Israeli Supreme Court Says Consumer-Facing Terms Are Subject to Israeli Law

By‎ Adv. Dotan Hammer

Partner at the Cyber, Privacy & Copyright Group, Pearl Cohen Zedek Latzer Baratz

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The Israeli Supreme Court delivered a landmark decision holding that operators of foreign (non-Israeli) websites and online services that take steps to target Israeli consumers, are likely to have their terms of service governed by Israeli law when they face disputes with Israeli consumers that allege violations of Israeli law, regardless of the choice of law clause in the terms of service.

The decision was delivered in a class action lawsuit that an Israeli consumer asserted against Agoda, the online travel agency, alleging that the company violated the Israeli consumer protection law by publishing hotel rates without Value Added Tax. Agoda’s terms of service provide that they are governed by the laws of Singapore, and Agoda asserted that therefore, there is no legal basis to the claim.

The Supreme Court’s plurality opinion laid down a two-part test to determine the governing law in online terms of service where the claim against the online provider is an alleged violation of Israeli law. The first prong of the test looks at whether the website takes particular steps to target Israeli consumers, such as the language of the website, the currency in which prices are presented, and any Israel-specific content. In that case, Israeli governing law is the default rule. The second prong of the test considers whether the non-Israeli governing law that the terms of service purport to specify would in effect be an attempt to modify non-waivable provisions of law, or whether the non-Israeli governing law would be an unduly disadvantageous condition in a contract of adhesion.

In the case at issue, the court held that Israeli law will govern the terms of service because the Agoda website has Israeli-specific characteristics, the claims against Agoda allege violations of Israeli consumer protection law, and because adopting Singapore law would be unduly disadvantageous to the class action members, and would in effect be an attempt to modify the non-waivable provisions of the consumer protection law in Israel.

Click here to read the Israeli Supreme Court’s decision in AGODA COMPANY Pte. Ltd v. Shay Tzvia (May 27, 2024), in Hebrew.