Israel
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. There are two types of freezing orders under Israeli civil law; interim injunction orders and interim attachment orders.
Interim injunction orders prohibit the respondent from dealing with the assets referred to in the interim injunction order until a specified time (for example, a further hearing, judgment or payment) or further order of the Court. As this order applies to the respondent (rather than a specific asset), its application is not limited to the Israeli jurisdiction.
Interim attachment orders prohibit the respondent from dealing with a specific asset until a judgment is rendered or until further order of the Court. This order applies only to assets located within the jurisdiction of an Israeli Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No.
3. Briefly what is the relevant legal test?
The applicant must demonstrate that:
(i) the alleged cause of action in the substantive claim is supported by prima facie evidence;
(ii) the balance of convenience must be in favor of the applicant (i.e. the harm to the applicant should the order not be granted, outweighs the harm which may be caused to the respondent should the order be granted; and when relevant – also outweighs the harm caused to a third party or to the public interest);
(iii) there is a reasonable concern that the respondent will hide/dispose of assets; or that the respondent’s other assets might prove insufficient to fully satisfy the judgment;
(iv) no other remedy of lesser harm could achieve the purpose of the freezing order (for example, the Court may order that the substantive claim is expedited).
The Court will also consider whether the parties have acted in good faith and whether there has been any unreasonable delay in bringing the application.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
(i) The applicant makes an application to the Court, setting out in an affidavit the reasons for the application and the basis on which the above considerations are met.
(ii) Interim injunctions must usually be made on notice, so that the respondent is afforded an opportunity to respond to an application. However, the Court may grant an interim injunction order without notice if the applicant can demonstrate that there is a reasonable concern that the delay caused by an inter partes hearing, or that notifying the respondent of the application, would hinder the order’s purpose or cause the applicant severe damage (for example, the respondent might hide or dissipate assets upon notice, thereby thwarting the order).
(iii) Applications for interim attachment orders are ex parte by default.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. The applicant must deposit both of the following securities with the Court:
(i) an undertaking to compensate the party against whom the order is sought for any damages incurred as a result of the application and the order. This undertaking is uncapped, unless otherwise instructed by the Court; and
(ii) sufficient collateral as the Court orders.
6. Can it be sought against third parties?
Yes. Both types of order can apply to assets owned by the respondent, or to assets which the respondent has at the time of the application a right to receive (even in the future), which are in the possession of a third party (in regard to an interim attachment, only assets which are in the Israeli jurisdiction), whether a party to the underlying proceedings or not (for example, a financial institution holding the respondent’s assets).
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets provided they are not perishable within the jurisdiction of the Court.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes, but only pursuant to a final judgment rendered in foreign proceedings. An applicant must file a petition to recognize the foreign judgment as enforceable in Israel, and then apply for an interim attachment order in light of that judgment.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the claim (although once the order is granted, the applicant is required to file the claim within a week). However, an applicant seeking a freezing order long after filing the substantive claim will be required to explain the delay. Unjustifiable delay may lead to the application being denied, but the evaluation of the delay is fact sensitive and will be dealt with on a case-by-case basis.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
(i) Interim attachment order: where the attached asset is the respondent’s salary, the attachment must guarantee that the respondent receives a living wage.
(ii) Interim injunction order: civil procedure regulations specify no formal exceptions, such as the payment of legal expenses. However, as Courts apply similar principles to both types of interim orders, such exceptions may be imposed by the Court. Furthermore, an interim injunction order is likely to be limited to the value of the claim.
12. What happens after a freezing (or equivalent) order is granted?
(a) Interim attachment order:
(i) if the order was granted ex parte, notice will be provided to the respondent, who may challenge the order within 30 days;
(ii) notice must be given to any third parties in possession of an asset subject to the order. The third party must confirm which assets are in its possession and can raise any claim for a proprietary interest in those assets.
(b) Interim injunction order:
Where the order was granted ex parte, notice will be provided to the respondent, and a hearing (inter partes) scheduled within 14 days.
At this point, the original order can be set aside, extended or replaced with a Court-sanctioned undertaking which has broadly the same effect as an injunction order until trial.
The applicant will typically notify third parties (such as banks) of the injunction order when they might hold the respondent’s assets.
13. Who pays the costs of the application for a freezing (or equivalent) order?
If the Court grants the order, it may also order the respondent to pay a proportion of the applicant’s costs and attorney fees incurred in filing the application. In practice, however, Courts rarely order one party to pay the actual attorney fees paid by the other party, and usually settle for a lower, often significantly lower, number.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
As noted at question 5, above, applicants are generally required to undertake to pay for damages suffered by the parties against whom the order was issued. Third parties may also be able to evidence that they have ownership rights to the assets at issue, such that granting the order would violate their rights. Third party financial institutions notified of a freezing order may also have a right to set-off in certain circumstances.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who fails to comply with a freezing order may be held in contempt of Court and may be imprisoned, fined or have their assets seized.
A third party who is on notice of a freezing order may be held to be in contempt of Court where it knowingly helps or permits the respondent to breach the terms of the order.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
A third party owes a duty of good faith to the applicant, and therefore may be found liable for breach of such duty in case of non-compliance, and therefore required to compensate the applicant for damages incurred as a result of said breach.
17. Can a freezing (or equivalent) order be enforced abroad?
In principle, yes, though this will depend on the laws of the relevant jurisdiction and/or whether the country is a party to a convention on the recognition and enforcement of judgments with Israel which covers such decisions.
However, this is not the case for interim attachment orders which are not enforceable outside the jurisdiction of an Israeli Court.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In principle, yes, but only where the freezing order was granted following a final judgment. The judgment must also comply with the requirements for the enforcement of foreign judgments in Israel.
Contact
Adv. Dr. Haim Machluf Partner Herzog Fox & Neeman Tel Aviv, Israel machlufh@herzoglaw.co.il www.herzoglaw.co.il
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