International distribution : legal tips to export safely in Israel

The Israeli market, despite its small size, represents a market of great interest for Italy (we are the 6th supplier and its 14th customer) and, before the Pandemic, the trade trend was characterized by constant growth in the last 10 years (+ 3.9% annual average). 

Bilateral economic relations between Italy and Israel have seen a growing flow of initiatives aimed at stimulating scientific, technological and financial cooperation in various sectors: hi-tech, energy, cyber space, aerospace, security of infrastructural and defense (about it we underline the agreement on military cooperation for the exchange of military technology and products of 2018). 

Regarding Italian export, the leading sectors are: agri-foodmachineryfurniture and designchemicalsjewelry and precious metals (the diamond sector deserves a separate note, whose import / export is regulated directly by the Government which supervises the quantity of importable and / or exportable diamonds). 

As known, in general, the greatest obstacle to development it is represented by the business climate due to the almost constant tensions with neighboring countries. However, the Israeli regulatory framework is very favorable to foreign investment and trade, with relatively few restrictions and a markedly improving infrastructure framework. 

At the level of international agreements, Israel is a member of the WTO and has signed several multilateral and bilateral trade agreements with major industrialized countries (including the European Union which is an important strategic partner). 

The Pandemic certainly caused an economic crisis in a country that was growing at a constant rate of 3.5% per year; nevertheless, Israel still represents an excellent opportunity to develop its business and the measures implemented by Israeli institutions must be favorably assessed: the Government has injected about 25 billion euros of liquidity and the Central Bank of Israel has implemented economic policy measures in support of businesses to increase the supply of credit and thereby support the liquidity of SMEs. 

From a legal and contractual point of view, the Italian exporter who intends selling its products in Israel must keep in mind the following: 

1. Israel is a signatory country of the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980). For this reason, unless its application is expressly excluded, this Convention will apply to sales relations between Italian and Israeli companies. 

Accordingly, the provisions relating to the form and conclusion of the contract, the obligations of the parties, the liability in case of non-fulfillment, the conformity parameters of the goods and the consequent terms for the complaint of defects will be applied. 

2. the domestic justice system is characterized by long procedural times (approximately 975 days for a first degree proceeding plus the enforcement phase before the Tel Aviv Courts) at relatively high costs (approximately 25% of the credit). 

Considering that Israel has signed the New York Convention of 1958, a valid alternative may be represented by the choice of arbitration as method of disputes resolution by drafting the arbitration clause, evaluating the pros and cons of this choice. 

3. The Israeli law does not provide for specific rules to govern the distribution contract: where not governed by the parties,  the general provisions contained in the Contracts Law of 1973, or those specific to the sale, contained in the Sales Law of 1999, will apply. 

In the absence of a breach of contract by the supplier, Israeli jurisprudence does not seem to recognize to the distributor any goodwill indemnity for termination of the relationship. 

Avv. Luca Davini  
Avv. Massimiliano Gardellin 

#internationalcontracts #international sales #internationaldistribution #internationalarbitration #internationalinvestments #internationalcreditrecovery #salesisraele #israeldistribution #contractsisrael #export #madeinitaly #dobusinessinsecurity 

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