by: Adv. Haggai Carmon
The court has granted the motion to dismiss filed by the defendant – a foreign company issued a bankruptcy discharge in the United States – and rules that the claim filed by the plaintiff for breach of contract shall not be heard in Israel. The plaintiff filed a complaint against the defendant for breach of a contract between them, while the defendant was issued a discharge in the United States in the course of liquidation proceedings. It therefore petitioned to dismiss the case due to the discharge.

The movant – the defendant – claims exemption from any debt to the plaintiff in light of the discharge it was granted by a US court, and according to an expert opinion on the foreign law that it submitted which states that because the plaintiff failed to submit a debt claim during the bankruptcy proceedings in the US, the defendant is exempt from any debt to the plaintiff.

The plaintiff claims that the discharge issued in the US cannot be enforced in Israel, and the defendant has not proven its insolvency.

The Court ruled:

The respondent – the plaintiff– has not presented an expert opinion on the foreign law that contradicts the expert opinion submitted by the movant. According to the expert report, the defendant is exempt from any debt to the plaintiff since the plaintiff did not submit a debt claim during the bankruptcy proceedings in the US.

The discharge granted the defendant by a US federal court is the equivalent of the Israeli discharge injunction and may be indirectly and inexplicitly recognized as a foreign judgment, due to the inherent authority of the district courts in Israel.

The discharge injunction issued in the United States in the defendant’s case can be recognized in Israeli law by virtue of Paragraph 11(b) of the law, as a foreign judgment which discharges all debts owed by the defendant to the plaintiff.

This recognition of the injunction as a foreign judgment constitutes indirect and incidental recognition by an Israeli court of the discharge concerning corporate insolvency, based on the expert opinion on the foreign law submitted by the defendant.

Therefore it is ruled that the claim shall be dismissed.

The motion is granted.