by: Adv.Haggai Carmon

The court granted a petition to confirm a foreign judgment after finding that Petitioner had met the requisite conditions to confirm a foreign judgment pursuant to the Foreign Judgments Enforcement Act, due to Respondent’s failure to demonstrate that it was entitled to one of the defenses set forth in paragraph 6 of the Act.

The parties are companies engaged, inter alia, in the field of fashion. Petitioner is a company duly registered in Cyprus; Respondent is a company registered in Israel. The two firms had resolved to establish a business partnership. Petitioner complied with the terms of the agreement, whereas Respondent did nothing to fulfill the agreement.

Petitioner demanded return of its investment in the partnership, and after negotiation the parties reached an agreement pursuant to which Respondent would return to Petitioner the sum of $350,000. Of this sum, Respondent returned the sum of $50,000 only. Subsequently, the parties conducted further negotiations to no avail. Accordingly, Petitioner brought a claim against Respondent and additional business entities in a Florida, USA court, which referred the parties to mediation. It was there agreed that Respondent would pay Petitioner $300,000, and the mediation settlement was given the force of a judgment. Respondent did not transfer to Petitioner the funds that had been agreed to pursuant to the foreign judgment. Petitioner therefore applied to the [Israeli] court for an order to enforce the foreign judgment.

Petitioner argued that the foreign judgment granted against Respondent is an enforceable judgment in conformity with the statutory requirements: the foreign judgment was granted in the State of Florida pursuant to its laws; the foreign judgment has not been appealed; the obligation contained in the foreign judgment is enforceable pursuant to the law of foreign judgment enforcement in Israel; the substance of the foreign judgment is not contrary to public policy; and the foreign judgment is enforceable in the State of Florida.

Respondent argued that the petition to enforce the foreign judgment should be denied, on the ground that the foreign judgment does not meet the conditions and tests set forth in the statute. It was argued that Respondent was not a party to the mediation settlement on the basis of which the foreign judgment was granted; it took no part at all in the mediation proceeding or the arguments before the foreign court. It was thus argued that a foreign judgment, having been granted against a nonparty before the foreign court, is contrary to public policy and should not be enforced.

The court held:

The burden of proving the conditions specified in paragraph 3 of the Foreign Judgments Enforcement Law of 1958 lies with the party seeking enforcement of the foreign judgment. Once the court has reviewed the matter and found that the petitioner has met the conditions set forth in the statute, it is necessary to determine whether the respondent has succeeded in showing that it is entitled to one of the defenses listed in article 6 of the statute.

It was held that respondent’s claims do not injure public policy, as that has been defined and elucidated by the Supreme Court. Therefore, the burden of proving a defense of fraud lies with respondent, which failed to lift that burden.

Note that by analogy, this is comparable to the relation between a decision and an order. It is fundamental that an order must reflect the decision and may not deviate from it. Nevertheless, note that in a case where the order does not adequately reflect the decision, the way is open for the aggrieved party to object in the manner specified by law. In a case where a party forgoes its right to object to the order, then the order remains valid, its failure to reflect the decision notwithstanding.

Inasmuch the foreign court erred, and this or some other error inadvertently found its way into its decision, respondent could have applied to the foreign court to remedy that. Our court, when considering a petition to enforce a foreign judgment, must deal with what has been put before it. As long as the foreign judgment satisfies the conditions set forth in article 3 of the Law, and it has not been shown that one of the defenses of article 6 applies, then the judgment should be enforced.

It our case, it was held that petitioner had demonstrated that the conditions were met for confirmation of the foreign judgment as a foreign judgment under the law. \The Respondent failed to overcome that showing, and since the respondent did not establish that it was entitled to one of the defenses set forth in paragraph 6 of the Law, the court ruled that the foreign judgment granted in the Florida, USA court is an enforceable judgment.

The petition was granted.

Civil File no. 3119-09 Lavi Industrial and Medical Agencies Ltd. v. Molecular Insight Pharmaceuticals Inc. (District Court – Jerusalem, Orit Efaal-Gabay) December 4, 2011

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.