Israeli Supreme Court: Class actions against global corporations with online businesses that target Israeli consumers will be adjudicated under Israeli law

Recently, the Supreme Court of Israel ruled that a choice of law provision in a foreign corporation’s terms of use, which applies foreign law to disputes with Israeli consumers, is invalid. Consequently, it was determined that the class action filed against the foreign corporation would be adjudicated under Israeli law (Civil Appeal 6992/22 AGODA COMPANY Pte. Ltd v. Tzvia).

The case involved the online travel services platform Agoda, which is incorporated in Singapore. Agoda operates a website offering hotel room booking services worldwide, including in Israel. The class action was filed on behalf of Israeli consumers who booked hotel rooms in Israel through Agoda’s website. The claim alleged that Agoda displays hotel room prices in Israel without including VAT, contrary to the Israeli Consumer Protection Law. Agoda argued that the provisions of the Israeli Consumer Protection Law do not apply because its terms of use stipulate that Singaporean law governs.

The District Court rejected Agoda’s argument and certified the class action. Subsequently, the Supreme Court affirmed this decision, following the current trend in Israeli case law.

In the Agoda ruling, the Supreme Court established that to determine the applicable law, the court must first apply the Israeli choice of law rules. The Agoda case was based on a tort claim under the Consumer Protection Law, and according to the Israeli choice of law rules in tort, the governing law is the law of the “place where the tort was committed.”

The Supreme Court stated that when the alleged tort relates to information presented on the Internet, the “place where the tort was committed” would be the place where the plaintiff viewed the information published by the defendant. In this case, there was no dispute that the plaintiff viewed the information in Israel. The Supreme Court further noted that the conclusion that the tort was committed in Israel is also supported in this case because the Agoda website was targeted to serve Israeli consumers, by using an online platform in Hebrew and by allowing payments in Israeli currency.

Accordingly, it was determined that Agoda targeted Israeli consumers, the “place where the tort was committed” is Israel, and the choice of law rules point to Israeli law.

The Supreme Court further ruled that if the choice of law rules points to Israeli law, then in the second stage of analysis, the court must examine whether there is a valid choice of law provision in the agreement between the parties that applies foreign law. The Supreme Court determined that when the claim is based on a mandatory (i.e., non-dispositive) Israeli law, such as the Consumer Protection Law, this law cannot be waived by a contractual agreement stipulating that foreign law applies. This is true not only for standard-form contracts between global corporations and consumers but also for any other contracts.

Additionally, the majority opinion of the Supreme Court determined that even if the relevant law was not mandatory, the choice of law provision in Agoda’s agreement would still be invalid. It was determined that when a global corporation targets its business at small Israeli customers – consumers or small businesses – a provision in a standard form contract that intends to apply foreign law constitutes an “unfair advantage”, regardless of whether the foreign law is appropriate and fair by itself. Such a provision is deemed as a “depriving condition” according to the Israeli Standard Contracts Law, and thus, it is null and void.

For further information, please contact Ran Sprinzak or Tomer Weissman, co-managers of our litigation department, or Hadas Bekel, a partner in our litigation department specializing in class actions.