Israeli Court’s Order Appears to Recognize the Higher Costs For International Litigants

© 2016 Sherby & Co., Advs.


Does a non-Israeli litigant have an advantage when it, as the prevailing party in Israeli litigation, seeks an order for the payment of legal costs?  Based upon a recent judgment from a Tel Aviv District Court, the answer is sometimes.

By way of background, Israeli courts are not known for issuing large awards for the payment of litigation costs.  The general rule in Israeli litigation is that the losing party pays at least some amount of its adversary’s legal costs.  See Encyclopedia of Int’l Commercial Litig. (Israel Chapter) § A.10.7 (explaining how Israeli law differs both from US law and UK law).  Under Israeli procedure, some amount of costs is routinely awarded in favor of the prevailing party.  See id.  Under Israeli practice, when determining the amount of costs, a court is required to take into account the amount at issue in the litigation as well as the amount of the relief that was actually awarded.  The court is also authorized to consider the manner in which the litigants conducted the case.

It is on that issue – the manner in which a litigant conducted itself in the course of the litigation – that makes the recent (April 2016) District Court case of Alstom Transport S.A. v. Israel Railway Ltd. et al. of interest.

The French company Alstom had submitted a bid in a tender issued by Israel Railway (in connection with one of the largest infrastructure projects in Israel’s history).  Alstom lost the tender to the Spanish company Sociedad Española de Montajes Industriales SA (“SEMI”), whereupon Alstom decided to challenge the tender process in court.

Alstom lost its legal challenge, and the court found that its conduct – which included “spying on a business competitor” – was “fundamentally improper.”

Prior to issuing its substantive ruling regarding the tender process, the District Court ordered each party to notify it, in writing, as to the amount actually spent (by that party) on the litigation.

That information proved to be significant.  In its final judgment, the court observed that all of the litigants had acknowledged that, because of the intense timetable of the litigation and the need to present testimony from non-Israeli witnesses, the costs were high.

As part of its judgment, the court ordered Alstom to pay legal costs to Israel Railroad in the amount of NIS 83,000 and to SEMI in the amount of NIS 691,000.

By Israeli standards, those amounts were unusually high.

Was the Alstom case sui generis?  Assuming that “spying” is the exception and not the norm, then perhaps Alstom was sui generis, which would suggest that Alstom’s conduct justified a relatively high award of costs.

But aside from the specific (and possibly unique) facts of Alstom, there is one procedural “take away” from this case:  that the presence of “unusual” circumstances – such as the need to present testimony from foreign witnesses, or a tight schedule for evidentiary hearings – could cause an Israeli court to issue an order for an unusually high payment of costs.

An additional observation:  It is common for an Israeli court’s order of costs to be expressed in a round number.  When an Israeli court uses the round number method, it commonly does so without requiring the prevailing party to submit any written evidence as to its actual costs.  However, when an Israeli court issues a costs award in an amount other than a round number, it usually does so after the submission of evidence concerning actual costs.

Yet in the Alstom case, there is no indication that the written notices (which, as noted above, the court required all parties to submit) concerning amounts actually spent on the litigation included any declaration (affidavit).

Perhaps Alstom made it easy (ironically) for the court to accept the (apparently) unsubstantiated amounts claimed by SEMI and Israel Railroad – Alstom had informed the court that its actual costs were approximately NIS 1 million.  Because SEMI sought under NIS 700,000 in legal costs, the court might have reasoned that Alstom got off “cheap.”

In all events, it can be expected that Alstom will (if not appealed) be cited by non-Israeli litigants when they prevail before Israeli courts.

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