ISRAEL Law and Practice Contributed by: Shiri Shaham, Yuval Shalheveth, Aviad Lachmanovitch and Asher Bichoonski, Arnon, Tadmor-Levy
6.2 Foreign Law and Jurisdiction Israeli courts generally uphold the choice of foreign law and submission to foreign jurisdiction. However, if the debtor enters insolvency proceedings, it is possible that the insolvency court will not uphold the foreign jurisdic- tion contractual arrangement and may apply Israeli law instead of the relevant foreign law, if the application of foreign law may prejudice other creditors. Waiver of immunity will be upheld. Additionally, mortgages over real estate assets are subject to Israeli law and this cannot be contractually changed or waived. 6.3 Foreign Court Judgments Monetary judgments from foreign courts are enforce- able in Israel without retrial, provided certain con- ditions are met under the Enforcement of Foreign Judgments Law 1958, including finality of such court decisions, reciprocity (whether or not the other foreign jurisdiction honours Israeli court rulings and allows the enforcement thereof), and compliance with pub- lic policy. The opinion of an expert in the foreign law may be required to demonstrate compliance with such conditions. Arbitral awards are enforceable under the New York Convention, subject to Israeli arbitration law. 6.4 A Foreign Lender’s Ability to Enforce Its Rights Foreign lenders are subject to the same requirements applicable to Israeli lenders and there are no other significant barriers to enforcement by foreign lend- ers of their rights under a loan or security agreement (except for technical ones, eg, providing a notarised and apostilled POA to the attorneys representing the lender).
tion (subject to adequate protection for secured credi- tors). Realisation of pledges requested by a creditor requires the approval of the court. The court will not prevent such realisation, except where (i) the pledged assets are essential for the rehabilitation of the insolvent entity, and (ii) the creditor has adequate protection. In other words, fixed or floating charge holders are usually permitted by the court to enforce the security during a moratorium if adequate protection cannot be guaranteed or if enforcement should not jeopardise the arrangement. In liquidation, secured creditors are not subject to the moratorium (except with respect to any portion of debt that is unsecured). In cases where the value of the pledged assets seems to exceed the secured debt, the court may order the realisation of the pledge to be implemented by the insolvency official (trustee). Creditors may independently exercise a right of set- off, subject to compliance with the set-off statutory terms and subject to providing notice to the insol- vency official within 30 days of the time the creditor became aware of the insolvency. 7.2 Waterfall of Payments The order of creditors’ priority upon insolvency is as follows. • Secured creditors: (a) holders of duly perfected fixed charges; and (b) holders of a possessory lien over an asset – holders of a possessory lien have priority over creditors with a security interest in the same asset. Among different holders of security interests over the same asset, the security interest created first prevails, unless otherwise agreed among the creditors, and provided that the security interest was properly per- fected. Secured creditors who have not duly perfected their security interest are considered unsecured credi- tors for the purposes of the creditors’ order of priority.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
In insolvency, the court decides whether to pursue rehabilitation or liquidation of the insolvent entity, with possible moratoria on enforcement during rehabilita-
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