1 November 2017

Boycot of Israeli products and business –  Risk to be sued for damages

[Initial note: This article is not aimed as a political article pro or con boycott movements or the Israeli government, but rather as a legal informative overview, in light of the actual and financial impact or exposure international business may have in the referred to matter.]

It is perhaps not known to many international trading players, but under Israeli law, Bill for prevention of damage to the State of Israel through boycott – 2011, affirmed by the Supreme Court in 2015 (after a slight interpretive adjustment), boycotting Israeli origin products, or deliberate avoidance of economic or academic ties, may give rise to a lawsuit for actual damages under civil law.

In light of the international BDS movement, attempting to place pressure upon the State of Israel by means of economic and cultural pressure, Israel has realized such activity, indeed, causes actual harm and damage to Israeli based business, manufacturers, importers/exporters, etc., as well as to academic students and professors, and so on, in cultural ties of many sorts – just because the origin is Israel.

This boycott movement affects the people and businesses of Israel, as opposed to  Israeli leaders or politicians or  the State of Israel as a state, and conveys questionable (to say the least) economic and cultural negative effects upon the people facing unprecedented obstacles in trade in the international arena – for no wrongdoing on their part.

Regardless of the political opinion one may have concerning the legitimacy, or rather the non-legitimacy, of the BDS movement or concerning the current political policy of the State of Israel – the relatively new law provides actual legal tools to deal with negative economic outcomes (damages, loss of profits, etc.) that businesses or private people encounter or suffer from boycott measures, solely because of their affiliation or relation to the State of Israel.

Regardless of any opinion of the act itself or its enactment, at the end of the day the act exists and may be used and exploited by filing civil lawsuits against anyone who called for or participated in a boycott. In that sense it creates a new civil wrong as part of the Israeli tort laws.

Moreover, even a deliberate avoidance of economic, cultural or academic ties can raise liability for the avoider towards the business or ties avoided, as well as liability for anyone who has called for the boycott or publicly expressed support of it.

The law goes even further – and also excludes the defense argument of “sufficient justification” and thus provides that anyone who has caused or led to a breach of a contract, by calling for a boycott, may be liable for damages, as well.

As for the damages that can be claimed, after the adjustment to the law according to the Supreme Court ruling of 2015 (ruling that compensation must be awarded in correspondence with the actual damages or loss of profit caused, and cancelled the clause for penal compensation) – the entity that may sue for torts is the entity that suffered the damage and what can be sued for is the actual damage according to the regular Israeli torts law.

The law also prohibits a person who calls for a boycott from participating in any public tender, but this is a different focus from the side of the state.

It is worth mentioning  that the rationale for this legislation was also reviewed by the widely respected Israeli Supreme Court, that has strongly elaborated that such legislation is constitutional and, inter alia, that international entities and individuals such as the BDS movement (as opposed perhaps to states) should not be able to harm or interfere with international or domestic economic affairs without at least being accountable for the outcome of such, and that freedom of speech cannot be unlimitedly protected when it in fact calls for action (or for refraining from action)  that has an actual impact on another and is not simply an expression of an opinion.

To date, it seems that the Magistrates and District Courts of Israel have yet to render judgments in actual cases based on the boycott act, indicating that the implementation of the act is still inchoate. However, it seems that instances and measures of boycotting are on the rise and the methods of boycotting are becoming increasingly overt, in a manner that is bound to lead to considerable litigation in the near future.

Needless to say, issues of jurisdiction, and other aspects of private international law, or imposing jurisdiction on foreign players, are also yet to be resolved in reference to the emergence of lawsuits under the boycott law, but these will surely find their creative legal solutions with the actual submission of lawsuits concerning real life cases.

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Benjamin Leventhal - Legalmondo

Benjamin Leventhal

Arbitration, Corporate, Litigation.

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