimed that the Israeli court was the proper forum since the contract pertaining to the deal was signed in Israel and the individuals behind the contract, as well as their attorneys, were Israeli. Without derogating from these claims, the plaintiff agreed that the case be heard in Romania, subject to the defendants accepting the Romanian law and jurisdiction upon themselves.

The court ruled that the claim of improper forum was raised without offering an alternative foreign forum and therefore was to be considered lack of good faith.