ISRAEL Law and Practice Contributed by: Barak Platt, Micki Shapira, Liron Hacohen and Nataly Margalit, Arnon, Tadmor-Levy
In addition, acquisitions of interests in companies in certain types of industries may trigger industry-spe - cific licences or permits. For example, the acquisition of 5% or more of an Israeli bank, insurance compa - ny or other financial institution requires government permits. Meanwhile, the acquisition of interests in a telecommunications company may trigger a permit requirement from Israel’s Ministry of Communications. Additionally, the State of Israel has the right to restrict the acquisition of interests in natural resources or other essential services. 2.3 Restrictions on Foreign Investments Israel has no general unified legislation or approval regime for foreign direct investment (FDI). As a result, there are no broad, cross-sector consolidated con - trols on foreign investments in the country. Foreign entities can generally purchase and sell assets and securities in Israel at will, and FDI is not categorically prohibited in any particular sector. That said, there is a series of standalone, sector-specific FDI regulations and requirements. These regulations and requirements often relate to investments in com - panies operating in the public utility and infrastructure fields. FDI requirements may also stem from terms included in government licences, public tenders or concessions. In addition, under Israeli law there are various restric - tions and prohibitions related to anti-terrorism and national security concerns. For example: • the Israeli State bans all economic activity of Israelis with “enemy states, entities or nationals”, including direct and indirect trade. Iran, Syria, Lebanon and Iraq (with certain exemptions for Iraq) are considered to be “enemy states” by the Israeli State; • the Israeli State also restricts imports from “non- enemy states” without diplomatic ties with Israel, which require special permits; and • defence-related exports and knowledge transfer are strictly regulated to protect national security, and the export of certain civilian goods that could have military applications (ie, dual-use goods) is also highly regulated.
Within Israel’s regulatory structure, regulators over - seeing a specific sector typically have wide discretion in issuing and revoking licences, concessions and per - mits. As such, regulators can include specific condi - tions, restrictions or approval requirements regarding FDI and subsequently alter them as they see fit. The exercise of regulatory discretion, as well as any action by a regulator, is subject to the principle of legality, the rules of the administrative process and the principles of judicial review of administrative discretion. Alongside the FDI-related obligations that may be implemented in licences, concessions and permits, contractual regulations have become increasingly common in Israel. FDI conditions can also be found in agreements between public and private entities. 2.4 Antitrust Regulations A transaction requires prior approval from the ICA Commissioner if: • it qualifies as a “merger of companies”; • at least two of the merging parties have a sufficient nexus to Israel; and • at least one of the three statutory filing thresholds is met. A “merger of companies” is defined specifically and generally. The specific definition refers to acquiring the target company’s principal assets, or more than 25% of its shares, voting rights, rights to appoint direc - tors or dividend rights. The general definition applies even if these criteria are not met if the transaction creates substantial and ongoing influence between the parties’ decision-making processes. The ICA has increasingly focused on this broader interpretation of the “merger of companies” definition. The nexus requirement can be met by fulfilling any of the following conditions: • owning more than 25% (directly or indirectly) of the voting rights, rights to appoint directors, dividend rights or outstanding shares in an Israeli entity; • having a registered office or being incorporated in Israel; or • operating a place of business in Israel, either through direct activity (such as a branch office or
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