Precedent-Setting Ruling Awards Precise Litigation Prices | Barnea Jaffa Lande & Co.

An Israeli court recently issued a precedent judgment in a case we tried and won. This decision is a milestone in terms of the costs involved in litigation in Israel. In its ruling, the court awarded our client a surcharge for actual costs (ie the actual amounts the client spent on litigation).

The new Code of Civil Procedure, which came into force on January 1, 2021, was intended to fundamentally change the way civil proceedings are conducted in Israel. The real test, however, is behavior, ie how the courts interpret and apply the rules.

One of the issues facing clients involved in litigation is the costs and fees incurred after the legal process is completed. The expectation is that the opposing party will bear the burden of the ruling party’s legal costs in initiating legal proceedings and ultimately prevailing (i.e. the court will rule in favor of that party and its claims).

So far, however, the Israeli courts have not worked this way. Although the court from time to time recognized the need to award the actual costs of the litigation, the actual costs awarded did not, in reality and routinely, reflect or even approximate the actual costs of the dominant party.

In the case where we won, the court responded to the new rules and wrote that their implementation is a good opportunity to give due weight to the property rights of the dominant party, even if the actual legal costs appear high.

We note that the court awarded an extraordinarily high cost of around NIS 2.6 million in this case (with the appeal rewarded to our client in excess of NIS 50 million). However, the large sum did not deter the court, which insisted on the principle of allocating actual costs in order to avoid a financial blow to the dominant party.

It seems that we are on the verge of a fundamental shift in terms of the costs that the courts will award. This change is important for anyone initiating litigation. The parties should be aware of this and add this to their other considerations and risk diversification when engaging in litigation.