Communications

 

LCA 6897/14
Radio Kol BaRamah	Applicant:
v.

 

Kolech – Religious Women’s Forum	Respondent: Attorney for the Applicant: Moti Arad, Adv. Attorneys for the Respondent: Asaf Pink, Adv., Orly Erez-Likhovski, Adv.
The Supreme Court   Before Justices E. Hayut, Y. Danziger, D. Barak-Erez   Application for leave to appeal the judgment of the Jerusalem District Court of September 9, 2014,  in Class Action 23955-08-12, delivered by the Honorable Judge Gila Kanfi Steinitz   12 Tammuz 5775 (June 29, 2015)

 

 

Israel Supreme Court cases cited

[1]        LCA 8671/09 Cellcom Israel Ltd. v. Fattal (6.5.2010).

[2]        LCA 2282/15 Psagot Provident and Pension Funds Ltd. v. Levy  (8.7.2015)

[3]        HCJ 746/07 Ragen v. Ministry of Transport (5.1.2011) [http://versa.cardozo.yu.edu/opinions/ragen-v-ministry-transport]

[4]        HCJ 153/87 Shakdiel v. Minister of Religion [1988] IsrSC 42(2) 221 [http://versa.cardozo.yu.edu/opinions/shakdiel-v-minister-religious-affairs]

[5]        HCJ 4541/94 Miller v. Minister of Defence [1995] IsrSc 49(4) 94 [http://versa.cardozo.yu.edu/opinions/miller-v-minister-defence]

[6]        HCJ 2671/98 Israel Women’s Network v. Minister of Labor and Welfare [1998] IsrSC 52(3) 630

[7]        LCA 8821/09 Prozansky v. Layla Tov Productions Co. Ltd. (16.11.2011) [http://versa.cardozo.yu.edu/opinions/prozansky-v-layla-tov-productions-ltd]

[8]        CA 5378/11 Frankl v. Allsale (22.9.2.2014).

[9]        LCA 9615/05 Shemesh v. Focaccetta Ltd. (5.7.2006) [http://versa.cardozo.yu.edu/opinions/shemesh-v-focaccetta-ltd]

[10]      CA 9494/08 Pan v. Israel Railways (27.6.2013)

[11]      CA 6887/03 Resnik v. Nir Cooperative (20.7.2010)

[12]      LCA 3814/14 Hogla Kimberley Marketing Ltd. v. Mastei (6.7.2015)

[13]      LCA 1868/15 Yetedot T.S.M.V. Publishing and Advertising Ltd. (15.3.2015)

[14]      HCJ 6111/94 Committee for the Preservers of Tradition v. Chief Rabbinical Council of Israel [1995] IsrSC 49(5) 94

[15]      HCJ 1514 Gur Aryeh v. Second Authority for Television and Radio [2001] IsrSC 55(4) 267 [http://versa.cardozo.yu.edu/opinions/gur-aryeh-v-second-television-and-r...

[16]      HCJ 1067/08 Noar KeHalacha Assoc. v. Ministry of Education (6.8.2009) [http://versa.cardozo.yu.edu/opinions/noar-kehalacha-v-ministry-education]

[17]      LCA 8014/09 Dikla Insurance Co. Ltd. v. Friedman (21.4.2011)

[18]      LCA 729/04 State of Israel v. Kav Mahshava Ltd. (26.4.2010)

[19]      CA 10085/08 Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel v. Estate of Tufik Raabi (4.12.2011) [http://versa.cardozo.yu.edu/opinions/tnuva-central-cooperative-v-raabi-e...

[20]      LCA 2128/09 Phoenix Insurance Co. Ltd. v. Amossi (5.7.2012)

[21]      CA 4534/14 Daniel v. Direct Teva Ltd. (14.6.2015)

[22]      HCJ 428/86 Barzilai v. Government of Israel [1986] IsrSc 40(3) 505

[23]      HCJ 910/86 Maj. (ret.) Ressler v. Minister of Defense [1988] IsrSC 42(2) 441

[24]      CA 8416/99 E.I.M. Electronics and Computers (1999) Ltd. v. Mifal Hapayis [2000] IsrSC 54(3) 425

[25]      CA 7699/00 Tamgash Management and Project Development Co. Ltd. v. Kishon River Authority [2001] IsrSC 54(4) 873

[[26]    LCA 3489/09 Migdal Insurance Co. Ltd. v. Zevulun Valley Metal Plating Ltd., (11.4.2013)[27]      AA 980/08 Minirav v. State of Israel – Ministry of Finance, (6.9.2011)

[28]      HCJ 7200/02 D.B.S. Satellite Services (1998) Ltd. v. Council for Cable and Satellite Broadcasts [2005] IsrSC 59(6) 21

[29]      HCJ 6792/10 D.B.S. Satellite Services (1998) Ltd. v. Knesset (20.7.2014)

[30]      HCJ 1030/99 Oron v. Speaker of the Knesset [2002] IsrSC 56(3) 640

                       

Israeli District Court cases cited

[31]      Class Action (Econ.) 2484-09-12 Hatzlaha, Consumer Movement for the Promotion of a Fair Society and Economy v. Cohen (18.2.2013)

[32]      CC (Center-Lod District Ct.) 25435-03-15 Kolian v. Yetedot T.S.M.V. Publishing and Advertising Ltd. (13.3.2015)

 

Israeli Magistrates Court cases cited

[33]      CC (Bet Shemesh Mag. Ct.) 41269-02-13 Phillip v. Aboutbul (2015).

[34]      SC (Βeer Sheva) 33424-02-12 Michaeli v. Chevra Kadisha – Ofakim Religious Council (15.6.2012).

[33]      SC (Bet Shemesh) 2917-10-11 Marsden v. Negdi  (5.7.2012).

 

United States courts cases cited

[36]      Wal-Mart Stores, Inc. v. Dukes et al. 564 U.S. 1, 11 (2011).

[37]      Brown v. Board of Education, 347 U.S. 483 (1954)

[38]      Amchem Products, Inc. v. Windsor 521 U.S. 614 (1977)

 

Israeli Legislation cited

Basic Law: Human Dignity and Liberty

Civil Wrongs Ordinance [New Version], sec. 6

Class Action Law, 5766-2006

Equal Rights for Persons with Disabilities Law, 5758-1998, sec. 19(53)

Prohibition against Discrimination in Products, Services and Entry to Places of Entertainment and Public Places Law, 5761-2000

 

Abstract

 

The District Court certified the application of Kolech – Religious Women’s Forum Organization (hereinafter: Kolech) to bring a class action against the radio station Kol BaRamah Ltd. (hereinafter: the radio station), holding that the declared policy adopted by the radio station in the years 2009-2011, whereby women could not be heard on the station’s broadcasts, constituted prohibited discrimination under the Prohibition against Discrimination in Products, Services and Entry to Places of Entertainment and Public Places Law, 5761-2000 (hereinafter: Prohibition against Discrimination Law). (It should be noted that the change in the management of the radio station as of the year 2011 was the result of a regulatory and monitoring process instituted by the Second Authority). Hence this Application for Leave to Appeal, which was heard as an appeal, at the center of which lie the following questions: Does the policy of the radio station, according to which women are not heard on its broadcasts, constitute cause for bringing a class action? Under what conditions is an “organization” authorized to bring such an action?

The Supreme Court (per Justice Y. Danziger, Justices E. Hayut and D. Barak-Erez concurring) dismissed the appeal, except for comments on the question of quantification of damages and subject to the determination that in adjudicating the case, the District Court will not address violations that occurred in the period after the beginning of the process of regulation, for the following reasons:

After a short discussion of the general phenomenon of exclusion of women from the public domain, and after the Supreme Court expressed its feeling of disgust and revulsion at the existence of this phenomenon in those cases in which it amounts to prohibited discrimination, and after setting the parameters of the discussion as a class action on grounds of discrimination, the Court proceeded to examine the central questions presented by the case. The Court concluded that there were no grounds  to intervene in the majority of the determinations of the District Court or in its conclusion that the said action is suitable for adjudication as a class action, both in its substance and in the manner in which it was submitted. In particular, no grounds were found for intervening in the two central determinations according to which Kolech is an organization that is eligible to bring a class action by virtue of section 4(a)(3) of the Class Actions Law, and there is prima facie cause for bringing a class action under the provisions of sec. 3(a) of the Class Action Law and item 7 of the Second Appendix to that Law.

Sec. 4(a)(3) of the Law states that an “organization” (within the meaning of the definitions section of the Law) may bring a class action, provided that the action addresses an area that is among its public purposes, and provided that it would be difficult to submit the application on behalf of a plaintiff who has a personal cause of action. In the opinion of Justice Danziger, narrow, cautious interpretation should normally be adopted in removing the procedural barriers that the above sec. 4(a)(3) places before organizations that wish to submit an application for certification of a class action, out of concern that lack of caution in this regard is liable to encourage the phenomenon of bringing baseless actions, and even affect cases in which there would not seem to be any difficulty in bringing the action in the names of plaintiffs with personal causes of action.

An organization seeking to bring a class action in place of a plaintiff with a personal cause of action must meet the following cumulative conditions:  first, the organization must prove that it complies with the conditions of sec. 2 of the Class Action Law, which include proving that it is an active, recognized organization, that regularly and actually operates, and has been doing so for at least a year, and that the purpose of its activity is clearly a public purpose; secondly, the organization must prove that the lawsuit is within the area of one of its public purposes; thirdly, the organization must prove that a difficulty exists in submitting the application in the name of a person with a personal cause of action. The term “difficult” should be examined in accordance with the case and its circumstances, and with regard to several indicators, among them a lack of financial means among potential plaintiffs; areas or situations in which the direct victims are not aware of the fact of the harm done to them due to gaps in knowledge or an inability to comprehend the harm; and cultural barriers which make it difficult to find a plaintiff with a personal cause of action. All these are relevant to situations characterized by the existence of a cultural gap that deters plaintiffs with a personal cause of action from turning to the courts, and does not constitute a closed list. As a rule, proving this condition will require that evidence be presented showing that the organization acted with “due diligence” to locate a plaintiff with a personal cause of action, in both the quantitative and the qualitative sense, but  subject to the possibility of there being exceptional situations in which the court will be satisfied that there is an inherent difficulty, or that there are special, known and convincing data arising from the circumstances of the case that would suffice to show a difficulty in finding a plaintiff with a personal cause of action.

As the District Court determined, Kolech – whose purpose is promoting the status of women in the religious community and in Israeli society – complies with the above conditions, and it is therefore a “qualified organization” for the purpose of bringing a class action. The main reason supporting the conclusion that it was difficult to find a plaintiff with a personal cause of action in the present case is that there is a reluctance on the part of ultra-Orthodox women to place themselves at the forefront of the struggle to increase gender equality in the ultra-Orthodox community, for fear of harm to their position in the community. In this regard, the cultural aspect carries great weight, and it is sufficient to support the concern that had  Kolech not submitted the application for certification of the class action, it would not have been submitted at all. The Court added that even had it been possible to locate a plaintiff with a personal cause of action who could have submitted the application herself, it would not have been right in the circumstances to order that the request be denied or dismissed in limine, but at most, to order that the organization be replaced by that plaintiff.

As for the cause of action, the Court decided that the Prohibition against Discrimination Law applies in the circumstances of the case. As the District Court determined, the prohibition against discrimination in the provision of a “public service” refers not only to access to the broadcasts of the radio station, but to all the services that the station provides to listeners, including the possibility of listeners participating in programs. Denying this possibility to women because they are women – provided such denial is proved – is certainly liable to amount to discrimination to which the Prohibition against Discrimination Law applies. Pursuant to this, the Court dismissed the argument of the radio station that gender distinction is necessitated by the traditional religious nature of the radio station and is due to the halakhic position of the station’s rabbinical committee, and therefore there is no discrimination, or alternatively, that the exceptions specified in the Prohibition against Discrimination Law apply such that it is not possible to sue the station for its policy. The Supreme Court held that the policy adopted by the radio station does, indeed, constitute discrimination under sec. 3(a) of the Law, and that there are no grounds for applying the exceptions prescribed in secs. 3(d)(1) and 3(d)(3) of the Law, according to which it will not be considered discrimination where “the action is necessitated by the character or nature of the product” and that it is possible to maintain “separate frameworks for men or women, as long as this separation is justified”. In this context, the Court determined that in order for either of the two above exceptions to apply, it must be proven that the religious norm is indeed binding, or at least justifies adopting the differential attitude to women. In the present case, it cannot be said that religious practice mandates or justifies application of the exceptions in the Prohibition against Discrimination Law, particularly when the halakhic opinion upon which the station relies – that of the late Rabbi Ovadia Yosef – stated specifically that the prohibition on allowing women’s voices to be heard is not in the category of a halakhic prohibition, but rather, in the category of “enhancing a precept” [hidur mitzvah]. Moreover, the facts in the present case show that the cultural and the religious character of the radio station was preserved even after the said practice of excluding women from the broadcasts of the station was stopped in the framework of the regulatory process, and what is more, the scope of the activity of the station actually continues to grow. Moreover, the exception specified in sec. 3(d)(3) of the Law does not apparently apply in our case, inter alia, for the reason that it refers to the existence of “separate frameworks” for men and women, i.e., an arrangement of separation. In our case, there was no arrangement of separation but an arrangement that apparently prevented women, and only women, from participating in the broadcasts of the radio station.

Further, no cause was found for intervening in the determinations of the District Court with respect to the immunity provided in sec. 6 of the Civil Wrongs Ordinance.

With respect to harm and calculating the compensation, even though the Court accepted some of the arguments raised by the radio station regarding the harm, it was of the opinion that this element was proved by Kolech at the required prima facie level for this stage of the proceedings, and therefore there is no reason to depart from the final conclusion of the District Court that it had been proven to the required extent that the members of the class incurred harm due to the policy of the station. At the same time, the Court decided to intervene in certain determinations of the District Court in this context, such as the determination regarding the possibility of awarding damages in the suit “without proof of harm”. The Court held that it was not possible to award damages without proof of harm in the circumstances of the case, notwithstanding the possibility of doing so under the Prohibition against Discrimination Law in matters other than a class action. A second comment referred to the matter of the relief that was sought – NIS 104,000,000. It was noted that the case raised questions concerning the appropriate method of calculation of the compensation in the circumstances of the case.

No grounds were found for intervening in the determination of the District Court whereby a common question existed in respect of all the members of the class, i.e., “whether the station acted in a prohibited discriminatory manner against the members of the class in that it prevented women from being heard on air from the time it began operating and until today, Nov. 6, 2011…”; according to the Court, the focus on the issue of the common question should be on the tortious conduct of the radio station during the period of the declared policy. This question is one that stands at the center of the action. The District Court should not address questions that relate to the period of time after the commencement of the regulatory process, in the course of which the two concrete violations occurred. The Supreme Court also found no grounds to intervene in the determination that there is a “reasonable possibility” that the above question will be decided in favor of members of the class.

Neither was reason found to intervene in the determination of the District Court that a class action is the suitable means of conducting the said dispute, insofar as the period prior to the beginning of the regulatory process is concerned. As opposed to this, the Court held that with respect to the period of the particular instances of violation, a class action is not necessarily the most efficient way of conducting the particular dispute, and it is preferable that it be adjudicated in the framework of personal actions brought by the women who were allegedly harmed, to the extent that they wish to do so.

Furthermore, the conditions laid down in secs. 8(a)(3) and 8(a)(4) were met. There is reasonable basis to assume that the interests of all members of the class will be represented and conducted in an appropriate manner and in good faith.

Consequently, it was ruled that the decision of the District Court will stand, except for any changes necessitated by what has been said above.

Justices E. Hayut and D. Barak-Erez concurred with the above and added comments, inter alia, regarding procedural questions related to class actions being brought by means of an organization, and on the substantive issue of the exclusion of women, including reference to an additional aspect relating to the “location” of the present case on the private-public continuum.

.

 

 

JUDGMENT

 

Justice Y. Danziger

Does a radio station’s policy that women will not be heard on its broadcasts constitute cause for bringing a class action,  and under what conditions will an “organization” be permitted to bring such an action? These are the central questions before the Court.

 

Introduction

1.         The Jerusalem District Court granted an application to certify a class action submitted by the organization “Kolech – Religious Women’s Forum” (hereinafter: Kolech) against the Kol BaRamah Ltd. radio station (hereinafter: the radio station or the station), claiming that the station’s declared policy that women would not be heard on its broadcasts constitutes prohibited discrimination under the Prohibition against Discrimination in Products, Services and Entry to Places of Entertainment and Public Places Law, 5761-2000 (hereinafter: the Prohibition against Discrimination Law).  The court dismissed various arguments raised by the radio station regarding the suitability of the action for adjudication as a class action. Thus, for example, the station’s argument that the application for approval should be dismissed because it was not submitted by a plaintiff who has a personal cause of action was dismissed.  In addition, the argument that there was no cause for bringing the action since the Prohibition against Discrimination Law does not apply in the circumstances of the case was dismissed. It was held that the policy adopted by the radio station constitutes blatant gender discrimination under the Prohibition against Discrimination Law, and therefore there is cause for adjudicating the suit as a class action. It was further held that the action raises questions that are common to all members of the class; that it is the efficient and fair way to decide the dispute; that there is a reasonable possibility that the dispute will be decided in favor of the members of the class; and that it is reasonable to assume that the action will be presented and conducted in the appropriate manner. The application for leave to appeal was lodged against this decision

 

The Pertinent Facts

2.         The radio station Kol BaRamah has operated since 2009 by virtue of a concession for radio broadcasts issued by the Second Authority for Television and Radio (hereinafter: the Second Authority). The concession was issued to the station after it won a tender published by the Council for the Second Authority for granting a concession for a radio station intended for the “religious-traditional-Sephardic” community.  As emerges from the material submitted to us, the radio station has significant influence in the communications market, and today it is the fifth-largest regional radio station in the State of Israel. There is no dispute that since its establishment in 2009 and until the end of 2011, the radio station  maintained a declared policy whereby women would not be heard on its various broadcasts. Moreover, there is no dispute that following various regulatory directives, the station changed its policy, and as of November 2011, women’s voices began to be heard in its broadcasts.

3.         The change in the policy of the radio station, which began towards the end of 2011, was the result of regulatory and oversight procedures that were adopted by the Second Authority, in the framework of which various directives were issued to the radio station. The Second Authority began to adopt these procedures after it received complaints against the radio station, which upon investigation, revealed that the policy was based on directives that had been issued by the “Rabbinical Committee”, which is the station’s “halakhic” [Jewish law] committee, and which plays a role in the station by virtue of the terms of the concession. The purpose of the procedure was to establish rules pertaining to women’s voices being aired in the station’s broadcasts, while, insofar as possible, conducting a dialogue with the radio station. Against this background, various directives were issued ordering, inter alia, that the station allow women who hold public office to be heard on the radio broadcasts, and that its broadcasting schedule would devote a “weekly program” intended for its female audience. These directives were first published in a letter sent by the Second Authority to the station on Oct. 10, 2011, as follows:

“1.  News or currently breaking events  transmitting a message to the Israeli public will be broadcast live and unedited. This directive is effective immediately.

2.    When the response of a female public official is required on a particular subject, for journalistic or ethical reasons, or when the public official initiates a request to respond to a particular subject, the station will allow the said official or her representative to participate in the broadcast and to be heard. This directive is effective immediately.

3.    The station will incorporate into its broadcasting schedule a weekly program intended for the station’s female listeners, in the framework of which women will be able to speak and make their position heard. This directive will take effect at the beginning of November, 2011.

       You are requested to inform the Authority of the manner in which the program will be integrated into the schedule of broadcasts no later than Oct. 24, 2011.

4.    The station will continue to provide a complementary response to the station’s male and female listeners by means of the IVR system, inter alia, by means of rabbis’ wives, insofar as necessary, in different and varied areas. This directive is effective immediately.

       As clarified in our discussion, implementation of these directives will be carried out on all the frequencies that serve the station’s broadcasts. As stated, the manner of implementation will be reviewed by the Authority at the end of four months from the times specified above.

4.         In accordance with the terms of the letter, the radio station established a weekly program intended for the female audience, albeit at an early hour. Approximately three months later, the Second Authority approved the broadcasting schedule submitted by the station for the year 2012, but at the same time, added a requirement that the station include broadcasts of women holding public office, and that it incorporate into its scheduled programs a “daily broadcast strip”, amounting to several weekly hours, in which women would be able to speak on the programs. This requirement, too, was issued in writing, as follows:

1.    The station will include women who hold public office in all current events programs of the station. This applies both when the female public official asks to comment on a particular subject that is raised in the program, and when such comment is relevant and required for journalistic reasons.

2.    The station will include women who have expertise in various areas in all its broadcasts. This directive is effective immediately.

3.    The station will air news or currently breaking events on live transmission without editing that includes considerations of gender distinction. This directive is effective immediately.

4.    The station will incorporate into its broadcasts two weekly hours of programming intended for female listeners, with the participation of women. These two hours will be incorporated into the broadcasts of the station as of April 15, 2012, and will be brought prior to that date to the attention of the Board of the Authority.

5.    The station will incorporate into its broadcasts two weekly hours in addition to those specified in sub-section (4), in which women will be incorporated into the programs intended for all listeners. These two hours may be in consumer programs, conversations with listeners, youth programs, etc. These two hours will be incorporated into the station’s broadcasts as of April 15, 2012.

       The Council notes the statement of the station’s owner, Mr. Zvi Amar, on behalf of all the owners of the station, that the station will act diligently and in good faith to include women who are public figures and experts in all broadcasts of the station.

5.         The dialogue in the framework of the regulatory process continued into the years 2013-2014, when the Second Authority approved the broadcasting schedule submitted by the station in relation to those years, but it continued to oversee and to issue directives to the station. Inter alia, the Second Authority decided that the station would increase the number of weekly hours in which women would be permitted to go on air. The latest relevant directive that was issued to the radio station appeared in writing on Jan. 8, 2014, and it determined that there would no longer be any restrictions on women being included in the station’s broadcasts:

1.    There will be no restriction on women being heard in the station’s broadcasts.

2.    At the request of the station, the Council approves one hour of broadcasts daily that will be devoted to sermons and to conversations of listeners with rabbis, in which the station will be permitted to exclude the voices of women. The Council is of the opinion that approval of this limited scope in which women will not be heard also provides a response to the most ultra-Orthodox listeners of the station, and it is reasonable and proportionate.

3.    In light of the long regulatory process on this matter, which already began in 2011 with the station’s declared policy in regard to allowing women to be heard, the Council directs the station’s administration to initiate action to encourage women being included in its broadcasts, including female public figures and female experts in various fields.

4.    The Council stresses that the station must ensure that it acts lawfully, including in relation to the employment of women at the station.

6.         And indeed, the process of gradual regulation that began in 2011, at which time the declared policy of the station stated that women would not be heard in its broadcasts, took shape. By 2014, all the previous restrictions on airing women’s voices in the station’s broadcasts were removed, with the exception of the restriction in sec. 2 of the letter dated Jan. 8, 2014. The Second Authority even emphasized its satisfaction with the dialogue and with the process of “genuine internalization” on the part of the station, and it announced that the station’s concession would be extended for another three years.

 

Report of the Departmental Team for Examining the Phenomenon of “Exclusion of Women”

7.         Parallel to the regulatory procedures undertaken by the Second Authority, the Attorney General also turned his attention to this matter and examined the phenomenon of “exclusion of woman” in the public domain in general, and the activity and policy of the Kol BaRamah radio station in particular. This was pursuant to an increasing number of reports on various manifestations of exclusion of women. On Jan. 5, 2012, the Attorney General appointed a team to investigate all aspects of this phenomenon. The team was asked to examine the legal aspects of some of the manifestations of the phenomenon in the public domain, and to formulate recommendations for addressing them. In this framework, the team also examined the policy of the radio station. On March 7, 2013, the team submitted a report to the Attorney General (hereinafter: Report of the Departmental Team). Insofar as the policy of the radio station was concerned, the Report stated that “exclusion of women” on the part of the station was expressed in that, initially, women were not heard at all. At the same time, the report described the change that had taken place at the radio station in complying with the directives of the Second Authority, noting that over time, women began to be heard over the airwaves, and that a noticeable trend of adding broadcasts and programs dedicated to women could be discerned.

8.         The Report of the Departmental Team added that three meetings had been held on the subject of the activities of the radio station, and that there had been meetings with the representatives of the Second Authority, the Commission for Equal Opportunity in the Workplace, and the representatives of the radio station. The Departmental Team noted that it was impressed by the significant progress that had been made following the actions of the Second Authority, which led to women being heard on the broadcasts of the radio station. Nevertheless, it was noted that at the time of the writing of the Report, the broadcasting of women’s voices by the station was still subject to significant restrictions. The team was of the opinion that these circumstances raised legal and constitutional difficulties. An important point in relation to the case at hand, which is addressed in the Report of the Departmental Team, addresses the application of the Prohibition against Discrimination Law to the activities of the radio station. In this context, the Departmental Team thought that the statutory provision according to which “communications services” constitute a “public service” also applied to the activity of the radio station, and therefore its policy should be “treated” in accordance with the provisions of the Prohibition against Discrimination Law. This point was summarized in para. 198 of the Report of the Departmental Team, which noted that the routine broadcasting arrangements “entail a violation of the basic rights to dignity, equality and freedom of expression and they are contrary to the provisions of the Prohibition against Discrimination Law…”.

9.         The Attorney General adopted the Report of the Departmental Team, and subsequently sent a letter, on May 7, 2013, to a number of government ministers. The letter included specific reference to the activity of the radio station, and mentioned that its broadcast practices entailed a serious violation of women’s basic rights. It should be noted that the Government of Israel also adopted  the Report [Resolution no. 1526 of the 33rd Government of Israel, “Prevention of the Exclusion of Women from the Public Domain” (March 30, 2014)].

 

Arguments of the Parties in the District Court

10.       Kolech submitted its application for certification of the class action as a non-profit organization devoted to social and cognitive change in regard to gender equality in the religious community in Israel. Kolech claims that the station’s policy constitutes unlawful discrimination under the provisions of sec. 3(a) of the Prohibition against Discrimination Law, which prohibits, inter alia, acting in a discriminatory manner in the provision of a public service “due to gender”.  Kolech concentrated its arguments on two major focal points of discrimination that existed, in its view, in the activity of the radio station. The first point of discrimination lay in not allowing women to “appear on air”. In this context, it was alleged that in the relevant periods, the radio station prevented women from appearing on air and speaking in the broadcasts, first in a comprehensive manner, and later, in a partial manner, whereas men were allowed to be heard. The second point of discrimination lay in the “deprivation of content” from the male and female listeners of the radio station. This point of discrimination related to the fact that due to the policy of the radio station, listeners received communications services “purely from the male sex”, with women being excluded from the world of communications content. As a consequence of the policy adopted by the station, the listeners were deprived of the opportunity to listen and to be exposed to the opinions of women. Kolech added that these two focal points of discrimination reflect conduct that is a serious violation of the basic rights of women under Basic Law: Human Dignity and Liberty and its derivatives, including their right to dignity, to equality, and to freedom of expression.

11.       On the legal plane – since we are dealing with the area of class actions – Kolech argued that the suit should be certified as a class action under item 7 of the Second Appendix to the Class Action Law, 5766-2006 (hereinafter: Class Action  Law), namely, for a cause according to the Prohibition against Discrimination Law. In accordance with the various provisions of the Class Action Law, Kolech asked that it be determined that the “class” in the name of which the class action would be conducted would include “all the female listeners of the radio station and all the women who wished to listen to the station but refrained from doing so due to the discrimination against women at the station”, and that the “relief” would be “by way of issuing an order directing [the station] to cease discriminating against women at the Kol BaRamah radio station, and financial compensation for members of the class”. It should be noted that Kolech brought support for its various arguments, both concerning the definition of the class and with respect to the damage caused to its members, in an expert opinion prepared by the Sarid Institute for Research Services Ltd. In the framework of this opinion, a survey was conducted that examined the extent of damage to women from the policy of the station. Based on the data from the survey, Kolech estimated the number of women who were harmed by the policy of the station “to a great extent” at some 64,000 women. Kolech pointed out that, indeed, it is difficult to quantify the non-monetary damage, but at the same time, it is possible to do so based on cases in which compensation was awarded for violation of the Prohibition against Discrimination Law. Against this backdrop, Kolech set the sum of compensation at NIS 104,000,000, explaining that the compensation for each member of the class amounted to between NIS 1,000 and 2,000. Kolech added that the action raises questions common to all members of the class; that a reasonable possibility exists that the action will be decided in its favor; and finally, that the class action is the most efficient way to decide the dispute.

12.       The radio station requested that the application to approve a class action be denied. First, the station contended that Kolech – as an organization that is not an injured party with a personal cause of action – is not qualified to file a class action. It argued that Kolech had not proved that it had acted with due diligence to locate a person with a personal cause of action prior to submitting the class action, as required by the Class Action Law. In that context, it was contended that Kolech is also not qualified to submit the class action because there is a difference between its national-religious world view and the world view of the women who constitute the target audience of the radio station, who are from the ultra-Orthodox Sephardic sector. On the merits, the radio station contended that there is no cause of action because sec. 3(a) of the Prohibition against Discrimination Law does not apply in the circumstances of the case. In this context it was contended that the section requires that there be no discrimination in access to the service or product, whereas in the present case, the service that the radio station provides is accessible to all listeners, and every woman can listen to the radio station, just like any man. Therefore, it was argued, the relevant section of the Prohibition against Discrimination Law does not apply. Alternatively, it was argued that the practice adopted by the station does not in any way constitute “discrimination”, but is rather a “permitted distinction”. The radio station’s version was, therefore, that if it is held that the Prohibition against Discrimination Law applies, then the exceptions enumerated in secs. 3(d)(1) and 3(d)(3) apply, whereby an act is not considered to constitute discrimination when it “is necessitated by the character or nature of the product,”  and by which it is permissible to maintain “separate frameworks … for men or women …  on condition that the separation is justified …”

13.       The radio station further argued that apart from the fact that no grounds exist for submitting a class action, no harm was caused to the members of the class. Inter alia, it was argued that women in the relevant class are not at all interested in being exposed to or having their voices heard in the wider public, and similarly they are not interested in hearing the voices of other women. In this context, the radio station also attacked the findings of the survey, pointing out that Kolech did not submit any substantial proof for the existence of harm, as was claimed. As for the requested relief, the radio station claimed that if it is awarded, the station’s character will be harmed and the purpose for which it was established will be frustrated. The radio station additionally claimed that weight should also be attributed to the regulatory procedures it underwent, and to the fact that it complied with the directives of the Second Authority. In this context, it was argued that due to the fact that its activity was in accordance with the directives of the Second Authority, it has immunity from being sued under sec. 6 of the Civil Wrongs Ordinance [New Version] – immunity that applies to acts that were done in accordance with statutory provisions or by virtue of legal authority. It was argued that this immunity applies as of the date on which the station was established, since the concession to operate the station stated that a “spiritual committee” would be set up that would determine the rules for its broadcasts. It was noted that the station acted in light of these provisions in good faith, in the reasonable belief that it acted in accordance with the valid legal permission of the spiritual committee not to broadcast women’s voices, and upon the basis of the opinions of the leading rabbis in Israel.

 

The Decision of the District Court

14.       The District Court initially addressed the qualification of Kolech to apply for certification. The court noted that the provisions of sec. 4(a)(3) of the Class Action Law allow  an “organization” to submit a class action subject to two cumulative conditions: one, that the action filed is within the area of one of the objectives of the organization; and two, that in the circumstances of the case, submitting the request for certification on behalf of a person who has a personal cause of action would prove problematic. The District Court held that Kolech met these two conditions. It stated that Kolech provided proof that it was an organization that had been acting for years to promote the status of women in religious Jewish society, and as such, the action was clearly within the area of its objectives. It also stated that Kolech proved that it would be difficult to find a woman with a personal cause of action, in that there is an inherent difficulty in placing an ultra-Orthodox woman “at the forefront of the battle”, due to the fear of reprisal by the society in which she lives and the social harm that she would likely incur. The court also found support for its conclusion in the findings of the survey that was submitted on behalf of Kolech, from which it emerges that the percentage of women who stated that they are prepared to take legal action to change the policy of the station is extremely small. Finally, the court remarked that because the action raises issues that are of public importance, the fact that it was submitted by an organization that has resources and knowledge has the potential to realize the objectives of the Class Action Law.

15.       The court subsequently addressed the question of whether, in the circumstances of the case, there were grounds for submitting a class action.  Central to this issue was the question of whether sec. 3(a) of the Prohibition against Discrimination Law applied in the circumstances. The Court dismissed the narrow interpretation of the radio station, whereby the section treats only of prohibiting discrimination in the form of access to a service or a product, and therefore, would not appear to be relevant in our case. It was noted that the language of the section refers to the prohibition of discrimination in providing a “public service”, and the Law defines communications services as such a service. Furthermore, the communications services provided by the radio station include news and commentary broadcasts, as well as offering listeners the opportunity to express their opinions on the air. The court emphasized that this conclusion is also necessitated by the purpose of the Law, which is the prevention of discrimination, and in particular discrimination of the type expressed in the case at hand. The court therefore held that the policy of the radio station may fall within the purview  sec. 3(a) of the Prohibition against Discrimination Law, however it distinguished between two different periods in which discrimination, as defined by the Law, occurred, as follows:

a.  The period of the declared policy (2009 – Nov. 6, 2011): In relation to this period, the District Court held that the policy adopted by the radio station constituted prohibited discrimination within the meaning of sec. 3(a) of the Prohibition against Discrimination Law. It added that the exceptions in secs. 3(d)(1) and 3(d)(3) of the Prohibition against Discrimination Law, according to which an action is not deemed to be discriminatory where it “is necessitated by the character or nature of the product” and by which it is permissible to maintain “separate frameworks … for men or women …  on condition that the separation is justified …” do not apply. Inter alia, the court explained that it was not proven that there was a “relevant difference” between men and women that justified the gender distinction that was adopted, for even according to the radio station, the distinction was not based on an explicit religious precept, but was adopted as a “stringency” (“enhancement of the precept” [hidur mitzvah]) that is not a halakhic requirement. It was also held that the policy of the station in any case does not meet the condition of maintaining “a separate framework”, since the matter at did not involve separation, but rather prevention directed solely at women.

b. The period of specific violations (Nov. 6, 2011 –Aug. 28, 2012). In this period, regulatory procedures were undertaken, but it was alleged that in two instances the radio station violated the directives it was given. The first instance occurred in November 2011, when the station refused to interview Prof. Sofia Ish Shalom of Rambam Hospital because she was a woman. In respect of this event, the Second Authority imposed a fine of NIS 10,000 on the station. The second instance occurred in the same month, when one of the station’s producers requested of Rambam Hospital that a medical resident discuss a certain topic on the air. Here, too, the producer stressed that the interviewee must be a man and not a woman. The District Court held that these two violations constituted cause under sec. 3(a) of the Prohibition against Discrimination Law, and it saw no reason to change its conclusion due to any exceptions in the Law.

16.       In the framework of the deliberations on the cause of action, the court also considered the radio station’s contention that it enjoyed immunity by virtue of section 6 of the Civil Wrongs Ordinance [New Version]. The court considered this argument, even though it pointed out that the radio station had not raised it in its response but only at a later stage, apparently in a “change of front”. On the merits, the court held that the argument should be partially accepted. The court explained that, as of the end of 2011, the radio station began to operate in dialogue with the Second Authority and subject to its directives. In these circumstances, it was held that the station should not be held liable in tort for actions that were conducted in the framework of the regulatory process, and that its actions during this period are covered by the immunity granted under sec. 6 of the Civil Wrongs Ordinance. On the other hand, it held that this immunity did not extend to acts carried out by the radio station prior to the regulatory processes, nor to acts carried out at in the course of the regulatory processes but which deviated from the directives of the Second Authority.

17.       Upon completing its deliberations on the cause for bringing a class action, the court proceeded examine the additional conditions for certification. The court held that under the circumstances of the case, the action raises substantial questions that are common to all the members of the class. One question was “whether [the station] wronged the members of the class through unlawful discrimination in that it prevented women from being heard on the air from the time that it began its operations and until November 6, 2011…”. A second question was “whether [the station] wronged the members of the class through unlawful discrimination in that it prevented women from being heard on the air in the two instances…”. The court further held that a class action was the efficient and fair way to decide the dispute, noting that there is an inbuilt advantage in conducting such an action against the background of concerns about various constraints that exist amongst the female members of the class in relation to filing personal actions. It explained that conducting this action as a class action was likely to facilitate modes of proof and relief that would not be possible in personal suits. It was also likely to enable many women to receive appropriate relief for breach of the law, where it was doubtful that these women would turn to the courts as individuals. In relation to the relief, it was further pointed out that according to the Prohibition against Discrimination Law, it is possible, in the circumstances of the case, to award compensation even “without proof of harm”. Finally, the court noted that it believed that the case of the members of the class would be conducted in a suitable manner and in good faith.

18.       The court summarized its determinations by saying that Kolech had met the burden of proving the fulfillment of all the required conditions for approving a class action. Therefore, and as provided by the legislature in section 14(a) of the Class Action Law, the court held that the class in whose name the class action would be conducted was: “All the female listeners of the Kol BaRamah radio station and all the women who were interested in listening to the station but refrained from doing so due to discrimination against women at the station from the date of the beginning of the activity of the station and until the date of submission of the application for certification”. The court also held that Kolech and its attorneys would serve as the representatives in the action, and that the requested relief is an order requiring the radio station to desist from its discrimination against women, as well as monetary compensation for the members of the class.

 

The Application for Leave to Appeal

19.       The arguments of the radio station essentially restate the arguments it raised in the District Court, and I will therefore repeat only the main points. The radio station believes that filing a class action is not appropriate in the circumstances of the case, inasmuch as it operated in cooperation with representatives of the Second Authority and in accordance with its directives. In addition, the station believes that the court erred in all its determinations and in its decision to certify the class action. Thus, for example, the radio station claims that the court erred in its determination that Kolech was qualified to submit the class action as an organization. It also claims that there was a mistake in the court’s ruling on the existence of a “cause” under sec. 3(a) of the Prohibition against Discrimination Law, and in its ruling that the immunity under sec. 6 of the Civil Wrongs Ordinance applied only from the beginning of the regulatory process and not from the time that the station was set up. Another central argument in the application for leave to appeal is that the court did not explain what “harm” was allegedly caused to the class that would give rise to an entitlement to monetary relief. Inter alia, it was stated that the Court erred in its determination that compensation can be awarded “without proof of harm”, in view of sec. 20(e) of the Class Action Law which precludes the possibility of doing so in a class action. The station also contests the finding concerning the “definition of the class”. According to the station, there was no justification for including all the female listeners of the station in the class. Rather, the class should, at most, comprise only those listeners who requested to be heard on air and were refused. Finally, it was argued that the members of the class do not in any way share common questions. For these and other reasons, the radio station reiterated its position that the class action should not be certified.

20.       Kolech objects to the application for leave to appeal. Kolech argues that the decision of the District Court is well-founded and reasoned, and reveals no flaws. As a preliminary argument, it says that the application for leave to appeal does not meet the criteria laid down in the case law of this Court for granting leave to appeal a decision certifying a class action. On the merits, Kolech supports the findings of the District Court both in relation to its qualification and in relation to the existence of cause under sec. 3(a) of the Class Action Law, and with respect to the extent of immunity by virtue of sec. 6 of the Civil Wrongs Ordinance. Kolech objects to the argument of the radio station whereby women were apparently not harmed, since they could “listen” to the radio station. Kolech argues that preventing the possibility of women having their voices heard does not harm only those women who were not permitted to go on air, but it conveys a harmful and humiliating message to all female listeners that the class to which they belong – that of women – is an “inferior” class. Concerning the damage, Kolech adds that at the stage of certifying the class action it is not necessary to prove the exact harm caused to each of the members of the class, and that the harm will be calculated and assessed in the principal procedure itself. In any case, Kolech argues, harm was certainly caused due to the significant breach of the rights of the members of the class to dignity and equality.

 

Deliberation and Decision

21.       After examining the material that was presented to us, I have reached the conclusion that granting the application for leave to appeal, and adjudicating it as an appeal, is justified. Even though the criterion for granting leave to appeal a decision to certify a class action has been narrowed over the years (see: LCA 8671/09 Cellcom Israel Ltd. v. Fattal [1]; LCA 2282/15 Psagot Provident and Pension Funds Ltd. v. Levy, paras. 11-10 [2]), my opinion is that the present application raises several exceptional legal questions that must be discussed already at this procedural stage. Accordingly, the following discussion will address the arguments of the radio station on the merits. I will begin with a short discussion of the general phenomenon of exclusion of women from the public domain, and I will also define the questions relevant to the class action in the present case. I will subsequently examine whether the conditions for certifying a class action have been met in the present case, focusing particularly on those conditions that relate to the party that is seeking certification and the existence of cause of action.

 

(A)       Exclusion of women from the public domain – Some preliminary comments

22.       The phenomenon known as “exclusion of women” refers to the particular case of generic discrimination on the basis of sex, the main characteristic of which is not allowing women – by virtue of being women – to receive public services or to take part in public activity. In one sense, the phenomenon is liable to manifest itself in gender separation, i.e., in situations in which public services are in fact supplied to women, but separately. This, for example, is the case in relation to gender separation between men and women on buses or in health clinic waiting rooms. In another sense, exclusion of women might also manifest itself in a situation in which women are categorically prevented or constrained from receiving services or from being active participants in activity that is taking place in the public domain, as if there were a sign to the effect that the service is provided “for men only”. This is the situation in respect of the sweeping prohibition on broadcasting women’s voices, as in the present case. The practices suspected of being exclusionary of women inherently give rise to questions on different legal planes, and in particular on the public-constitutional plane, where they emphasize the tensions surrounding the rights of women to equality, dignity, freedom of expression, autonomy and freedom of occupation, as opposed to contrary rights and interests that derive from the principle of multi-culturalism, freedom of religion and a desire to prevent harm to religious sensibility (for a discussion of the various considerations, see, e.g.: HCJ 746/07 Ragen v. Ministry of Transport [3]; Report of the Departmental Team, at 10-34; Ruth Halperin-Kaddari, Women, Religion and Multiculturalism in Israel, 5 UCLA J. Int’l & For. Aff. 339, 362-366 (2000); Susan M. Okin, Is Multiculturalism Bad for Women? in Is Multiculturalism Bad for Women? 9-24 (Joshua Cohen, Matthew Howard & March C. Nussbaum eds., 1999).

23.       The theoretical center of gravity in relation to the exclusion of women in Israel – as reflected in the relevant literature and in the Report of the Departmental Team – lies in various manifestations of the phenomenon in contexts that include religious-halakhic aspects. In particular, disagreement arises in relation to the question of whether these aspects justify according a separate or limited status to women in the public sphere, having regard to the entire range of conflicting interests (see, inter alia: Alon Harel and Aharon Schnarch, Separation of the Sexes on Public Transportation, 3 Alei Mishpat 71(2003)  (Hebrew) (hereinafter: Harel & Schnarch)); Noya Rimalt The Separation between Men and Woman as Discrimination between the Sexes, 3 Alei Mishpat 99 (2003) (Hebrew) (hereinafter: Rimalt); Zvi Triger, Separation  between Women and Men as Sexual Harassment, 35 Iyunei Mishpat 703, 709-713 (2013) (Hebrew) (hereinafter: Triger); Alon Harel, Regulating Modesty Related Practices, 1 Law and Ethics of Human Rights 211(2007)). As we have said, the Report of the Departmental Team dealt in depth with the phenomenon of the exclusion of women in this context. In doing so, specific instances of the phenomenon were discussed, and the various cultural and halakhic interests were considered – including gender separation and distinction in cemeteries, in state ceremonies, on public transportation and the free movement of female pedestrians in ultra-Orthodox neighborhoods. As mentioned in the Report of the Departmental Team, the criterion that was adopted for examining the constitutionality of every instance that was suspect in relation to exclusion of women was that which had been formulated over the course of many years in the case law  of this Court in relation to discrimination. According to this criterion, what must be examined is whether there is a “relevant difference” that derives from the character and nature of the public service that justifies the gender separation. As the Court has pointed out, in the framework of this examination, weight should also be attributed to the unique cultural aspects of the ultra-Orthodox community, including the question of how to relate to the fact that women in the ultra-Orthodox community are members of a class that is a “sub-minority” within the ultra-Orthodox minority (Report of the Departmental Committee, paras. 13, 25 and 242).

24.       Indeed, the practice that is suspected of being exclusionary will be examined on its merits, according to its nature and characteristics, and according to the rules that were laid down in the case law in relation to similar instances of discrimination, all, of course, with the necessary changes by virtue of the various interests resting on the scales (see: Aharon Barak, Human Dignity: The Constitutional Right and its Derivatives, vol. 2, 703-705 (2014) (Hebrew); HCJ 153/87 Shakdiel v. Minister of Religion [4], at 242-243); HCJ 4541/94 Miller v. Minister of Defence [5], at 109-110; HCJ 2671/98 Israel Women’s Network v. Minister of Labor and Welfare [6], at 652-660). Not every activity or policy that is alleged to constitute “exclusion of women” will necessarily be classified, ultimately, as prohibited discrimination. We will already say that the reality of life in these contexts is complex, and does not allow for the adoption of a simplistic, radical approach to all its  manifestations. This was discussed by Justice S. Joubran in HCJ 746/07  Ragen v. Ministry of Transport [3], who explained that the context of the practice of separation is likely to  shed a different light on our view concerning constitutionality, having regard to the circumstances of each individual case, paraphrasing the words of Justice T. Marshall of the United States Supreme Court (Cleburne v. Cleburne Living Ctr. 473 U.S. 468-469 (1985)): “A sign that says ‘Men Only’ looks very different on a bathroom door than on the door of a bus.” This, therefore, will be the starting point for examining suspected incidents of exclusion of women, including in our case.

25.       As I mentioned, the general discussion of the phenomenon of exclusion of women from the public domain is merely an introduction to the main subject with which we are concerned, viz., the class action. However, I have decided to express at the outset my sense of revulsion and repugnance at this phenomenon, which seems only to be increasing in those cases in which it amounts to prohibited discrimination. This is an illegitimate, unworthy phenomenon that has been describes as one that “delivers a mortal blow to human dignity” (HCJ 2671/98 Israel Women’s Network v. Minister of Labor and Welfare [6], at 658-659), and it is a gross violation of the basic, fundamental rights of women. Moreover, the exclusion of women also has the potential of instilling a conception that the public domain belongs to “men only”, and consequently, of perpetuating gender-driven gaps in status and behaviors that by their very nature humiliate, degrade and debase women. This is particularly evident when women are forced to turn to the authorities and the courts for a declaration that they are “permitted” to execute basic acts in the public sphere, and clearly the harm that this involves is not limited only to their individual matter, but involves injury to society as a whole (I had occasion to discuss a matter in this spirit, in a slightly different context, in LCA 8821/09 Prozanski v. Layla Tov Productions Co. Ltd. [7], paras. 17-30).

 

(B)       Class action on grounds of discrimination – the parameters

26.       Both in the District Court and in this Court, the arguments of the parties did not focus on the question of the suitability, in principle, of class actions for dealing with the general phenomenon of discrimination, and in that context, for dealing with the exclusion of women from the public domain. In my opinion, they were correct in not doing so. The absence of any disagreement on this point derives from the understanding that, in principle, insofar as the alleged discrimination is prohibited under any of the sections of the Prohibition against Discrimination Law, a class action can be employed as a means for realizing or protecting the rights that have been violated. This is the legislative desire, and it derives directly from a combination of the provisions of sec. 3(a) of the Class Action Law and item 7 of the Second Appendix to the Law, in which the possibility of filing a class action for a cause pursuant to the Prohibition against Discrimination Law is regulated. A different question, which might require consideration in the future, is whether it would be possible to file a class action for  a discriminatory practice that is not regulated under the provisions of the Prohibition against Discrimination Law, and what (if any) might constitute the appropriate ground for basing such an action. In any case, consideration of this question is not required here, since in the present case, certification of the class action is based on the provisions of the Prohibition against Discrimination Law alone.

27.       The above notwithstanding, and without taking a definitive stand on this matter, I will comment as an aside, that in the past, the professional literature raised the possibility that a class action might provide a possible device for addressing cases of collective harm, such as discrimination, and for repairing the damage it had caused,  apparently even independently of the Prohibition against Discrimination Law  (see, e.g., Guy Halfteck, A General Theory Regarding the Social Value of Class Actions as a Means for Law Enforcement, 3 Mishpat ve-Asakim 247-331, note 31 (2005) (Hebrew); Yifat Bitton, Bringing Power Relations within the Scope of Negligence Liability, 37 Mishpatim 145, 212-213 (2008) (Hebrew); Yifat Bitton, Dignity Aches: Compensating Constitutional Harms, 9 Mishpat uMimshal 137, note 5 (2005) (Hebrew) (hereinafter: Bitton, Dignity Aches); Assaf Pink, Class Actions as an Instrument of Social Change, 6 Maasei Mishpat  157 (2014) (Hebrew) (hereinafter: Pink, Class Actions); and see, mutatis mutandis, Daphne Barak-Erez, Constitutional Torts 296 (1993)). Furthermore, quite apart from the discussion of class actions, recent judgments of the trial courts in “regular” – not class action – civil suits have granted recognition to the right of female injured parties to non-monetary compensation for distress, humiliation and violation of dignity caused by a policy of exclusion of women adopted in their regard (see: CC (Bet Shemesh Mag. Ct.) 41269-02-13 Phillip v. Aboutbul [33]; SC (Beer Sheva) 33424-02-12 Michaeli v. Chevra Kadisha – Ofakim Religious Council [34]; SC (Bet Shemesh) 2917-10-11 Marsden v. Negdi  [35]).

28.       The discussion below – except for a brief discussion regarding the “efficient and fair” way to conduct the proceedings – will not deal with the general argument that a class action should not be used in cases of discrimination because there would seem to be “more suitable” alternatives, such as seeking relief on the constitutional and administrative planes (see the discussion of this argument in Bitton, Dignity Aches, at 139. Bitton argues that in the case of collective harm to the dignity of women and their right to equality, the instrument of class action is, indeed, available, but it may be that “the relief of a court order is a more suitable remedy”). As stated, in our case there is no dispute that on the legal level, compensation for discrimination under the Prohibition against Discrimination Law can be sought in a class action procedure, even if other legal possibilities exist. Moreover, the possibility of being awarded relief on the administrative and constitutional planes does not necessarily rule out the possibility of receiving parallel relief by way of a class action. It must be borne in mind that a class action may include applications for relief of several kinds at once, and that sometimes, the actions on separate legal planes are addressed from the outset to different bodies. Furthermore, a class action sometimes constitutes a vital instrument of enforcement precisely when the administrative sanctions are insufficient (see, e.g.: CA 5378/11 Frankl v. Allsale, para. 34 [8]; LCA 9615/05 Shemesh v. Fucacheta Ltd., para. 5 [9]).

29.       In the absence if a need to discuss the questions mentioned above, our deliberations will focus on the question of whether the conditions for approving a class action are met in the present case. As we know, the Class Action Law states in secs. 3(a) and 8(a) that an applicant who seeks certification of a class action must prove several cumulative conditions: (a) One condition is that the cause of action must be one of the causes of actions for which a class action may be brought; (b) A second condition is that the action raises substantive questions of fact or law that are common to all members of the class, and that there is a reasonable possibility that they will be decided in favor of the class; (c) A third condition is that the class action is the most efficient and fair way in which to decide the dispute; (d) The fourth and fifth conditions are that there are reasonable grounds to assume that the concerns of all the members of the class will be represented, and that the matter will be conducted in an appropriate way and in good faith. Additional conditions  specified in sec. 4 of the Class Action Law require that the plaintiff in the class action be authorized in advance to bring and conduct the action; and that insofar as one of the causes of action is harm, the plaintiff in the class action proves prima facie, already at this procedural stage, that harm was caused to a member of the class or that there exists a reasonable possibility that harm was caused to the class (on the conditions, see: CA 9494/08 Pan v. Israel Railways, para. 5 [10]; CA 6887/03 Resnik v. Nir Cooperative, para. 24 [11]).

 

(C)       Interpretation of section 4(a)(3) of the Law – Is “Kolech” qualified to file the action?

30.       Section 4 of the Class Action Law treats of the question of who may apply for certification of a class action. The section specifies the said persons, and in particular, sec. 4(a)(3) of the Law provides that an “organization” (as defined in the Law) may also submit a class action, provided that the action concerns an area that is included in one of its public objectives, and provided that submission of the application by a plaintiff with a personal cause of action would prove difficult. The Law states as follows:

 

By whom and in whose name may an application for approval of a class action be brought	4(a) The following are entitled to submit to the Court an application for approval of a class action as specified below:
		(1)	A person who has cause for an action or matter specified in section 3(a), which raises substantive questions of fact or law common to all members of a class of persons – in the name of that class;
		(2)	A public authority in an action or matter specified in section 3(a) that is within the sphere of one of the public purposes in which the public authority engages – in the name of a class of persons, if that action or matter raises substantive questions of fact or law common to all its members;
(Amendment no. 4) 5768-2008		(3)	An organization in an action or matter specified in section 3(a) that is within the sphere of one of the public purposes in which the organization engages – in the name of a class of persons, if that action or matter raises substantive questions of fact or law common to all its members, on condition that the Court is satisfied that – under the circumstances of the case – it would be difficult to submit the application in the name of a person specified in paragraph (1); however, the Israel Consumer Council, as defined in the Israel Consumer Council Law 5768-2008, may apply for approval of an action as a class action, even if it is not difficult for a person to submit the application as stated in paragraph (1).

The definitions section of the Law defines “organization” as follows:

 

Definitions

2.

In this Law: “Organization” – a body corporate, other than a body corporate set up by a law or a religious trust, which exists and operates in practice and in a regular manner and has done so for at least one year for the advancement of one or more public purposes, its assets and income being used only for the achievement of public purposes, on condition that its activity is not on behalf of a political party or of some other political body, or in connection with a party or aforesaid body or for the advancement of their purposes;

 

 

31.       The interpretation of sec. 4(a)(3) of the Law has not yet been decided by this Court, but it has been addressed in the past by the Economic Department of the District Court (Judge C. Kabub) in Class Action (Econ.) 2484-09-12 Hatzlacha, Consumer Movement for the Promotion of a Fair Economic Society and Economy v. Cohen [31]). The District Court held that in order for an organization to qualify to bring a class action, it must prove that there are prima facie grounds, that there is a difficulty involved in locating a plaintiff with a personal cause of action, and that it is a suitable organization per se. With respect to interpretation of the word “difficult”, the Court held that this requirement attests to the fact that the legislature did not wish to open too wide a portal through which organizations could bring class actions. However, at the same time, it was held that a narrow, pedantic approach should not be adopted, as it might divest the purpose of the law of content in that it would not be possible at all for organizations to file class actions. Against this background, it was decided that the term “difficult” would be examined “in accordance with each matter and its circumstances” (para. 68), and in that particular case, the court added that “the organization that is petitioning bears the burden of proving that it acted with due diligence to locate a person with a cause of action” (para. 64), and that the attempt to locate such a person will be examined from a “quantitative” as well as a “qualitative” perspective (para. 77). The court also noted that “[I]t must be recalled that a class action is indeed a collection of personal suits, but at the same time it has the status of a public action. Therefore, where there is a public interest in the action, this might lead to a certain leniency with respect to the procedural conditions for its submission” (para. 34).

32.       My fundamental view is that a narrow, cautious approach should be adopted to the question of the interpretation of sec. 4(a)(3) of the Law. Careless removal of the procedural barriers, which would allow organizations to submit applications for approving class actions with no limitations, is liable to increase the extent of the phenomenon of submitting groundless claims, even in cases in which there is apparently no real problem in the applications being submitted by plaintiffs who have a personal cause of action (for a discussion of the general concern about groundless actions, see e.g., Alon Klement, Keren Weinshall-Margel, Ifat Taraboulous and Ronnie Avissar-Sadeh, Class Actions in Israel – An Empirical Perspective 9 (2014) (Hebrew) (hereinafter: Class Actions – Empirical Perspective). Another concern is that removing the barriers will motivate certain elements to unite for the sole purpose of facilitating class actions. As I shall explain below, the narrow approach is also the consequence of reading the provisions of the Class Action Law themselves. In this context, the provisions of sec. 4 of the Law present several significant hurdles which organizations must overcome in order that they be allowed to submit an application for certification of a class action, and which attest to the legislative desire to limit their power and to allow them to submit class actions only in cases which are indeed suitable. Moreover, this conclusion also derives from the legislative history of sec. 4 of the Law, it being evident that the legislature did, indeed, wish to allow organizations to bring class actions, but at the same time it did not totally abandon the model that had prevailed in Israeli law prior to the enactment of the Law, whereby the party that brought the class action had to be a member of the injured class (see: Steven Goldstein, Comments on the Class Action Law, 5766-2006 6 Alei Mishpat  7, 16-18 (2007) (Hebrew)).  

33.       The point of departure in the Law is that it is preferable if the person bringing the class action is “a plaintiff with a personal cause of action” or a “public authority” and not an “organization”. This conclusion can be deduced from a reading of sec. 4 of the Class Action Law, in which the legislature established a clear hierarchy among the three bodies. First, sec. 4(a)(3) of the Law states that the application should not be made by an organization if the action can be brought by a plaintiff with a personal cause of action,. Secondly, it is evident that the legislature similarly prefers that the class action be brought by a “public authority” under sec. 4(a)(2) of the Law, as may be inferred from the broad authority granted to such authorities. And note that the three bodies defined as a “public authority” are authorized to bring class actions in certain areas, in view of the recognition that in these areas, it may be difficult to file suit in other ways. The legislature deemed it advantageous to concentrate bringing class actions in these areas in the hands of public authorities, in view of their accumulated experience , their human resources and the fact that at times they have parallel administrative powers, so that they have a more varied means at their disposal for dealing with the wrongdoers. The legislative preference is evinced primarily from the scope of the authority conferred on public authorities, in that they are authorized to bring class actions without even being required to prove the difficulty involved in bringing the action in the name of a plaintiff with a personal cause of action. The language of the Law and the wide power given to the public authorities attest to a clear legislative preference that the plaintiff in class actions be “a plaintiff who has [personal] cause for an action” or a “public authority”. This preference is significant also from the aspect of the qualification of the organization seeking to bring a class action.

I would incidentally note that I am aware of the argument that, in practice, the public authorities have yet to exercise their power (see: Class Actions – Empirical Perspective, at 15-16; Appeal in Class Actions, at 638). However, I do not think that this argument adds or detracts from the empirical analysis above.

34.       Another point of departure is that the term “organization” must be interpreted narrowly, solely in accordance with its definition in the Class Action Law only, and not according to its definition in other laws. And note that in several laws enumerated in the Second Appendix to the Class Action Law, the status of an organization is recognized in various contexts, and they are sometimes vested with the power to sue. Thus, for example, sec. 7(a) of the Prohibition against Discrimination Law states that a corporate body that is engaged in the defense of rights may bring a civil action for a tort under the Law, even when the tort was perpetrated against an individual, as long as that individual has consented thereto. The legal question is whether the fact that an organization was accorded a status by means of an “external law” exempts it from the conditions pertaining to organizations in the Class Action Law. Apparently, it can be argued that putting the organization in the shoes of the plaintiff with a personal cause is effected by way of an external law, and not by means of sec. 4(a)(3) of the Class Action Law. According to this approach, the organization comes within the bounds of the Class Action Law as a “person with a cause” according to sec. 4(a)(1) of the Law, and it is therefore not required to overcome the hurdles placed before an organization under sec. 4(a)(3) of the Law (on this view, see Pink, Class Actions, at 166).

35.       My position, as stated, is that no analogy can be drawn from the status accorded to an organization under external laws with respect to its status for the purpose of bringing a class action. When the provisions granting a status to organizations in external laws were enacted, no examination was conducted of all the aspects required to grant status to an organization as a plaintiff in a class action. Furthermore, the Class Action Law sets hurdles and conditions with respect to organizations that do not exist in the external laws, such as the requirement of operating in practice and in a regular manner for the duration of at least one year. It may well be added that an understanding of the background to the enactment of the Class Action Law leads to a similar conclusion, bearing in mind that the legislature wished to concentrate all the procedural aspects connected to the filing of class actions under one law (see sec. 1 of the Class Action Law: “The purpose of this law is to prescribe uniform rules on the submission and conduct of class actions, in order to improve the protection of rights …”; and  the memorandum to the Class Action Law 5765-2005). Accordingly, it is clear that adoption of an interpretation that allows an organization to be accorded a status by virtue of external laws for the purpose of submitting a class action will lead, in effect, to the decentralization, contrary to the legislative intent, of those procedural aspects that were deliberately concentrated under the Class Action Law.

36.       The first hurdle placed before an organization that seeks to submit a class action in place of a plaintiff with a personal cause of action appears in sec. 2 of the Law. This section defines the term “organization” for the purpose of sec. 4(a)(3) of the Law, and in so doing, establishes a number of conditions that must be met by the organization. In particular, the section prescribes that the organization must prove that it operates in practice and in a regular manner, and has done so for at least a year, that its activities serve a public purpose, and that its assets and income are used only for achieving the public purpose. As noted above, these preconditions prescribed in the definitions section of the Class Action Law demonstrate that the legislature sought to open the door to the bringing of class actions only to active organizations that have proven records in their clearly public area of activity, and which did not incorporate merely for the purpose of bringing a class action.

37.       On the assumption that an organization that wishes to bring a class action has overcome the hurdle of sec. 2 of the Class Action Law, the next hurdle it faces is to prove compliance with the two central conditions for qualification, namely, the conditions prescribed in sec. 4(a)(3) of the Law. First, the applicant organization must prove that the action is within the area of one of its public purposes. This limitation, too, attests to the legislative desire to allow class actions to be brought by organizations only sparingly, in a manner that will ensure that the organization is in fact fit to conduct the class action in the name of the class, inter alia, due to its expertise in and knowledge of that area. Secondly – and this condition apparently constitutes the main obstacle placed before an applicant organization – the organization must convince the court that it would be difficult to submit the application in the name of a person with a personal cause of action. This condition reveals a clear preference of the legislature that class actions not be pursued by organizations, but by a plaintiff with a personal cause of action, who  has been directly harmed, based on an understanding of the importance that a direct victim insists on his rights.

38.       With respect to the statutory requirement of proving that it would be difficult to locate a plaintiff with a personal cause of action, in principle I accept the interpretative approach whereby the word “difficult” must be understood in accordance with the circumstances of each case. Nevertheless, and without making a categorical statement, one can conceive of several indications that would indicate the existence of such a difficulty. Thus, one can imagine that a lack of financial means among potential plaintiffs may indicate a difficulty. Clearly, the higher the anticipated cost of submitting an application for certification of a class action, the greater the concern that a plaintiff with a personal cause of action who would agree to institute the proceeding will not be found. This concern is relevant, for example, in situations in which the class of victims is from a “weak” sector whose members lack sufficient economic means, particularly when the application for certification of the class action must be accompanied by a costly expert opinion. One can also imagine areas or situations in which the direct victims are not aware of the harm done to them due to gaps in knowledge or the absence of the ability to comprehend the harm. In such situations, when the direct victims have difficulty in assessing the damage done to them, it is liable to be difficult to convince them to submit a class action in their own names. Cultural barriers are also liable to make it difficult, at times, to find a plaintiff with a personal cause of action. These are relevant to situations characterized by the existence of a culture gap that deters plaintiffs with a personal cause of action from turning to the courts (see, mutatis mutandis, Yuval Elbashan Access to Justice of Underpowered Communities in Israel 3  Alei Mishpat  497, 510 (2004) (Hebrew)).

39.       It should be emphasized that the burden of proving the difficulty in finding a plaintiff with a personal cause of action lies with the petitioning organization. In this context, I accept the basic approach of the District Court in Hatzlacha v. Cohen [31] according to which the organization must prove that it acted “with due diligence” to locate a plaintiff with a personal cause of action, both in the “quantitative” and in the “qualitative” sense. My view, too, is that there is no reason to accept the argument that it is difficult to find a plaintiff with a personal cause of action where the said argument has not been supported by a true attempt to find one. The basic assumption is that the organization must prove that it tried to find a plaintiff who would meet the conditions of sec. 4(a)(1) of the Law, even though there should be no automatic dismissal of the possibility that there may be exceptional situations in which the court may be convinced that it is difficult to find a plaintiff with a personal cause of action, even where no attempt has been made to approach potential plaintiffs directly. In this context it is possible that the court may be convinced that there is an inherent difficulty or that there are other special, substantial and convincing circumstances which suffice to lead to the conclusion that it is difficult to find a plaintiff under sec. 4(a)(1) of the Law.

40.       Finally, it should be noted that even if the organization does not overcome the hurdles prescribed in sec. 4(a)(3) of the Law, this does not necessarily mean that the application for certification must be dismissed or denied. It should be recalled that the Class Action Law states that insofar as the application for certification of the class action meets the requirement criteria, the court may approve it even in cases in which the applicant party does not meet the conditions prescribed in sec. 4 of the Law. Thus, sec. 8(c)(1) of the Class Action Law states that the Court may approve the action “if it concludes that those conditions can be assured by the addition or replacement of a representative plaintiff or of a representative attorney, or in some other manner,” and sec. 8(c)(2) of the Law states that “…if the Court concludes that all the said conditions in subsection (a) have been met, but that the conditions in section 4(a)(1) to (3), as the case may be, are not complied with in respect of the application, then the Court shall approve the class action but in its Order it shall order the representative plaintiff to be replaced.” In other words, a finding that the organization does not meet the conditions prescribed in sec. 4(a)(3) of the Law does not automatically preclude the action itself, and it is possible to proceed with it by replacing the plaintiff. Thus, for example, if the organization does not meet the conditions of the Law because there is a plaintiff with a personal cause of action, it is possible to replace the organization with that plaintiff and to proceed to adjudicate the case. In the same manner, if the organization does not meet the conditions of the Law in that, for example, its public purpose is different from that of the subject of the action – it is possible to replace it with another organization whose objectives are consistent with the subject of the action (for a more extensive discussion of this matter, see para. 32 in Hatzlacha v. Cohen [31]).

41.       To sum up this chapter, an organization that wishes to bring a class action in place of a plaintiff with a personal cause of action must meet the following cumulative conditions:

a.     First, the organization must prove compliance with the conditions of sec. 2 of the Class Action Law, including that it is a proven, active corporation, and that it has operated in practice and in a regular manner for at least one year, and that the objective of its activity is a patently public purpose;

b.    Secondly, the organization must prove that the action is within the area of one of its public objectives;

c.     And thirdly, the organization must prove that it is difficult to bring an action in the name of a person who has a personal cause of action, where the term “difficult” will be interpreted in accordance with the case and its circumstances, and having regard to a number of indicators as mentioned above, which is not a closed list. As a rule, proving this condition will require that data be presented showing that the organization acted “with due diligence” to find a plaintiff with a personal interest, both in the quantitative and in the qualitative sense, subject to the possibility of exceptional situations in which the court will be convinced that there is an inherent difficulty or that there are other special, substantial and convincing circumstances which suffice, per se, to demonstrate the difficulty in finding a plaintiff with a personal cause of action.

42.       In our case, the District Court held that the Kolech Organization meets the above conditions, and it is therefore a “qualified organization” to bring the class action. My impression is that this conclusion is justified and that there is no basis for intervention. First, it will be noted that the radio station does not dispute the existence of the first condition, which relates to the organization meeting the condition in sec. 2 of the Class Action Law, as it does not object to the factual findings of the District Court that Kolech is “an organization that has operated for several years” (para. 46 of the decision), its activity is carried out in a regular and actual manner, and its declared objective is primarily the public objective of “promotion of the status of women in religious Jewish society and in Israeli society” (ibid.). As opposed to this, the radio station’s arguments focus on challenging Kolech’s compliance with the two conditions prescribed in sec. 4(a)(3) of the Class Action Law, namely, the second and third conditions. According to the radio station, Kolech did not prove that the action deals with an area in which it operates in practice, and primarily, that Kolech did not prove that it is difficult to bring the action in the name of a plaintiff with a personal cause of action.

43.       I will first note that I see no cause to intervene in the determination that Kolech proved that the action is within the area of its public objectives. The District Court based this determination on evidence that was presented to it, and held that the condition is factually met – a determination in which the appeal court does not customarily intervene. Moreover, the radio station’s argument in this context relies on its opinion that the objectives of Kolech are apparently inconsistent with the class that it purports and seeks to represent. According to the radio station, “the purpose of the organization must be identical to that of the class” (para. 42 of the application for leave to appeal). With all due respect, this argument is baseless. As pointed out in the decision of the District Court, sec. 4(a)(3) of the Class Action Law does not include a condition of identity or congruence in the world view of the organization with each plaintiff in the class that was injured. Section 4(a)(3) of the Law concentrates on the question of whether the action addresses the public aims of the organization, and in the present case it may clearly be said that Kolech has set as its objective, promotion of the status of women in the religious community and in Israeli society. The fact that the action also involves women who belong to the ultra-Orthodox community does not indicate a departure from the area of the objectives of the organization in a way that would negate the qualification of Kolech. This is even more true in view of the court’s determination that in fact, Kolech is also active in the ultra-Orthodox sector; that in any case the concession that was given to the radio station was not defined as being for the ultra-Orthodox community only, but “to establish a ‘Torani-traditional-Sephardic radio,’ i.e. to establish a radio station intended for the religiously observant public and not only for the ultra-Orthodox”; and that the radio station itself declared that its listening public is not limited only to ultra-Orthodox listeners (for elaboration, see para. 46 of the judgment of the District Court).

44.       After giving careful thought to the matter, my conclusion is that we should not intervene in the determination that Kolech proved that it was difficult to submit the application in the name of a plaintiff with a personal cause of action. I am not unaware of the fact that Kolech confined itself to noting that “there is an inherent difficulty” in the circumstances of the case, without having tried to prove that difficulty by presenting any facts showing that it acted “with due diligence” to find a plaintiff with a personal cause of action. Similarly, as the radio station contends, with a good deal of justification, it is possible that an approach on the part of Kolech to potential plaintiffs who had been directly harmed by the policy of the radio station would not have been pointless. The argument of the radio station whereby from the findings of the survey that Kolech submitted, it emerges that 2.4% of the women who were asked said that they are prepared to take legal action to change the situation, shows that there are women – albeit only a few – who could and would have been prepared to be plaintiffs in a class action under sec. 4(a)(1) of the Law. However, the District Court found, on the basis of other justified, convincing reasons, that in the circumstances of the case, it is difficult to bring the class action in the name of a plaintiff with a personal cause of action, basing this finding on many logical arguments. I concur with the District Court on this point.

45.       The main reason supporting the conclusion that it would hav been difficult to find a plaintiff with a personal cause of action in the present case is that there is a reluctance on the part of ultra-Orthodox women to stand at the forefront of the battle to promote gender equality in the ultra-Orthodox community, due to their concern that their position in the community will suffer. This conclusion was supported by the testimony of Dr. Hannah Kehat, Director General of Kolech, which was found to be reliable, and I see no cause for intervention. This reason is also consistent with the declaration of the radio station according to which some of the female listeners of the station are accustomed to abiding by the religious code of conduct, such that it is reasonable to assume that they would not rush to initiate a class action, even if they felt degraded and that their dignity had been offended. We encountered a similar phenomenon when we considered the matter of the “Mehadrin bus lines”, when the picture that emerged in relation to gender separation in that case was that “women who did not immediately conform to the new arrangement were subjected to harassment, insults, pressure and threats, and matters reached the point of actual physical violence” (Rimalt, at 117), and that “many of those who objected expressed this position anonymously … for fear of reprisals” (Triger, at 726). Against this backdrop, my conclusion is that indeed, the weight of the cultural aspect in the present case is decisive, and it is of sufficient import to justify the concern that if the Kolech organization had not submitted the application to certify the class action, it would not have been submitted. Moreover – and this is very important in our context – even if I were convinced of the correctness of the argument of the radio station that it would have been possible to find a plaintiff with a personal cause of action who could have submitted the application herself, I do not believe that it would have been right to order that the action be dismissed in limine or denied. At most, an order could have been given to substitute that plaintiff for the organization. For these reasons, my conclusion is that there is no reason to intervene in the determination of the District Court, based on the particular circumstances of the case, that Kolech proved to the extent required that it would be difficult to find a plaintiff with a personal cause of action, within the meaning of sec. 4(a)(3) of the Law.

46.       Hence, the first argument of the radio station whereby Kolech is not “qualified” to bring the class action is rejected. As explained, even though as a rule, a interpretation should be adopted in relation to sec. 4(a)(3) of the Law, in the present case, the conditions for compliance with the section have been proven. Therefore, I recommend to my colleagues that we not intervene in the determination of the District Court in this regard.

 

(D)       Cause of Action

47.       A discussion of the subject of the cause of action must begin with the question of whether the Prohibition against Discrimination Law applies in the circumstances of the case. Insofar as it is found that the Law does indeed apply, and insofar as the policy adopted by the station indeed constitutes prohibited discrimination under the Law, there is no dispute that cause exists for bringing a class action on the basis of a combination of the provisions of sec. 3(a) and item 7 of the Second Appendix of the Class Action Law. The relevant sections for the purpose of analyzing the argument concerning the application of the Prohibition against Discrimination Law are secs. 2(a), 3(a), 3(d)(1), 3(d)(3) and 5(a) of the Law, which state as follows:

   

Definitions	2(a) In this law -
		“Public service” – Transportation Services, communications, energy, education, culture entertainment, tourism and financial services, intended to serve the public.
	[…]
Prohibition against discrimination (Amendment no. 1) 5765-2005 (Amendment no. 3)5774-2014	3(a)	A person who deals in the provision of a product or a public service or in operating a public venue, will not discriminate in the provision of the product or the public service, in allowing access to the public venue or in providing a service in the public venue, for reason of race, religion or religious affiliation nationality country of origin gender, sexual orientation, outlook, political affiliation, age, personal status or parenthood. […]
	(d)	The following shall not be deemed discrimination under this section —
		(1)	If the act is required by the nature or the essence of the product, the public service or the public venue;
		(2)	[…];
		(3)	In the establishment of separate frameworks for men and women, in the event that non-separation will prevent the provision of the product or the public service, or access to the public venue, or provision of the service in the public venue, to part of the public, provided that the separation is justified considering, inter alia, the nature of the product, the public service or the public venue, the extent to which it is essential, the existence of a reasonable alternative, and the needs of the public which is liable to be harmed by the separation.
	[…]
Civil wrong	5(a)	An act or omission contrary to sections 3 and 4 constitutes a civil wrong, and the provisions of the Civil Wrongs Ordinance [New Version] will apply thereto, subject to the provisions of this Law.

 

48.       As stated, the first question on the subject of the cause is whether the Prohibition against Discrimination Law applies. The District Court answered in the affirmative, dismissing the narrow interpretation urged by the radio station to the effect that the Prohibition against Discrimination Law deals only with access to the service or product. The court held that this interpretation is not consistent with the language of the Law or its purpose, and that the prohibition against discrimination in the provision of a “public service” applies not only to access to the broadcasts of the radio station, but to the entire range of services that it provides to its listeners, including newscasts, commentary and programs in which listeners express themselves on the air.

49.       I completely accept the approach of the District Court in this regard, and I see no need to expand at length upon its decision. First, it will be noted that the court discussed the subject of the cause in depth, even though at this procedural stage, an prima facie examination would have sufficed (cf. my opinion in LCA 3814/14 Hogla Kimberley Marketing Ltd. v. Mastei, para. 11 [12]).  On the merits, the interpretation presented by the District Court is compatible with earlier rulings of this Court with respect to the scope of the Prohibition against Discrimination Law, according to which the Law reflects a long-standing trend of extending the scope of application of the principle of equality to areas of private law as well, and that the purpose of the law requires that an interpretation which leaves instances of discrimination in place must be rejected (see, LCA 8821/09  Prozanski v. Layla Tov Productions [7], para. 29; HCJ 746/07 Ragen v. Ministry of Transport [3], per Justice E. Rubinstein, para. 34). An examination of the various legislative proceedings, too, reveals the legislative intent to extend the reach of the Law widely to instances of discrimination, and in particular to phenomena of generic discrimination on the basis of gender (cf., e.g., the Prohibition against Discrimination in Products, Services and Access to Places of Entertainment and Public Places (Amendment no. 4) (Prohibition against Humiliation or Degradation due to Discrimination) Bill, 5774-2013).  It is worth noting that the position taken by the District Court on the question of the prima facie application of the Prohibition against Discrimination Law is also consistent with the position expressed in the report of the Departmental Team, which  stated: Section 3(a) of the Prohibition on Discrimination in Products, Services and Entry to Places of Entertainment and Public Places Law 5761-2000 provides that communications services constitute a “public service”. Therefore it is prohibited for the station to discriminate in the provision of the public service due to gender” (para. 179). This position is also compatible with the approaches that support a narrow interpretation in relation to the application of the Prohibition against Discrimination Law (see: Moshe Cohen-Elia, Liberty and Equality in the Prohibition of Discrimination in Products and Services Law, 3 Alei Mishpat 15, 35 (2003) (Hebrew) (hereinafter: Cohen-Elia)).

50.       I will briefly state that the radio station’s focus on the question of access to the radio broadcasts is not clear to me. The fact that women are permitted to listen to the radio station like men does not negate the argument that, at the same time, discrimination was practiced against them in the provision of other services. Moreover, the argument raised by the radio station displays signs of a practice whereby “entry is permitted – but participation is forbidden.” This is similar, therefore, to a club which allows entry to all those who arrive on its doorstep, but which permits only some of those arrivals to take part in the activity going on inside. Even if women could listen to the broadcasts of the station, they were not permitted to take part in the activity included in the broadcast. Can it be said that this practice does not constitute apparent discrimination? It is clear to me that the answer to this question is negative. There is no doubt that some of the services provided by the radio station to its listeners include the possibility of the listeners participating in the programs and expressing their opinions: this is an “activity” (“service”) that the station offers. Therefore, preventing women from invoking this possibility because they are women – to the extent that such prevention is proved – is certainly liable to amount to discrimination to which the Prohibition against Discrimination Law applies. Therefore, the argument of the radio station that the women have no “vested right” to come on air and express their position must be dismissed. The question is not the right of women to participate in the radio broadcasts – and in any case, we are not concerned here with that question – but the right of women to be treated equally, in a manner in which possibilities will not be closed off to them when they are open and accessible to men.

On this matter, it would not be superfluous to mention that a recent case before the courts concerend the refusal of an ultra-Orthodox newspaper to publish the election propaganda of an electoral list of female ultra-Orthodox candidates to the 20^th Knesset, based on the fact that they were women. The District Court expressed its position that this practice, per se, constitutes prohibited discrimination within the meaning of the Prohibition against Discrimination Law, although the application for leave to appeal was granted for other reasons (see: CF (Center-Lod District Ct.) 25435-03-15 Kolian v. Yetedot T.S.M.V. Publishing and Advertising Ltd. [32], per Judge Y. Spasser; LCA 1868/15 Yetedot T.S.M.V. Publishing and Advertising Ltd .[13], per Justice N. Hendel).

51.       In view of my ruling that rejects the narrow interpretation of the radio station in principle, I will now proceed to address the question of whether the policy adopted by the radio station indeed constitutes apparent discrimination for the purposes of sec. 3(a) of the Law, and to the extent that it does so, whether the exceptions specified in secs. 3(d)(1) and 3(d)(3) of the Law apply – exceptions according to which a case will not be deemed discriminatory where “the act is required by the nature or the essence of the product” and in addition that it is possible to establish “separate frameworks for men and women … provided that the separation is justified…”. The argument of the radio station in this context is, as will be recalled, that gender distinction is required due to the traditional, religious character of the radio station, and due to the halakhic position of the rabbinical council, and therefore there is no discrimination, and alternatively, that the exceptions specified in the Prohibition against Discrimination Law apply, and therefore it cannot be sued in respect of that policy.

52.       With respect to sec. 3(a) of the Law, there would seem to be no doubt that the basic assumption is that the policy of the station constitutes discrimination against women in the sense of the Law. As may already be understood from the general discussion above concerning exclusion of women, a norm that prevents women from taking part in an activity in the public sphere only because they are women is presumed ab initio to be a breach of the women’s right to equality, even if at the end of an investigation that assumption is rebutted, and it is found that the gender discrimination is permitted due to a “relevant difference” or for some other justified reasons (on this assumption, see also sec. 6(2) of the Prohibition against Discrimination Law).  In our context, to the extent that it transpires that women were not permitted to participate in the broadcasts of the station, whereas men were permitted to do so, it is not inconceivable that the activity of the station will fall within the bounds of sec. 3(a) of the Prohibition against Discrimination Law. The question which must now be addressed is whether this assumption is apparently rebutted by proof of a “relevant difference” that justified differential treatment of men and women in the circumstances of the case. This question must be examined in the framework of a discussion of the applicability of the exceptions specified in the Law.

53.       With respect to the exceptions, there is no dispute that the balancing formula that appear in secs. 3(d)(1) and 3(d)(3) of the Law allows for recognition of practices involving gender separation between men and women for religious reasons. The legislature explicitly expressed its opinion on this matter in the framework of the sections, and even included a concrete provision in sec. 3(d)(3) of the Law in the matter of arrangements for separation between men and women. However, in order for one of the above two exceptions to apply, it must be proven that the religious norm indeed mandates or at least justifies the adoption of a differential policy towards women. In the professional literature, we find that in order to reach such a conclusion, an examination must be made, inter alia, of the weight of the religious norm amongst the relevant population in view of its culture, and also whether the weight is so great as to tip the balance in its favor, despite the violation of the rights of the individual. It has also been said that one important distinction that might help in weighing the conflicting interests in the matter is the distinction between norms that the religion requires and those that the religion permits. To the extent that the religious practice of separation between women and men is based on a religious precept (commandment), and to the extent that this requirement is found at the halakhic or cultural core, the scales tip in the direction of applying the exceptions, and vice versa. Professor Amnon Rubinstein discussed this at length in his article The Decline, but Not the Death, of Multi-Culturalism, 49(1) Hapraklit 47, 89-90 (2006) (Hebrew):

Another distinction is that made by the Israeli Supreme Court between norms that the religion mandates and norms that the religion permits. Thus for example, Islam does not mandate polygamy, but merely permits it, and therefore the prohibition against bigamy does not violate a religious norm or freedom of religion.

A question of this type arose in the Knesset in its deliberations on the subject of the Prohibition against Discrimination in Products, Services and Entry to Places of Entertainment and Public Places Law, 5761-2000. The purpose of the Law is “to promote equality and to prevent discrimination in entry to public venues.” The prohibition against discrimination also applies to a person’s gender. The question arose: What is the law in relation to venues that serve ultra-Orthodox Jews or orthodox Muslims in which separation between men and women is required by their culture and their heritage, and without which the women and the men will not use the service or the place? In the Constitution, Law and Justice Committee, which dealt with this subject in a series of sessions in which arguments abounded, opinions were divided. The women’s organizations – which represent those dedicated to equality between the sexes – asked that separation be banned, whereas the ultra-Orthodox representatives, who spoke in the name of multi-culturalism, pointed out that if there is no separation, the ultra-Orthodox community will refrain from using the service or the venue. Ultimately the Constitution, Law and Justice Committee adopted a compromise, which found expression in sec. 3(d)(3) of the Law …

This compromise is problematic in its reference to separation between the sexes, and even more problematic with respect to separation between religions and ethnicities. However, every case must be judged on its merits in accordance with the particular circumstances, and with the criteria for balancing that were proposed above. This, for example, is the case with the Jewish-Haredi or the Muslim community, in relation to which we are concerned with norms that are mandated (and not only permitted) by the religion, and the weight of the religious prohibition is so great and significant that non-separation can prevent use of the service or the product …. It is also necessary to consider the balancing criteria that were proposed above – in relation to the magnitude of the harm to the religious-traditional norm in particular, the weight of the religious norm in the culture, and the question of whether it is a matter of a religious precept or a religious possibility [emphasis partly added – Y.D.].

For a similar approach attesting to the importance of the distinction between an “enabling” religious norm and a religious “prohibition”, see HCJ 153/87 Shakdiel v. Minister of Religion [4], para. 22; HCJ 6111/94 Committee for the Preservers of Tradition v. Chief Rabbinical Council of Israel [14], at 101-102; HCJ 1514 Gur Aryeh v. Second Authority for Television and Radio [15], at 282, in which it was said, for example in the dissenting opinion of Justice D. Dorner, that the criterion is “whether the prohibited action is forced upon those who are observant or whether they are prevented from performing a religious obligation”; and Menachem Elon, The Status of Women – Law and Jurisdiction, Tradition and Transition: The Values of a Jewish and Democratic State 53 (2005) (Hebrew). For criteria that differ slightly from those proposed by Prof. Amnon Rubinstein in his above article, see Harel & Schnarch, at 75; for reservations about the criteria proposed by Harel & Schnarch, see Rimalt, at 127.

54.       In the present case, it cannot be said that religious practice mandates or justifies the application of the exceptions in the Prohibition against Discrimination Law. I find it difficult to accept the position of the radio station whereby its policy is justified by virtue of halakhic norms and the instructions it received, and I certainly do not think that the weight of this norm in the ultra-Orthodox community justifies the apparently severe harm to the basic rights of women. It should be emphasized that even according to the approach of the radio station, the religious norm that underlies the gender distinction in the broadcasts is not a binding norm; rather it is an enabling  norm, and the halakhic opinion upon which the station relies – that of the late Rabbi Ovadia Yosef – stated explicitly that the prohibition on women being heard does not constitute a halakhic prohibition but rather, it is in the category of enhancing the precept (see: para. 62 of the judgment of the District Court; para. 181 of the Report of the Departmental Team). Moreover, the data relating to the present case shows that the cultural and religious character of the radio station has been preserved even after the alleged practice of excluding women from the broadcasts of the station was stopped in the framework of the regulatory processes, and what is more, the scope of the activity of the station has only grown. In these circumstances, it was not proven that the religious norm mandates or justifies adopting a differential attitude towards women, and it is even difficult to argue that ceasing to abide by that norm caused real harm to the radio station. From here it is but a small step to the conclusion that at this prima facie stage, the two exceptions to the Prohibition against Discrimination Law do not seem to apply.

55.       Furthermore, the exception that appears in sec. 3(d)(3) of the Law apparently does not apply in our case, also for the reason that it refers to the existence of “separate frameworks” between men and women, i.e.,  an arrangement of separation, similar, for example, to the circumstances in HCJ 746/07 Ragen v. Ministry of Transport [3]. However, our case does not involve an arrangement of separation, but an arrangement which apparently prevented women, and only women, from participating in the broadcasts of the radio station. For this reason, too, it would appear that the section does not apply in view of its language and its purpose.

56.       It may and should be added with respect to the above two exceptions that despite the fact that the Prohibition against Discrimination Law recognizes them, in any case “not every cultural class practice must be accorded recognition, and the free ‘will’ of a member of a particular cultural class need not always be acknowledged as free will, and not all ‘free will’ need be respected” (per Justice E. Rubinstein in HCJ 746/07 Ragen v. Ministry of Transport [3], para. 10), and clearly in certain cases, in which the harm to the individual is critical, the religious or cultural practice may be ruled out even if it is based on religious precepts and apparently lies at the core of the culture or the religion. This approach has been expressed several times by this Court, which has said, inter alia, that most of the theoretical approaches justify almost categorical subjection of the cultural and religious practices to certain basic criteria, such as that of the right to human dignity in its core sense (cf. the opinion of Justice H. Melcer in HCJ 1067/08 Noar KeHalacha Assoc. v. Ministry of Education, para. 6 [16], and the sources cited there). In this sense, it may be assumed that the exceptions to the Prohibition against Discrimination Law will not apply in those cases in which these criteria are not maintained. In any case, this is over and above what is necessary, for as stated, my conclusion is that there is no apparent ground to invoke the exceptions to the Prohibition against Discrimination Law for the reason explained above, and therefore there was no flaw in the conclusion of the District Court in this context.

57.       I also find no flaw that would justify intervention in the decision of the District Court on the question of immunity by virtue of sec. 6 of the Civil Wrongs Ordinance. On this matter I accept the distinction drawn by the District Court between the period prior to the commencement of regulatory proceedings and the period subsequent thereto. To be precise, there is no dispute that as long as the radio station was subject to close oversight and conducted an ongoing dialogue with the Second Authority, and as long as it operated in accordance with the directives that were addressed directly to it, it had immunity. This determination is also solidly grounded in the case law of this Court (CLA 8014/09 Dikla Insurance Co. Ltd. v. Friedman, para. 5 [17]; CLA 729/04 State of Israel v. Kav Mahshava Ltd., paras. 12-13 [18]). As opposed to this, immunity should not apply to anything pertaining to the period in which the activity of the station was apparently not conducted in accordance with the said directives. In this context, the argument of the station whereby it also enjoyed immunity prior to the commencement of the regulatory process, because in that period it relied on the directives of the Spiritual Committee in the reasonable and good faith belief that this Committee had legal authority by virtue of the terms of the license, cannot be accepted. Even if the terms of the concession recognized the status of the Spiritual Committee, this clearly does not mean that this Committee had the legal authority to confer “legal license” on the radio station to operate in apparent contradiction to the Law. The Spiritual Committee cannot permit an act that is contrary to the terms of the license or unlawful. Moreover, as we have said, the opinion of the Spiritual Committee in our regard did not state that there is a halakhic prohibition on women being heard on air, and therefore the decision to prevent women from participating in the broadcasts was, to a great extent, that of the radio station itself. In these circumstances, and having regard for the prima facie nature of our hearing, the argument of the radio station that its activities were conducted in good faith in the belief that they were legally authorized, in reliance on the position of the Spiritual Committee, must be dismissed.

58.       To conclude the discussion of the issue of cause, I propose to my colleagues that we decide that at this procedural stage, that there are no grounds for our intervention in the determinations of the District Court on this point. As I explained above, no fault can be found in the determination that the Prohibition against Discrimination Law applies, prima facie, in the circumstances of the case. The prima facie determination that the policy of the radio station constitutes “discrimination” within the meaning of sec. 3(a) of the Law is correct, as well. As was further explained, in the circumstances of the case the exceptions found in the Prohibition against Discrimination Law do not pertain, and neither is there room to change the determination of the District Court with respect to the scope of immunity as prescribed in sec. 6 of the Civil Wrongs Ordinance. Hence, the determination of the District Court, namely, that cause by virtue of sec. 3(a) of the Class Action Law has been proved to the extent necessary at this stage, should stand.

 

(E)       The damage and calculation of the compensation

59.       As stated, a large part of the arguments of the radio station deals with the issue of the harm and calculation of the compensation. In this context, the radio station argues that no “harm” was caused to the members of the defined class, and alternatively that the only women who were harmed are the women who asked to be heard and were turned away. It was also argued that calculating the damage is problematic, and that the District Court erred in its ruling with respect to the possibility of awarding compensation “without proof of harm.”  First I will note that I have seen fit to address these arguments immediately following the discussion of the question of cause since, in our case, the two matters are related, as will be explained. On the substantive level, even though I believe that some of the arguments raised by the radio station regarding the harm are correct, my conclusion is that this element was proven to the extent required at this procedural stage, and there is therefore no reason to depart from the final conclusion of the District Court in this regard.

60.       Section 4(b)(2) of the Class Action Law states that in the case of an application for certification of a class action submitted by an organization, the organization must show “that prima facie, harm was caused to a member of the class, or that it is reasonably possible that harm was caused to the class, in whose name the application was submitted.” Clearly, the burden of proof in relation to the element of harm at the stage of approving the application for a class action is not an onerous one. The applying organization is not required to prove the harm to the members of the class in full or a precise manner, but only prima facie; the exact harm will be calculated and assessed in the main procedure. Moreover, the leniency regarding the burden of proof of the harm at the stage of certifying the class action is also expressed in the fact that at this procedural stage, it is already possible to rely on the possibility that ultimately, collective relief will be awarded for the benefit of the class (see: Yuval Procaccia and Alon Klement, Reliance, Causation and Harm in Consumer Class Actions, 37 Tel Aviv U. L.Rev. 7, 33-34 (2014)(Hebrew).

61.       The main question, therefore, is whether Kolech proved, at the prima facie level required at this stage, that harm was caused to the members of the class or to the class itself. This question must be answered in the affirmative. Recognition of the existence of harm and the legal right to receive compensation for it emanate in the circumstances of the case from within the Prohibition against Discrimination Law, even without recourse to other legal frameworks to support the conclusion. The Prohibition against Discrimination Law assumes, as a working assumption, that when there is discrimination within the meaning of its provisions, harm is caused by that discrimination, and that harm is compensable. A basic conception embodied in the provisions of the Law is that “the refusal to allow a person access to a public venue or to supply him with a service or a product, merely because of his affiliation to a class, and particularly a class in respect of which there is a history of past discrimination, constitutes a grave violation of human dignity” (Prohibition against Discrimination in Products, Services and Access to Places of Entertainment and Public Places Bill, 5760-2000). Moreover, the legislature even suggests, in the Prohibition against Discrimination Law, devices for receiving compensation and a ceiling on the amount of compensation that can be awarded without proof of harm.

62.       Prof. Barak Medina adds on this matter as follows:

               The psychological harm involved here is in addition to the direct harm caused to a person who is discriminated against due to the low wages that he earns or due to the inability to purchase some product or service. In terms of economic theory, the psychological harm is calculated according to the sum that the individual would have been willing to pay in order not to incur discrimination. Apparently, the fact that in the absence of legislation, those belonging to the victimized class do not “purchase” their right not to suffer discrimination demonstrates that the monetary value of the harm done to them is less than the utility that the owner of the business derives by virtue of the discrimination, and therefore the efficient consequence is actually to refrain from imposing a prohibition on discrimination.

However, this difficulty can be resolved. First, the special nature of the harm involved here – the feeling of humiliation that derives from the discrimination – rules out a “market solution” to the problem, i.e., it rules out the possibility of preventing discrimination by way of “purchasing” the right not to be discriminated against. As Donohue noted, payment to a business owner in order that he refrain from practicing discrimination creates, of itself, harm and emotional damage of the type that is caused as a result of discrimination (Barak Medina, Prohibition against Discrimination in the Private Sector from the Point of View of Economic Theory, 3 Alei Mishpat 37, 55-56 (2003) (Hebrew) (hereinafter: Barak Medina); emphasis added – Y.D.).

And see also Cohen-Elia:

Israeli law requires individuals to act in accordance with the value of equality, in the sense of discrimination being prohibited. It prohibits discrimination on the basis of race, nationality, sexual orientation and for other analogous reasons, and thereby it realizes a value regarding which there is relatively wide consensus; a value the breach of which is liable to cause acute harm to people and to decrease their autonomy (p. 22, emphasis added – Y.D.).

63.       Another, no less important question that merges with additional questions, particularly with the definition of the class, is: to whom was the harm caused? One could argue that in our case, harm was caused only to women who took active steps and asked to come on air but were refused. However, I think that the discriminatory policy adopted by the station caused harm to additional women as well, even though they did not attempt to participate in the broadcasts, but simply listened to them. The harm to these women is, first of all, the psychological harm inherent in the very knowledge that only because they are women, they are not permitted to participate in the broadcasts of the station. This knowledge is harmful, degrading and humiliating, and it suffices in order to indicate that harm has been incurred by those women. Moreover, harm is also caused in the sense that women refrain from the outset from attempting to be heard on air due to their knowledge that their request would anyway be refused, i.e., there is effective harm to the possibility of access of women to the public service that is being offered. Therefore, it is difficult to accept – at this preliminary stage – the argument that no harm at all was caused to women who “only” listened to the station, even if one may wonder whether a distinction should be made between these women and those who took active steps to be heard on air at the station, on the basis of reasons such as the magnitude of the harm, the degree of distance from the humiliating event and so forth.

What Barak Medina writes later in his article is very apt in this context:

It must be recalled that adopting a discriminatory policy usually has a negative effect on third parties as well, mainly those who belong to the class against which there was discrimination. This is a matter of psychological harm that is caused in light of the knowledge of the existence of the discrimination. These are “external effects”, i.e., the effect of the discriminatory policy on a person who is not party to the transaction between the business owner and the worker or the potential customer …

The negative external effect of adopting a discriminatory policy is significant mainly in the case of supplying a product in the course of “business”, and certainly with respect to providing a public service or operating a public venue. In these cases, even if the business owner does not have a monopoly, and even if he is not supplying an essential product, the policy he adopts is liable to have a negative impact on third parties, beyond the harm to the potential customer of the business owner. In such cases, the assumption is that the extent of the activity of the business – and hence, also, the number of cases in which its potential customers will encounter a discriminatory policy – is relatively high, and so, too, the extent of the “distribution” of the negative impact of its policy. It is thus possible to explain the application of the Prohibition against Discrimination Law with respect to these cases (ibid., at 56-58. Emphasis added – Y.D.).

64.       With respect to the station’s arguments regarding the question of calculation of the harm, it is not necessary that we delve deeply into these arguments at this procedural stage. The entire array of aspects relevant to the issue will be discussed in detail in the framework of the principal proceedings. One cannot deny that, indeed, the task of calculating the value of the compensation in the present case raises complex questions, particularly since the alleged harm deals with subjective, individual feelings of humiliation and violation of dignity. It has been said, in relation to a slightly different issue, that calculation of the damage in cases such as these is liable to be a difficult task, particularly in the case of a class action lawsuit (see, mutatis mutandis, the opinion of my colleague E. Hayut in CA 10085/08 Tnuva Central Cooperative for the Marketing of Agricultural Produce in Israel v. Estate of Tufik Raabi [19]). Without expressing any position, I do not rule out the possibility that possible models for awarding compensation will be examined as the need arises, including those contained in secs. 20(a)(3) and 20(c) of the Class Action Law, in the framework of which the possibility of awarding comprehensive monetary relief  and relief for the benefit of the class or the public is regulated. It may also be assumed that in examining the question of compensation, the arguments concerning the difference between the injured parties and the extent of the harm they have incurred will be considered in depth, as will the arguments concerning the possibility of invoking models for calculating harm which are used in cases of discrimination in other areas of law.

65.       In any case, I believe it appropriate to make two comments already at this stage about calculation of the harm and the compensation. One is that the radio station is correct in its argument against the ruling of the District Court with respect to the possibility of awarding compensation “without proof of harm.” In this context, the Class Action Law provides in sec. 20(e) that: “The Court will not, in a class action, award exemplary damages, and it will not award damages without proof of harm, except in an action as specified in item 9 of the Second Appendix; however this will not prevent the award of compensation for damage that is not financial damage…” (cf. also Tnuva v. Tufik Raabi [19], para. 39). Hence, it is not possible to award compensation without proof of harm in the circumstances of the case, notwithstanding the possibility of doing so under the Prohibition against Discrimination Law when the suit is not brought by way of a class action.

66.       Another comment relates to the relief that is being sought. Apparently, and without taking a categorical stand, it appears that the relief that is sought in the present case – Kolech is asking for compensation in the amount of NIS 104,000,000 – raises questions about the appropriate method of calculating the harm in the circumstances of the case. We need not put the cart before the horse. Suffice it to say that the question arises as to whether in determining the compensation it would be correct – also due to the complexity of the circumstances – to attribute weight to the change that the radio station has undergone in the framework of the regulatory process. Even though awarding compensation in the framework of a class action “looks to the past”, weight should, perhaps, be attributed to the fact that the radio station changed its practice and mended its ways through dialogue and with openness, in a manner that actually renders the requested declaratory relief unnecessary. Of course, this issue, too, will be examined and elucidated in the principal process by the District Court.

67.       My conclusion as to the question of the damage is that it has been proven to the degree required at this procedural stage that the members of the class incurred harm due to the policy of the station. As I mentioned above, even though there is justification for our intervention in certain determinations of the District Court in this context, such as the determination with regard to the possibility of awarding damages in the action “without proof of harm”, there is no reason to depart from the final conclusion that the element of harm indeed exists.

 

(F)   Does the action raise substantive questions of fact or law that are common to all members of the class, and is there a reasonable possibility that they will be decided in their favor?

68.       The first condition specified in sec. 8(a)(1) of the Class Action Law requires that there be “common questions” vis-à-vis the members of the class. Difficulty in proving that this condition has been met is especially liable to arise when the action does not deal with a single instance of tortious conduct on the part of the wrongdoer that caused harm to a large number of victims, but rather with a series of behaviors in relation to which the “connecting thread” is not clear. Indeed, it is natural that when several separate instances of tortious conduct are involved, there may be a need to examine different factual and economic data, and various issues may arise in relation to each separate case that will not necessarily be relevant to all members of the class (see: Alon Klement, Guidelines for Interpretation of the Class Action Law, 5767-2006, 49 Hapraklit 131, 140-179 (2007) (Hebrew) (hereinafter: Klement, Guidelines for Interpretation)). In the present case, the radio station contends that “common questions” do not arise amongst the members of the class, since there are differences among the members. It claims, for example, that there are differences between women who sought to be heard on air and were refused, and women who simply listened to the radio broadcasts. Similarly, according to the radio station, there are differences between women whose world view is similar to its own and women whose world view differs. Moreover, there are differences among the various women in the class due to the fact that each one’s experience of harm is individual, as explained above. It was further argued in relation to two specific instances of discrimination that allegedly occurred during the regulatory period, that they, too, do not raise questions that are “common” to all members of the class, but only to the specific women who were harmed.

69.       The arguments that were raised by the radio station in this context disregard the fact that the discrimination in the case before us was a matter of policy, and that it is this fact that underlies the common questions of the members of the class. To be precise, where it is a matter of discriminatory policy, the “connecting thread” between the members of the class is the policy itself that was adopted in relation to them. This is different from discrimination that occurred in various factual situations, in departure from the customary practice of the wrongdoer. It must be recalled that the questions common to a class are usually connected to the liability of the defendant (Klement, Guidelines for Interpretation, at 141). Where the matter is one involving the defendant’s policy, the question of liability for the harm caused by that policy is indeed common to all those harmed, even if the compensation awarded to each of them is different (ibid.: “The difference in the relief cannot, of itself, stand in the way of an action being certified as a class action”). 

70.       The United States Supreme Court, too, discussed this distinction in the case of Wal-Mart Stores, Inc. v. Dukes et al. [36], noting that in proving a pattern or practice, and certainly in proving discriminatory policy adopted by the wrongdoer, a rebuttable quasi-presumption arises whereby all the members of the class suffered from that discriminatory pattern, and therefore they share “common questions” that are connected to the liability of the defendant in relation to this pattern:

               In a pattern-or-practice case, the plaintiff tries to “establish by a preponderance of the evidence that … discrimination was the company’s standard operating procedure [,] the regular rather than the unusual practice” … If he succeeds, that showing will support a rebuttable inference that all class members were victims of the discriminatory practice …

(See ibid., note 7 of the opinion of Justice Scalia. See also p. 7 of the opinion of Justice Ginsburg. Emphasis added – Y.D.).

I would stress that in the Wal-Mart case, it was ruled that the “pattern or practice” were not proved, and I am also aware that the subject of that case was discrimination in employment, which of course has somewhat different aspects from those of our case. In addition, needless to say, the American case must be read with due caution in view of possible differences between the legal systems, inter alia, regarding the question of causes of action and relief. Nevertheless, it may be said with respect to the determination on principle to the effect that discriminatory policy establishes questions that are common to members of the discriminated class, that what was said there is also applicable in our case.

71.       In other words, even if there are, indeed, certain differences in our case among the women who make up the class of victims in its entirety, such as the differences relating to the magnitude and extent of the harm, common questions of fact or law arise in relation to them all. In the circumstances of the present case, the spotlight, from the point of view of the common questions, is focused more on the conduct of the station, and less on the differences that there may be among the women who were harmed. The “common questions” in our case concern the lawfulness of the policy that was adopted by the radio station, and the extent of its legal liability for this policy. Thus, for example, the question of whether the policy of the station even constitutes a tort for which compensation could be claimed is certainly a question common to all members of the class. A “connecting thread” exists with respect to these and similar questions among all the plaintiffs in the class. This is so even if it is possible to conclude that not all of them were exposed to the activity of the station in an identical fashion, or that they were all harmed equally. Therefore, I do not think that there is reason to intervene in the first determination of the District Court that there exists a substantive question common to all members of the class and it is “whether the station acted in a prohibited discriminatory manner against the members of the class in that it prevented women from being heard on air from the time it began operating and until Nov. 6, 2011…” (para. 102 of the judgment of the District Court).

72.       The above reason is, of course, not valid in relation to the period in which the discrimination perpetrated by the radio station was not a matter of policy. In this context, the radio station’s argument that the two particular instances of discrimination that occurred during the period of time in which regulatory procedures were under way do not give rise to questions that are “common” to all members of the class, but rather they are individual and specific in nature with respect to each case, is sound. I tend to agree with this argument due to the change in the set of factual and legal circumstances in relation of the period of time in which the particular instances of violation occurred. To be precise, the policy of the radio station in relation to first period constituted prohibited discrimination within the meaning of the Prohibition against Discrimination Law, which does not enjoy immunity under sec. 6 of the Civil Wrongs Ordinance. The situation is different in relation to the period in which the particular instances of discrimination occurred, that is, in the period from Nov. 6, 2011 until Aug. 28, 2012. Owing to the fact that regulatory procedures were under way during this period, it was correctly found that the activity of the radio station in this period is covered by the immunity granted under sec. 6 of the Civil Wrongs Ordinance. Similarly, the instances of violation that were perpetrated during this period are bound by time and place, and they constitute a departure from the practice at that time. In view of the above, I am of the opinion that due to the possible factual and legal disparities between the periods of time, different questions are liable to arise with respect to the tortious conduct of the radio station during the period subsequent to the beginning of the regulatory processes. Moreover, even were I prepared to assume that these cases give rise to the same “common questions”, it is possible that they are better suited to being adjudicated other than in the framework of a class action, and more will be said about this below.

73.       The second condition prescribed by sec. 8(a)(1) of the Class Action Law requires proof of a “reasonable possibility” that the common questions will be decided in favor of the members of the class, the main objective being to prevent situations in which applications are submitted for certification of class actions even though their chances are slim, thus preventing an unjustified risk to defendants (see: LCA 2128/09 Phoenix Insurance Co. Ltd. v. Amossi [20]; Klement, Guidelines for Interpretation, at 142). I do not think that the case before us is of the type that gives rise to such a concern, in that the various determinations until now lead me to the conclusion that the questions arising here reveal, at the very least, a “reasonable possibility” of ultimately being decided in favor of the members of the class.

74.       To summarize: I do not think that there are grounds for intervention in the determination of the District Court that a question common to all the members of the class exists, and it is “whether the station acted in a prohibited discriminatory manner against the members of the class in that it prevented women from being heard on air from the time it began operating and until Nov. 6, 2011…”, with the main focus in relation to the issue of the common question being on the tortious conduct of the radio station during the period of the declared policy. I would recommend to my colleagues that this question be the focus of the lawsuit, and that the District Court not address questions that relate to the period of time after the beginning of the regulatory process, in which the two concrete instances of discrimination occurred. I would also recommend to my colleagues that we not intervene in the determination of the District Court that a “reasonable possibility” exists that the above question will be decided in favor of the members of the class.

 

(G)       Is a class action the efficient and fair means of deciding the dispute?

75.       As mentioned in the section dealing with the parameters of the discussion (paras. 26-29 above), I do not think that this decision is the appropriate place for a fundamental discussion of the extent to which class actions are appropriate for dealing with the range of cases of discrimination, particularly when the parties raised no arguments on point. The examination required, in accordance with the provisions of sec. 8(a)(2) of the Class Action Law, is whether under the circumstances, when deciding the case relies on the provisions of the Prohibition against Discrimination Law, “the efficient and fair means of deciding the dispute” is a class action. The case law has held that for the purpose of responding to this question it is possible to consider, inter alia, factors such as the size of the class and the extent to which deciding the questions common to all the members will help resolve the individual dispute between each of the members and the defendant. It is also possible to bring into the equation the advantages and the disadvantages of conducting a lawsuit by way of class action, as compared to the conducting of personal actions – “cost versus utility” (see LCA 2128/09 Phoenix Insurance Co. Ltd. v. Amossi [20], para. 19; Klement, Guidelines for Interpretation, at 125-146; Eran Taussig, Appeals in Class Actions, in Hemi Ben-Nun and Tal Havkin,  Civil Appeals  (3^rd ed.) 632 (Hebrew) (hereinafter: Appeals in Class Actions)).

76.       The District Court was of the opinion that in the present case, the advantages of conducting the lawsuit as a class action outweighed the disadvantages involved. It was mentioned, inter alia, that precisely because we are dealing with an “action the main cause of which is unlawful gender discrimination, on the basis of declared policy, and not on the basis of individual cases … there is an advantage to conducting it by way of a class action” (para. 103). It was added that the advantage of conducting the lawsuit as a class action in the circumstances of the case is particularly relevant “where there is a concern about various constraints on members of the class bringing a personal action” (ibid.), and that approving the lawsuit as a class action can realize the whole range of objectives that appear in the Class Action Law, inter alia because this will promote the interest of “enforcement of the law and deterrence against its breach” (ibid.), and because in this way, those women who were harmed will be able “to realize the right of access to the court, including those who find it difficult or who are afraid to turn to the court as individuals” (ibid.).

77.       I concur with the reasons of the District Court in their entirety, and I will further add that I did not find substance in the arguments raised by the radio station regarding its determinations. Thus, for example, the argument that the apparent “difference” among the members of the class means that there is no use in conducting a class action must be dismissed for, as stated, the spotlight in our matter must be turned primarily on the tortious conduct of the radio station. In this sense, the utility in adjudicating this tortious conduct in the framework of a class action far outweighs the utility of individual adjudications through personal lawsuits. In addition, I believe that in the present case, bringing a class action will prevent “erosion” of the rights of the potential plaintiffs in relation to some who, it may reasonably be assumed, would not turn to the courts for relief, so that by approving the class action the goals of deterrence and compensation will be achieved in a better manner than by other procedural means (See Alon Klement,  Overcoming the Advantages of a Single Defendant over Multiple Plaintiffs – The Class Action Device, 21 Mehkerei  Mishpat 387, 401 (2004) (Hebrew)). Moreover, as stated in the decision of the District Court, it is possible that it is the actual conduct of the lawsuit as a class action that allows for means of proof and relief that are not possible in personal actions (see a discussion in this context, although dealing with discrimination in the field of employment, in Alon Klement and Sharon Rabin-Margaliot, Employment Class Actions – Did the Rules of the Game Change? 31 Iyunei Mishpat 369, 410-415(2009) (Hebrew)).

78.       From between the lines of the application for leave to appeal, the argument emerges that apparently the class action is not appropriate in the circumstances of the matter due to the fact that the Second Authority acted on the regulatory plane. The uncertainty in relation to this point increases in view of the fact that the regulatory procedures indeed were productive. The answer to this argument is that the fact that the radio station mended its ways is indeed commendable, however, this does not constitute a barrier to an action for compensation relating to past wrongdoing. The fact that the radio station has made positive progress in the framework of the process of regulation, and that it (so it seems) is conducting itself lawfully at this time, does not immunize it from a suit for the wrongs it perpetrated in the past, even though, as stated, this may be taken into consideration in relation to the compensation. Moreover, as explained above, in the circumstances of the present case there is no dispute that on the legal plane, compensation for discrimination by virtue of the Prohibition against Discrimination Law may be claimed in the process of a class action, and the possibility that these and other bodies have of acting in different frameworks does not negate the possibility of receiving parallel relief  in the framework of class actions (as an aside, one may mention that in the United States, recourse has been made to class actions by plaintiffs who were harmed as a result of gender or racial discrimination – see Appeals in Class Actions, at 636; Brown v. Board of Education [37] – where the United States Supreme Court expressed its opinion that these cases of discriminatory policy, in the area of labor,  for example, are clear examples of cases that are inherently suited to being heard in the procedural framework of a class action: Amchem Products, Inc. v. Windsor [38]).  

79.       My conclusion, therefore, is that there are no grounds for intervention in the determination of the District Court that the class action is the appropriate means for conducting the present dispute, insofar as the period prior to the beginning of the regulatory process is concerned. As opposed to this, and as I explained above, with respect to the period of the particular instances of discrimination, I do not think that a class action is necessarily the efficient means of adjudicating the individual disagreements. As stated, these are two instances of concrete violations which, even if it is ultimately decided to litigate them, should not be adjudicated in the framework of a class action, but rather in the framework of personal actions brought by the women who were allegedly harmed, if they wish to do so. In summary, I shall recommend to my colleagues that even in view of the condition prescribed in sec. 8(a)(2) of the Law, there are no grounds for our intervention in the determinations of the District Court, except for the determination concerning the period of the particular instances of violation.

 

(H)  There are reasonable grounds to assume that the interests of all members of the class will be represented and conducted in an appropriate manner and in good faith

80.       Examination of compliance with these conditions, prescribed in secs. 8(a)(3) and 8(a)(4) of the Class Action Law, is marginal in the circumstances of the case, also in view of the fact that the parties hardly argued the point. In any case, in order to complete the picture I will mention that these conditions, too, have been met in the present case. In my opinion, Kolech has the required tools to conduct the class action in a manner that is suited to the needs of the members of the class, inter alia, in view of its professional familiarity with the field, and having regard also to the conclusion of the District Court which conducted the certification hearing. In addition, I do not think that the case before us gives rise to any concern about the action not being conducted in good faith (cf: CA 4534/14 Daniel v. Direct Teva Ltd., para. 5 [21]).

 

Conclusion

81.       No grounds have been found to intervene in the majority of the determinations of the District Court, nor in its final conclusion whereby the lawsuit is suited to being adjudicated as a class action both in its substance and in the manner in which it was submitted. In particular, no grounds have been found to intervene in the two central determinations according to which Kolech is an organization that is qualified to bring the class action by virtue of sec. 4(a)(3) of the Class Action Law, and there is apparent cause for bringing a class action under sec. 3(a) of the Class Action Law and item 7 of the Second Appendix to that Law.

82.       In view of what I have written above, I propose to my colleagues that we dismiss the appeal, subject to my comments in the framework of the discussion of the question of the harm and calculation of the compensation, and subject to my determination in the framework of the discussion of the issue of the questions common to the class, whereby in adjudicating the action, the District Court will not discuss the violations that occurred in the period of time after the commencement of the process of regulation (from Nov. 6, 2011 until Aug. 28, 2012). Consequently, the decision of the District Court will stand, except for the changes required by virtue of the above.

83.       I also recommend to my colleagues that we decide that the radio station bear the costs of the proceeding and the legal fees of the Kolech Organization, in the amount of NIS 50,000.

 

Justice E. Hayut

I concur in the conclusions reached by my colleague Justice Y. Danziger as stated in para. 82 of his opinion, and I would like to add a few comments.

1.         My colleague concluded that the respondent organization complies with the requirements of sec. 4(a)(3) of the Class Action Law in that it is an organization within the meaning of sec. 2 of the Law that engages, inter alia, in a public purpose that is central to the action, in the name of the class of women who have been harmed by the conduct of the appellant radio station.  Justice Y. Danziger is of the opinion that, as a rule, narrow and cautious interpretation should be employed in removing the procedural barriers placed by the said sec. 4(a)(3) in the path of organizations that wish to submit applications to approve class actions, for fear that lack of caution in this context is liable to increase both the scope of the phenomenon of groundless actions being brought, even in cases in which, prima facie, there is no difficulty in applications being submitted in the name of plaintiffs with personal causes of action (para. 32 of the opinion of Justice Danziger).  However, in the particular circumstances of this case, Justice Danziger found that the Respondent proved to the extent required that it would be difficult to find a plaintiff who had a personal cause of action against the Appellant, and he therefore held that the Respondent met the conditions of sec. 4(a)(3) of the Law, even according to the narrow interpretation that he supports (paras. 45-46 of his opinion).

2.         I, like my colleague, am of the opinion that the Respondent complied with all the threshold conditions specified in sec. 4(a)(3) of the Law, and I would add that there is no small measure of symbolism in the fact that an organization by the name of “Kolech” [translator’s note: “Kolech” means “your (female) voice”] should be the one standing in the front line of the class action on grounds of exclusion  and silencing of the women of the religious community who are among the listeners of the appellant radio station. With respect to symbolism, it should be mentioned that the name of the organization, like the name of the appellant radio station [translator’s note: “Kol BaRamah” means “A voice in Ramah”], are taken from our Jewish sources, and in both of these sources, the voice is that of a woman, the power and Jewish significance of which is indeed great. Thus we find in the Book of Isaiah 40:9: “O Zion, that bringest good tidings, get thee up into the high mountain; O Jerusalem, that bringest good tidings, lift up thy voice [kolech] with strength; lift it up, be not afraid”; and in the Book of Jeremiah 31:14, the voice in Rama is the voice of our matriarch Rachel who is weeping for her children, as it is written: Thus saith the Lord: “A voice was heard in Ramah [kol b’ramah nishma], lamentation and bitter weeping; Rachel, weeping for her children…”.

3.         The central objective that the respondent organization has inscribed on its banner, and which my colleague Justice Danziger discussed, is to pioneer a social and cognitive change on the subject of gender equality in the religious community in Israel. This objective is indeed consistent with the matter for which the Respondent sought certification of the class action, and therefore the District Court correctly found Kolech to be qualified as an organization, from this aspect, to serve as a voice for the class of women who are apparently harmed by the silencing policy adopted by the Appellant. I will further mention that on the level of principle, and unlike my colleague, I tend to the opinion that too narrow an approach in interpreting the threshold requirements of sec. 4(a)(3) of the Class Action Law is liable to detract from the power of the class action as an instrument for promoting public interests. The explanatory notes to the Class Action Bill noted that the law was being enacted in “recognition of the public role of the instrument of the class action for enforcing the law and … the desire to encourage the bringing of class actions which are of public importance” (Explanatory Notes to the Bill). One means that the legislature found for promoting the said objective is the flexibility that it adopted, inter alia, in the area of the laws of standing, in that, similar to the standing accorded to public petitioners in the High Court of Justice (HCJ 428/86 Barzilai v. Government of Israel  [22]; HCJ 910/86  Maj.(ret.) Ressler v. Minister of Defense [23]), and to a person who does not have a personal cause in the laws of tenders (CA 8416/99 E.I.M. Electronics and Computers (1999) Ltd. v. Mifal Hapayis [24]; CA 7699/00 Tamgash Management and Project Development Co. Ltd. v. Kishon River Authority [25], at 883), in the Class Action Law, too, standing is accorded to a wide range of bodies that are active in the promotion of public purposes, allowing them to submit applications for certification of class actions; these include public authorities (some of which, like the Israel Consumer Council, achieved a similar status by way of concrete legislation that preceded the Class Action Law. See: Chap. 6.1 of the Consumer Protection Law, 5741-1981, which was repealed in sec. 33 of the Class Action Law), and organizations as defined in sec. 2 of the Law.

4.         The flexibility in relation to formal-procedural requirements that the legislature adopted in this area of class actions as opposed to regular actions, emphasizing the substantive analytical criteria, also finds expression in sec. 8(c)  of the Law, according to which it is possible to replace the representative plaintiff, and in secs. 20(a)(3) and 20(c) of the Law in which the legislature departed from the normal rules of damages in torts. All this was for the purpose of realizing the rationales and the objectives underlying the institution of the class action as an effective instrument of civil-public enforcement (on this, see my article, The Class Action as a Means of Civil-Public Enforcement 19 Mishpat ve-Asakim (forthcoming, 2016).)

 

Justice D. Barak-Erez

1.  I concur in the judgment of my colleague Justice Y. Danziger, and with the comments of my colleague Justice E. Hayut. Nevertheless, I would like to relate briefly both to the procedural question of bringing a class action by means of an organization, and to the substantive issue of the exclusion of women that underlies it all, in general, and in this case, with its special characteristics, in particular.

 

Bringing a Class Action by Means of an Organization and the Special Difficulties of Action within the Community

2.         Under the Class Action Law, bringing an action by an organization whose objectives comport with those of the action is made conditional, inter alia, on the Court being “satisfied that – under the circumstances of the case – it would be difficult to submit the application in the name of a person…”.  Here, the Law expresses its known preference for a specific injured party standing before the court in order to enable the court to form an unmediated impression of the injury. Nevertheless, it is important to note that the Law makes do with it being “difficult” in to bring the action in the name of a person. The bar that the Law sets on this matter is not low, but neither should it be too high. Indeed, it is normally to be expected that an organization that seeks to sue will show in a concrete manner that attempts were made to bring the action in the names of individuals. At the same time, there may be exceptions to this rule, and in any case its implementation must take into consideration the context and the concrete circumstances of the matter. As a rule, recognition of the power of organizations to bring class actions is one of the innovations of the Class Action Law (see: Steven Goldstein, Comments on the Class Action Law, 5766-2006 6 Alei Mishpat 7, 17-18 (2007) (Hebrew)), and overly-high barriers that would cause a reversion to the approach that prevailed prior to the passage of the Class Action Law ought not to be erected in this context.

3.         More specifically, I am of the opinion that weight should be attributed to the legislative recognition of the fact that bringing an action for discrimination against the members of a weak class involves, by its very nature, a “difficulty”. Several of Israel’s laws dealing with equality, and particularly the Prohibition against Discrimination Law, recognize the right of action of an organization that deals with protection of the rights of a person against whom it is prohibited to discriminate. These constitute exceptions to the regular tort laws. Section 7(a) of the Prohibition against Discrimination Law prescribes as follows on this matter:

               An action in tort under this Law may be brought by a corporate body that engages in the protection of the rights of a person against whom it is prohibited to discriminate under this Law, provided that if the cause of action is discrimination against a particular person, that person has agreed thereto.

Similar provisions may be found in additional laws that are concerned with equality (see, e.g.: sec. 19(53) of the Equal Rights for Persons with Disabilities Law, 5758-1998). These provisions are powerful witnesses to the statutory assumption as to the existence of a difficulty in bringing an action for discrimination when the potential plaintiff belongs to a class that suffers from social weakness.

4.                                                            The above applies with even greater force when already at the preliminary stage of submitting the application for approval of the action as a class action, confrontation is expected between the plaintiff and the social/communal class with which s/he is affiliated. This does not come out of nowhere. In effect, the position adopted by the Respondent regarding the fact that its spiritual leadership supported not putting women on the air, i.e., that this is a policy that had the support of the rabbis –  the leaders of the community – attests in itself to the difficulty inherent in an identified representative plaintiff coming forward. In such a situation, the accompanying social barriers are in the category of res ipsa loquitur.  Moreover, this is not the first time that this Court has been called upon to consider situations of separation between men and women in the public domain. After the commencement of the deliberations in the petition against the separation on the “Mehadrin bus lines” in HCJ 746/07 Ragen v. Ministry of Transport [3], a public committee was convened to discuss the matter (The Committee to Examine Transportation Arrangements on Public Transport on Lines that Serve the Haredi Sector – Concluding Report (2009)). In its report, the Committee discussed women who objected to separation, while careful to preserve their anonymity (they were referred to as G. and H.). As opposed to this, religious women who supported the separation appeared before the Committee and were identified by  their personal and family names (pp. 25-26 of the Report). As such, it is precisely when the subject under discussion is the voice that is not given to women within the community that the path to their being given a voice should not be blocked, even if that path is being paved by an organization. More generally, the justification for allowing the action to be brought by means of an organization, for the purpose of protecting rights, increases when such an action helps in giving a voice to all the members of the class. In other words, bringing a class action by means of an organization in order to help those who belong to the community and are interested in remaining affiliated with it is a means of giving a voice to those whose voices are not heard.

5.         On a more general level, it seems that the “bar” that the organization must reach in order to satisfy the Court that it took sufficient steps to ascertain that there is a difficulty in bringing the action by means of a flesh and blood person must also take into account the costs involved in taking such steps, in order not to place obstacles that are too great in the path of the representative plaintiffs, having regard to the context of the particular action. The application for approval of a class action must, in any case, meet a certain level of requirements, which is not marginal (see: LCA 3489/09 Migdal Insurance Co. Ltd. v. Zevulun Valley Metal Plating Ltd., para. 13 of my judgment [26];  AA 980/08 Menirav  v. State of Israel – Ministry of Finance para. 13 [27]). These are joined by additional conditions with which an organization that wishes to act as a representative plaintiff must comply (see para. 41 of the judgment of my colleague). Against the background of all these, I agree with the comments of my colleague Justice Hayut that it is not appropriate to overburden the organization that seeks to act as a representative plaintiff. One might add that at the stage following certification of the class action, too, the Respondents still have the opportunity to try to prove that – as they contend – the number of women who in fact identify with the claim of discrimination on which this action is based is not large. This question ought to be decided at the stage of adjudicating the action itself.

 

The Characteristics of Exclusion of Women in the Present Case: Discrimination and Silencing

6.         I agree wholeheartedly with the apt and incisive words of my colleague Justice Danziger regarding the harm done by the exclusion of women, and in fact, of any class, from the public domain. Such exclusion is by its very nature a type of discrimination. To this it must be added that the present case is particularly grave due to the fact that the exclusion also involves silencing. As my colleague explained, full participation in the modern world of communications includes the element of active involvement in the opportunity to “be heard” and not only the passive component of “hearing”, just as full participation in the democratic process means not only the right to vote but also the right to be elected. In this sense, the discrimination in this case is harmful not only to equality, but also to freedom of expression in its full sense, having regard to its various objectives (both from the aspect of self-realization of women who are prevented from expressing themselves in the public arena, and from the aspect of their potential contribution to the public discourse).

7.         On a wider view, the “shock waves” of  exclusion such as in the present case potentially impact not only the women who listen to the broadcasts of Kol BaRamah and those among them whose path to participation in the broadcasts is blocked. Prevention of participation of women in the broadcasts contributes to impressing and “transcribing” a constitutive world view upon all the listeners of the radio station, both men and women, and there may well be even wider ramifications. This acquires even greater significance in view of the fact that the modern communications reality has a significant role in the way in which we perceive the world (see: Mike Feintuck and Mike Varney, Media Regulation, Public Interest and the Law 1 (2^nd ed., 2006).

8.         The exclusion of a particular class from the public discourse harms not only the excluded class, but also the discourse itself. The “marketplace of ideas”, which is so important, will not express all the positions and the different variations in society when participation in this marketplace is limited in advance, or when the effective means of participation is blocked. Society as a whole loses as a result. In view of these undesirable ramifications of exclusion for other classes – over and above the class included in the class action – as well, it would appear that recourse to the device of class action is especially suitable here. It is well known that recourse to this procedural device, not only in the context of the concrete case before us, creates positive externalities for the wider public, and not merely for the class represented by the representative plaintiff (see: Guy Halfteck, A General Theory Regarding the Social Value of Class Actions as a Means for Law Enforcement, 3 Mishpat veAsakim 247, 269, 287-289 (2005) (Hebrew); William B. Rubenstein, Why Enable Litigation? A Positive Externalities Theory of the Small Claims Class Action, 74 UNKC L. Rev. 709, 720, 723-725 (2006)).

9.         Finally, the harm involved in excluding women in this case is even more marked in view of the special purpose of granting concessions to specialized television channels and radio stations: the encouragement of pluralism, and to hear and make heard the variety of opinions and classes in the population (see: HCJ 7200/02 D.B.S. Satellite Services (1998) Ltd. v. Council for Cable and Satellite Broadcasts  [28],  at 37, 47); HCJ 6792/10 D.B.S. Satellite Services (1998) Ltd. v. Israel Knesset, para. 58 [29]).

 

Extent and Weight of the Obligation Involved in Exclusion

10.       My colleague Justice Danziger discussed the distinction between the religious norm that mandates or justifies adopting differential treatment of women and a religious norm that merely allows this, and he added that since in what is involved our case is not a binding norm but the enhancement of a precept, the weight of the religious argument here is reduced. My colleague did not base his decision on this distinction (as explained in para. 55 of his opinion). Nevertheless, I wish to address this distinction, due to its extensive discussion in my colleague’s opinion, even if it was over and above what was required. I will begin by saying that I agree that the distinction between a binding norm and an enabling norm is important, but I would add that in cases similar to that before us, it is better not to base a decision on it. First, the answer to the question of whether the practice of separation is an “obligation” or an “enhancement” is liable to be controversial, and the Court ought not to be the arbiter on this question. Second, and more importantly, we must bear in mind the possibility that there may be strict religious approaches that view separation or total exclusion of women from the public sphere as a real obligation. In my view, even if this were the case, it would not be right to accord this consideration precedence in those cases in which the violation touches the core of the right to equality (in the spirit of para. 56 of my colleague’s opinion).

11.       In effect, the matter may be presented as follows: when the practice of separation and exclusion does not stem from a binding religious norm, but from a desire to enhance a precept, the weight that must be attributed to following this practice as against protection of the right to equality should be relatively low. However, the opposite conclusion should not be derived from this, namely, that when the practice of separation and exclusion stems from a binding religious law, it ought to take precedence over the right to equality for that reason alone.

 

Between the Private and the Public

12.       I wish to address an additional aspect relating to the “placement” of the present case on the continuum between the private and the public. The cause of action is grounded in the Prohibition against Discrimination Law, which also applies to use of resources, for which there is no formal limitation as to number or extent beyond the constraints resulting from market conditions (such as businesses of various types). At the same time, the cause of action acquires added power and gravity when the exclusion involves activity to which access is limited from the outset, and which is therefore monitored and regulated by the state. In such cases, in which the activity belongs to some extent or another in the “public” arena as well, the weight of the claim of exclusion is even greater, as is the harm. An example of use of a resource of this type is found in the area of public transport (see: HCJ 746/07 Ragen v. Ministry of Transport [3]). Similarly, a broadcast on a radio frequency constitutes a clear use of a public resource which is even subject to quantitative limitations (see: HCJ 1030/99 Oron v. Speaker of the Knesset [30], at 651). It is therefore important to emphasize that this case does not involve intervention in an internal communal area, but rather, it involves fashioning the face of the public sphere – a fact that adds to the justification for certifying the class action.

 

A Final Word

13.       “A voice is heard in Ramah” – may that also be the voice of Rachel.

 

Decided as per the judgment of Justice Y. Danziger

27 Kislev 5776

9 December 2015

 

 

 

 

In the Supreme Court

Sitting As the High Court of Justice

HCJ 3809/08

HCJ 9995/08

 

Before:	Her Honor, President (Ret.) D. Beinisch His Honor, President U. Grunis His Honor, Deputy President E. Rivlin Her Honor, Justice M. Naor Her Honor, Justice E. Arbel Her Honor, Justice E. Hayut His Honor, Justice H. Melcer
The Petitioner in HCJ 3809/08:	The Association for Civil Rights in Israel
The Petitioner in HCJ 9995/08:	The Israel Bar
AGAINST
The Respondents in HCJ 3809/08:	1. The Israel Police
	2. The Military Police CID
	3. The Police Internal Investigations Department of the Ministry of Justice
	4. The Securities Authority
	5. The Antitrust Authority
	6. The Israel Tax Authority
	7. The Minister of Justice
	8. The Knesset
	9. Bezeq, The Israel Telecommunications Corp. Ltd
	10. Pelephone Communications Ltd
	11. Cellcom Israel Ltd
	12. Partner Communications Ltd
	13. MIRS Communications Ltd
	14. HOT Telecom LP
	15. Netvision 013 Barak Ltd
	16. 012 Smile Communications Ltd
	17. Bezeq International Ltd
The Respondents in HCJ 9995/08:	1. The Minister of Justice
	2. The Israel Police
	3. The Military Police CID
	4. The IDF Military Police Internal Investigations Unit
	5. The Securities Authority
	6. The Antitrust Authority
	7. The Israel Tax Authority
	8. The Knesset
Amicus Curiae in HCJ 3809/08:	The Press Council

 

Petitions for the award of an order nisi

 

Date of Sessions:	28th Shevat, 5769 (February 22, 2009)
	23rd Cheshvan, 5770 (November 10, 2009)
On behalf of the Petitioner in HCJ 3809/08:	Adv. Dori Spivak
On behalf of the Petitioner in HCJ 9995/08:	Adv. Dan Hay; Adv. Kobi Sade
On behalf of the First to Seventh Respondents in HCJ 3809/08 and HCJ 9995/08:	Adv. Dana Briskman;
On behalf of the Eighth Respondent in HCJ 3809/08 and HCJ 9995/08:	Adv. Roxanna Scherman-Lamdan
On behalf of the Tenth Respondent in HCJ 3809/08:	Adv. Guy Flanter; Adv. Abayansh Tasma
On behalf of the Eleventh Respondent in HCJ 3809/08:	Adv. Jonathan Hamo; Adv. Asher Doga
On behalf of the Twelfth Respondent in HCJ 3809/08:	Adv. Amir Vang
On behalf of the Ninth and Thirteenth to Seventeenth Respondents in HCJ 3809/08:	No appearance
On behalf of the Press Council (Amicus Curiae):	Adv. Orna Lin; Adv. Vered Kinar

 

 

 

JUDGEMENT

 

President (Ret.) D. Beinisch

 

The petitions, which have been joined, concern the constitutionality of some of the arrangements prescribed in the Criminal Procedure (Powers of Enforcement – Communications Data) Law, 5768-2007 that was published in the Official Gazette on December 27, 2007 and came into effect on June 27, 2008 (hereinafter referred to as “the Communications Data Act” or “the Act”), which permits the Israeli investigatory authorities to obtain communications data of telecommunications subscribers generally, as they are defined in the Communications (Telecommunications and Broadcasting) Act, 5742-1982 (hereinafter referred to as “the Communications Act”).

 

General

 

1.         It is common to say that we are now living in what is called the “information age,” an age in which advanced technology makes it possible to transmit large-scale data in respect of the world around us immediately. Infinite information flows through various media – especially the Internet and the cellular communications related to it – providing a rapid answer to all the issues that concern us in our lives. The general public takes an active and intensive role in the flow of information and it streams data into the information market that affects different strata of the fabric of our lives.

 

As everyone knows, the technological age has not stopped developing merely with the creation of infrastructure for the ongoing transmission of information, and over the years modern technologies have also been created to enable gathering the information that flows in the virtual world and processing and analyzing it according to the different needs of those who have the ability to do so. Combining the ability to transmit information rapidly and the ability to gather it has given various entities – from State authorities, through private corporations to organized crime – a wide variety of tools and abilities they did not previously have.

 

This is also the background to the enactment of the Communications Data Act – the subject matter of the petitions – which resulted from an attempt to regulate how the various State authorities’ powers to obtain communications data on Israel’s residents are exercised in the course of performing their public duties, as well as to regulate how those data are kept by the authorities. This is of particular relevance in terms of how enforcement agencies follow the Act when performing their duties, and it necessitates a balance between the purpose of enforcement and the infringement of individual liberty.

 

2.         The Communications Data Act prescribes arrangements, as detailed below, which enable investigatory authorities – the Israel Police, the Military Police CID, the Military Police Internal Investigations Unit, the Police Internal Investigations Department of the Ministry of Justice, the Securities Authority, the Antitrust Authority and the Israel Tax Authority – to obtain communications data of telecommunications subscribers generally. According to the Act, a telecommunications subscriber is anyone who receives telecommunications service. The Act defines “telecommunications” as “broadcasting, transfer or reception of signs, signals, writing, visual forms, sounds or information by means of wire, wireless, an optical system or other electromagnetic systems.” Therefore, a telecommunications subscriber is anyone who makes use of a telephone, mobile phone or computer for the transfer of messages of any type (conversations, text messages, email and the like.) This means the Act makes it possible to obtain communications data from all the communications companies – the various different cellular and line telephone companies and Internet providers. The communications data covered by the Act include subscriber data, which include the subscriber’s identifying particulars, details of his means of paying for the service, the address where the telecommunications device used by him is installed and more; location data, which include pinpointing the peripheral equipment in the subscriber’s possession; and traffic data, which include details of the type of message transmitted, its duration and scope, identification details of the subscriber who is the source of the message and also the subscriber to whom it is addressed, the time of the message’s transmission and more. The Act clarifies that obtaining those data does not include obtaining the content of the messages transmitted. The ability to obtain the content of communications messages is limited, and it is regulated by the Secret Monitoring Act, 5739-1979 (hereinafter referred to as “the Secret Monitoring Law,”) that is not subject to constitutional review here.

 

In brief, it can be said that the Act regulates three major aspects. The first concerns granting the relevant authorities power to obtain an ex parte order for obtaining communications data. The second is issuing an administrative permit, without filing a motion with a court, to obtain communications data in the cases detailed in the Act. The third is a database set up by the Israel Police to include several sets of data prescribed in the Act.

 

3.         Two similar petitions challenge the Act, focusing on complaints related to those three arrangements (hereinafter “the petitions.”) On April 28, 2008 the Association for Civil Rights in Israel filed a petition in which the Association maintains, in a nutshell, that the arrangements established by the Act to obtain communications data infringe the right to privacy disproportionately, and that the Act, as it is, is therefore unconstitutional. On November 26, 2008 the Israel Bar filed a petition aiming, in a nutshell, to limit the Act’s application to those who have privilege (hereinafter referred to as “professionals,”) such as attorneys and their clients, and also to restrict the ability to use the information collected under the Act as evidence in court proceedings. At a later stage the Press Council joined the first petition as amicus curiae, seeking to emphasize the harm anticipated from implementing the Act on journalists and their work because of the possibility created by some of the Act’s provisions that journalists’ sources would be exposed. With the State’s oral consent, given during a hearing held before us on February 22, 2009, these petitions were heard as if a provisional order had been issued.

 

Discussion

 

4.         The petitioners’ arguments in the petitions are rooted in constitutional law, which are the foundation for the constitutional challenge against the Act. We shall therefore review their arguments according to the process of constitutional review accepted in our jurisprudence; in the first stage we shall review whether the Act does indeed infringe upon a protected constitutional right; in the second stage we shall review whether the Act meets the requirements of the Limitations Clause – whether it is for a proper purpose and whether it meets the criteria of proportionality accepted in our case law. In this latter respect we shall focus the discussion on the three main arrangements that make up the Act, which the petitioners’ arguments mainly target . Alongside this, we shall consider whether the Act overall, given all of its arrangements, meets the criteria of proportionality. After all this we shall consider several other arguments made by the petitioners.

 

Does the Act Infringe a Protected Human Right?

 

The Right to Privacy in the Information Age

 

5.         The petitioners’ central complaint is that the Communications Data Act infringes the constitutional right to privacy. The right to privacy is enshrined in section 7 of Basic Law: Human Dignity and Liberty, which is titled “Privacy” and provides as follows:

 

“(a)     All persons have the right to privacy and to intimacy.

(b)       There shall be no entry into the private premises of a person who has not consented thereto.

(c)       No search shall be conducted on the private premises of a person, or on or in his body or personal effects.

(d)       There shall be no violation of the confidentiality of conversation, or of the writings or records of a person.”

 

In light of the clear, express language of the Basic Law, it appears we need not go into the extensive case law that has elucidated these express statements for the purpose of these petitions. Instead, suffice it for us to refer to the classic definition of the right to privacy, developed by Warren & Brandeis back in 1890, as “the right to be let alone” (S.D. Warren, L.D. Brandeis, The Right to Privacy, 4 Harv L. Rev. 193 (1890)). As was held in the past, the right to privacy “draws a domain in which the individual is left to himself, to develop his ‘self,’ without the involvement of others (and see HCJ 2481/93, Dayan v. The Jerusalem District Commander, IsrSC 48(2) 456, 471 (1994) and the references there,) and as such it is worthy of constitutional protection.

 

Nevertheless, given current reality it would be difficult for us to discuss the right to privacy without giving weight to the complexity of protecting it in the modern age because of the challenges that modern technology poses to the proper protection of the right (Michael Birnhack, The Private Domain: the Right to Privacy between Law and Technology, at 35-36, 44-55, 57-88 (5771) (hereinafter: “Birnhack”); David Brin, The Transparent Society – Will Technology Force Us to Choose between Privacy and Freedom?, at 3-26 (1998)).

 

On one hand, it is clear to everyone that modern technological resources give those with access to them – be they the State or private individuals – numerous very sophisticated tools to penetrate a person’s private domain that used to be considered almost inaccessible: means of surveillance and identification, computerized search methods and organized data collection in electronic databases. On the other hand, at the same time technology also provides tools that make greater protection of privacy possible, enabling the blurring of identity in the virtual domain and the performance of acts in the real world that used to necessitate complete exposure: from economic interactions through to the creation of virtual, interpersonal connections. For us, this complexity means an ambivalent attitude to the adoption of such technologies and their role in protecting the constitutional right to privacy. Moreover, it is not unusual these days to hear arguments that the behavior of individuals in the information age can be regarded as their implied waiver of privacy rights. This is in light of a prima facie informed choice by individuals in society to conduct social, political and economic interaction over the Internet and cellular communications, with clear knowledge of the potential exposure of that information (see further, Birnhack, at 267). It should be noted that only recently the significance of this implied waiver arose in a decision by the United States Supreme Court that came down on January 23, 2012 (United States v. Jones, hereinafter: “Jones,” available at http://www.supremecourt.gov/opinions /11IsrSCf/10-1259.IsrSCf). All these aspects demonstrate to us the complexity of imposing constitutional balances and delineating the boundaries of the right to privacy in the present age. We have borne this complexity in mind when ruling on the petitions.

 

The complexity of positioning the boundaries of protection of privacy is particularly highlighted against the background of the “concern about excess power of the State, which may gather together under its control extensive information about citizens and residents and may abuse such information” (Then Justice A. Grunisin HCJ 8070/98, The Association for Civil Rights in Israel v. The Ministry of Interior, IsrSC 58(4) 842, 856 (2004)). This concern increases as the government gains more sophisticated means, making more extensive infringement of privacy possible. On the other hand, it is also clear that modern technology is a vital, important tool in the hands of the government, a tool that significantly assists the government in performing its duties. In fact, barring the authorities from making reasonable, balanced use of technological tools available to them could significantly impair their ability to perform their law enforcement duties. This is because technological progress and the tools that it develops are not only in the authorities’ possession but are also extensively used by both small and large criminal groups that long ago realized their advantages strongly facilitate their objectives (see also Birnhack, at 175-176). In this technological battle, which continues to be waged, he who lags behind is likely to have the lower hand. It can therefore be said that the authorities must almost certainly keep their hands on the technological pulse and rapidly adopt advanced tools and systems to help them do their work.

 

We considered this complexity in the past in a discussion that was focused on the proper regulation of the laws of search regarding “intruding” into one’s computer:

 

““Needless to say that due to the potential infringement of the individual’s rights when intruding into computer material, such regulation is essential and therefore ought to be completed soon. In the present era, computers have become a prime work tool and means of communication and an almost infinite archive that stores one’s memories, the fruits of his work and his negotiations (as to the potential infringement of one’s rights when intruding into computer material, see Sharon Aharoni-Goldenberg, Hacking into Computer Systems – the Ideal and Actual Scope of the Offense, The David Weiner Book on Criminal Law and Ethics 429 (2009) (hereinafter: ‘Aharoni-Goldenberg’). At the same time, the intensive use of computers also makes them a treasure trove of incriminating evidence and relevant information that can and should be used by investigatory authorities in their battle against lawbreakers and criminals. The complexity and sensitivity of the subject makes it necessary for the Act’s adaptation to technological innovation and the potential harm that follows technology, to be undertaken not only seriously and responsibly but also with due speed” (CrimLA 8873/07, Heinz Israel Ltd v. State of Israel, (unreported, January 2, 2011) para. 17 of the opinion).

 

The statement is also apt herein.

 

The balance between these extremes – the concerns of government’s over-intrusion into the individual’s life, on the one hand due to increased technological capabilities, and the importance of recognizing the advantages that technological resources provide as a means to ensure security and public order, on the other hand – is what lies at the heart of the petitions herein. Making these balances is undoubtedly intricate. In our opinion we shall examine whether the balance the legislature reached in the Act’s arrangements meets the constitutional criteria recognized in our legal system.

 

In this context we would mention that this complexity – which affects the right to privacy in the modern era – is certainly not specific to Israel, and many countries seek to contend with it. As mentioned, as recently as January 23, 2012 the United States Supreme Court decided Jones, which is important to this issue. In that case the question that arose was whether attaching a GPS tracking device to a person’s private vehicle amounted to a search, which is protected by the Fourth Amendment to the United States Constitution. The United States Court unanimously held that the search violated the Constitution and that an appropriate judicial order was therefore necessary. Nevertheless, the Justices were split on the proper criterion for the application of the Fourth Amendment – whether it should be in the context of the doctrine of trespass under common law (the majority opinion) or in the scope of the criterion adopted in Katz v. United States, 389 U.S. 347, namely the “reasonable expectation of privacy” (the minority). The ability of different criteria to adapt to the changing technological environment that makes the physical dimension underlying the search less relevant given the technological surveillance capabilities that the authorities currently possess was, among other things fundamental to the difference in opinions between Justices.

 

6.         We would also mention the important protection of the right to privacy provided by the Protection of Privacy Act, 5741-1981, which preceded the Basic Law and prohibits infringement of privacy. Although the Protection of Privacy Act expressly provides that a security authority is immune from responsibility under that statute, the exemption is limited to “an infringement reasonably committed in the course of their functions and for the purpose of carrying them out” (section 19(b) of that Act.)

 

Infringement of the Right

 

7.         The Act relevant to these petitions makes it possible, as noted, to obtain communications data relating to the conversations between a subscriber and other parties, the type of messages that the subscriber transmits, their scope, duration and more. In fact, as its language additionally reflects, the Act permits obtaining all the information concerning the message transmitted, other than its contents. In addition, the Act allows obtaining extensive information about the subscriber, independently of the message he transmitted – the subscribers’ current location (looking back and to the future), address, the means of payment used to purchase the device in his possession and more. In its general wording the Act allows obtaining communications data about any person involved in an offense, whether he is the victim, suspect or someone else who can lead investigatory entities to a clue. Moreover, though incidentally, the scope of the powers granted by the Act includes the authority to obtain other communications data relating to other individuals who are not necessarily involved in any offense, with whom the person who is involved in the offense has been in touch.

 

On its face, reviewing the powers granted by the Act suffices to reach the conclusion, which even the State does not dispute, that the Act indeed violates the constitutional right to privacy. Clearly, in surveillance of a subscriber, the investigatory authority can observe his habits in using a mobile phone, a computer or the Internet and thereby locate his social network and his activity both during working hours and in leisure time. Even assuming that the surveillance is justified and even if the subscriber is somehow involved in an offense that should be prevented, there is no doubt that his privacy is infringed when his moves are studied in such a way. Clearly, the surveillance of someone, even for the purpose of a criminal investigation, can reveal other details, the knowledge of which constitutes an infringement of the person’s privacy, such as health problems, consumption habits, sexual preferences and the like. The very knowledge of them infringes the person’s privacy after the data is obtained and they certainly have potential to infringe his privacy when they can be used for the purposes of investigation. This is also the case in respect of third parties with whom the individual involved in the offense has any contact. In their petition, the petitioners draw a scenario similar to that described by George Orwell in 1984. Even without finding that we have already reached such a horrifying scenario, there is no doubt that the feeling of surveillance – the knowledge that the investigatory authorities are watchful and can scrutinize anyone, anywhere and at any time – has a disciplining effect on a person’s behavior even in the private domain (Michel Foucault, Discipline and Punish: the Birth of the Prison, 195-228 (1977); Bart Simon, The Return of Panopticism: Supervision, Subjection and the New Surveillance, 3(1) Surveillance and Society 1-20 (2005)). Such being the case, it appears that we can assume that the Communications Data Act does indeed infringe upon the constitutional right to privacy.

 

8.         As to the extent of the Act’s infringement of the right to privacy, the petitioners compare the infringement of privacy caused by the Act and that caused by the Secret Monitoring Act. According to them, the infringement is on a similar scale, which, in the appropriate cases, necessitates a comparison between the various arrangements in the Secret Monitoring Act and the Act relevant to these petitions. The State again emphasized to us that, in its view, the comparison is not appropriate and that the infringement caused by the Communications Data Act is not similar to that caused by the Secret Monitoring Act. Thus, it was explained, for example, that the Communications Data Act does not permit actual listening to conversations or reading written transmitted messages, while the Secret Monitoring Act allows far greater exposure of one’s privacy. According to the State, the infringement caused by the Communications Data Act is more akin to that caused by search warrants and production orders of different types.

 

It seems that the State’s position is accepted in other legal systems. Thus, for example, American legislation distinguishes between four basic categories of electronic surveillance (see the Electronic Communications Privacy Act 1986 (ECPA) established by Chapter 18 of the United States Code (hereinafter: “USC”), the first category, and the greatest infringement of privacy, is secret monitoring (which is regulated by Chapter 1 of the ECPA). The other categories are perceived as constituting lesser infringements of privacy: electronic tracing devices (which in certain respects provide information similar to location data in the Israeli statute) are perceived as infringing privacy less than secret monitoring; obtaining data from communications service providers (similar in part to subscriber data in Israel) is a category whose infringement is even lower (the obtaining of which is regulated by the Stored Communications Act, which is part of the ECPA); and finally what are known in American law as pen/trap taps (electronic surveillance devices that make it possible to obtain data in real time about telephone numbers that have been dialed and received on a particular telephone device) that are defined as the least infringing surveillance category. In this context we would first note that the United States Patriot Act (2001) extended the definition to additionally include data about Internet addresses. Second, American courts are split as to whether permitting the use of these surveillance devices also permits obtaining data on the location of cellular phones (see further: Deborah F. Buckman, Allowable Use of Federal Pen Register and Trap and Trace Device to Trace Cell Phones and Internet Use, 15 ALR Fed. 2d 537 (2006)). This difference in the extent of the infringement is demonstrated in different arrangements formulated in American law for the different categories’ application, which include looser requirements as the infringement caused is mitigated. The same is the case regarding different data that can be obtained from communications providers under the Stored Communications Act mentioned above, which sets different arrangements depending on the type of data sought and distinguishes, for example, between identification data, which can also be obtained through an administrative subpoena (§2703(c)2, Chapter 18 of the USC), and the contents of transmitted messages, which require a search warrant with judicial authorization (§2703(a)(b)). Thus, according to American law’s approach, in light of the relatively limited infringement caused by obtaining data through surveillance devices of the pen/trap taps type, it was held in Smith v. Maryland, 442 US 735, 745 (1979) that individuals have no inherent expectation of privacy in the telephone numbers that they voluntarily dial. Consequently, it was held there that a motion to obtain such data cannot be considered a “search,” as protected by the Fourth Amendment to the Constitution and therefore investigatory authorities need not meet the requirements necessary for obtaining a search warrant. Nevertheless, as stated above, on January 23, 2012, the United States Supreme Court unanimously held in Jones that fitting a GPS tracking device to one’s private motor car and monitoring his movements for 28 days did constitute a “search” that is protected under the Fourth Amendment to the Constitution and therefore did necessitate an appropriate judicial order. English law also draws a similar distinction in protecting content data compared to communications data (see, for example, section 1 the Regulation of Investigatory Powers Act, 2000, c. 23 (Eng.) (hereinafter: “the RIPA,”) which requires an order for obtaining the contents of communications, as opposed to sections 21 to 25 of the same Act that grant powers to numerous authorities to obtain other communications data.)

 

It should be said that the parties’ positions regarding the extent of the infringement upon the right to privacy as a result the Communications Data Act impacted those parties’ positions regarding the Act’s arrangements and their proportionality. We have given consideration to these aspects and reached the overall conclusion that for the purposes of the petition we need not decide whether the infringement of the right to privacy in the Act is greater or less than the infringement of privacy resulting from the Secret Monitoring Act. It should not be overlooked that given modern technology, the State’s position creates a somewhat artificial distinction between content data and data, the obtaining of which the Act permits, because it appears that the differences between them are not so clear (see further Omer Tene, Look at the Pot and See What Is in It: Communications Data and Personal Information in the 21st Century, in Legal Net: Law and Information Technology 287 (Niva Elkin-Koren and Michael Birnhack eds., 2011). However, for the purpose of these petitions we need only find that the Communications Data Act indeed infringes upon the constitutional right to privacy, and we do not consider it necessary to establish strict rules on the relationship between the data obtained under the Secret Monitoring Act and the data obtained under the Act subject to our review.

 

In any event, it is clear that such infringement in itself does not render striking down the Act as unconstitutional. Investigatory powers, like penal powers, for the most part inherently infringe protected human rights. We must therefore analyze – under our accepted constitutional system – whether the infringement of the constitutional right which results from the Act’s implementation meets the requirements of the Limitations Clause of Basic Law: Human Dignity and Liberty. Should it become clear that the infringement meets such requirements, there would be no constitutional reason to strike down the Act.

 

9.         However, before moving on to study the conditions of the Limitations Clause, in view of the petitioners’ pleas, we must also review whether alongside the right to privacy, the Act infringes other protected rights. According to the Israel Bar, In addition the infringement of privacy, the Act does infringe other rights, namely the rights embodied in the professional privileges that have been recognized by statute and case law, including the right to be represented by defense counsel, freedom of the press, freedom of association, free expression, freedom of occupation, freedom of religion and more. Naturally, the Bar devoted most of its arguments to the infringement that the Act causes, as it argues, to attorney-client privilege and to the client’s right to be assisted by an attorney, even when the attorney is not at all involved in the offense.

 

Indeed, as a general rule, it can be said that the infringement of privilege established in statute might infringe the rights the privilege protects. Among other things, as the State also mentions in its reply from January 11, 2009, the infringement of attorney-client privilege might infringe the client’s due process rights. Similarly, infringing the privilege of a journalist’s source might lead to an infringement of the journalist’s freedom of expression. Moreover, infringing the privilege of other professionals presumably impairs – if only to a certain extent – their professional activity. On its face, professionals’ freedom of occupation is thereby also infringed because such infringement erodes their ability to assure their clients’ absolute confidentiality about the very relationship with them, which is an important aspect to many clients, especially when the mere need for the professional is something that the client wishes to conceal, for example need for psychological treatment or support by the social services.

 

Nevertheless, according to the State, the Communications Data Act – which as mentioned, prohibits the transmission of message content – does not infringe upon the various different professional privileges (except in the case of journalists, as discussed below.) This is because obtaining data concerning the very relationship between the privileged person and the professional is not within the scope of the privilege recognized by the Israeli legal system.

 

10.       Courts have reviewed the extent of the various different professional privileges several times in the past and have held that professional privileges essentially extend to the content of the conversations held between the professional and the privileged person but not to the very existence of a relationship with the professional. The purpose of the privilege is to allow the privileged person a realm of free communication between him and the professional. Therefore, it appears that there is merit to the State’s position that, generally, when the statute does not permit obtaining the contents of the conversation it does not infringe upon the protection that the privilege affords to the privileged person. (See also on medical privilege: HCJ 447/72, Dr Bernardo Ismachovitz v. Aharon Baruch, Tel Aviv and Central Investigatory Assessing Officer, IsrSC 27(2) 253, 259 (1973) (Justice Y. Sussman); on attorney-client privilege: MP 227/83, Eliyahu Miron et al v. State of Israel, IsrSC 45(1) 62, 79 (1983) (Judge Z Cohen); MP (TA) 1529/83, Israeli, Yerushalmi, Cohen & Co. v. State of Israel, DCJ 5746(3) 265 (1985), which was upheld in HCJ 301/85, Jacob Israeli v. Israel Levy, Deputy Chief Secretary of the Tel Aviv – Jaffa District Court, IsrSC 40(1) 159 (1986)). See also Gabriel Kling, Ethics in Advocacy 418 (2001). See also in American Law: Baird v. Koerner 279 F. 2d 623 (9th Cir. 1960).

 

It is fitting here to emphasize that professional privilege, including attorney-client privilege, is for the benefit of the client, not the professional, as has already been held:

 

“The privilege in section 90 above is that of the client and is first and foremost designed to guarantee an honest and open relationship between him and the attorney when the latter’s professional services are needed, without the client being concerned or afraid that matters or documents disclosed during the consultation or handling of his case will ever be used against him without his consent” (BAA 17/86, John Doe v. Israel Bar, IsrSC 41(4) 770, 778 (1987), Justice M. Beiski).

 

As for journalists, the situation is slightly different. We have already discussed the importance of free press in many decisions by this Court as well as the difference between journalism and other professions. Thus, in CFH 7325/95, Yedioth Aharonoth et al v. Kraus et al, IsrSC 52(3) 1, 53 (1998) Judge Y. Zamir stated that:

 

“A free press is not only a necessary result of democracy but it is also a necessary condition for democracy. It is a necessary condition for a representative regime, for fair and functioning governance and for human liberty. It can in fact serve as a litmus test for democracy: there is free press, so there is democracy; there is no free press, so there is no democracy. One of the main functions of the press in a democracy is to regularly and effectively criticize and check all the state agencies, and first and foremost the government. To enable the press to perform that function properly, it must be free of supervision or other government involvement.”

 

As the State also agreed, with regard to journalists, the very identity of the person who contacts a journalist can constitute part of journalistic privilege because it may expose the journalist’s source despite the protection given to such sources. This Court, by Justice M. Shamgar, discussed the protection afforded a journalist’s source in the Tzitrin case (MP 298/86 Ben Zion Tzitrin v. The Disciplinary Tribunal of the Israel Bar, Tel Aviv District IsrSC 41(2) 337 (1987)). Justice Shamgar stated there: “protection of sources of information necessary for the performance of a journalist’s function, including protecting the relationship of trust on the basis of which information is given in return for assurance that the source will not be revealed, is therefore a public interest and not the particular interest of the relevant newspaper or journalist” (id., at 358). We shall return to this relevant distinction below when we come to discuss its significance in respect to the various arrangements concerning those who have privilege.

 

To summarize, given the concept of privilege in our legal system, apart from the case of journalists, the petitioners were unable to demonstrate that the Communications Data Act per se infringes the various professional privileges created by statute and case law. To the extent that there is an infringement, it is marginal to the protected right and not at its core, which enjoys broad protection. Consequently, nor have we found it possible to show infringements to other rights intended to be protected by the privilege.

 

Nevertheless, and for the purposes of the discussion here, we are willing to assume the possibility of obtaining communications data about professionals also constitutes a derivative infringement of the right to privacy. Consequently, when analyzing the infringement of the right to privacy as detailed above, it is proper to review it – together with the right’s derivatives by applying the Communications Data Act in light of the Limitations Clause.

 

The Limitations Clause

 

Proper Purpose

 

11.       The purpose of the Act, as put to us by the State, is to give the Police and other investigatory authorities effective tools for the battle against crime in the developing, modern world. According to the State, the dramatic development of the modern world of communications has not passed over criminals, and the media have become a convenient platform to improve the means of communication and commission of crimes. Consequently, enforcement authorities must contend with such capabilities and at the same time improve their own. It was therefore argued that an inability to obtain communications data would place law enforcement authorities at a significant disadvantage compared to criminals, both when it comes to detection and when it comes to gathering the evidence for their prosecution. In addition, the State pleads that the purpose of the Act is to make it possible to deal with urgent situations quickly, for example when a person’s life is on the line or when it is necessary immediately to find offenders who have already committed crimes. According to the State, communications data – and especially pinpointing the telephone – might save lives and significantly help the prosecution of offenders. It appears that at this level there is no dispute between the parties because, as emerges from the petitions, the petitioners also agree that the purpose of the Act is a proper one and in fact they are merely contesting some of the arrangements contained in it (and see para. 23 of the Association for Civil Rights’ petition and para. 22 of the Bar’s petition).

 

We would mention that in addition to these purposes, the State mentions another, which is to regulate the obtaining of communications data which until now, according to it, has been regulated generally and broadly in the scope of section 43 of the Criminal Procedure (Arrest and Search) Ordinance [New Version], 5729-1969 (hereinafter referred to as “the Criminal Procedure Ordinance”) and internal guidelines of the Attorney General. According to the State, the Act is designed to regulate and limit investigatory authorities’ use of communications data in order to reduce the infringement of human rights as much as possible. Clearly this purpose itself is also a proper one. The petitioners do not dispute this, and they also agree that the creation of a complete legal arrangement for obtaining communications data by enforcement authorities is justified (see para. 22 of the Bar’s petition). Indeed, as already mentioned above, it is difficult to conceive these days of law enforcement without monitoring communications data – from locating offenders when they commit offenses, tracking them and making immediate arrangements to stop an offense while it is committed (for more see Birnhack, at 53). It is therefore possible to sum up by saying that the Communications Data Act was legislated for a proper purpose. It is also clear that the Law is not inconsistent with the values of the State of Israel.

 

As such, our main discussion will address the proportionality of the Act and its arrangements. The petitioners themselves concentrated their constitutional arguments on the three basic arrangements relating to the possibility to obtain a judicial order under section 3; the possibility to obtain an administrative order under section 4; and the establishment of a database under section 6. At the same time, the petitioners’ case did not seek the Act’s striking down as a whole, and the Association for Civil Rights even emphasized in its petition that it does not dispute its “constitutionality as a whole”. Our discussion will therefore first focus on reviewing the individual arrangements challenged in the petition. We shall then also briefly discuss the proportionality of the Act as a whole, considering the mechanisms and internal balances in it.

 

The individual arrangements prescribed by the Law, the proportionality of which we shall discuss below, are as follows –

 

(a)       The Arrangements Prescribed in the Law

 

Section 3 – A Judicial Order

 

12.       Section 3 prescribes an arrangement that enables an investigatory authority, as defined by the Act, to obtain communications data by applying to the magistrates court in the jurisdiction where the investigatory unit is located or the offense for which the data sought was committed. Because of the section’s importance, we shall quote it below:

 

“Order to Obtain Communications Data from the Database of a Telecommunications Licensee

3.         (a)       The court may, upon a motion by a police officer authorized by the Inspector General, or by a representative of another investigatory authority (in this section referred to as “the motion”), permit by order the Police or the other investigatory authority to obtain communications data from the database of a telecommunications licensee as prescribed in the order, if it is satisfied it is necessary for any of the purposes specified below, provided that obtaining such communications data does not infringe any person’s privacy beyond that necessary:

                        (1)       To save or to protect human life;

                        (2)       To detect, investigate or prevent offenses;

                        (3)       To detect and prosecute offenders;

                        (4)       To lawfully confiscate property.

           

            (b)       Where the subscriber subject the motion is a professional, the court shall allow communications data to be obtained as provided in subsection (a) only where there are grounds to suspect that the professional is involved in the offense for which the motion is filed.

                       

            (c)       The motion shall be filed in writing, and it shall be supported by a declaration under warning, or by an affidavit.

           

            (d)       All the following shall, inter alia, be stated in the application:

                        (1)       The facts establishing the court’s jurisdiction;

                        (2)       Details of the identity and position of the filing party and the source of his authority to file for an order under this section;

                        (3)       A summary of the facts and information on which the motion is based;

                        (4)       The purposes for which the communications data are needed;

                        (5)       The requested communications data;

                        (6)       The period of time for which the communications data are requested, including the time period preceding the order, and – subject to the provisions at the bottom of subsection (g) – including the time period after the order (in this section referred to as “future communications data”);

                        (7)       Identifying details of the subscriber or the telecommunications installation for which the communications data are requested, if known in advance, including whether the subscriber is a professional covered by professional privilege under any law (in this Act referred to as “professional”); in this paragraph, “law” includes case law;

                        (8)       Details of previous motions to obtain communications data regarding the same person in the same investigation file (in this section referred to as “previous motions”).

 

            (e)       Privileged material, on which the information specified in subsections (d)(3) and (4) is based, shall be made available only for study by the court; the material shall be marked and returned to the moving party after it has been studied.

 

            (f)        (1)       The following shall be attached to the application:

 

                                    (a)       Decisions of the court that heard previous motions;

                                    (b)       Copies of previous motions and transcripts of court hearings on previous motions, to the extent that those were heard by a different court.

                        (2)       Notwithstanding the provisions of paragraph (1), the court may – for special reasons that shall be recorded – hear an urgent motion even without the documents in that paragraph, if it is satisfied that it has the information it needs in order to decide the motion.

 

            (g)       When deciding a motion and when setting the period for which the communications data will be provided, the court shall consider, inter alia, the need to realize the objectives detailed in subsection (a), the extent to which a person’s privacy will be infringed, the severity of the offense, whether the subscriber is a professional and the kind of communications data permitted to obtain under the order. The court may set different periods for obtaining communications data according to the type of communications data it permitted to obtain, provided that the maximum period for obtaining future communications data shall not exceed thirty days from the day of the order.

 

            (h)       All the following shall be specified in an order under this section:

                        (1)       The grounds for making the order, and for an order regarding a subscriber who is a professional – detailed grounds for making the order under such circumstances;

                        (2)       The communications data that may be obtained under the order;

                        (3)       Identifying details of the subscriber or of the telecommunications installation, for which the communications data were requested, if known in advance;

                        (4)       The period of time during which communications data may be obtained under the order;

                        (5)       The date on which the order is issued and the date on which it expires.

 

            (i)        The grounds for issuing the order, as provided in subsection (h)(1), shall not be communicated to the telecommunications licensee to whom the order applies.

 

            (j)        An order issued under this section shall be in effect for thirty days from the day of its issue. 

 

            (k)       The provisions of this section shall not limit the court’s power to grant additional orders in the same investigation.”

 

As can be seen, this comprehensive arrangement was established in primary legislation and it details the procedure of issuing a judicial order granting permission to obtain communications data. According to the arrangement, representatives of the competent authorities may request a communications data order from a court in the cases listed in the section. The particulars of the motion, and the factors that the court ruling on the motion must consider, are detailed and include reference to preventing unnecessary infringement of the right to privacy of the person for whom the order is sought and that of others.

 

13.       The petitioners’ arguments as to this arrangement are essentially twofold. Firstly, they maintain the objectives defined in sections 3(a)(2) and 3(a)(3) are overly broad. The petitioners ask us to read into these sections a restriction whereby the goal of a judicial order under the Act can be the investigation of a particular, specific offense or the detection of an offender who has committed a particular offense, rather  than general intelligence activity to be used by the investigative authorities in their regular work of detecting offenses and offenders. Second, the petitioners assert that applying the arrangement to misdemeanors violates the proper balance between infringing the right to privacy and the proper public interest of preventing dangerous crime, and the section should therefore only be applied to offenses that are a felony.

 

In its reply to the petitioners’ arguments, the State argued generally that the Act, including the arrangement now being discussed, is balanced, detailed, proper and practical, and that it improves, rather than violates, the protection of privacy. This is essentially considering the situation before the Act came into effect, when investigatory authorities could request communications data from communications companies with a court’s order to produce documents issued according to section 43 of the Criminal Procedure Ordinance upon the request of investigatory entities. The State explains that the legislature was aware of the possibility of infringing the right to privacy but, according to it, the current Act includes mechanism to properly protect citizens against disproportionate infringement of their rights. With reference more specifically to the petitioners’ first argument, the State asserted that it did not consider additional conditions to the Act’s sections to be justified. This is because, according to the State, the sections of the Act in any event require demonstrating a concrete suspicion in order to file the motion. Thus the petitioners’ concern about a general motion that involves no suspicion is dispelled. The mandatory reports to the Knesset also limit the petitioners’ concern. We shall consider the petitioners’ arguments in order.

 

The Breadth of the Grounds for Issuing a Judicial Order under Section 3

 

14.       According to the language of sections 3(a)(2) and (3) they do prima facie permit the investigatory authorities to act in the broadest of circumstances. According to those sections, when issuing an order the court may consider general objectives, like detection of offenses or detection of offenders. The acts specified in subsections (1) to (4) do in fact define all the functions of the investigatory authorities, and thus under the language of the Act the court may therefore issue an order to obtain communications data regarding any activity by such authorities. This arrangement meets the first requirement of proportionality because it maintains a rational connection between the objective of preventing crime and detecting and penalizing offenders. Nevertheless, the arrangement does create several difficulties in terms of the second proportionality requirement. In other words, does the arrangement in section 3 of the Act constitute the least restrictive means of those available to the investigatory authority. According to the petitioners, the purpose of the Act can be achieved by taking less restrictive means: exercising the power prescribed in sections 3(a)(2) and 3(a)(3) only in cases where the communications data is requested for detecting a particular offense or a specific offender, as opposed to general intelligence activity for detecting offenses or offenders.

 

15.       According to the petitioners, such a limiting requirement can be read into the Act under the doctrine known (essentially in Canadian law) as “reading in”. This doctrine seeks to read into the statute under judicial review a provision that will cure its unconstitutionality (on “reading in” see: Aharon Barak, Interpretation in Law, Part Three – Constitutional Interpretation 763 (5754), hereinafter: “Interpretation in Law”, HCJ 8300/02, Gadban Nasser v. Government of Israel (unpublished, May 22, 2012 (hereinafter: “Nasser”) paras. 55-60). It should first be said that the use of this tool is not the appropriate way to limit the arrangements in the Act as the petitioners seek. The use that is generally made of this doctrine has sought, in the name of the principle of equality, to apply the statute under review to categories the legislature omitted, reading new categories into the statute, all within the legislative purpose. This was done, for example, in HCJ 721/24, El Al Israel Airlines Ltd v. Jonathan Danilevitz, IsrSC 48(5) 749 (1994) (hereinafter: “Danilevitz”), when a new category – same-sex couples – was introduced into the beneficial collective agreement (and see Danilevitz, p. 764-67 and sources there; Interpretation in Law, Id.; see also s, para. 60). Our case is different. In the circumstances of the Act, we are not faced with a question of preferring certain categories to categories to which the Act, according to its plain language, does not apply, and we have no interest in infringing equality. Even the petitioners do not indicate such infringement. We therefore do not believe the doctrine of “reading in”, with all its implications, should be applied in the present circumstances. At this time, when the Act is before us at first instance, we must make use of the inherent tools at the Court’s disposal – interpretation of the statute from within it and according to its language. This is how we must interpret the arrangement in section 3 of the Act because, as we previously held, so long as the potential infringement involved in the provision of the statute can be limited by interpretation, the interpretive move should be advanced, thereby exercising constitutional review according to the Limitations Clause (and see CrimA 6659/06, John Doe v. State of Israel (unpublished, June 11, 2008) hereinafter: “the Unlawful Combatants case”, para 7).

 

As we know, the Court’s interpretative work is done according to the limitations obliged by the language and purpose of the statute, in addition to presumptions of interpretation accepted in our legal system which the interpreter may utilize (the Unlawful Combatants case; HCJ 9098/01, Genis v. Ministry of Construction and Housing, IsrSC 59(4) 241 (2004) (hereinafter: “Genis”). As the point of departure in the work of interpretation the Court will, so far as possible, seek to avoid striking a statute enacted by the Knesset in deference to the legislature and the separation of powers that stands at the centre of the Israeli legal system. The Court will therefore often prefer to leave the statute as it is, applying an interpretation that is adaptable it to the constitutional system and fundamental values. Accordingly, we shall seek to adopt an interpretation of the text that leads to the least infringement of human rights. As we said, for example, in the Unlawful Combatants case:

 

“Our legal system presumes the legislature has knowledge of the contents and effects of the Basic Laws and every statute enacted after them. According to the presumption, a statutory provision is reviewed in an attempt to interpret it so as to befit the protection extended to human rights by the Basic Law. This achieves the presumption of normative harmony, according to which ‘a discrepancy between legal norms is not presumed and every possible attempt is made to maintain ‘legal uniformity’ and harmony between various norms’ (A. Barak, Interpretation in Law – the General Doctrine of Interpretation (1992), 155).  … An effort of interpretation should be made in order, as much as possible, to reduce infringement on liberty so that it be proportional for the purpose of achieving security and no more. Such interpretation will be consistent with the basic philosophy prevailing in our legal system, that a statute ought to be implemented by interpretive means and as much as possible striking it down for unconstitutionality must be avoided” (id, para. 7).

 

And in HCJ 4562/92, Zandberg v. The Broadcasting Authority, IsrSC 50(2) 793, 812 (1996) President A. Barak stated:

 

“It is better to achieve limits on a statute by interpretation rather than having to limit it by declaring part of the statute void for violating provisions of a Basic Law… A reasonable interpretation of a statute is preferable to finding it unconstitutional.”

 

According to our said philosophy, based on the assumption that the legislature intends to limit infringement on human rights as much as possible, and especially the human rights enshrined in and protected by Basic Laws, there might be cases where, in order to achieve the purpose of the text and avoid striking it down, it is justified to interpret it more narrowly so that it will not apply, for example, to a particular category of circumstances.

 

President A. Barak’s statement is apt here:

 

“May the commentator limit the broad language of the text in order to achieve the purpose of the text? When the text prescribes a legal arrangement that applies to ‘everyone’ with respect to ‘everything’ in ‘all circumstances’, may the interpreter – who seeks to achieve the underlying purpose of the text – interpret the text so it does not apply to a particular category of persons (not ‘every’ one,) does not apply to a particular category of things (not ‘every’ thing,) and does not apply to a particular category of circumstances (not ‘all’ circumstances)? The answer to this question in Israel and also in comparative law is in the affirmative. I considered this in the Zandberg case, stating: ‘When the language of the statute is broad, the judge may and can give it a narrow meaning, extending to only some of the options emerging from the language, provided that he thereby achieves the purpose of the enactment. That is the case in Israel. That is the case in comparative law…

 

            … Indeed, in order to achieve the underlying purpose of the statute – be it a specific or general purpose – the interpreter may give the broad language of the statute a narrow meaning” (Genis, p 37).

 

From the General to the Specific – the Interpretation of Section 3

 

16.       Hence, it appears that under the circumstances here the petitioners’ application can be considered in terms of interpretation, as a request for narrow interpretation that would limit investigatory authorities’ ability to rely on general objectives for the purpose of orders to obtain communications data. To that end, we must, to use Justice M. Cheshin’s metaphor, “peel the statute as one peels the integuments of an onion: healthy ones are kept and unhealthy ones discarded” (Genis, at 268). The “unhealthy integuments” are those cases where the investigatory authority might have applied to court for an order to obtain communications data for achieving general objectives. Although according to the language of the Law – and its language alone – there is no bar, on its face, to doing so, it does appear that in light of constitutional interpretation, consistent with the language and purpose of the Act, the investigatory authority is not authorized to act in that way and must apply for orders only in cases where the order is necessary for detecting a particular offender or for investigating or preventing a particular offense that is anticipated or being committed. This conclusion is consistent with the particular stated purpose of the Act, which concerns combating crime and the detecting and punishing of offenders, while limiting the use of the broad tool embodied in section 43 of the Criminal Procedure Ordinance. This conclusion is consistent with the general purpose of the Act, which calls for limiting the infringement on the constitutional right to privacy so that it is proportional in achieving the purpose of the Act (see also Genis, at 291-93, the Unlawful Combatants case, para. 8). This interpretation is consistent with the fundamental concepts of our legal system and brings about a proper balance between leaving the Act as it is and achieving the goals of Basic Law: Human Dignity and Liberty.

 

As mentioned, this is indeed the position of the State as well. In its notice of May 22, 2008 the State agreed to this narrow interpretation. According to the State, the language of the Act clearly indicates its drafters intended to permit issuing orders in order to obtain communications data only where necessary to inquire into a concrete suspicion rather than for gathering general intelligence. The State clarifies that, in its opinion, too, in requesting an order investigatory authorities must at least “indicate a clue, the first stage of a prima facie evidential foundation for police action relating to a concrete investigation,” consistent with the relief the Association for Civil Rights seeks in its petition (para. 52 of the State’s notice). Then chairman of the Knesset’s Constitution, Law and Justice Committee expressed a similar position (hereinafter: “the Constitution Committee”) in the discussions around the Regulations for the Act’s implementation. Thus, then chairman of the Constitution Committee, Prof. Menachem Ben Sasson, stated during the discussion held on August 13, 2008: “This Act must be elucidated narrowly. That is to say that where there is doubt, the answer is ‘no’. I am not saying that as an interpreter of the Act but it cannot be interpreted otherwise and anyone participating in the discussions knows it…” (Transcript of meeting no. 639 of the Constitution, Law and Justice Committee of the 17th Knesset, 5 (August 13, 2008)). This limit on investigatory authorities’ discretion, which is accepted by the State, also finds expression in the Police procedure that regulates Police action under the Act, which is none other than procedure 03.344.306 that was formulated after the Act came into effect and when the petitions were pending (hereinafter: “the procedure”). As for section 3, the procedure adds little to what the Act requires given the procedure in section 3 is very detailed. Thus, the procedure specifies, lifted directly from the Act’s language, the details that any request for an order must included, as well as the considerations the officer seeking the order must apply. Those considerations are, inter alia, the severity of the offense and the strength of the suspicion, and the evidential foundation as to the request’s subject matter. By following this, the Police activity in terms of these orders complies with the proper interpretation as established by us above.

 

It should be emphasized that our above interpretation of section 3 is not based on the State’s concession as to the proper interpretation of the section or of other sections the petitioners have challenged.  Nor is it based on the existence of the Police procedure. The State’s concession or action may change as they are a product of the State’s policy alone. Nevertheless, under the circumstances here, that concession also reflects the proper interpretation that, in our opinion, should guide how the authorities exercise their powers. This interpretation is consistent with the language of the text and its purpose (both particular and general), and it permits the arrangement prescribed in section 3 to subsist as a proportional arrangement that does not over-infringe the constitutional right to privacy. Indeed, it might perhaps have been preferable to amend the Act itself so that it embodies the approach – shared by the State, the petitioners and the Court – with regard to the narrow implementation of section 3’s broad provisions. Nevertheless, interpretation is a tool at the Court’s disposal and it enables us to clarify the boundaries of the Act, even if the actual language of the Act remains unchanged. We would go on to say that in the scope of our interpretive work of identifying the legislative intent we may be assisted by information the executive authority holds (see: Aharon Barak, Interpretation in Law, Part Two – Legislative Interpretation 346 (5753) (hereinafter: “Legislative Interpretation”). Thus, the procedure demonstrates the Act’s legislative intent as viewed by the executive authority and that the interpretation it adopted is consistent with the interpretation that we have prescribed above. This joins with the other facts that have led us to conclude this is indeed the proper interpretation of the Act under review.

 

We have therefore reached the overall conclusion that the proper constitutional interpretation of sections 3(a)(2) and of 3(a)(3) of the Communications Data Act is that investigatory authorities are empowered to request a court for an order under the Act only for the purpose of detecting concrete offenders or offenses rather than for general intelligence activity as to offenders or offenses. This interpretation achieves the second requirement of proportionality because, in our opinion, it constitutes a means that less restricts the right to privacy, while still achieving the purpose of the Act in the same way. This conclusion is also required by the State’s concession to a narrow interpretation, which indicates that in its opinion the objectives for which the Act was passed will not be hindered by that narrow interpretation.

 

Given this interpretation, we have reached the overall conclusion that the arrangement in section 3 also meets the third requirement of proportionality because the extent of the infringement on the right to privacy – in the manner described – is in proper proportion to the benefit from applying the Act and its arrangements, a benefit which the petitioners themselves do not dispute.

 

17.       A similar approach, that relates to the necessary balance between the right’s infringement and the benefit to public interest characterizes parallel legislation in legal systems similar to ours, which have articulated various grounds for obtaining communications data – some more extensive than the grounds under Israeli law and some closer to the grounds included in it. Some countries have made the concrete nature of the offense or offender requirement clear as opposed to general aspects of law enforcement, and others have not. This reinforces our conclusion that in terms of the grounds for exercising authorities under the Act, and given the proper interpretation for their exercise, as delineated above, this aspect of the Israeli Act complies with the requirements of proportionality and is consistent with the constitutional concepts prevailing in legal systems that are similar to ours.

 

In English law, for example, the RIPA, mentioned above, regulates powers to obtain communications data in an arrangement that sets the various surveillance powers State authorities have, both to obtain the content of information and to obtain communications data without content. The Chapter that addresses the grounds for requesting communications data, regulated in section 22(2) of the RIPA, is relevant here. It details a very broad list of grounds for when communications data can be obtained. Not all the grounds make it possible to obtain all types of data and in any event obtaining them is subject to proportionality. The grounds are defined in the English Act as follows:

 

“(a) in the interests of national security;

(b) for the purpose of preventing or detecting crime or of preventing disorder;

(c) in the interests of the economic well-being of the United Kingdom;

(d) in the interests of public safety;

(e) for the purpose of protecting public health;

(f) for the purpose of assessing or collecting any tax, duty, levy or other imposition, contribution or charge payable to a government department;

(g) for the purpose, in an emergency, of preventing death or injury or any damage to a person’s physical or mental health, or of mitigating any injury or damage to a person’s physical or mental health; or

(h) for any purpose (not falling within paragraphs (a) to (g)) which is specified for the purposes of this subsection by an order made by the Secretary of State”.

 

From the above it is clear that the list of grounds in English law is far broader than those recognized in the Act subject to the petitions here. In American law as well, the accepted criterion for placing surveillance devices of the pen/trap device type – which require a judicial order – is relatively broad and examines whether the required data are “relevant to an ongoing criminal investigation” (18 USC §3123(a)(1) which is the ECPA, mentioned above). Reviewing section 2703(d), which addresses the conditions necessary for granting a judicial order to obtain communications data (which are similar to subscriber data and some of the traffic data in the Israeli Act), and also regulates the possibility of obtaining message content, a higher bar emerges, which is supplemented by the condition that the party requesting the order must indicate “specific and articulate facts showing that there are reasonable grounds to believe that the contents of a wire or electronic communication, or the records or other information sought, are relevant and material to an ongoing criminal investigation”. On its face, the American standard does not limit the nature and gravity of the investigation but it does appear that, like in the Israeli Act as we described above, it is necessary that the information is sought for a concrete investigation. Canadian law, on the other hand, permits granting a judicial order when only two requirements are fulfilled – other means of investigation cannot be used (or they have been attempted and failed); and the order “would be in the best interests of the administration of justice” (see the Criminal Code of Canada, §186(1)(a)), namely in circumstances where granting the order will best serve justice.

 

Application of the Arrangement in Section 3 to Offenses of the Misdemeanor Type

 

18.       As mentioned, the petitioners’ second argument is that the Act as a whole – and section 3 in particular – should be applied to offenses that are defined by the Israeli Penal Law as “felonies” but not to those defined as “misdemeanors”. As this argument goes, and reiterated in both petitions as well as in the position of the Press Council, offenses of the “misdemeanor” type extend over a wide range, a substantial proportion of which are not sufficiently serious to justify the infringing measures in the Act. Consequently, according to the argument, granting sweeping power in the Act to obtain a judicial order for all misdemeanors, without drawing lines based on the seriousness of the offense, is sweeping and not proportional. In support of this argument, the petitioners referred to the Secret Monitoring Act, which restricts the exercise of the power prescribed in it to felonies.

 

The State for its part does not believe that the petitioners’ arguments in this regard justify amending the Act, let alone striking it down . In its introduction, the State explains that many misdemeanors are serious, very common offenses that affect the quality and integrity of life in the country. Thus, for example, the State mentioned that these offenses include assault, fraud, forgery, breach of trust, computer hacking, sexual harassment, harassment by telecommunications device, obstruction of justice, witness harassment, giving information to the enemy, threats, negligent homicide and more. Serious misdemeanors are included in the Military Justice Act as well. The State therefore asserted that granting the relief sought and precluding investigatory authorities from obtaining communications data for misdemeanors would significantly impair their ability to perform their duties. Additionally, the State explained that there are misdemeanors that cannot be investigated without communications data, such as sexual harassment by a computer or telephone. The State also reiterated its position that the infringement caused by obtaining communications data is far reduced compared to that caused by other investigatory means, including secret monitoring. Therefore, according to the State, there is no justification for imposing a limitation based on the gravity of the offense, as prescribed in the Secret Monitoring Act. After all that, the State again emphasized that the Act prescribes many mechanisms intended to prevent its improper exercise, including for misdemeanors that do not justify it – from the detailed mechanism for submitting motions, through a court’s role in authorizations, to the mechanism for reviewing the Act’s implementation through reports to the Knesset and the Attorney General.

 

19.       The Penal Law, 5737-1977 (hereinafter: “the Penal Law”) prescribes in its definitions section that a misdemeanor is:

 

“An offense punishable by no less than three months’ imprisonment, but no more than three years imprisonment; and if the penalty is a fine – a fine higher than the fine that may be imposed for an offense punishable by fine the amount of which has not been determined ”.

 

            This definition applies to many of the offenses on the Israeli law books and it means that investigatory authorities’ powers under the Communications Data Act cover a wide range of offenses, the severity of which varies. Consequently, the petitioners’ argument that a sweeping application of section 3, without requiring authorities to consider the gravity of the offense, could indicate a disproportionate infringement on the right to privacy is understandable. In view of this, we somewhat hesitated as to whether it is indeed justified to leave misdemeanors to the sweeping application of section 3 or whether in this case as well the section should be narrowly interpreted so that only when particularly serious misdemeanors are concerned or where communications data is an inherent element of the offense (for example computer hacking) will it be possible to request the court for such an order.

 

            Ultimately, we reached the overall conclusion that this aspect does not warrant our intervention and that this arrangement meets the requirements of proportionality. To be specific, regarding the first requirement of proportionality, there is no question that there is a rational relationship between the means and the end because including misdemeanors would significantly help the Police achieve legislative intent and it would appear that their blanket removal would likely impair that ability. Nevertheless, as mentioned, here again the second requirement of proportionality raises difficulties because on its face, limiting the types of misdemeanor to which the arrangement applies similarly achieves the end but nevertheless reduces the infringement on the right to privacy. The position of the State in this respect is based on the nature of requests under section 3. According to the State, there is no justification for making a formal distinction between different types of misdemeanors for the purpose of applying the Act and the focus should be on the need for the request. To that end, according to the State, the Act establishes balances and checks that do not consider obtaining communications data as trivial but present a detailed mechanism for submitting the request. Moreover, as mentioned, these requests are submitted merely for the court’s approval and the court must review all the relevant aspects, including whether obtaining the data in order to detect the concrete offense infringes the right to privacy beyond that necessary. Again, the array of reports to the Knesset and the Attorney General should ensure that the arrangement is only used when appropriate.

 

Under the circumstances, it appears to us that the mechanisms in the Act – and especially the motion’s judicial review – may certainly provide at this time an adequate resolution for the petitioners’ concern as to the arrangement’s improper use. It should be added that according to the reports that were submitted to the Knesset in 2009 and 2010 as to the implementation, 60% to 70% of the motions for a judicial order were made and approved regarding felonies. As regards misdemeanors for which a judicial order was sought, it appears that between July 2009 and June 2010, a substantial proportion of the offenses would apparently have been considered by the petitioners, too, as “serious offenses”, including threats, theft, negligent homicide, harassment, arson, killing, vandalism, causing damage and more. These data indicate, on their face, that in the implementation of section 3 in terms of misdemeanors is not treated lightly and the data above certainly do not demonstrate the alleged disproportionality resulting from including misdemeanors under the section. Under the circumstances, and considering the restraint that we exercise in intervening in legislation, we have not found it justified for us to intervene in this determination by the legislature. Nevertheless, there is no doubt that the courts that grant the various motions are tasked with considerable work – to ensure the Communications Data Act is used solely in the cases where it is necessary according to the interpretation adopted above. In this respect it is clear that courts would have to analyze whether the nature of the offenses for which the orders are sought necessitate exercising the powers granted by the Act in light of the privacy infringements they cause. Courts would also have to consider the possibility that the extent of infringement by one type of data might be greater than another.

 

Apt in this respect is the Canadian Supreme Court’s ruling in R. v. Araujo [2000] 2 SCR 992, Par. 29, which our courts should also apply as a point of departure when considering various different motions to obtain data under the Act:

 

            “The authorizing judge stands as the guardian of the law and of the constitutional principles protecting privacy interests.

 

The judge should not view himself or herself as a mere rubber stamp… The authorizing judge should grant the authorization only as far as need is demonstrated by the material submitted by the applicant. The judge should remember that the citizens of his country must be protected against unwanted fishing expeditions by the state and its law enforcement agencies.”

 

As stated there, judges are duty-bound to safeguard the Act and the protection of privacy, and they must bear in mind that the State’s citizens should be protected against a fishing expedition conducted by law enforcement agencies.

 

Assuming that this power will be exercised only when appropriate, we believe that the arrangement that covers misdemeanours also meets the third criterion of proportionality because the infringement to privacy caused by its application is in proper proportion to the benefit from exercising the authorities the Acts grants.  

 

20.       It appears, regarding the types of offense that justify obtaining communications data, different legal systems have adopted different arrangements that are essentially based on the same principles. Thus, for example, it seems the American legislature did not see fit to limit the power to obtain data along the “ordinary” track – by judicial order under chapter 18 of the USC – to a particular type of offense. In English law, too, there is no such restriction and the grounds permitting obtaining communications data are, as mentioned, broader. It should nevertheless be noted that English law does define “serious crime”, but solely in the context of obtaining content data. According to the definition, a serious crime is one that carries, for an adult without relevant previous convictions, an expected sentence of at least three years imprisonment. It is also a crime committed in collusion, a crime committed with the use of violence or a crime leading to substantial financial gain. Hence, it appears that the English legislature also prescribed a threshold for the definition of a “serious crime” that does not make do with defining the offense according to the likely penalty for it, but also takes into account the circumstances in which it is committed. This substantive view with regard to the offense and its gravity is similar to the State of Israel’s position regarding cases in which it could be appropriate to act according to the arrangement in section 3. On the other hand, Canadian law, which regulates the issue through the Canadian Criminal Code, details a very extensive list of various offenses defined as serious. The Canadian list includes more than 100 offenses (see section 183 of the Criminal Code). Hence, we again see that different countries have prescribed different arrangements as to the types of offenses resulted in requests for obtaining communications data. We can infer from this that it is at least possible to articulate several means that achieve the purpose in the same way and it clearly cannot be said that the Israeli arrangement goes beyond those applied in countries with a similar constitutional regime. The arrangement therefore does not exceed the bounds of proportionality so that they justify the Court’s intervention.

 

21.       Consequently, regarding section 3, we have reached the overall conclusion that subject to our interpretation of above observations, the arrangement in section 3 meets the requirement of proportionality and we have therefore not found there is constitutional grounds for our intervention.

 

Section 4 – Administrative Order

 

22.       Section 4 of the Act prescribes a different arrangement that does not condition obtaining communications data upon a judicial order. Instead it allows investigatory authorities to obtain communications data in urgent cases through an order from a professional entity (hereinafter: “the administrative arrangement”). The language of the section is as follows:

 

“Permit to Obtain Communications Data in Urgent Cases

 

4.         (a)         A competent officer may – at the request of a policeman or military policeman, as the case may be – grant a permit to obtain communications data from a telecommunications licensee’s database without a court order under section 3, if he is satisfied that, in order to prevent an offense that is a felony, to detect its perpetrator or to save human life, it is necessary to obtain the said communications data without delay and that an order under section 3 cannot be obtained in time.”

 

            According to the petitioners, the arrangement in section 4 is disproportionate because it permits an administrative – rather than judicial – entity to issue an order that enables a serious infringement of privacy without the restrictions imposed on courts by section 3, especially in terms of professionals. The petitioners, who are also joined by the Press Council in this respect, focus their arguments on the following two. Their first argument is that the investigatory authorities’ power to obtain the communications data of professionals, especially journalists and attorneys, by administrative order is not proportionate. This is essentially because that power is not subject to restrictions similar to those the Act imposes on communications data orders regarding professionals because section 4 – unlike section 3 – does not refer at all to the aspects relating to obtaining an order in urgent cases when professionals are involved. According to the argument, enabling an administrative entity to infringe legal privilege without a judicial order is not proportionate. These arguments were presented to us by the entities that represent such professionals. As metioned, the Israel Bar filed a petition addressing the alleged damage to lawyers’ occupation because this compromises attorney-client privilege. The Press Council joined the general petition as amicus curiae and presented its arguments as to the likely damage to journalists’ occupation caused by section 4, in light of the potential exposure of journalists’ sources. The Press Council applied to the Court for the principal relief of an order striking down section 4 in terms of journalists so that a motion for obtaining communications data of journalists would be only allowed under the mechanism set in section 3(b) of the Act, namely by a judicial order alone, and only if there are grounds to suspect the journalist is involved in an offense. The other argument against the arrangement in section 4 made during the hearing concerned the method of implementing the arrangement and its alleged excessive use. In this context it was also argued that judicial and administrative review of investigatory authorities’ exercise of their powers under the arrangement is deficient.

 

23.       The State asserted in response that the benefit of this arrangement exceeds the infringement of the right to privacy caused by obtaining communications data urgently without a judicial order. According to the State, the need to save lives or immediately detect offenders at the crime scene does, in urgent cases, justify forgoing judicial review facilitated by a court procedure as provided in section 3 addressing the population as a whole, without having to make a specific distinction in the case of professionals. As appears from the State’s reply “the urgent cases which section 4 addresses are extreme… in cases of saving life, in urgent cases of solving a crime when the professional is the victim of a felony or is missing and must be found urgently, where it is necessary to obtain the professional’s communications data in order to prevent a felony of which he is suspected and other urgent cases of similar nature” (see para. 61 of the State’s reply of May 22, 2008). Moreover, the State asserted that the urgent arrangement is applied sparingly and limitedly according to relevant Police procedures. As discussed, on February 16, 2009 the State furnished for our review the Police procedure that regulates the Act’s application, formulated after the Act came into effect. The procedure is based on section 4(f) of the Act, which provides that “the Inspector General … shall ... prescribe provisions for the purpose of this section, including how the permit is granted … and may prescribe different provisions according to the grounds for granting the permit and the circumstances in which it is granted.” The procedure emphasizes and clarifies the Act and limits the competent officer’s discretion in two significant respects. Thus, in terms of the factors the competent officer must consider before authorizing obtaining communications data without a judicial order, the procedure replicates the factors the officer must consider before applying for a judicial order. It then adds other factors as to the existence of an urgent need to prevent an offense, to detect its perpetrator, or to save human life. These factors also include the type of communications data sought, the severity of the offense and the extent of the damage to those who are not suspects.

 

            As to professionals, the procedure distinguishes between journalists and others referenced in the procedure: lawyers, doctors, social workers, clergymen, psychologists, government ministers and Knesset member. In regard to urgently obtaining professionals’ communications data, the procedure mandates that: “if the subscriber is a professional, that should be specifically taken into account and the necessary balance should be made between the possibility of infringing the professional’s privilege and the benefit that the communications data might have in the specific investigation, factoring in the seriousness of the offense, the circumstances of its commission, the likelihood the communications data will indeed lead to discovering the truth and detecting the offenders” (para. 7B(4) of the procedure). Regarding journalists the procedure lays down a narrower arrangement, providing that “insofar as it is known that the subscriber is a journalist, who is neither suspected of the offense nor the victim, the competent officer shall not authorize obtaining their communications data or the traffic data type (a list of incoming and outgoing calls).” This distinction is inter alia based on the State’s position, as detailed above, according to which, but for journalists, in the absence of power to obtain the content of calls the Communications Data Act does not infringe the various different professional privileges. Nevertheless, the State agrees the different privileges in the context of making a decision to grant an administrative order must be considered, and this is within the competent officer’s discretion. According to this set of balances, the State believes that under the circumstances the arrangement is proper and proportional.

 

(a)     Is the Arrangement Prescribed in Section 4 Proportional?

 

24.       On the face of it, it is clear that the arrangement in section 4 is narrower than that prescribed in section 3. Thus, it applies only to offenses of the felony type and it is plain from its wording – and the State also elucidated the same in its reply – that it applies in concrete cases in which there is an urgent need to prevent an offense, detect a perpetrator or save human life. Our interpretive finding, that the provisions of the Act do not grant power to obtain an order in circumstances where the order is sought for general intelligence activity detecting offenses, therefore also applies to section 4. That is indeed the proper interpretation of the section. Moreover, section 4 permits only the Police or the Military Police CID, and no other investigatory authorities, to obtain communications data urgently, and it is effective only for 24 hours.

 

            Nevertheless, the arrangement extends the power of investigatory authorities to obtain communications data without a judicial order. Thus, for example, until the Act became effective, the investigatory authorities followed the Attorney General’s Directive 4.210 (90.013) (The Delivery of Information by Telephone Companies to Entities Having Investigatory Authority), which provides that without a judicial order communications data (other than the name, address or telephone number of the subscriber) cannot be obtained, unless the defense of necessity applies in the particular case. This threshold, which required immediate, urgent danger that justifies obtaining communications data, has been lowered in the current arrangement. Moreover, the arrangement lacks section 3’s restrictions to discretion, particularly the restriction on transferring professionals’ communications data. According to this arrangement, as set in the Act, it is prima facie possible to transfer a professional’s communications data without any restriction when authorized by a competent officer, who is satisfied there is an urgent need to do so. These restrictions, albeit not in full, do appear in the Police procedure that regulates both the competent officer’s discretion to authorize administrative permits and the obtaining of professionals’ communications data.

 

            The petitioners’ arguments in this context reflect both aspects. The first aspect is at the level of the administrative discretion. In this respect the petitioners argued that restrictions in addition to those specifically mentioned in section 4 should be imposed on how the administrative discretion is exercised. The other aspect, according to the argument, concerns the Act’s actual infringement on the various different privileges.

 

25.       The point of departure necessary for reviewing the proportionality of the arrangement is based on our above finding that, in general – apart from in the case of journalists – the Communications Data Act does not infringe the various different professional privileges. This is considering the scope and extent of those privileges as recognized by Israeli law, compared to the data that can be obtained by applying the Act’s arrangements. In the absence of such infringement, prima facie it cannot be said that because section 4 does not refer to professionals per se it must be struck down for unconstitutionality. This is reinforced especially because the purposes of sections 3 and 4 are not the same. While section 3 is intended to enable obtaining communications data in the cases detailed in the section, which by their nature give the authorities adequate time to turn to a court, section 4 is designed to give the Israel Police and the Military Police CID a tool for cases where there is an urgent need, that cannot be delayed, to obtain the data without approaching a court. This distinction between the purpose of the sections can on its face also justify a distinction regarding professionals so that where there is urgent need, for example in life-threatening cases or because of the gravity of the matter, the weight attributed to protecting their privacy would be diminished. For such cases, it is difficult to say that the mere absence of an express provision of the Act relating to professionals amounts to a constitutional flaw that justifies our intervention.

 

26.       Nevertheless, despite the arrangements’ different purposes, we cannot help but wonder why the legislature saw fit to set out such a detailed arrangement in section 3, which delineates how the discretion of administrative authorities and courts dealing with applications to obtain data must be exercised, while in section 4, which concerns only how administrative authorities’ discretion must be exercised, there is no similar detail whatsoever. We have not been satisfied, nor has it been pleaded to us, that there is any particular difficulty in establishing more detailed guiding criteria in section 4 as well, to give proper weight to its different purpose. Thus, for example, in the case of professionals, section 3 provides that “the court shall not permit obtaining communications data… unless it is satisfied, on the basis of clear details to such effect in the motion, that there are grounds to suspect that the professional is involved in the offense for which the motion was filed.” As aforesaid, in view of the difference between the arrangements, we have not found that the legislature was required to prescribe identical arrangements. Nevertheless, along the lines of the legislature’s provision in section 3, it would be proper, while exercising power section 4 of the Act grants, that the authority considered that the subscriber is a professional and decides whether it is appropriate to obtain communications data in such case considering the proper balance between the privacy infringement and the urgent need to obtain the data. The considerations should also include the reservations required by the fact that the details sought involve professionals who have a special interest in not disclosing the data. In this context the authority clearly could also consider whether it is appropriate to order obtaining communications data even where the professional is not involved in the offense.

 

            The Act’s language certainly does not limit such an interpretation regarding how the power granted by section 4 of the Act must be exercised. It is also consistent with the particular purpose of the arrangement because it does not preclude the issue of an appropriate order in urgent situations in terms of anyone, depending on the competent authority’s needs. It is also such as to create internal harmony between the Act’s sections by attaching greater weight to the duty to consider the right to privacy when professionals are involved, along the lines of the legislature’s own determination in section 3. In addition, this interpretation achieves the general legislative intent because it gives greater weight to the constitutional right to privacy. This interpretation thereby constitutes the least restrictive means, while achieving the arrangement’s legislative intent in a similar way. Consequently, it appears to us that this interpretation is the proper one regarding how the authority should exercise its power under section 4.

 

            It should be noted that this is in fact apt not only as to professionals, but also as to the overall aspects emerging from section 3 and the restrictions on judicial discretion that the legislature mandated in it and which should of course also guide the administrative authority when exercising its power under the arrangement in section 4. In fact, the restrictions section 3 imposes can be viewed as part of the overall relevant considerations that must come into account when exercising the powers granted by the Act, in light of the arrangements’ different purposes. This aspect in fact mirrors the axiom of administrative law that an authority must exercise its power while weighing all relevant factors and ignore improper factors (Daphne Barak-Erez, Administrative Law vol. II 642 (5770); HCJ 953/87, Poraz v. Shlomo Lahat, Mayor of Tel Aviv – Jaffa, IsrSC 42(2) 309, 324 (1988)). Thus, for example, alongside the special reference to professionals that we have discussed at length, it appears that before deciding to permit obtaining communications data, the type of communications data sought, the extent of the infringement to anyone not suspected, the gravity of the offense, the urgency and the ability to take the judicial track under section 3, and which option should be given first preference are, among others, the factors to be considered. Let there be no doubt that in light of the differences in circumstances around implementing the arrangements, the authority need not attribute similar weight to each of these considerations, and the decision should be made in light of the particular circumstances of the case. Nevertheless, it does appear exercising the power under section 4 is subject to particularly strict review of all the above factors.

 

27.       It appears the State, too, accepts this approach as to how the power under section 4 must be exercised in terms of professionals – and generally. Thus, it asserts in its reply that the administrative arrangement in section 4 was essentially designed to be used in extreme cases where the professional is the victim of an offense or suspected of a felony, or in extreme cases of saving life. Given that, it appears that the State also believes that the difference between the restrictions imposed by the arrangement in section 3 and those imposed on the party seeking to obtain data under section 4 is not so great. Bear in mind that the petitioners’ basic argument is that section 4 is disproportional because it does not prescribe conditions similar to those in section 3 of the Act. Consequently, given to the proper interpretation which requires exercising discretion in a way that considers all the factors necessitating obtaining communications data, and in light of the State’s position as to how that principle should apply, it appears the argument regarding section 4’s disproportionality fails.

 

            As discussed, the administrative arrangement’s purpose – saving human life, preventing serious crimes of the felony type or quickly detecting an offender who has committed a felony – is achieved through this tool, which prevents having to approach a court and awaiting a judicial order. This tool is of course restricted and clearly should only be used where “the main road” – seeking a judicial order under section 3 – cannot be followed. Thus it appears there is a rational connection between the means and the end and that the arrangement would only be implemented where the end cannot be achieved by other means. This is where the very court proceeding makes the Police unable to obtain communications data “in real time”, in very urgent cases that necessitate doing so. Even when approaching a court can be done as quickly as possible, the same speed as when a competent officer who is always accessible and whose authority to obtain communications data immediate, is impossible. The State’s examples as to the cases where this procedure is used demonstrate this. At the same time, it also appears the Police acknowledges the potential privacy infringement the administrative procedure causes and the proper interpretation as to the exercise of the power as found here, which also appears to be accepted by the State, therefore further limiting the competent officer’s discretion. These restrictions, and paying strict attention to applying the administrative process only in serious, urgent cases, in our opinion reflects a proper balance between infringing the right to privacy and the need for Police immediate action.

 

            This approach as to how the power granted by section 4 should be exercised is also reflected in the Police procedure, which, according to the Police, achieves the proper balance between infringing privacy and the purpose of obtaining the order under section 4. Regarding professionals, and how we believe the power must be exercised, the procedure emphasizes the importance of safeguarding their privacy and the privacy of their clients, and it requires the competent officer to carefully examine the need for administrative order, considering the gravity of the offense, the circumstances of its commission, and the likelihood that communications data would indeed result in detecting the truth and discovering offenders. Nevertheless, the procedure does not apply all the restrictions prescribed in section 3 and does not limit the use of administrative order for professionals solely to cases where they are involved in an offense – except in the case of journalists. As mentioned, in our opinion, the purpose of the arrangement in section 4 is not the same as that of section 3 and the arrangements therefore need not be identical. This difference is, as noted, found in how some aspects of section 4 are narrow compared to section 3. As mentioned, including restrictions in the procedure does not demonstrate their proper interpretation as to the exercise of the power in section 4. However, the procedure does express the authority’s position in this respect and this is coupled with the overall factors leading to the conclusion that our above interpretation is the proper one.

 

            In light of all the above and the legislative intent behind section 4, recognizing the importance of cases where an urgent need can justify infringing professional privilege, and considering the limited infringement of privilege obtaining the data that the Act permits causes in any event, it appears to us that the arrangement in section 4, as written, given its proper interpretation, which requires considering the issue of professional privilege and other aspects as mentioned, does not require additional legislative restriction over the authority’s power in this context. This arrangement, which appears in the Police procedure too, therefore expresses in our opinion the proper equilibrium between protecting the right to privacy and the sometimes urgent need to obtain communications data, and as such we have found that it meets the criteria of proportionality.

 

28.       As we have mentioned above, and as noted that the State agrees with this approach, different treatment of the journalist’s privilege is appropriate. The State was therefore correct in prescribing special conditions for journalists in the procedure. As mentioned, according to the procedure, if the subscriber is a journalist who is neither suspected nor the victim of the offense, the competent officer will not authorize obtaining communications data of the traffic data type. In this way the journalist’s privilege has special protection in the procedure. Nevertheless, in cases in which the journalist’s life is at risk or in which the journalist is himself suspected of offenses – and it should be borne in mind that only offenses of the felony type are relevant – and in exceptional circumstances when because of their urgency it is impossible to approach a court to obtain a judicial order, it is indeed appropriate to permit obtaining a journalist’s communications data, even if this might be at the cost of infringing a source’s privilege. In such circumstances we do not believe there is any foundation to the argument that infringing the journalist’s privilege is disproportional. Here again it should be borne in mind that the procedure reflects how the authority interprets the Act in terms of journalists. As said above, through our interpretive work, the interpreter may refer – amongst the other sources available to him in understanding the legislative intent and its proper interpretation – to the information in the possession of the executive authority, as revealed by its secondary legislation (see Legislative Interpretation 346, 800-802). This information does not of course obligate the court insofar that it believes there is a more proper interpretation for the statute. But it can help in making the interpretation and ascertaining the purpose of the legislation (see HCJ 142/89, Tnuat Laor v. The Chairman of the Knesset, IsrSC 44(3) 529, 550 (1990)). In the instant case it appears that although there is no relevant secondary legislation and the procedure has inferior normative standing, the procedure indicates that the executive sees the purpose of the Act and the interpretation it adopted for it is consistent with the interpretation we stated above. In the circumstances, it appears the proper interpretation is the one the State follows and thus, too, it ought to be adopted.

 

29.       To complete the picture, we would mention that English law has an arrangement similar to that emerging from the Israeli procedure. There, the different treatment of professionals in gathering communications data is also regulated in a procedure, rather than a statute (Interception of Communications: Code of Practice (London, 2002)). There, too, sections 3.2 and 3.9 of the procedure provide that when permitting access to the communications data of anyone not directly linked to the data sought, the utmost care must be taken, especially where the information infringes legally recognized privilege or the data is personal, which by its nature is generally kept private or confidential. Section 3.2 of the procedure provides as follows:

 

“Confidential Information

      

3.2       Particular consideration should also be given in cases where the subject of the interception might reasonably assume a high degree of privacy, or where confidential information is involved. Confidential information consists of matters subject to legal privilege, confidential personal information or confidential journalistic material…

 

For example, extra consideration should be given where interception might involve communications between a minister of religion and an individual relating to the latter’s spiritual welfare, or where matters of medical or journalistic confidentiality or legal privilege may be involved”.

 

            Nevertheless, the statute and procedure there do not prohibit transferring data despite these privileges (even for journalistic privilege). Transferring such data is subject to the doctrine of proportionality, which as an overarching principle covers all the arrangements in the statute (see section 5 of the procedure). In this respect it should be noted that the English procedure was approved by Parliament. Again, Canadian law, in which the treatment of communications data is regulated by the Criminal Code, permits access to the communications data of practicing lawyers through a judicial order but only in circumstances where the lawyer himself is involved in the investigated offense or is likely to be its victim (section 186 of the Canadian Criminal Code). The Canadian arrangement is thereby similar to that prescribed in section 3 of the Israeli Law and also to a large extent, as in the interpretation adopted by us, to the way in which the arrangement in section 4 is applied to professionals.

 

30.       As mentioned, we were not originally satisfied in light of the specific purpose of section 4 and the limited potential infringement of privilege of most professionals caused by obtaining the data the Act permits, the section’s lack of specific reference to professionals does not indicate a lack of proportionality. A fortiori the same is the case in view of the section’s proper interpretation as to cases where section 4, whose arrangement is also acceptable to the State, should be applied. As noted, we have looked at journalists somewhat differently but it does appear the special treatment to the procedure affords journalists does in fact express the proper interpretation of section 4 in their regard. In view of all this, we have reached the overall conclusion that the arrangement is proportional and properly balances the purposes of the Act and the infringement to the right to privacy. Here again, like our process of interpreting section 3, we view the Police procedure and the restrictions imposed by it as reflecting the Act’s proper interpretation. This interpretation is consistent, as said, with the Act’s language and achieves its purposes. This interpretation is also consistent with the basic concepts of our legal system and our duty to exercise judicial restraint in intervening in the Knesset’s legislation. We have therefore considered it proper to adopt it  (compare: HCJ 1911/03, The Association for Civil Rights v. The Minister of Finance, (unpublished, November 12, 2003)).

 

            We would mention that we have not ignored the petitioners’ claim that the State could change the procedure or even revoke it completely. We have also considered the petitioners’ assertion that the procedure cannot “cure” a constitutional flaw in the Act, insofar as such flaw exists. Nevertheless, in view of our finding that section 4’s proper interpretation and its detailed reflection in the procedure the State presented, we do not believe that there is cause for us to intervene in the statutory arrangement as it is written. Naturally, a change in the authority’s conduct could also lead to a material change in the balance embodied in the Act. Such a change would give rise to new cause to challenge the Act, certainly at the administrative level and perhaps even the constitutional level. However we must not get ahead of ourselves and we can only assume that the administrative arrangement will be implemented according to the proper interpretation – sparingly, in extreme cases, for the purpose of dealing with offenses that necessitate so and only where urgency makes it clear that it would be impossible to obtain a court order under section 3. This is when the reasons for not approaching a court are circumstances relating to saving life or other serious circumstances, all considering a variety of factors, including the fact that the subscriber is a professional, the extent of his involvement in the offense, and the type of data sought, etc.

 

            It should nevertheless be noted, to complete the picture, that the other legally empowered authorities have not produced procedures to us that are similar to the Police procedure concerning the way they exercise these powers. The Military Police CID has a duty to prescribe such procedures under section 4(f) of the Act. In light of our findings as to the proper interpretation of how the Act’s powers must be exercised, and its compliance with the principles delineated in the Police procedure, we assume that the other authorities that operate under the Act will not exercise their statutory powers without applying similar criteria for exercising the authorities in the Act and formulating appropriate criteria to regulate those aspects.

 

(b)       The Act’s Practical Application

 

31.       In the time when the petitions were pending, the petitioners added to their case another claim essentially concerning the implementation of the Act in the years before it came into effect. At the heart of this argument was the petitioners’ concern that the investigatory authorities would exploit the powers granted by the Act where they could employ other less restrictive means. To support these arguments, the petitioners analyzed the data produced by the State about the extent of the Act’s use, which according to them demonstrate that the powers the Act has granted hare overused. Although the petitioners sought to establish constitutional cause to strike down the Act, it appears the argument is ultimately on an administrative law level, and challenges upon whom powers conferred by the Act are exercised. The petitioners therefore sought to show a flaw in the authorities’ discretion in implementing the Act or at least to express concern in how the discretion will in the future be exercised.

 

32.       From the material before us, it does indeed appear the petitioners are not the only ones concerned about the extent to which the powers the Act grants are exercised. The Constitutional Committee, which debated a motion to approve regulations of the database under section 6 of the Act, also expressed similar concern to the Police. This emerges, for example, from studying the transcripts of the proceedings of the Constitution, Law and Justice Committee dated August 13 and November 9, 2008, during which then chair of the Committee, Professor Menachem Ben Sasson, expressed his opinion that the Act should be interpreted narrowly. Concern was also expressed that the Police might use its powers under the Act excessively. The Constitution Committee of the current Knesset, headed by MK David Rotem, which met on February 2, 2010 in order to follow up the Act’s implementation, also emphasized the importance of correctly and cautiously using the tools the Act provides.

 

            The petitioners, for their part, used the concerns the Constitution Committee expressed on August 13, 2008 to support their position on the use of the Act’s powers and asserted these concerns demonstrate that the Israel Police contravened Act’s provisions. The State, in its replies, explained that the concerns raised in the Constitution Committee’s 2008 debates were essentially about mishaps resulting from the fact that the Act’s implementation was in its early days. Additionally, the State strongly rejected the petitioners’ arguments that the Police contravened the Act’s provisions.

 

            As to the actual use figures, the State presented us with very little data, which related solely to the use of section 4 of the Act (an administrative order) from its effect date (in June 2008) until the end of 2008. Those data shows that a total of 546 permits were sought in cases of life-saving, 85 in the prevention of future felonies and 124 permits were to detect perpetrators of felonies that had already been committed.

 

Nevertheless, studying the Constitution Committee’s portal on the Knesset website shows that to date various authorities have submitted two annual reports to the Committee according to the Act (available at http://www.knesset.gov.il/huka/FollowUpLaw_2.asp). The first report, filed by the Israel Police, is relevant to the period between June 27, 2008 and June 30, 2009. This report shows that 9,603 motions were filed and granted under section 3 of the Act (a judicial order). Of them, 9,227 were motions for detection and investigation of offenders, 252 were for saving of human life, and 124 were for seizure of property. The breakdown between felonies and misdemeanors is unclear. Nevertheless, a supplement submitted to the chair of the Constitution Committee on February 1, 2010, shows that as in 2009, more than 60% of the total offenses for which an order was sought were felonies. On the other hand, the Police’s second report, which was relevant to the period between July 1, 2009 and June 30, 2010, reveals that 14,133 motions were filed under section 3, namely an increase of about 4,500 (or approximately 50%). Of the motions filed in that period, 13,946 were for the purpose of detecting offenders and investigating offenses, 185 for the purpose of saving human life and two for seizure of property. Of the total offenses for which the order was sought, 71% were felonies.

 

            According to section 4 the Act (an administrative order) the first report reflects that 2,031 urgent permits were sought. 1,513 were for the purpose of saving human life and 518 for the purpose of preventing a felony and detecting the perpetrator of an offense. The second report reflects that under this section 3,039 applications were made, namely an increase of about 1,000 (a rise of approximately 50%). 2,192 were for saving human life and 847 were for preventing a felony and detecting a perpetrator. Data were not produced as to the orders sought for professionals. Hence, it appears that there was a significant increase in the Israel Police’s use of the Act.

 

            As regards the Military Police CID, The first report indicates that between November 1, 2008 and November 3, 2009, 1,381 motions for orders in under section 3 were filed, the majority for detecting and preventing offenses, conducting investigations, detecting offenders and their prosecution. The second report that was furnished by the Military Police CID relates to a shorter period from January 1, 2010 to July 1, 2010, and it indicates that 703 motions were filed to obtain orders under section 3. These included 38 motions for the purpose of saving or protecting human life, 340 for detecting, investigating or preventing offenses, 325 for detecting and prosecuting offenders and none for seizing property. It appears that on average there was no change in the total motions the Military Police CID filed under section 3.

 

            In respect to motions under section 4, it seems that on average there was some  increase in their number. While the first report states that 58 administrative requests were approved, including 6 cases for urgent policing, 4 cases for urgent investigatory purposes to prevent a crime and in 48 cases for the purpose of saving human life, the second report (relating, as mentioned, to only seven months) stated that 44 requests were filed, in six cases for urgent investigatory purposes to prevent an offense, 37 cases for saving human life and 1 for urgent policing purposes.

 

Reports were also received from the other authorities granted powers under section 3 of the Act. The data of the Tax Authority shows that between July 2008 and July 2009, 146 motions were filed under section 3, of which 145 were approved. Between July 2009 and June 2010 the number of motions doubled to 318. The Police Internal Investigations Department filed 388 motions between June 2008 and June 2009. The Police Internal Investigations Department filed 406 motions between June 1, 2009 and May 31, 2010. 44% of the motions were for felonies and 56% related to misdemeanors. The Antitrust Authority filed motions for 4 orders in the period between June 27, 2008 and June 16, 2010. Until June 2009 the Securities Authority obtained 13 orders; between July 2009 and June 2010 it obtained 12 orders, including 3 relating to people with professional privilege. Between June 2010 and June 2011, 19 orders were issued, including 2 relating to people with professional privilege.

 

33.       All the above figures reveal only a partial picture. On the one hand, it appears, prima facie, that some authorities, especially the Israel Police, have significantly increased their use of their powers under the Law – both section 3 and section 4. On the other hand, we have no explanation as to the change in the total use of the Act’s powers, which could actually be justified. In any event, in the current circumstances we do not see it necessary to review these aspects further. This is first because in practice all the petitioners’ arguments in this respect concern aspects of the Act’s implementation which do not, certainly not directly, go to the matter of its constitutionality. We have indeed already held in several contexts that implementing an administrative act can raise the question of its proportionality (HCJ 9593/84, Rashad Murad v. The Commander of the IDF Forces in Judaea and Samaria (unpublished, June 26, 2006); HCJ 9961/03, The Centre for the Protection of the Individual Founded by Dr. Lotte Salzberger v. The Government of Israel (unpublished, April 5, 2011)). We have also held that the implementation of a statute can impact its meeting the proportionality criteria (HCJ 6427/02, The Movement for Quality Government in Israel v. The Knesset IsrSC 61(1) 619 (2006), HCJ 6298/07, Yehuda Ressler v. The Israel Knesset (unpublished, February 21, 2012) paras. 19-22 of my opinion). Nevertheless, it appears that at the moment no justification has yet emerged for our intervention in this context. This is essentially based on the fact that the statute charges the Attorney General and the Israel Knesset with the task of reviewing the Act’s implementation. Their work in this respect is merely beginning. Nevertheless, from the material presented to us and the Israel Knesset’s position as reflected in its arguments, it appears on its face that the Knesset is acting according to its duties, and that it is aware of the concern of excessive use of, or extending, the powers under the Act to improper cases. Therefore we believe that for the time being various authorities should be permitted to do their work with the tools at their disposal. This should be coupled with the fact that our findings and the proper interpretation for the Act’s implementation would certainly help to maintain the proportionality of the authorities’ action under the Act and thus, too, all the authorities – both those that operate under the Act and those responsible for reviewing its implementation – should be permitted to create an accepted best practice routine according to the boundaries and restrictions we outlined. Under these circumstances, at the moment it is inappropriate for us to intervene in the aspects of the Act’s implementation. Hopefully there will be no need for us to consider them in the future either. Nonetheless, we have not overlooked the fact that the duty to report to the Knesset as prescribed in the Act was established as a temporary provision that is in effect only for four years from the date the Act took effect (see section 14(c) of the Act). It appears to us that because of the difficulties associated with the Act’s growing pains, which even the State does not dispute, the period of time necessary for assimilating the principles binding the authorities and the importance we attributed to the Knesset’s consistent review, it is appropriate to take action in order to extend the effect of that section. It could even be made permanent. We would also reiterate that it should not be ignored that aspects of a statute’s implementation might also affect review of its proportionality, and that the concern that the tools the Act granted be used excessively, especially given the significant increase in the number of motions filed, is real. Consequently, if in the future there is a change in the balance between the Act’s use, we do not discount the possibility the petitioners or others would once more be able to approach the Court for relief.

 

Sections 6 and 7; the Database

 

34.       Another argument by the petitioners challenges the arrangement in sections 6 and 7 of the Act, which establishes a database to be kept by the investigatory authorities (hereinafter: “the database”). These sections provide as follows:

 

“Requirement to Transfer an Information File from the Database of a Telecommunications Licensee

 

6.         (a)         The head of the Investigations and Intelligence Division may require a telecommunications license holder providing domestic landlines or mobile radio telephone services to transmit to him by computerized methods an up-to-date information file, as specified in paragraphs (1) and (2) below, which is in the licensee’s database:

 

                          (1)     Its subscriber’s identifying details, as well as the identifying numbers of his telephone devices or of any components thereof;

 

                          (2)     Information on the map of antennas which the licensee uses to provide telecommunication services by mobile radio telephone, including identifying data of each antenna and the areas it covers.

 

Keeping Information Files in a Protected Database

 

7.         (a)         An information file transferred as provided in section 6 shall be kept by the Police in a confidential database (to in this Act referred as ‘database of (communications) identification data’).

 

(b)       The database of (communications) identification data shall be kept as to ensure its protection and prevents its unauthorised use, including reading, transmitting, copying or altering the information without lawful authorization, and prevents its use in violation of this Act; acts performed in the database of (communications) identification data shall be documented as to facilitate supervision and control.

 

(c)       The database of (communications) identification data shall only be used for the purposes specified in paragraphs (1) to (4) of section 3(a)”.

 

            This reveals that the Act enables the Israel Police to require a telecommunications licensee, as defined, to transfer to it subscribers’ computerised identification data and the identifying numbers of their telephone devices (or of any components thereof). The Act also facilitates requiring information about antennas the licensee uses in providing telecommunications services. In effect, the Act permits the Police to establish a database linking one’s name with their telephone number and eliminates the need to telephone 144 service (which provides one’s telephone number according to their name or address) or the 441 service (which provides one’s name and address according to their telephone number). That said, information is kept in a confidential database and the use of that data is limited, according to section 7(c), to purposes that also warrant a judicial order, namely: saving or protecting human life, detecting, investigating and preventing offenses, detecting offenders and prosecuting them, and seizing property under the Act. It should be noted that the database does not permit keeping any data that the Israel Police is authorized to obtain under the Act. That is, it may not keep location and traffic data.

 

            We would say that on December 19, 2008, under his authority according to section 7(d) of the Act and with the Constitution Committee’s approval, the Minister of Internal Security promulgated the Criminal Procedure (Powers of Enforcement – Communications Data) (Database of Communications Identification Data) Regulations, 5769-2008 (hereinafter: “the Regulations”). These are designed to regulate the use of the database, define those authorized to access it, guide the position of database manager, and other aspects concerning its operation and maintenance and the security of the information it stores.

 

35.       The petitioners, and especially the Association for Civil Rights, do not object to the transmission of publically accessible telephone numbers to the Israel Police and other police entities. Their objection to the identification database is more specific and they request we restrict the ability to transmit identification data of anyone whose telephone number is unlisted to the database. They argue that the constitutional right to privacy, which includes the right to keep one’s “conversation confidential”, also includes the right to own a telephone number that is hidden from the public eye and the investigatory authorities. Although the petitioners do not dismiss the possibility that criminal activity will be conducted under “cover” of unlisted numbers, they maintain it is always possible to approach a court. They claim it is unnecessary to establish a database that is always open to investigatory authorities without having to obtain a court’s approval for unlisted numbers. The petitioners in fact focuses on the risk of establishing a database that includes unlisted numbers accessible to any policeman or other person who works for the investigatory authority, and on the concern about information “leaking” from the database to others – inside or outside the investigatory authority – who would use the information improperly.

 

36.       In response the State maintains first that the right to “confidential conversation” does not include the right to an unlisted telephone number, which is merely a technical possibility provided by the telephone companies as a contractual matter between them and customers. Furthermore, the state argues that even were the right to an unlisted telephone number recognized, such right does not exist vis-à-vis the investigatory and law enforcement authorities, and presumably no reasonable person really expects this to be the case. At the practical level, the State argues that even now calls made from unlisted telephone numbers to the Police call centers are not confidential to these centers. The State further warns that excluding unlisted numbers from the database that is accessible to the investigatory authorities would create a means for criminals, who wish to use unlisted numbers in criminal activity, to hide from the eyes of the Police. As to the purpose of establishing the database, the State explained that the arrangement is designed to limit the time necessary to trace a particular telephone number’s owner.  Without the arrangement embodied in the Act, investigatory authorities would have to reach out to the communications companies about any number in order to obtain the subscriber’s identification details.

 

37.       We do no see fit to accept the petitioners’ request to restrict the use of the database. We accept the State’s argument that a communication company’s commitment to the customer to provide an unlisted number does not entitle the customer to confidentiality from law enforcement authorities. Moreover, it should be borne in mind that the interpretation of the database’s use – like the use of the judicial arrangement – is narrow and restricts the investigatory authorities’ action to specific cases only, when the information in the database is required to prevent a particular crime, trace a particular offender, save or protect human life or seize property under the Act in concrete circumstances (and see section 7(c) of the Act, which refers to sections 3(a)(1) to (4)). As analyzed above, it appears that, given the Israeli constitutional system, it is improper to interpret the Act to permit using the database for Police intelligence activity generally or for infrastructure. Given this presumption, we do not consider it justified t limit the actual transmission of particular numbers to the database to enable those who wish to conceal themselves from the eyes of law enforcement authorities to do so. Consequently, the petitioners’ argument should be dismissed.

 

            As obiter dictum, we briefly refer to a new argument by the Association for Civil Rights (hereinafter: “the Association”) in its supplemental brief from November 16, 2008, which was not raised in the actual petition. As the argument goes, the Act’s infringement is aggravated due to the Police’s capability to obtain communications data automatically, without needing the communications companies’ authority, by connecting online to the cellular and Internet companies’ computers. According to the Association, section 13(b) of the Communications Act hints at this capability. The section enables the Prime Minister to prescribe security arrangements for transmitting data between security forces – including the Israel Police – and the communications companies. The Association relies on the fact that the General Security Service already uses such capability, and as support it presents the respondents’ answer in AP 890/07, The Movement for Freedom of Information v. The Ministry of Communications (unpublished, November 5, 2007). The respondents there explained there are indeed secret security appendices that regulate transmission of communications data from communications companies to the General Security Service. Nevertheless, the respondents there explained that those appendices do not regulate the General Security Service’s powers to obtain communications data but only the technical means to obtain them and that the powers to obtain the data are subject to the substantive law regulating them. In response, the State explained here that independently from how the data are transmitted – be it online in real time or by a specific motion – the accessible data would only be those permitted by the Act and its arrangements. It was further explained that the question about the technological way the data is transmitted is in any event of no constitutional significance. We have not found the Association’s argument, which was made partially and unsatisfactorily, to constitutionally justify striking down the Act. In any event, the concern the Association raised in its argument relates to the improper use of access to the data, which is facilitated through online access to the data, rather than to actually permitting access, which is restricted, as mentioned, by the Act, with the narrow interpretation that our opinion applies to them. Clearly, should the petitioners believe that the way the data are actually transferred demonstrates the Act’s implementation beyond the proper criteria outlined or should the petitioners find evidence of improper use of the means granted to the investigatory authorities, they may take the appropriate steps.

 

(b)       The Proportionality of the Law As a Whole

 

38.       We have therefore reached the conclusion that the arrangements in the Act, including the judicial arrangement, the administrative arrangement and the keeping of unlisted numbers in the database, do meet the requirements of the Limitations Clause and do not establish cause for constitutional intervention. In addition, we would further say that an overall review of the Act and all the arrangements and balances in it also leads to the conclusion that no cause for our intervention has been established.

 

            First, as stated in paragraph 25 of our opinion, the administrative arrangement in section 4 concerns only grave, urgent cases. Accordingly, the legislature has left the majority of the investigatory authorities’ actions under the Act to address by a court through the judicial arrangement. Such a balance, insofar as actually implemented according to the obligatory criteria, ensures judicial review of the majority of cases in which investigatory authorities infringe privacy by exercising powers under the Act. As discussed, the judicial authority has a weighty responsibility to insist on limited and appropriate use of the powers granted by the Act. But as discussed, the very existence of judicial review of the main procedure for obtaining data under the Act indicates its proportionality.

 

            It should be noted that the fact that “the usual course” is that which passes through the courts and that it is not self-evident that only in urgent, exceptional cases will the administrative course be used. Thus, for example, in the English law that deals with obtaining communications data, this distinction between emergencies and the ordinary course does not exist, and investigatory authorities can in all cases act through the administrative course without needing a judicial order (sections 25(1) and (2) of the RIPA). In particularly serious emergencies the authority may even act without written authorization at all – even administrative – and oral authorization is sufficient (as provided in the Regulations – section 3.56). On the other hand, the outlook of American law is closer to Israeli law and it lays down an administrative, alongside a judicial, course. As detailed above, the administrative course, which is regulated in §2703(c)2, Chapter 18 of the USC, enables the investigatory authority to obtain various types of communications data without judicial involvement. In this connection, by means of an administrative order, it is possible to obtain the subscriber’s name, address, calls documentation, means of payment and others. Beyond the data that can be obtained under this section, a judicial order is necessary (the American law distinguishes between two types of orders). It should nevertheless be noted that insofar as our examination has revealed, it appears that American law sometimes recognizes the ability to be relieved of the primary duty to approach a court and in urgent cases permits administrative orders. When the investigatory authority seeks to use surveillance devices that enable obtaining real time data of outgoing and incoming calls from an Internet or telephone communications source (pen registers/trap and trace devices), American law recognizes exceptional cases where a judicial order may be bypassed and an administrative order suffices: a risk to a person’s life or serious injury; acts suspected as organized crime; an immediate threat to a national security interest; or an attack on a protected computer. An administrative order issued according to this arrangement is only valid for 48 hours, after which the investigatory authority must request a judge’s approval again or stop using it (§3125(a) of Chapter 18 of the USC). Canadian law, too, reflects a similar approach to that of Israeli law. It provides that the usual course for obtaining communications data is by approaching a judge (sections 184 to 186 of the Canadian Criminal Code), while the administrative course is defined in Canada as an option that is available to the investigatory authorities only in rare emergencies.

 

            Second, the Law grants different powers to different investigatory authorities and delineates their use in a way that contributes to its proportionality. Thus, while all investigatory authorities addressed by the Act – the Israel Police, the Military Police CID, the Police Internal Investigations Department of the Ministry of Justice, the Securities Authority, the Antitrust Authority and the Israel Tax Authority – are authorized to use the judicial arrangement and approach a court for an order to obtain communications data, only the Police and the Military Police CID have been empowered to follow the administrative arrangement. This distinction acknowledges that alongside the importance of enabling the other investigatory authorities to perform their duties in the best way, the most “infringing” powers are to be granted to a limited group of authorities that are used to dealing with urgent cases, whose potential need of those powers is greater. In our opinion this substantially limits the potential infringement of the right to privacy.

 

            Again in this respect, the Act’s proportionality may be inferred by reviewing similar arrangements in corresponding legal systems. Thus, English law’s list of the authorities empowered to use the arrangements for access to communications data is not exhaustive. Instead, several investigatory entities are explicitly named, like the Police, the National Criminal Intelligence Service, the National Crime Unit, the Customs Authority, the Inland Revenue and also the intelligence services – and the Home Secretary is also empowered to go on to prescribe additional agencies for the purposes of the Act (see section 25 of the RIPA). It appears the powers the English law grants the various different authorities are broader than those recognized in the Communications Data Act, especially in light of the ability of the agencies mentioned to obtain communications data merely by using the administrative course, without needing a judicial order.

 

            Third, the Act’s proportionality also depends on the review to which it subjects its proper, limited implementation. This check is prescribed in section 14 regarding the Act’s general use and in sections 4(d) and (e) regarding the use of an administrative order. Section 14 mandates that the Minister responsible for the relevant investigatory authority must report to the Knesset Constitution Committee as to the use the investigatory authority for which he is responsible made of the Act, including the database. Sections 4(d) and (e) respectively provide that the competent officer who has authorized the administrative arrangement must report the order in writing; and that once every three months the head of the Israel Police Investigations and Intelligence Branch and the Commander of the Military Police CID must submit the data collected from the competent officers to the Attorney General or the Military Advocate General, as the case may be. This review is far more frequent than the review conducted by the Knesset. We would also mention that, presumably, in the course of the Attorney General’s periodic review, there will be consideration for, inter alia, reviewing the circumstances in which communications data has been obtained under section 4 and to whether it might have been possible in those circumstances to act under section 3 and obtain an appropriate judicial order.

 

            These mechanisms for review, coupled with the court’s approval of motions pursuant to section 3, make it possible to control the Act’s actual implementation and ensure the investigatory authorities limited use of the tools the Act provided them, according to the criteria detailed in our decision. Their existence makes it possible to assume that the Act’s implementation would be periodically reviewed and that problems arising in such respect, as reflected from the discussion in paragraphs 31-33, will be dealt with in the best possible way. That this control is maintained and that the supervisory entities – the Attorney General and the Constitution Committee – examine in detail the reports received and the authorities’ compliance with the guidelines deriving from our interpretation of the Act, as expressed by us above, must be guaranteed. It should be borne in mind that the Attorney General holds a special role in strictly ensuring that government authorities exercise their powers under the Act merely to the extent necessary in order to achieve its purposes, according to our interpretation in this decision and the criteria outlined in it.

 

39.       We acknowledge that a statute under review is not reviewed in a vacuum. As we have shown, the existence of the Police procedure, which should be read together with the Act, affects our perception of its implementation and the view that investigatory authorities would only use it properly and intelligently. Thus, the overall arrangements contained in it display a balanced and proportional picture of the exercise of powers it grants. In addition, the other means available to the authorities – which also infringe privacy – have an effect on our perception of the Act. As said, these means now include the capability to listen to one’s conversations, which are regulated and limited under the Secret Monitoring Law, and the ability to obtain information by implementing section 43 of the Criminal Procedure Ordinance. This means the Police, in fighting crime, has various resources that, to some extent, infringe privacy. The relevant Act joins those resources and apparently specifically within its scope the State has come a long way towards safeguarding the constitutional right to privacy. Given the restrictions detailed above we can see it as a means that does not infringe the systemic balance between the need to fight crime effectively and maintain public order, on the one hand, and the right to privacy and dignity to which everyone is entitled, on the other hand. It is to be expected that by adding more tools in the future to be available to investigatory authorities, the legislature will maintain the internal balance of each tool as well as the systemic balance, considering all the existing resources recognized by law.

 

            In this context we would also mention that the comparison with various arrangements the world’s countries have adopted must not be made in a vacuum either; rather, how the means for obtaining communications data are integrated into the general legal system should be analyzed. Thus, for example, countries where the ability to collect communications data in particular crimes is limited – like Canada and England (partially), which limit the list of offenses in different ways – at the same time make extensive access to communications data available. Thus, English law does not require authorization by a judge in order to collect communications data, and Canadian law makes obtaining communications data possible when demonstrating a vague, general cause. The comparison with different systems and their approach to the means for collecting communications data, as adduced above in the relevant contexts, leads to conclude that even were different countries to choose different balances, the balance in the Act under review is not unreasonable compared to the balances adopted in countries with similar legal systems to Israel’s, and which contend with similar challenges regarding technology, their battle against crime and in protecting privacy.

 

            In view of all the above, we have reached the overall conclusion that the Act – together with its arrangements and their interpretation in our decision – does not infringe the constitutional right to privacy to beyond necessary.

 

Inadmissibility of Evidence

 

40.       Before concluding, we believe it is appropriate to consider another issue the petitioners raised, namely the admissibility of evidence collected according to the Act in legal proceedings. The Israel Bar, which is the petitioner in HCJ 9995/08, asks that the Act stipulate that obtaining communications data in violation of the Act could not produce evidence that would be admissible in legal proceedings. Furthermore, it requests we add a requirement for the use of evidence procured through the administrative proceedings in section 4 of the Act, whereby a court would retroactively approve the competent officer’s permit before the communications data obtained through the administrative order may be used as evidence in court.

 

41.       Let it immediately be said that we do not find the petitioners’ arguments in this respect substantial and do not see fit to grant the relief sought here, for several reasons. First, we would mention as our premise that the majority of statutory arrangements in our legal system do not include specific rules for inadmissibility (see CrimA 5121/98, Private Refael Isascharov v. The Military Prosecutor, IsrSC 61(1) 461, 524-525 (2006) (hereinafter: “Isascharov”) and also compare CrimA 115/82, Heil Muadi v. State of Israel, IsrSC 38(1) 197, 262 (1984)). Consequently, the absence of an inadmissibility rule in the Communications Data Act does not per se indicate that the Act is constitutionally flawed. Moreover, we would note there are exceptions to the general rule about the lack of inadmissibility provisions in most statues in Israeli law as a limited number of statutes do include such provisions: section 32 of the Protection of Privacy Act, section 13 of the Secret Monitoring Act and sections 10A and 12 of the Evidence Ordinance [New Version], 5731-1971.

 

            As to the Protection of Privacy Act, section 32 of that law already prescribes that material unlawfully obtained while infringing privacy is inadmissible as evidence. As the section states:

 

“Material Inadmissible As Evidence

 

32.       Material obtained while committing an infringement of privacy shall not be used as evidence in court without the consent of the injured party, unless the court, for reasons which shall be recorded, permits such use or if the infringer, as a party to the proceeding, presents a defense or enjoys exemption under this Act.”

 

            Consequently, without ruling on the relationship between the inadmissibility section of the Protection of Privacy Act and conduct under the Communications Data Act, material obtained in violation of the criteria concerning the Communications Data Act might be subject to the inadmissibility provision of the Protection of Privacy Act. Insofar as the Secret Monitoring Act’s inadmissibility rule, as we have already held above, we do not find it possible to analogize between the two statutes and the fact that the Secret Monitoring Act includes a specific inadmissibility rule does not make it necessary to adopt a specific inadmissibility rule in the Communications Data Act too.

 

            Moreover, as we have already held many times in the past, since the 1980s our legal system has been marked by moving from rigid rules of admissibility towards a substantive examination of evidence. We acknowledge this approach prioritizes the court’s substantive review of evidence over disqualification. Nevertheless, this move has been tempered in recent years and because defendants’ basic rights in criminal law were increasingly recognized, a doctrine of relative inadmissibility was adopted in Isascharov. Under this doctrine a court has discretion to rule on the admissibility of evidence that has been unlawfully obtained, depending on the specific circumstances of the case. The rule in Isascharov was summed up as follows:

 

“Where in the past the case law in our legal system held that evidence admissibility is not examined by how it was obtained because the interpretive weight in such context was placed on the purpose of uncovering the truth and fighting crime, a more flexible balance is now sought. It takes into account the duty to protect the defendant’s rights and the fairness and integrity of the criminal procedure. The proper balance between all the competing values and interests in this particular respect leads to the adoption of a doctrine of relative inadmissibility, whereby a court would have discretion to rule on the admissibility of evidence that has been unlawfully obtained on the merits of the actual circumstances of every case and according to the criteria below” (Id, at 546).

 

Given this legal framework, we have, as mentioned, not considered it proper to grant the petitioners’ motions and we have certainly not found that the absence of a specific inadmissibility rule in the Act justifies constitutional intervention. Clearly, insofar as a defendant seeks to assert that material that was obtained under the Act is inadmissible evidence, he may so argue during the judicial proceedings and the court adjudicating the case would review these claims. We do not find this arrangement should be augmented by a specific provision as to evidence obtained under the Act, as opposed to any other evidence allegedly unlawfully obtained. In terms of a requirement to obtain retroactive approval of administrative orders that were duly issued under the Act, to the extent we held the Act and the procedures under it are constitutional, it is inappropriate to hold that they should be bolstered by requirements as to how investigatory authorities may use them in legal proceedings.

 

Conclusion

 

42.       The modern reality in which we live and the technological innovations that accompany it give the citizens of the world – who can afford it – means of communication that are constantly refined and that facilitate easy, quick transmission of information over great distances. On the one hand, this reality has made our world a place where a great deal of private information about the individual moves freely – frequently with the consent of that individual – in the public sphere. On the other hand, this reality has become a convenient platform for negative elements and criminals who wish to use such technology for their own purposes. Countries around the world, including Israel, have realized that these changes can be harnessed to improve their enforcement capabilities and the quality of life for their residents. The Act challenged by these petitions is Israeli law’s regulation of how law enforcement may use sophisticated technology. As discussed at length above, enforcement authorities should have appropriate tools to facilitate law enforcement in the changing reality. Additionally, undoubtedly these moves may potentially infringe greatly on residents’ privacy. This reality requires developing complex arrangements that properly weigh the overall interests at stake. Having carefully reviewed the overall arrangements of the Communications Data Act and its procedures, we have reached the overall conclusion that, considering the proper interpretation regarding the exercise of the powers the Act prescribes – an interpretation which essentially calls for limited implementation strictly when necessary – we see no cause for constitutional intervention. Nonetheless, as we have emphasized time and again, enforcement authorities are under a substantial duty to exercise their powers with prudent discretion and closest attention to the fact that the infringements caused by the Act should be executed only to the necessary extent and degree. Moreover, the Knesset and the Attorney General, who are legally charged with maintaining regular review over how much the Act is used, hold great responsibility in this respect. The same applies to courts reviewing motions for obtaining communications data under the Act. We assume, and trust, that all the authorities involved in implementing the Act will take the strictest care to ensure the powers the legislature granted them are not exercised unnecessarily and that they are used following the limiting criteria delineated in our decision.

 

For the sake of clarity, we would therefore sum up our interpretive findings regarding the Communications Data Act: first, as to the exercise of the powers in both section 3 and section 4, we held that they should be interpreted so that obtaining data under the Act is only permissible where it is necessary for a specific, concrete purpose, like an investigation of a particular occurrence regarding a specific suspect or victim, as opposed to executing the Act for general purposes of detecting offenders and preventing crime. Second, regarding exercising the power in section 4 of the Act, we held this should be interpreted so that a permit obtaining communications data is only sparingly permissible, in extreme cases, in order to deal with offenses that require it and only where because of the urgency it has become clear that it impossible to obtain a court order under section 3. This is when the reason for not approaching a court is because of circumstances involving saving life or other serious factors, always considering a range of factors, including that the subscriber is a professional, the extent of his involvement in the offense, the type of data sought, the degree of urgency, the gravity of the offense and other similar considerations. To the extent journalists are concerned, we have found that the restrictions on the use of orders, as reflected in the procedure concerning section 4, are mandated by the Act’s purpose and the balances the procedures reaches in implementation. Accordingly, when the subscriber is a journalist, who is not the victim or is not suspected of the offense, a motion under section 4 to obtain his communications data of the traffic data will not be approved.

 

43.       Given the above and subject to the restrictions and limitations outlined in this decision as to the proper exercise of powers under the Act, we found no constitutional cause for our intervention. The petitions are dismissed. In the circumstances, there will be no order for costs.

 

Justice E. Arbel

 

1.         The petition centers around the boundaries of the right to privacy as a constitutional right. Technological innovations raise concern that the State will gather and use extensive information of nationals and residents, and this requires adapting the law to this possible harm. In her opinion, the President reviews extensively and in great detail whether the balance the legislature strikes in the            Criminal Procedure (Powers of Enforcement – Communications Data) Act, 5768-2007 (hereinafter: “the Act”) meet the criteria of constitutionality according to our legal system. I agree with her unequivocal conclusion that the Act does infringe the right to privacy. Nevertheless, as stated, the Act neither permits actual listening to conversations or reading messages nor does it permit disclosure of the contents of a person’s conversations. I also agree that the Act meets the criteria of proportionality accepted in our jurisprudence and does not infringe the constitutional right to privacy to an extent beyond necessary. Constitutional cause therefore for this Court’s intervention does not arise. I believe that the inability to obtain communications data would place enforcement authorities at a disadvantage compared to offenders. I agree with my colleague the President’s interpretive findings and reasoning as to the execution of the powers under sections 3 and 4 of the Act. Nevertheless, I find it proper to add one point of reference.

 

2.         I would add what is seemingly self-evident about section 4 of the Act, which permits a competent officer to grant a permit to obtain communications data without a court order in urgent cases in order to prevent a felony, to detect its commission or to save human life, when a court order under section 3 cannot be obtained in time under the circumstances. Section 4(b) of the Act limits such permit to a period of no more than 24 hours. Nevertheless, the Act’s language does not expressly preclude the permit’s renewal by a competent officer at the end of such period or some time thereafter. In my opinion, section 4(b) should be construed as precluding that possibility and as requiring the competent authority to approach a court for an order under section 3 of the Act to the extent it is necessary after the initial period has expired – namely after 24 hours. This interpretation is warranted so that the infringement of the right to privacy does not to exceed the necessary. I would also note that it would be proper, in my opinion, to consider inferring from section 5(d) of the Secret Monitoring Law, 5739-1979 about the court’s retroactive approval of permits issued in urgent cases without a court’s approval. Although section 4 of the Act prescribes arrangements that would permit the Attorney General and the Military Advocate General’s review of that section’s application, in my opinion that is inadequate and the court’s review of the section’s implementation should also be required through retroactive approval of the permit awarded.

 

As said, I concur with the President’s comprehensive opinion and reasoning.

 

President U. Grunis

 

I agree that the petitions should be dismissed as proposed by my colleague, President (Ret.) D. Beinisch.

 

Justice M. Naor

 

I join the comprehensive opinion of my colleague, President (Ret.) D. Beinisch.

 

 

Justice E. Hayut

 

I join the opinion of my colleague the President and her conclusion that subject to the reservations detailed in her opinion as to the proper exercise of the powers granted by the Criminal Procedure (Powers of Enforcement – Communications Data) Act, 5768-2007, the Act meets the criteria of proportionality under the case law and does not infringe the right to privacy unconstitutionally.

 

Justice H. Melcer

 

1.         I join the comprehensive opinion of President (Ret.) D. Beinisch (hereinafter: “the President”) in respect to the proper constitutional interpretation of sections 3, 6 and 7 of the Criminal Procedure (Powers of Enforcement – Communications Data) Law, 5768-2007 (hereinafter: “the Communications Data Collection Act” or “the Act”). Nevertheless, I find myself at issue with the President on two matters:

 

(a)          The protection that should be given in the context of the Law to someone in respect of whom professional privilege applies by law, including case law (hereinafter: “professional privilege”); and

 

(b)         The proper constitutional interpretation of section 4 of the Act and the limitations of its deployment.

 

My opinion on both these issues is expressed below. I would immediately say that my view leads to a constitutional-interpretative conclusion that a competent officer, as defined by section 1 of the Act, cannot act under section 4 of the Act where professional privilege prima facie applies. The only way to try to obtain communications data in such situations is approaching a court and securing its authorization according to section 3 of the Act (especially section 3(b)), subject always to the provisions of law (including case law).

 

I shall now present the reasoning of my said approach and give details in order.

 

The Scope of Professional Privilege in the Context of the Communications Data Collection Act and the Constitutional Rights Involved, upon which the Privilege is Based

 

2.         The President states (at the beginning of para. 10 of her opinion) that it was held in the past that professional privileges “essentially extend to the content of the conversations between the professional and the privileged person but not to the very existence of a relationship with the professional person, and the purpose of the privilege is to allow the privileged person a realm of free communication between him and the professional.” Therefore, the President believes that the Communications Data Collection Act does not in fact infringe privilege, apart from journalistic privilege because, as she sees it, the Act in any event does not permit the obtaining of substantive data, to which the privilege applies.

 

3.         We can see that this method – which distinguishes between the conversation’s substance (which is privileged) and the information around the conversation’s existence and the identity of the parties to it, which is not privileged (according to the argument) – has a significant effect on the consequences of reviewing the whole Act because it impacts the precursory determination of the scope of the constitutional rights that are infringed by the Communications Data Collection Act. Indeed, the conclusion that the first stage of the constitutional analysis, which concerns identifying the scope and force of the constitutional right and its limits, naturally has a significant effect on the second stage of that analysis, which deals with reviewing the constitutionality of the infringement on the constitutional right or of the limitations imposed upon it (see: Aharon Barak, Proportionality in Law 43-48 (2010)).

 

I shall therefore start my enquiry into the key preliminary question as to the relevant privileges and the constitutional rights involved in the whole, an issue where my opinion differs from the position presented by the President.

 

4.         I agree that as a point of departure the distinction between “form” and “substance” should be respected so that the core of the privilege should first apply to the information concerning the contents of conversations between the privileged party and the professional. However, there are cases – and current technological development demonstrates that the same is becoming more and more prevalent – where the core of the privilege, as defined above, radiates outwards and should also protect information, which although per se constitutes only the “form” of the communication, does in the relevant context provide tools for the prohibited disclosure of privileged information. In such cases, that “technical” data, which is not apparently originally privileged, falls within the privilege because its disclosure provides access to protected information. What is important here is that in such cases (which, as noted, are recently not so few) obtaining communications data might infringe professional privilege.

 

Hence, the constitutionality of the Data Communications Collection Act’s provisions, for a provisional order was issued, not only regarding journalistic privilege but also regarding the privilege of other professionals, within the meaning of section 3(d)(7) of the Act. I shall now express my position as to two privileges: attorney-client privilege and doctor-patient privilege. I shall then explain what sets journalistic privilege apart and refer to the constitutional rights in all these contexts and their implications to the Act’s interpretation.

 

Attorney-Client Privilege and the Constitutional Rights upon Which It Rests

 

5.         It is common to believe that a particular method of payment by a client to an attorney – in cash or by check etc. – ordinarily falls into the category of information that is not privileged. In the United States, this distinction gives rise to certain difficulty that impacts the instant case. The enforcement authorities there have discovered that offenders who deal in smuggling dangerous drugs habitually pay for the services they use (that is to say lawful services, including legal services) in cash. Enforcement authorities therefore tried to use this and have attempted to inspect lawyers’ tax returns in order to find large payments of professional fees in cash and the identity of the payers. The lawyers have argued that privileged information, which should not be disclosed, is involved. The conclusion reached in the United States is that, generally, information concerning the method of a particular client’s payment and his identity are not privileged but such information can enjoy privilege where the information:

 

“reveals the motive of the client in seeking representation, litigation strategy, or the specific nature of the service provided” (Chaudhry v. Gallerizzo, 174 F. 3d 394, 402 (4th Cir. 1999); Diversified Group, Inc. v. Daugerdas, 304 F. Supp. 2d 507, 514 (S.D.N.Y. 2003)).

 

That is then one typical way in which the privilege can radiate outwards from its core to information that is not prima facie privileged and that is indeed the way in which matters have also been interpreted in the legal literature there:

 

“The privilege protects an unknown client’s identity where its disclosure would reveal a client’s motive for seeking legal advice. Here extending the privilege to the client’s statement of identity is a means to the end of protecting the confidentiality of the client’s more substantive communications with the attorney” (Edward J. Imwinkelried, The New Wigmore: Evidentiary Privileges 746 (2nd Ed., 2009) emphasis added – H.M.; see also Thomas E. Spahn, The Attorney-Client Privilege and the Work Product Doctrine vol. 1 93 (2007)).

 

In Israel, although it is usual to think that the privilege does not apply to the client’s name, it has been maintained that this position is not free of difficulties similar to those described above (see, Dr Gabriel Kling, Ethics in Advocacy 418-419 (2001)). It should also be noted that it was recently held in this context that the obligation imposed on certain attorneys in Israel to include clients’ names in their periodic VAT returns “is not a disproportionate infringement of the client’s privilege vis-à-vis his relationship with the attorney.” Nevertheless, that finding was qualified: “if a concrete problem arises regarding the privilege, the client’s right to argue for privilege is reserved.” (HCJ 115/11, Adv. Cassouto v. The Tax Authority (unpublished, April 30, 2012)).

 

6.         It should be noted here that attorney-client privilege, which is regulated in Israel by section 90 of the Israel Bar Act, 5721-1961 and section 48 of the Evidence Ordinance [New Version], 5731-1971 (hereinafter: “the Evidence Ordinance”), preceded the Basic Law: Human Dignity and Liberty, but since its legislation this privilege apparently also has constitutional element. Attorney-client privilege now derives, at the constitutional level, from the constitutional right to dignity (sections 2, 4 and 11 of the above Basic Law), the constitutional right to liberty (sections 5 and 11 of the above Basic Law) and the right to due process, which was recognized in the case law as a (derivative) constitutional right. See and compare the statement by then Justice D. Beinisch in CrimA 5121/98, Isascharov v. The Chief Military Prosecutor, IsrSC 61(1) 461, 560-561 (2006); Mot.Crim 8823/07, John Doe v. State of Israel, para. 16 of Deputy President E. Rivlin’s opinion (unpublished, February 11, 2010).

 

7.         It should also be mentioned here that the Constitutional Court of Germany recently heard a petition similar to those before us here (which was brought by the German Bar and German Press Association against a corresponding statute that had been enacted there, regulating the collection of communications data). The German Constitutional Court held – in a judgement that was handed down on October 12, 2011 – that absolute privilege should be granted in respect of the gathering of communications data from a practising lawyer, on the basis of attorney-client privilege (which there is based on the constitutional right to dignity) and it also recognized partial privilege (which can be lifted by judicial order) over collecting communications data from journalists. (See BVerfG, 2. Senat, Az: 2 BvR 236/08, 2 BvR 422/08).

 

A similar constitutional approach was adopted in Britain in R. (On the Application of Morgan Grenfell & Co. Ltd) v. Special Commissioner of Income Tax [2003] 1 AC 563 (hereinafter: “MG”). See also Phipson, On Evidence 658 (17th ed, 2010). Compare the judgment of the European Court of Human Rights, Kopp v. Switzerland [1998] 27 EHRR 91. See on the other hand In Re McE [2009] UKHL 15 and criticism of that judgment by Simon McKay, Covert Policing – Law and Practice, pp 277-279 (2011).

 

Doctor-Patient Privilege

 

8.         When a doctor practices exclusively in a particular medical field a situation might arise where the very contact with that doctor – even though the substance of the contact or treatment is not disclosed – will enable a third party to deduce information concerning the purpose underlying the contact and infringe the privilege that governs the relationship between doctor and patient. Thus, for example, it was held in this context in HCJ 447/72, Ismachovitz v. The Investigatory Assessing Officer, IsrSC 27(2) 253 260 (1973) (hereinafter: “Ismachovitz”), as also mentioned in the President’s opinion:

 

“… Here the petitioner states that because of his specific practice in the sphere of sterility and impotence, the disclosure of patients’ names and others who have visited him, such as sperm donors for artificial insemination, merits privilege because those involved would not go to a doctor if they perceived the risk that it would become known. […] I am willing to assume that there may be special cases, where even the identity of the patient will fall within the scope of a privileged confidence under section 49 of the Ordinance, although I dare to doubt whether the petitioner’s practice does indeed require such extension of the protection of privilege”.

 

As mentioned, in the circumstances of Ismachovitz it was held that the identity of the person going to the doctor was not protected, inter alia because the petitioner there practiced in several spheres (and for other legal reasons). However, this conclusion does not derogate from the more general perception that the rigid distinction between the very contact and its substance is problematic in many cases, especially in areas concerning telecommunication. See Constitutional Rights and New Technologies – a Comparative Study, 277-278 (Ronald Leenes, Bert-Jaap Koops, Paul De Hert, Ed., 2008).

 

Furthermore, once the Patient Rights Act, 5756-1996 was legislated (especially if we interpret it in light of Basic Law: Human Dignity and Liberty, which preceded it), the patient’s right to privacy gained paramount status and was raised to constitutional level. Section 19(a) of this Act provides in our context as follows: “a clinician or medical institution worker shall keep secret all information relating to the patient that comes to his knowledge in the course of his duty or in the course of his work” (emphasis added – H.M.).

 

Nevertheless, there is still a certain difference so far as we are concerned between the professional privileges that are regulated, for example in the Evidence Ordinance (all of which can be constitutionally justified one way or another) and journalistic privilege (which is considered to be a creature of case law, with specific characteristics). This difference was also highlighted in these petitions and the President also acknowledged it. We shall immediately deal with this at greater length.

 

The Journalistic Privilege and the Constitutional Rights upon Which It Rests

 

9.         In paragraph 10 of her opinion, the President writes as follows:

 

“As the State also agreed, with regard to journalists, the very identity of the person who contacts a journalist can constitute part of journalistic privilege because it may expose the journalist’s source despite the protection given to such source.”

 

This Court has considered the protection granted to a journalist’s source. In the case of Tzitrin (MA 298/86, Ben Zion Tzitrin v. The Disciplinary Tribunal of the Israel Bar, Tel Aviv District, IsrSC 41(2) 337 (1987) (hereinafter: “Tzitrin”)), President M. Shamgar stated:

 

“The protection of the sources of information necessary for the performance of the journalist’s function, including protecting the relationship of trust on the basis of which information is given in return for an assurance that the source not be disclosed, is therefore a public interest and not the particular interest of the relevant newspaper or journalist” (ibid, p 358).

 

Since Tzitrin, this view has been an axiom of Israeli constitutional law. Nevertheless, the journalist’s privilege has several unique elements compared to other professional privileges and they are set out below –

 

(a)       As already mentioned, it is the result of case law, while the others are statutory.

 

(b)       It is relative (like some of the statutory privileges), unlike, for example, the privilege covering evidence concerning the attorney-client relationship (section 48 of the Evidence Ordinance) or evidence presented by clergymen (section 51 of the Evidence Ordinance), which are absolute. For these, the Evidence Ordinance does not prescribe a balancing formula and courts have not been granted power to order revoking the privilege. See: LCA 5806/06 The Estate of Michael Namirovski, Deceased v. Shimko, paras. 6-7 of Deputy President E. Rivlin’s opinion (unpublished, June 13, 2007); HCJ 844/06 Haifa University v. Prof. Avraham Oz, para. 11 of Justice E. Hayut’s opinion (unpublished, May 14, 2008) (hereinafter: “Haifa University”).

 

(c)       It blocks evidential expression in judicial or investigative proceedings – with the intent of making journalistic information public. The other privileges that apply, for example, in respect of treatment-oriented professions, like lawyers, doctors, psychologists or social workers, preclude the flow of information (to the court) in order to enable the individual privately to put to the professional all the information necessary for his treatment. On the other hand, journalistic privilege blocks evidential expression in judicial or investigatory proceedings specifically with the intention of making matters public and ensuring the public’s right to know. See: pp viii and ix of the work by Yisgav Nakdimon, Precluding Expression in Order to Permit Expression – Suggested Thought Process for Fashioning the Scope and Protection of Journalistic Privilege in the Constitutional Era (Ph.D. thesis, under the supervision of Prof. Ariel Bendor, The Faculty of Law, Haifa University, 2012 (hereinafter: “Nakdimon”).

 

(d)       Unlike the other privileges, it is likely to be infringed per se on disclosure of the journalist’s communications data, which is likely to expose the identity of his sources of information, which is at the very heart of the privilege and not the mere periphery of the right. Hence, it should be acknowledged that not only the name of the source, but any detail or information that might lead to his identification should fall within the scope of journalistic privilege. See: Nakdimon, id, at 153-154, 276-277.

 

10.       The journalist’s privilege is therefore one of the means that guarantee freedom of the press, and constitutionally it is as though it were drawn from the freedom of expression, which is an independent constitutional right that is “at the very heart of democracy” (CrimA 255/68, State of Israel v. Ben Moshe, IsrSC 22(2) 427, 435 (1968)). Other approaches maintain that the freedom of expression itself depends upon a certain degree of privacy, which permits one’s autonomous and original development. See: Stephen Breyer, Active Liberty 62-63 (2008); Ruth Gavison, Privacy and the Limits of the Law (Yale L. J. 475 (1980). For a summary of the different perspectives on this, see also: CA 751/10, John Doe v. Dr Ilana Dayan-Orbach, paras. 61-66 of Deputy President E. Rivlin’s opinion (unpublished, February 8, 2012) (hereinafter: “Dayan”).

 

11.       The other view does not see journalistic privilege as rooted in the doctrine of free expression but bases it directly on the rationale of individual privacy and confidentiality of conversations, that are now constitutional values protected under section 7 of Basic Law: Human Dignity and Liberty (to be precise, the confidentiality of conversation would also appear to include the confidentiality of the parties to the conversation, rather than just its content). Hence, according to this view, journalistic privilege enables the reporter’s source to maintain his anonymity in the world outside the “confidential domain” between the two (see: Michael Birnhack, Control and Consent: the Notional Basis of the Right to privacy, Mishpat U’Mimshal II, 63-64 (2007) (hereinafter: Birnhack, Control and Consent); Michael Birnhack, The Private Domain: the Right to Privacy between Law and Technology, 121-122 (2011) (hereinafter: Birnhack, Private Domain); Nakdimon, at 141-143). In this context anonymity is perceived as part of the right to privacy since “it enables a person ‘to act in peace’ and avoid personal exposure and the giving of information about himself that he does not wish to give… Anonymity gives a person control over information about himself… and prevents ‘gazing’ into his privacy”. (See LCA 4447/07, Mor v. Barak ETC (1995) International Telecommunication Services Ltd, para. 13 of Deputy President E. Rivlin’s opinion (unpublished, March 25, 2010); see also Nakdimon, p 141).

 

12.       All the above indicates that the journalist’s original privilege can also be based on the value of human dignity, enshrined in sections 2, 4 and 11 of Basic Law: Human Dignity and Liberty, because such privilege contributes to safeguarding the freedom of expression, which in turn is embodied in the doctrine of human dignity (see: CA 105/92, Reem Contracting Engineers Ltd v. Nazareth Elite Municipality, IsrSC 47(5) 189 (1993); HCJ 2481/93, Dayan v. The Commander of the Jerusalem District, IsrSC 48(2) 456 (1994); PPA 4463/94, Golan v. The Prison Service, IsrSC 50(4) 136, 152-153 (1996)).

 

To be exact, another constitutional track, which also has certain support, in fact finds the constitutional embodiment of the freedom of expression in the right to liberty, as protected under sections 5 and 11 of Basic Law: Human Dignity and Liberty (see, for example, the paper by Dr Guy E. Carmi Dignity – the Enemy from Within: a Theoretical and Comparative Analysis of Human Dignity As a Free Speech Justification, 9 U. Penn. J.  Con. L. 957 (2007) (hereinafter: “Carmi I”); Guy E. Carmi “Dignitizing” Free Speech in Israel: the Impact of the Constitutional Revolution on Free Speech Protection 57 McGill L. J. (forthcoming 2012) (hereinafter: “Carmi II”). However, this possibility – which has not yet become entrenched in the Israeli legal system – does not directly impact the analysis here and there is therefore no need to consider it at length. Furthermore, as mentioned in LCA 10520/03, Ben Gabir v. Dankner (unpublished, November 12, 2006), there is in any event a certain natural proximity between the separate doctrines of liberty and dignity, which inter alia also finds expression in protections of free expression: “the freedom of expression is the mother of freedoms. It is also the most fragile of them. It is the first to be infringed but the infringement never stops there. All the freedoms fall together with it. Its fall marks the end of human dignity. Human liberty – man’s dignity. Human dignity – man’s liberty” (emphasis added – H.M.; see also in this respect Carmi I, pp 966-967; Dayan para 66).

 

Interim Summary

 

13.       The analysis so far demonstrates that the possible infringement by the Communications Data Collection Law of the protected privileges is not limited merely to journalistic privilege and it might also extend to other privileges that are embodied in the Evidence Ordinance and other provisions of law, or those the case law has or will recognize in the future (see: section 3(d)(7) of the Act. See also Haifa University, bottom of para. 19 of Justice E. Hayut’s opinion (unpublished, May 14, 2008); HCJ 793/05, Bar Ilan University v. The Jerusalem National Labor Court, paras. 11-14 of President D. Beinisch’s opinion (unpublished, January 31, 2011)).

 

Professional privilege therefore promotes the interests of a person involved in a variety of relevant spheres (religion, medicine, law and the like), without concern that his sensitive, personal information will be disclosed (see: Birnhack, Control and Consent, p 34; Isaac Amit, Admissibility, Confidentiality, Privilege and Protected Interests in Civil Law Discovery Proceedings – An Attempt to Impart Order in Uri Kitai Book 247 (Ed. Boaz Sangero, 2007)).

 

As aforesaid, this concept affects constitutional review because in my opinion infringing the privileges constitutes at least an indirect infringement of the constitutional rights to dignity, liberty and privacy.

 

14.       In view of all this and considering the compound infringement of the constitutional rights of privileged persons, which is at stake here, it seems appropriate to ease the sharp distinction between “substance” and “form” in the context of privileges and the communications that include or encompass them. Indeed, “cohesion between the media and the collapse of the distinction between content and communications data requires a new legal framework for protecting privacy, which is not based on a dichotomy like its predecessor but on a continuum of situations classified according to the degree of risk they pose to privacy” (see: Omer Tene, Look at the Pot and See What Is inside: Communications Data and Personal Information in the 21st Century” in Legal Network: Law and Information Technology 287, 313 (Ed. Niva Elkin-Koren & Michael Birnhack, 2011)).

 

I shall now then move on to analyze the constitutional validity of the provisions of the Communications Data Collection Act under review here, in light of my conclusions above. Since I do agree, as noted, with the President’s approach as to the constitutionality of sections 3, 6 and 7 of the Communications Data Collection Act, my review below will center on the constitutionality of the “administrative course” prescribed in the Act, and the boundaries that should, in my opinion, be set for it.

 

Summary Review of the Constitutionality of Section 4 of the Communications Data Collection Act

 

15.       Section 4 of the Communications Data Collection Act establishes a “course” for obtaining permits under the Act, which is reserved for “urgent cases.” The main characteristic of this “course” is that the entity authorizing the permit is not a court but a “competent officer,” as defined in section 1 of the Communications Data Collection Act. It stands to reason – and the President also agrees – that such “administrative course” involves greater infringement of constitutional rights than the “legal course” since a permit to obtain communications data is granted here by an administrative entity – the competent officer – who is asked to do so by another administrative entity (sometimes within the same organization as the competent officer), without having to justify to the judicial authority the reasons for awarding the permit.

 

Indeed, there is a presumption that the administrative authority acts properly and presumably section 4 of the Communications Data Collection Act will only be used where the competent authority believes – in good faith – that this is essential. However, even given this, it does appear to me that, as a society, it is our duty to limit such situations as far as possible since “without judicial review of the executive authority, the separation of powers is undermined and with it man’s liberty is impaired and the fundamentals of the free regime are harmed” (see: HCJ 294/89, The National Insurance Institute v. The Appeals Committee under Section 11 of the Victims of Hostile Action (Pensions) Law, 5730-1970, IsrSC 45(5) 445, 450 (1991); see: Amnion Rubinstein, Barak Medina, The Constitutional Law of the State of Israel vol. I 174 (2005)). Compare with the decision of the Constitutional Council in France, No. DC 2005-532 of January 19, 2006.

 

16.       This inherent problem of section 4 is resolved to some extent by the fact that some of the elements of the “the administrative course” detailed in it are narrower than “the judicial course” regulated in section 3 of the Act and also because it is motivated by the situation’s urgency.

 

Nevertheless, as I see it, “the administrative course” is not appropriate for contending with professional privilege. I shall below explain the reasons for this approach, which differs from my colleague’s opinion.

 

17.       In paragraph 25 of her opinion, the President states that “in the absence of such infringement [in the proportionality of the Communications Data Collection Law – of the privileges, apart from journalistic privilege; the additions in square brackets are mine – HM], prima facie it cannot be said section 4 does not refer to professionals per se it must be struck down for unconstitutionality.” The President also believes the difference between the purposes of the separate “courses” established in the Communications Data Collection Act and the fact that section 4 of the Act is reserved merely for urgent cases can all justify infringing the constitutional rights (to privacy) of professionals, including journalists (albeit with more extensive reservations regarding the latter).

 

In this respect I would adopt a different line and, in my opinion, even in urgent cases, greater (albeit not absolute) weight should be attributed to the constitutional rights of the beneficiaries of professional privilege that may only be infringed, if at all, through a judicial order under section 3 of the Act, which inter alia meets the conditions of the Limitations Clause (my opinion in CA 9183/09, The Football Association Premier League Ltd v. John Doe (unpublished, May 13, 2012). I reach this conclusion by giving a restrictive constitutional interpretation to the provisions of section 4 of the Communications Data Collection Act and the structure of the Act generally but not by invalidating the section, as the petitioners seek. The main reason I am adopting this method of interpretation is twofold –

 

(a)       Invalidating a provision of statute is indeed a last resort and before doing so it should be attempted to resolve the difficulties, if at all possible, by interpretation.

 

(b)       Invalidating a section of the Act opens up the possibility for another inadequate normative arrangement to be enacted in the future, while interpreting the section now resolves the constitutional difficulty once and for all.

 

See: HCJ 9098/01, Genis v. The Ministry of Construction and Housing, IsrSC 59(4) 241 (2004) – in the opinions of President A. Barak and then Justices M. Cheshin and D. Beinisch there.

 

My willingness to interpret, rather than strike down, is thus my joining the President’s. Nevertheless, as for the proper interpretation, I take issue with my colleague’s opinion as I shall immediately explain.

 

18.       The President believes that the narrow arrangements in section 3 of the Communications Data Collection Act can also be reflected in implementing section 4 of the Act as relevant factors that must be considered when exercising the discretion (see para. 26 of her opinion). She also states (in paras. 27-28 of her opinion) as a factor in support of her opinion that the State in fact accepts that position and it is reflected in the Police procedure that regulates the Act’s use (hereinafter: “the procedure”).

 

I myself believe that neither the State’s concession nor the procedure should carry determinative weight in this context. Although the State now agrees that the section 4 of the Act should be implemented somewhat narrowly, nothing lasts forever and in any event this concession (and the procedure based on it) does not constitute a meaningful constitutional factor, but at most alters the administrative framework. It is also deficient in that it involves something of a prohibited secret enactment. Compare: CA 421/61, State of Israel v. Haaz, IsrSC 15 2193, 2204-2205 (1961); LPrisA1127/03, State of Israel v. Klein, IsrSC 48(3) 485, 515 (2005).

 

Hence, I cannot accept the President’s position that “naturally, a change in the authority’s conduct could also lead to a material change in the balance embodied in the Act. Such a change would give rise to new cause to challenge the Act, certainly at the administrative level and perhaps even the constitutional level” (see para. 30 of her opinion). As I see it, the infringement of privilege is currently happening and there is therefore no reason to postpone constitutional review until such time as the administrative authority departs from its narrow approach, a fortiori since in my opinion that approach is inadequate. Hence, as I see it, considering the great role of privileges in safeguarding the constitutional rights detailed above, it is appropriate to hold that interpretatively the “course” for dealing with requests concerning professionals is only in section 3 of the Communications Data Collection Act and constitutes specific law in such respect. Section 4 of the Communications Data Collection Act cannot therefore be used in order to request an “administrative permit” concerning professional privilege.

 

I shall clarify this conclusion below and commence by detailing the relevant constitutional context.

 

19.       In CA 6821/93, United Mizrahi Bank Ltd v. Migdal Cooperative Village, IsrSC 49(4) 221, 265 (1995), President (Ret.) M. Shamgar held as follows (emphasis added – H.M.):

 

“The theoretical point of departure is that the legislature, wishing to alter or infringe a protected right, does so by express provision or clear contradictory determination in the language of the new provisions that conflicts with what preceded it. In any event there should be an attempt to implement statutes that cause this issue by trying to reconcile them. Consequently, the interpretive presumption is that a right protected by an ordinary statute cannot be changed or infringed by subsequent ordinary legislation unless otherwise stated or implied.”

 

In the instant case I believe the argument was established that section 4 of the Communications Data Collection Act – if implemented against professional’s privilege – would infringe their constitutional rights. Such infringement is not done by express language but impliedly and it does not constitute a “clear contradictory determination” in the words of President (Ret.) M. Shamgar. President D. Beinisch and Justice. E. Hayut adopted a similar approach in HCJ 10203/03, National Commander Ltd. v. The Attorney General (unpublished, August 20, 2008). It should also be noted that based on a similar perception it was held in Britain, in MG, that:

 

“Legal professional privilege is a fundamental human right long established in the common law… The courts would ordinarily construe general words in a statute, although literally capable of having some startling or unreasonable consequence, such as overriding fundamental human rights, as not having been intended to do so. An intention to override such rights must be expressly stated or appear by necessary implication… Section 20(1) contained no express reference to legal professional privilege and the question is therefore whether its exclusion must necessarily be implied.”

 

(Id, paras. 7 and 8 of the opinion; emphasis added – H.M.)

 

In this context it should be further emphasized that there is a consensus that section 3 of the Communications Data Collection Act offers a more balanced arrangement in this respect, both substantively (the inclusion of detailed arrangements) and at the level of jurisdiction (the requirement that the application for the permit should be made to court, rather than the administrative authority.) The question is therefore whether, in view of the infringement to constitutional rights that underlie professional privilege, we can make do with a guideline that section 3 of the Communications Data Collection Act constitutes considerations (and nothing more) when exercising the power under section 4 of the Act. In my opinion, the answer to the question is in the negative. The overall proper constitutional result is therefore that the arrangement along the court “course” should constitute an exclusive mandatory course in the case of an application to obtain communications data concerning professionals. The reasons for this are explained below.

 

Professional Privilege Is Not to Be Infringed without a Judicial Order

 

20.       Section 3 of the Communications Data Collection Act purports to also permit consideration of urgent cases (see: section 3(f)(2) of the Communications Data Collection Act, in the knowledge that the courts system is organized to respond to such situations 24 hours a day); the “course” prescribed in it is more balanced and proportional than that delineated in the “administrative course”; its infringement on such constitutional rights is less restrictive because it requires considering a greater range of factors. It furthermore requires the administrative authority to submit its justifications to judicial review. Given these factors, enabling the administrative authority “to circumvent” the balanced legal “course” in section 3 of the Communications Data Collection Act in the case of professionals is improper. As mentioned, a series of reasons support the above conclusion and they are set out immediately below.

 

21.       The purpose of the professional privileges is to protect the constitutional values that justify them. They therefore cannot be infringed without suitable justification as provided in the Limitations Clause of Basic Law: Human Dignity and Liberty. Such justification is generally only possible through a judicial order, rather than administrative measures (a fortiori since the privileges are sometimes also presumed absolute.) This perception is what led to MKs Gideon Sa’ar and Shelly Yachimovich’s proposal on second reading, in a reservation to the Act’s Bill, the language of section 3(b) of the Act that was passed, providing as follows:

 

“If the subscriber subject the motion is a professional, the court shall not allow communications data to be obtained as provided in subsection (a), unless it is satisfied, on the basis of clear details to such effect in the motion, that there are grounds to suspect that the professional is involved in the offense, in connection with which the motion was filed.”

 

See: Knesset Proceedings of the 181st session of the 17th Knesset on December 17, 2007, at 12,895, 12,901.

 

These conditions strengthen the requirements the court faces when issuing an order to obtain communications data from the database of a telecommunications licensee, as set in section 3(a) of the Act, which mandate the court be satisfied that “it is necessary” for the purposes of the section “provided that obtaining the communications data does not infringe a person’s privacy beyond necessary”. We therefore have expression of the “Limitations Clause”, which is to be applied in every specific motion and reviewed by the judicial authority. If it does not do so, a serious situation arises as stated by then MK Gideon Sa’ar:

 

“… Whoever understands the significance in the relationship of attorney-client or journalistic privilege, or all those types of privilege, understands that it could be a device for suppressing all professional privilege” (id, at 12,895).

 

MK Shelly Yachimovich further refined matters in the context of journalistic privilege and stated:

 

… And it could go further into somewhat darker realms, and the risk of leading to the unnecessary monitoring of a journalist’s telephone lines might seriously impair his ability to function, the trust that his sources place in him, his ability to expose wrongdoing and corruption and therefore indirectly, or even directly, infringe the freedom of the press, which is a fundamental cornerstone of our democracy” (id, at 12,901)

 

22.       In light of this, it appears to me that the approach that makes infringing professional privilege conditional upon obtaining a judicial order  is the “proper constitutional” format, without which doing so is impossible. The language of section 52 of the Evidence Ordinance, which provides as follows, supports this as well:

 

“The provisions of this chapter shall apply to providing evidence both to a court or tribunal and to any authority, body or person competent under law to hear evidence; and every reference in this chapter to a court shall be deemed to be a reference to a tribunal and to any such body or person as well.”

 

In this regard, scholar Jacob Kedmi states in his work On Evidence, Part III (2009) as follows:

 

“The prevailing approach is to view the term ‘authority’ as expressing the entities that are empowered to conduct an investigation within the meaning of gathering evidence (as distinct from other entities that are empowered ‘to hear evidence’ in the way typical of giving testimony in court); and in that way to interpret the initial provision – as distinct from the final provisions that do not include the term ‘authority’ – as also applying to entities that are legally empowered ‘to gather evidence,’ like the Israel Police, income tax investigators, customs investigators, etc.” (id, at 1012) (emphasis in original – H.M.).

 

This position was in fact adopted in CrimA 8600/03, State of Israel v. Gilad Sharon, IsrSC 58(1) 748 (2003), where an extended bench, per Deputy President T. Or, held as follows:

 

“On its face, it may have been concluded that the Police, which collects evidence, could be treated as a ‘court’… This result is unsatisfactory. It is unreasonable that the Police, in attempting to obtain certain documents and facing a suspect who asserts privilege, are charged with deciding whether he does indeed have privilege… Consequently, when a suspect being investigated by the Police claims a privilege applies, the Police investigator will not have power to decide whether the documents are privileged. In order to obtain the documents the investigator will have to request a court order” (id, at 766).

 

Here it should be stated that in MG, in Britain, a similar approach and interpretation were adopted.

 

It should further be noted that section 12 of the Communications Data Collection Act, which regulates the conflicts of laws, gives effect to this position, as follows:

 

“The provisions of this Act shall not affect the powers granted by law in respect to obtaining information and documents, including communications data, but for a court’s power under section 43 of the Criminal Procedure (Arrest and Search) Ordinance [New Version], 5729-1969 to order communications data to be presented or produced upon request by investigatory or prosecution authorities.”

 

23.       My above conclusion is further supported in terms of journalistic privilege – because of its special characteristics as discussed above since the interpretation expressed in the Police procedure and adopted by the President – does not prima facie bar that where a journalist is suspected of committing a felony (for example holding “secret information” within the meaning of section 113(c) of the Penal Law, 5737-1977) the authorities would seek to act in his regard according to section 4 of the Act or by another administrative method, and there have indeed been examples of this (see Nakdimon 274-276).

 

Moreover, in the analysis so far I have ignored the fact that the Police procedure’s reference to the case of obtaining an “administrative permit” to gather communications data relating to a journalist is limited solely to traffic data (a list of incoming and outgoing calls) (see: section 7(b)(4) of the procedure). On its face this means there is no impediment to requesting other communications data, even when the journalist is not suspected of a “felony,” but this is not expressed in the President’s opinion. This is joined with the initial problem I have discussed above, and even aggravates it, because other communications data can also infringe the journalist’s privilege to the same extent as traffic data. For example, location data regarding communications equipment in the journalist’s possession could expose or help to expose the source of the privileged information (on the distinction between location data and traffic data, see: section 1 of the Communications Data Collection Act.) In this respect Nakdimon states as follows:

 

          “It appears to me that this state of affairs, where journalistic privilege as to communications data is partly regulated by internal Police directives – that might change from time to time otherwise than in the context of public proceedings, and from which the authority might depart – rather than principal legislation, is improper. Moreover, the substance of the arrangement prescribed in the directives is also inadequate because it leaves the door open to circumventing journalistic privilege, without judicial review that would facilitate its protection where it is asserted that the journalist is suspected of the offense involved in the investigation or is its victim, or when the communications data sought are not traffic data but, for example, location data that enable knowing exactly where the parties to the communication between the journalist and the source of information are” (see: id, at 277; emphasis added – H.M.).

 

          This logical statement is apt here and it appears to me that it also appropriately sums up my overall position. The time has therefore come to conclude the matter.

 

Conclusion

 

24.    In conclusion, in light of the Communication Data Collection Act’s potential significant infringement on professionals’ privilege and their protected constitutional rights, I believe that the scope of the Act should be confined by an interpretive determination that the “administrative course” to obtain a permit may not be used where the permit is sought regarding professional privilege. In such a case, the “legal course” will in my opinion constitute an exhaustive and exclusive arrangement. Furthermore – again in the scope thereof – a court would grant an order for disclosure only when the conditions of the “Limitations Clause” were met and when the court is satisfied, in the context of the “professional privilege,” that the interest of collecting the data outweighs the constitutional values that justify the specific privilege.

 

25.    A review of the history that has recognized professional privilege – in Israel and elsewhere in the world – demonstrates that individual rights were developed and founded, inter alia, on the basis of this specific area of law. This was the case in the past and although the present is somewhat complex, as noted, I trust this will also be the case in the future given the need to contend with the challenges with which new technology, the Act and the case law present us.

 

Deputy President E. Rivlin

 

          I join in the result my colleague President D. Beinisch reached, whereby the petitions should be rejected, in light of and subject to the boundaries and limitations detailed in the judgement.

 

          My colleague Justice H. Melcer rightly insists on the need for special protection the Act should afford anyone with professional privilege under statute or case law. He believes that a competent officer should not be permitted to act under section 4 of the Act where privilege prima facie applies because of a profession and that the only way to obtain communications data in those situations must be approaching a court.

 

          As for myself, I would not go so far as to rule out the administrative course in those cases. Nevertheless, I do agree that extreme care should be taken in such cases, as reflected in my colleagues the President and Justice E. Arbel’s opinions.  First, as President D. Beinisch held regarding exercising the power in both section 3 and section 4 of the Act, it should be interpreted so that the data is only obtained where it is required for a specific, concrete need. Second, regarding the exercise of the power in section 4 of the Act, it should be interpreted, as she proposed, so that it is used sparingly in extreme cases for the purpose of dealing with offenses that require it and only where because of the urgency it is impossible to obtain a court order; this is when the motive for applying to court is a serious circumstance such as a  risk to human life. The fact that the subscriber is a professional person should also be taken into account when exercising the power under section 4 or refraining from doing so.

 

          As my colleague Justice E. Arbel believes, I too believe that section 4 of the Act should be construed to preclude the competent officer’s authority to renew a permit. After issuing the initial permit, which is not to exceed 24 hours, section 4 should be interpreted so that the permit may only be renewed by a court.

 

 

          Unanimously decided to dismiss the petitions.

 

          Regarding the interpretation of sections 3, 6 and 7 of the Act, it is decided according to President (Ret.) D. Beinisch’s opinion, joined by all members of the bench.

 

          Regarding the interpretation of section 4 of the Act, it is decided by a majority of the bench, as stated in President (Ret.) D. Beinisch’s opinion, that the power can also be exercised where the communications data are sought from a “professional,” always subject to the limitations and reservations detailed in the opinion. This is against Justice H. Melcer’s dissenting opinion, who believes that the power prescribed in section 4 may not be exercised in order to obtain a permit under the Law in the case of a “professional”.

 

May 28, 2012 (7th Sivan 5772)

 

The Supreme Court sitting as Court of Civil Appeals

 

  CA 5097/11 

And Cross Appeal

 

Before:                                    The Hon. Justice E. Rubenstein

                                    The Hon. Justice Y. Amit

                                    The Hon. Justice Z. Zylbertal

 

The Petitioner and Cross-Respondent:                       Telran Communications (1986) Ltd.

v.

The Respondent and Cross-Petitioner:                       Charlton Ltd.

 

Formal Respondents:                                                  1. Shabtai Giron

                                                                                    2. Erez Ben Zion

                                                                                    3. Shaul Aslan

                                                                                    4. Fédération Internationale de Football

                                                                                        Association (FIFA)

 

Appeal of the judgment of the Tel Aviv District Court in CC 1094/07, decided on May 19, 2011, per Deputy President Drora Pilpel.

 Hearing date:                                                             27 Sivan 5773 (May 6, 2013)

Attorneys for the Petitioner:                                       Dr. Gilad Wekselman, Adv., Eli Shimon,

                                                                                    Adv.  Racheli Pery-Reichman, Adv.

 

Attorneys for the Respondent:                                   Lior Lahav, Adv. Dan Wistrich, Adv.,

Meiran Eliahu-Fort, Adv.

 

 

 

Facts:   The Respondent and Cross-Petitioner (hereinafter: Charlton) acquired the exclusive right to broadcast the summer 2006 FIFA World Cup in the State of Israel. The Petitioner and Cross-Respondent (hereinafter: Telran) sold decryption cards (hereinafter: cards) that enabled the dycription of encrypted satellite broadcasts of foreign broadcast networks. The foreign networks broadcasted the World Cup games by encrypted satellite broadcast. The broadcasts could be received and watched in Israel only by means of the cards. The Tel Aviv District Court held that Telran had infringed (indirectly) Charlton’s copyright, and ordered that it pay Charlton damages in the amount of NIS 1,250,000. It should be noted that the Copyright Act of 1911 (hereinafter: the Act or the Copyright Act) is the relevant normative framework in this matter, inasmuch as the alleged breaches occurred prior to the entry into force of the Copyright Law, 5768-2007 (hereinafter: the Law).

Held:   The Supreme Court (per Z. Zylbertal, J., E. Rubenstein and Y. Amit, JJ. concurring) granted the appeal, in part, for the following reasons:

            Intellectual property rights in general, and copyright in particular, are the result of a complex balancing of the various interests in the background of the legal regime established by the legislature. Therefore, the scope of copyright extends only to the boundaries delineated by law.

            The Act distinguishes between a direct infringement (sec. 2 (1) of the Act) and an indirect infringement (sec. 2 (2) of the Act).

            “Direct” Infringement: A copyright grants the owner of the right exclusivity in regard to certain acts in regard to the work. Performing one of those act reserved to the owner of the copyright by the Act, without its permission, constitutes a “direct” infringement of the right. Naturally, the Act did not treat of use of a work by means of broadcasting, and therefore, in order to adapt the Act to a changing technological reality, the term “public performance” in the Act has been interpreted to include broadcasting. In accordance with the case law, a broadcast requires the transmission of sounds or images, or their combination, from one instrument that sends the sounds or images. To another instrument that receives and plays or presents the sounds and images to the public. Inasmuch as the card sold by Telran does not “transmit” or “distribute” the World Cup broadcasts – but, as noted, merely enables the decrypting of signals broadcasted by another body – the distribution of the card does not fall within the definition of a broadcast or a secondary transmission. Therefore, Telran did not perform an act reserved to the copyright owner – it did not broadcast the World Cup games (but only provided the cards that make it possible to watch them). Therefore, its conduct did not fall within the ambit of sec. 2 (1), and Telran cannot be held to have “directly” infringed the copyright of Charlton.

            “Indirect” Infringement: An indirect infringement is the knowing performance of a prohibited act with an infringing copy. In order to establish that there has been an indirect infringement, there must be a direct infringement by a third-party. Three conditions must be met in order to show an indirect infringement: the existence of an infringing copy, the performance of one of the acts enumerated in the section, and that the indirectly infringing party knew, or should have known that the rights to the work belonged to another. In the instant case, the act performed by Telran was the providing of a means for “cricumventing” a “technological fence”. Such an act does not constitute indirect infringement, inasmuch as no exclusive right of Charlton was infringed by a third-party (the foreign broadcasters did not unlawfully broadcast the games to Israel, and as for the viewers, the act of viewing protected content is not one of the acts reserved to the copyright owner under the Act).

            “Circumventing” Technological Measures: No legislative provision has been adopted in Israel that would make the evasion of technological safeguards an infringement of the rights of the owner of a copyright, both under the old Act or under the new Law. As stated, the fundamental principle is that anything that the law has not included within the scope of copyright is not included among the protected rights. Therefore, the argument that the very selling of cards enabling the circumvention of technological measures constitutes an indirect infringement of Charlton’s copyright cannot be accepted.

            “Contributory” Infringement: The Supreme Court has recognized that an act contributing to an infringement can impose liability for infringement upon the “contributor”. The Court’s judgment in CA 5977/07 in the matter of The Hebrew University established the following conditions for such a contributory breach: a breach by a third-party; actual concrete knowledge of the breach; and a significant, substantial contribution to its perpetration. It was further stated that “the mere existence of protection does not negate the existence of the breach. Protection prevents the user from bearing responsibility, but does not eradicate the breach.” In addition, it was stated obiter dicta in the Premier League case: “Where a ‘permitted’ use is concerned, there is, indeed, no infringement according to the Law. But that does not suffice to eradicate the fact that, in substance, there is an infringement of the copyright, even if such infringement be permitted for various reasons. This is the case primarily where the combined effect of many protected infringements causes significant harm to the copyright holder. As has already been held, in such circumstances there is nothing to prevent us from recognizing the contributory responsibility of the intermediary that caused the infringement.” The judgment further explains that such permitted uses constitute defenses that the Act chose to grant to users, but do not grant a positive right of infringement.

            In this regard, Zylbertal, J. added the additional observation that, in his view, the correct interpretation of “permitted use” is that it concerns a substantive finding rather than a technical defense.  A “permitted use” is precisely what it says, i.e., permitted use that, therefore, does not constitute a “protected” breach, and indeed, is not a breach at all. Where there is no breach, there is nothing to which one might “contribute”. Thus, when end users do something that is permissible, the intermediary “contributes” to a permitted act, and cannot be said to breach a copyright holder’s rights that have not been infringed. Zylbertal, J. added that even were we to take the view that permitted use creates a defense, the contributory “infringer” would be protected a fortiori in cases of a “protected infringement”. In any case, he emphasized that his approach would not entirely abolish the contributory-infringement doctrine. That doctrine continues to operate in Israeli law, and it is right and proper that it do so in appropriate cases.

            In the instant case, having found that there was no direct infringement, there is no need to examine whether the other conditions of a contributory infringement were met, and it must be held that Telran did not commit a “contributory infringement” of Charlton’s rights.

            Therefore, selling a card that serves as a means for technological “circumvention” does not constitute an “infringement” by Telran of Charlton’s copyright under the Copyright Act.

            However, it is possible that by those actions, Telran enriched itself at Charlton’s expense. This issue was not considered by the District Court (which found an infringement of copyright, and therefore, was not required to address the head of unjust enrichment), nor was it addressed in the instant case. Therefore, the case was remanded to the District Court so that it might rule upon the cause of action of unjust enrichment, as well as the issue of damages in regard to that cause of action.

            E. Rubenstein, J. concurred, but added that while the result was legally correct, it was not the desirable result. Its import is that the sinner is rewarded. Rubenstein, J. called upon the legislature, reminding it that it is the legislature’s job to prevent injustice in a changing world in which technological advances are a daily occurrence. He further referred, inter alia, to Jewish law in the matter.

            Amit, J. concurred that the result was legally correct, but it raised a sense of discomfort. He conjectured, obiter dicta, that it might be possible to include the sale of decryption cards within the definition of the Act by construing “perform” and “public performance” as including making the work available to the public.

 

Judgment

Justice Z. Zylbertal:

1.         A company sold its customers a card that enables the decryption of encrypted satellite transmissions broadcast by foreign networks. The foreign networks transmitted encrypted television broadcasts for which another company holds exclusive copyright in Israel. Did the seller of the decryption cards infringe the copyright of the Israeli copyright holder? That is the primary question before this Court in the appeal and cross-appeal of the judgment of the Tel Aviv District Court from May 19, 2011 (per Deputy President D. Pilpel) in CA 1094/11 (hereinafter: the Judgment), which held that the Petitioner and Cross-Respondent infringed the copyright of the Respondent and Cross-Petitioner.

Background

2.         In the summer of 2006, the 18^th World Cup football tournament was held in Germany (hereinafter: the Mondial). The tournament was organized by Formal Respondent 4, the Fédération Internationale de Football Association (hereinafter: FIFA). FIFA owns the international broadcasting rights to the Mondial. The Respondent and Cross-Petitioner Charlton Ltd. (hereinafter: Charlton) purchased the exclusive rights to broadcast the Mondial in the territory of the State of Israel. As stated in the complaint, Charlton discovered that a company named Tube Ltd. (hereinafter: Tube) was publically broadcasting the Mondial games. In response to Charlton’s enquiry, Tube explained that it had purchased a subscription to view the Mondial on a South African network called MNET (hereinafter: MNET) via satellite. The subscription was purchased by means of the Petitioner and Cross-Respondent Telran Communications (1968) Ltd. (hereinafter: Telran) – a private company registered in Israel, which, inter alia, imports, markets and sells communications media – that provided Tube an encoded card that enabled the decryption and viewing of MNET broadcasts. According to Charlton, it discovered that Telran sold and distributed encoded cards (hereinafter: the cards) that made it possible to decrypt encrypted satellite transmissions of foreign broadcasters, among them MNET and another satellite network, ART that (apparently) broadcasts from Jordan (hereinafter: ART, and all together: the foreign networks). The foreign networks transmitted the Mondial games by means of encrypted satellite broadcasts that could be viewed in Israel only by means of the cards. In light of these findings, Charlton brought suit in the District Court.

3.         In its complaint, Charlton claimed that the use of the cards is prohibited in Israel, and that their sale constitutes an infringement of its copyright in regard to broadcasts of the Mondial games in Israel, which are protected broadcasts under the Copyright Act 1911 (hereinafter: the old Act or the Act or the Copyright Act). It was further claimed that Telran had sold at least 7,500 cards at a price of NIS 500 apiece. As a result, Telran and Formal Respondents 1-3, who are Telran directors and stockholders, were unjustly enriched in a total amount of NIS 3,750,000. It was added that in the framework of Charlton’s enquiries into the activities of Telran and their scope, a meeting was held in Charlton’s offices on May 12, 2006 between one of Charlton’s directors, Mr. Alex Weinstein (hereinafter: Weinstein) and a representative of Telran, Mr. Shai Aslan (hereinafter: Aslan), who is the son of Formal Respondent 3. Weinstein recorded the conversation. A transcription of the conversation (hereinafter: the transcript) was appended to Weinstein’s affidavit (Appendix C1 to Exhibit P/1). According to Charlton, Aslan admitted to Telran’s infringing conduct and to the scope of the profits garnered as a result of that infringing conduct.

            In its brief, Charlton claimed a direct infringement of its copyright, or alternatively, a contributory infringement of its copyright (we will address the meaning of these terms, as well as the term “indirect infringement”, below). Direct Infringement: It is claimed that the very distribution of the cards that enable decoding of the satellite signals of the foreign networks constitutes a direct infringement of the copyright, under sec. 2 (2) of the old Act. It was emphasized that the foreign networks that did not have broadcasting rights in Israel and that did not distribute cards for viewing their transmissions (as Telran failed to produce any agreement with any of the relevant networks), encrypted their transmissions such that they could not be viewed in Israel, which prevented infringement of Charlton’s copyright. Telran distributed the encrypted cards, and thereby infringed Charlton’s copyright. Contributory Infringement: It is claimed that this is recognized in Israeli law, which has established that providing infrastructure for perpetrating an infringement creates liability, even if the infringement itself is committed by others. It was emphasized that it was Telran that facilitated the infringing conduct – viewing of “blocked” channels that cannot be viewed in Israel without the cards – by supplying the cards. We would note that, in its brief, Charlton changed the basis of its calculation of damages, and claimed that Telran sold 5,000 cards at a profit of NIS 500 per card, for a total of NIS 2,500,000.

4.         In response, Telran argued that the cards were purchased from the official representatives of the foreign networks, which broadcast lawfully, and that we are concerned with a purely technological device that serves solely for the reception of broadcasts. Therefore, it argued that there was no infringement of copyright. It was further emphasized that Telran has no control over the content of the channels that can be received by means of the cards.  Telran claims that the cards were sold and distributed since 2003, without reference to the Mondial broadcasts, such that there was no connection between the sale of the cards and the Mondial. In addition, several preliminary arguments were advanced: It was argued that there was a lack of privity and a failure to state a cause of action, in that Charlton did not produce the full chain of agreements that would show how it obtained the copyright from the original copyright owner – FIFA; laches – in that the action was instituted four years after Telran began marketing, and a year and a half after selling the subscription to Tube; as well as that the suit was not brought in good faith, and was vexatious – as the recording of the conversation between Aslan and Weinstein was the product of a misrepresentation of its purpose as a business meeting – and that the sole purpose of the suit is to extort monies from Telran.

             In its brief, Telran claimed that it was not proved that the Mondial games were broadcast over the foreign networks, that it was not proved that Charlton owned the Israeli broadcasting rights, and that in any case, it did not hold exclusive rights for broadcasts in Arabic (it would appear from the recorded conversation with Aslan that the buyers of the cards were primarily Arabic speakers). It was further claimed that the cards only made it possible to view the broadcasts in Arabic, and that, as stated, Charlton did not hold exclusive rights over such broadcasts. It was emphasized that the contract under which Charlton purportedly acquired the Israeli broadcasting rights distinguished among Hebrew, English and Arabic, inasmuch as “FIFA knew” that representatives of the foreign networks were selling the cards such that it was possible to receive their broadcasts in Israel, and Charlton was intentionally not granted full broadcasting rights in Arabic. It was further claimed that, in fact, only 120 cards were sold, over the course of several years, and with no connection to the Mondial broadcasts, and that in 2006 – the year of the Mondial games in question – only 22 cards were sold. It was further emphasized that Charlton’s calculation was based upon the conversation between Weinstein and Aslan, but what was stated in that conversation was that there was a market potential of 5,000 cards, and not that such a number was actually sold.

5.         To complete the picture, it should be noted that on May 25, 2008, the Copyright Law, 5768-2007 (hereinafter: the new Law or the Law) entered into force, replacing the Copyright Act. Nevertheless, the old Copyright Act is the relevant normative framework in the instant case, as the claimed infringements occurred prior to the entry into force of the new Law.

The Judgment of the Trial Court

6.         These are the questions that were before the District Court: First, as a claim in limine,  the questions of laches or a lack of good faith in bringing suit; second, do the Mondial broadcasts constitute a work protected by copyright; third, does that copyright belong to Charlton; fourth, did Telran and its owners (Formal Respondents 1-3), or any of them, infringe Charlton’s copyright; fifth, can Telran rely upon the defenses established under the old Act; sixth, is Telran liable under the laws of unjust enrichment; seventh, what is the extent of damages.

            We will now proceed to examine the lower court’s holdings on each of these questions.

7.         (A)       In regard to the in limine claim of laches and an absence of good faith, the trial court held that the recording of Telran’s representative did not amount to a lack of good faith that would constitute an abuse of process or of the right of access to the courts. As for laches, the court found that the complaint had been filed about half a year after Charlton became aware of the sale of the cards by Telran, and held that such a period did not constitute laches that would justify dismissing the suit in limine.

            (B)       The trial court held that the Mondial broadcasts were, indeed, a protected work under copyright law. It held that sec. 1 of the Act establishes that copyright may apply to a “dramatic work”, and that in the Tele Event case (CFH 6407/01 Arutzei Zahav & Co. Ltd. v. Tele Event Ltd., 58 (6) IsrSC 6 (2004), hereinafter: the Tele Event case), this Court explicitly held that a live broadcast of a sporting event constitutes such a work.

            (C)       It was held that Charlton owned the copyright over the broadcasting of the Mondial games in Israel. The court reviewed the entire chain of the transfer of rights from the original copyright holder – FIFA – to Charlton. What is important in the instant case is Telran’s claim that Charlton did not adequately prove the transfer of rights. That claim was rejected by the trial court. The court held that although the original agreements among the various parties along the chain were not produced, but only copies thereof, there was no evidentiary basis whatsoever to ground a suspicion as to the veracity of the photocopies that were submitted, and that those copies, as well as additional evidence submitted (primarily letters from office holders in the various companies and testimony of representatives of Charlton), showed that Charlton held the copyright to the broadcasting of the Mondial in Israel on the relevant dates.

            (D)       The question of the infringement of the right by Telran and its owners was subdivided into a number of questions. First, did the rights purchased by Charlton include Arabic broadcasts in the territory of the State of Israel; second, did the very distribution of the cards constitute an infringement as defined by the Act; third, who perpetrated the infringement.

            (1)        As for the language question, the agreement between ISMM Investment AG (hereinafter: ISMM), which was the owner of the rights by virtue of a chain of agreements, and which is the relevant agreement for the instant question (hereinafter: the Agreement) delineated Charlton’s rights by means of two elements – geography and language. The Definitions paragraph of the Agreement established that Charlton held exclusive rights in the geographic area (Licensed Territory) of the State of Israel, and non-exclusive rights in the areas of Judea, Samaria and Gaza (hereinafter: the Area):

"Licensed Territory" means Israel on an exclusive basis and Palestine (Occupied Territory) on a non-exclusive basis.

            As for the language of the broadcasts, the Agreement established that Charlton had exclusive Hebrew broadcast rights in Israel and the Area; exclusive English broadcast rights in Israel, and non-exclusive English broadcast rights in the Area; and Arabic broadcast rights in Israel for cable television, terrestrial television and satellite television, provided that the satellite signals were fully encrypted as set forth elsewhere in the Agreement:

"Licensed Language" means:

(a) Hebrew in Israel and Palestine on an exclusive basis.

(b) English in Israel on an exclusive basis and in Palestine on a non-exclusive basis. (c) Arabic in Israel only for Cable Television, Terrestrial Television and Satellite Television provided that the signal is fully encrypted as contemplated by the agreement.

            The District Court held that the fact that the Agreement did not grant Charlton exclusive rights in Israel in regard to Arabic broadcasts did not negate the territorial exclusivity that it was granted in the territory of the State of Israel. In other words, Charlton also held exclusive Arabic broadcast rights to the extent that the broadcasts were made within the territory of the State of Israel.

            (2)        The second issue before the court in this regard was whether distributing and selling the cards constituted an infringement of Charlton’s rights. The court held that Charlton held the exclusive right to broadcast the Mondial, and the transmission of broadcasts for commercial purposes also constituted an infringement under sec. 2 (2) of the Act. The court ruled that, in accordance with the judgment in the Tele Event case, the prohibition upon infringing the copyright of the owner of a right to broadcast also applies to the transmission of the broadcasts of foreign networks. The court emphasized that the Tele Event case held that, as opposed to a private individual who acquires a “dish” for receiving satellite broadcasts, a commercial company that transmits broadcasts to its subscribers is involved in prohibited “commercial distribution”. The court explained that Telran sold cards, for a commercial purpose, which made it possible to decrypt the encrypted transmissions of the foreign networks, and that this was the only means by which such transmissions could be received. It was held that Telran knew that the Mondial games were broadcasted over the foreign networks, knew that the cards that it sold made it possible to view those games, and aimed “sale promotions” specifically at the period of the Mondial. It also knew that Charlton held the broadcasting rights to the Mondial. In view of the above, the trial court concluded that Telran had actively violated Charlton’s rights.

            (3)        The final issue addressed by the trial court was that of the identity of the infringing parties. Based upon the above, the court determined that Telran had, indeed, infringed Charlton’s copyright. However, in regard to Formal Respondents 1-3 (the owners of Telran), the court held that Charlton failed to meet the evidentiary burden required to show that any of them fulfilled the requisite elements required to attribute liability for an infringement of its rights. The court emphasized that establishing that a company committed a tort does not necessarily require a conclusion that the company’s organs or office holders bear personal liability, and that the court was under the impression that those defendants were sued solely on the basis of their positions as organs of Telran. This issue was not raised in Charlton’s notice of appeal.

            (E)       Telran argued that it enjoyed various legal defenses, viz., good faith in accordance with sec. 8 of the Act, and market overt under sec. 34 of the Sales Law, 5728-1968 (hereinafter: the Sales Law). The trial court ruled that Telran was not entitled to either of those defenses, as shall be explained.

            (1)        The Good Faith Defense: Section 8 of the Act establishes a defense that exempts the infringer from paying damages to the party whose rights were infringed if he prove that “he was not aware and had no reasonable ground for suspecting that copyright subsisted in the work”. Telran argued that it did not know that copyright applied to the cards it sold and/or to the broadcasts that could be received through them, and that, in any event, it could not have known what programs, if any, would be broadcast by the foreign networks. The trial court held that, in light of the above findings, according to which Telran knew that Charlton held exclusive rights, and that the foreign networks were broadcasting the Mondial games, the claim of good faith must be denied.

            (2) The Market Overt Defense: Section 34 of the Sales Law establishes that a buyer’s ownership of movable property sold by a person who carries on the sale of property of the kind of the object sold, when the sale was made in the ordinary course of his business, is free of any third-party right in the object sold, even if the seller is not entitled to transfer it, provided that the buyer bought it in good faith. The court held that Telran could not avail itself of this defense. Telran, the court emphasized, had not proven that it had purchased the cards from representatives of the foreign networks. Formal Respondent 3 testified before the court that he did not approach the official Israeli representatives of the foreign networks, and no documents were submitted to the court that showed a contractual relationship with any of the foreign networks or the purchase of cards from them. The court added that in CC (TA) 2469/02 Hasbro International, Inc. v Li-Dan Agencies Ltd. (April 8, 2008), it was held that market overt does not apply to an infringer of copyright, as in the contest between the Sales Law and the Copyright Law, the preferred and exclusive purpose favors the owner of the property rights. Applying the provisions of the Sales Law to the Copyright Law would eviscerate the Copyright Law.

            (F)       As for the cause of action for unjust enrichment, the court held that in light of the Tele Event rule, once it has been established that relief should be granted under the Copyright Law, there is no further need to address the question of relief under the head of unjust enrichment. Inasmuch as it had been established that Telran had infringed Charlton’s copyright, the trial court saw no need to rule upon the cause of action.

            (G)       The Amount of Damages – Pursuant to a court order, on July 30, 2009 and August 20, 2009, Telran deposited invoices related to the sale of the cards in the court’s safe. Those invoices could have shed light on the scope of the card sales. On December 28, 2010, Judge H. Brenner ordered that Charlton be permitted to examine the invoices, after the identities of the customers had been blackened out. Charlton did not examine the invoices, explaining that the order granting permission to do so was issued after the hearing of evidence in the case had concluded, and that under those circumstances, the court order was no longer operative. As earlier noted, Charlton based its calculation of damages on the transcript. Telran argued that Charlton had not submitted any evidence in support of the method for its calculation; that the invoices that were handed over to Charlton were returned within a few hours, with a message that it had no intention of examining them; and that Charlton had made no attempt to examine the invoices over the course of a year and a half, such that its claim that it did not have sufficient time prior to the conclusion of the evidentiary stage of the trial could not be accepted. On point, Telran argued that it had sold only 120 cards over a period of several years, without any connection to the Mondial, and that from the beginning of 2006 until August of that year, it had sold only 19 cards.

            The court ruled that the argument that the invoices were not evidence in the trial was unacceptable, as Charlton had sat on its hands for a year and a half, and took no steps to enquire whether or not the invoices had been deposited in accordance with the court’s order. However, the court ruled that the invoices could not be relied upon in determining the scope of card sales, inasmuch as, in its brief, Telran claimed to have sold 120 cards, whereas Aslan attested to the purchasing of 250 cards in his affidavit. In his testimony, Aslan testified that 250 was an overstatement, and that after reviewing the invoices, they discovered that fewer than 100 cards were involved. Unfortunately, it was found that Aslan had signed his affidavit on November 29, 2009, that is, some four months after the invoices were deposited in the court’s safe. In addition, in the recorded conversation, Aslan noted that 5000 cards were sold during the period of the Mondial. The court held that although, in the course of his testimony in court, Aslan stated that he had exaggerated in order to impress Charlton’s representative, in his affidavit he himself attests that he claimed that Telran had sold 5000 cards in the past.

            The court ruled that the plaintiff must prove the damage it incurred and the factual data upon which to base the scope of compensation. However, the burden of proof in regard to the extent of damage is not uniform in all circumstances, and it must be adapted to the objective difficulty in bringing credible, precise evidence as to the extent of damage. It was noted that according to the case law, when the court faces difficulty in quantifying damages, it may make an estimate in order to respond to concrete cases. In light of that, and given the diametrically opposed versions in regard to the amount of damages, the court ruled that the damages must be estimated. Taking all the data into account, the court found that 2,500 cards had been sold. The court found that the amount paid to the foreign networks, as well as the sum stated by Aslan in the transcript, was NIS 500. Therefore, the total damages were set at NIS 1,250,000 (2,500 cards times NIS 500 per card). In light of that, Telran was ordered to pay NIS 1,250,000 in damages to Charlton. In addition, Charlton was awarded NIS 70,000 for attorneys’ fees, and expenses as calculated by the registrar.

            An appeal and cross-appeal were filed against the Judgment, upon which we are called to rule.

The Appeal and the Cross-Appeal

8.         Telran bases its appeal on four primary footings: The nature of the card – regarding which Telran’s primary argument is that the card is merely a technical device that is no different, in the matter before us, than any other device that enables the viewing of broadcasts, just like a television itself. An absence of infringement – the main argument here is that there was no direct infringement, inasmuch as “distribution” is, at most, an indirect infringement; that there was no indirect infringement, inasmuch as its actions did not meet the required conditions, and in particular, the absence of a direct infringement by a third party; and that there was no contributory infringement due to Telran’s lack of knowledge, and due to the absence of a direct infringement.  Charlton’s lack of copyright – regarding which the argument is that Charlton did not have exclusive copyright in regard to Arabic broadcasts. And lastly, quantification of damages – where the main argument is that the scope of damage was not proved, and recourse should not have been made to an estimate, and that the trial court did not distinguish between loss of profit (which is the damage) and loss of income (which is not). More specifically:

            As for the card, it is asserted that it is nothing but a technical device, “raw” material, not unlike a television or antenna, whose sale is not an infringement. Telran, it was stressed, is not a “broadcaster” or “subsidiary transmitter”, like the satellite or cable companies, but a party that lawfully sold legitimate decrypting cards. Telran further explained that it cannot control broadcast content, or blackout screens. Telran did not encode the cards itself, but rather sold encoded cards to its customers. Telran asserted that holding it liable for infringing copyrights would place an absolutely unreasonable burden upon it and others like it, who would be deemed infringers every time that the foreign networks broadcast content over which some other actor holds exclusive Israeli copyright.

            In regard to the infringement, it was argued, first, that there was no direct infringement. It was argued that the District Court found that the infringement perpetrated was the distributing of the card. Such an infringement, it was contended, constitutes an indirect infringement under sec. 2 (2) of the Act. Telran emphasized in this regard that it did not perform any act of direct infringement, in that it did not do anything for which the exclusive right was granted by law to the copyright holder, as the act requires. Second, it was argued that there was also no indirect infringement, inasmuch as an indirect infringement requires the existence of an “infringing copy” of the protected work, which does not exist in the instant case. Additionally, another condition that is not met is the existence of an “infringing third party”, as neither the foreign networks, nor the viewers, or any other party, infringed Charlton’s rights. In other words, in order for there to be an indirect infringement, there must be a direct infringement, which is not the case in this matter. Third, it was argued that Charlton had not raised the issue of contributory infringement in the proceedings before the District Court, and that raising the issue before this Court constitutes an impermissible introduction of a new issue on appeal. On point, it was argued that a contributory infringement requires some active, direct infringement, which was, as stated, not committed. Telran emphasized that supplying a technical device that enables viewing protected content does not meet the requirements of the legal definition of infringement. It was further contended that an additional condition for contributory infringement is the existence of actual knowledge of the infringing conduct, which was also not present, in that the cards were sold before the Mondial games and unelated to them. Another condition that was not met was that of a real, significant contribution to the infringement, in that Telran sold cards in connection with the satellite broadcasts of the foreign networks that broadcast lawfully and were entitled to broadcast, and thus Telran did not contribute in any way to the receiving of Charlton’s broadcasts.

            In regard to the broadcast language, it was contended that the Agreement made a clear distinction between English and Hebrew as opposed to Arabic. It was asserted that holding that geographic incidence “outweighs” language incidence is illogical, inasmuch as once absolute geographic incidence is established, there is no further reason to address the issue of the broadcast language. Nevertheless, the Agreement chose to address it, and with reason. Therefore, the conclusion of the District Court was in error. Secondly, it was argued that the language provision constitutes an additional element to the territory provision. In other words, there is an exclusive right within the territory, but only in regard to those languages designated in the provision. It was emphasized that an interpretation that denies a right must be made in strict accordance with the language of the license.

            As for the method for calculating damages, first, it was argued that the amount of NIS 500 represented expected income, rather than expected profit. The harm to Charlton was of expected loss of profits, such that the calculation is not consistent with the District Court’s ruling, and Charlton did not meet the burden of proof in regard to the extent of profits. Telran argues that, for this reason alone, the appeal should be granted. It adds that the profits of the foreign networks, upon which the trial court relied, did not exceed NIS 300 per card. Second, Telran contended that Aslan’s statement in regard to the sale of 5,000 cards was taken out of context. It argued that Aslan presented this exaggerated figure in order to make an impression, and that no actual finding could be grounded upon it. Furthermore, there was real data in regard to the sale of the cards – Telran’s invoices that were deposited in the court’s safe. In this regard, it argued that the trial court’s ruling that the invoices were admissible as evidence was not consistent with its ruling that the number of cards sold should be estimated on the basis of this evidence and on the basis of Aslan’s statement. Telran emphasized that the cards sold were, for the most part, not sold for viewing the Mondial, but rather for viewing a broad package of channels. It was further argued in this regard that in speaking of 5,000 cards, Aslan was referring to the possible market potential for the cards, and not to the number of cards actually sold by Telran. Lastly, it was argued that in the instant case there were clear, empirical data that were grounded in admissible evidence (Telran’s invoices) in regard to the quantity of cards sold. Therefore, this case does not fall within the ambit of the exceptions in which damages are to be calculated by an estimate.

9.         In its response, Charlton agreed with the judgment of the trial court, except in regard to the extent of damages. Charlton’s primary argument is that distributing and selling the cards constitute an infringement of its rights. Telran’s actions, it argued, constitute both a direct infringement and a contributory infringement. As for the extent of damages, it argued that despite the unambiguous data in regard to the harm incurred by Charlton, the District Court showed unjustifiable consideration for Telran. We will present the arguments in order.

            In regard to the card, it is argued that the District Court made a factual finding that Telran failed to prove its claim that it purchased the cards from representatives of the foreign networks or obtained their permission to transmit their broadcasts in Israel, let alone that those broadcasts were encrypted by or with the permission of the representatives of the foreign networks. Additionally,  no evidence whatsoever was brought to show that marketing the cards was permitted. The card, it was argued, was not merely a “technical” device, but rather a device intended to enable prohibited broadcasting by “breaking” the encryption that prevented viewing without the card. It was emphasized that Aslan noted in the transcript that it was Telran that burned the encoding on the cards. That being the case, we are not concerned with some “inert” object like an antenna, but rather with a device actively encoded to permit the viewing of transmissions that the broadcaster sought to prevent from being received in Israel.

            In regard to its rights to the Mondial broadcasts, Charlton argued that the Mondial broadcasts constitute a copyright-protected work, and that it had proved the chain of transfer of rights that led the court to make a finding of fact that it held the Israeli rights. It was argued that that those rights were, first and foremost, exclusive territorial rights, such that any broadcast of the Mondial games in Israel was prohibited. It added that the rights holder on behalf of FIFA insisted that the broadcasts of the games be encrypted by every broadcaster of the games in order to enforce the territorial exclusivity.

            In regard to the nature of the infringement, it was argued that the infringement was direct and/or indirect and/or contributory. Direct Infringement: As in its argument before the District Court, Charlton asserted that the very distribution of the cards that enabled the decryption of the satellite signals of the foreign networks constituted a direct infringement of its copyright. It argued that the entire purpose of encryption was to prevent prohibited broadcasts, and that the sale and distribution of the cards that circumvented that encryption constituted a direct infringement, or at the very least, an indirect infringement. Contributory Infringement: In this matter, as well, Charlton reiterated its argument that contributory infringement has been recognized in Israeli law, and that Telran, knowing that Charlton held the copyright, enabled the “circumventing” of that right by selling and distributing the cards, which made a real contribution to (and, actually caused) the infringement. It emphasized that Telran was well aware that Charlton held the rights to broadcast the Mondial, and that Telran intensified its sales, and even embarked upon a marketing campaign for the Mondial period.

            In its cross-appeal, and also as part of its response to Telran’s appeal, Charlton raised various arguments in regard to the extent of damages. First, it argued that its losses should be calculated on the basis of the profit garnered by the infringer, i.e., Telran. That profit, it was claimed, was incorrectly calculated by the District Court, inasmuch as 5,000 cards were sold for the Mondial, as is shown by the transcript. Moreover, it is argued that according to Aslan’s affidavit, the amount received for each card was NIS 650, and in his cross examination, Aslan put the amount at NIS 700. Since Telran did not prove the price it paid for each card, the entire amount should be treated as profit. At the very least, it was argued, Telran should be held to have sold 5,000 cards at a price of NIS 500. Second, in regard to the invoices deposited in the court’s safe, Charlton argued that they were made available only after the conclusion of the evidentiary stage of the trial, and therefore the discovery order was of no operative effect, and in any event, they were not submitted in evidence in the case, and should not have been considered by the court. Charlton emphasized that Aslan admitted under cross examination that Telran’s accounting department knew how many cards were sold during the period of the Mondial, but that it was Telran that refrained from providing that information. It should, therefore, be held that the absence of a document that was in its possession shows that the document would have been detrimental to Telran. Third, Charlton argued that interest and linkage should have been calculated from the date of the infringement – i.e., the date of the broadcasts – rather than the date of the Judgment. Fourth, Charlton claimed that the award for legal fees was low – amounting to 5 percent of the judgment – and does not realistically reflect the legal fees.

Discussion and Decision

Did Charlton hold the Exclusive Right to Arabic Language Broadcasts in the Territory of the State of Israel?

10.       The primary questions that must be decided in this framework concern copyright laws and their ramifications for this case. Before addressing that matter, we should dispense with Telran’s argument that the Agreement did not grant Charlton the exclusive right to broadcast the Mondial in Arabic within the territory of the State of Israel. To the extent that broadcasting rights were not exclusively Charlton’s, it would seem that Telran did not infringe Charlton’s copyright. We will now examine this matter, in which I see no reason not to adopt the finding that Charlton proved the “chain of agreements” that originated with the original copyright holder (FIFA).

11.       As stated, the Agreement between Charlton and ISMM defined Charlton’s rights by means of two elements – geographic area and language. The Definitions section established that Charlton enjoyed exclusive broadcasting rights in the geographic area of the State of Israel:

"Licensed Territory" means Israel on an exclusive basis and Palestine (Occupied Territory) on a non-exclusive basis"

            In regard to the Arabic language, the Definitions section stated:

"Licensed Language" means:

…

Arabic in Israel only for Cable Television, Terrestrial Television and Satellite Television provided that the signal is fully encrypted as contemplated by the agreement.

            Reading the two definitions (the language provision and the geographical incidence provision) indeed raises a question as to whether the language provision restricts the exclusivity granted under the geographical incidence provision. The trial court held that the exclusivity granted in the geographical incidence povision takes precedence, and that the language provision does not derogate therefrom. The court addressed, inter alia, the logic of the matter. No franchisee, including Charlton, that purchases broadcasting rights would invest substantial resources unless it held an exclusive license, for otherwise what purpose would be served by purchasing the license. The trial court also deemed this to be consistent with the language of the Agreement and the intention of the parties thereto.

12.       Indeed, reading the language and geographical incidence provisions in the Definitions section divorced from the operative provisions of the Agreement raises the question whether the language provision is intended to detract from the exclusivity granted in the geographical incidence provision, as Telran asserts, or whether it is not intended to detract therefrom, as Charlton asserts. However, inserting the definitions into the operative provisions of the agreement shows that the language provision is not intended to derogate from the geographical exclusivity granted to Charlton. Thus, for example, sec. 2.1 (a) of the Agreement, which is similar in language and substance to the other operative provisions of the Agreement, establishes in regard to the right acquired by Charlton (with the above definitions in regard to the language and area of the license incorporated in square brackets):

"The exclusive license to make four (4) telecasts of the basic Feed and supplementary Feed (if any) in [Israel on an exclusive basis] in [Arabic in Israel only for Cable Television, Terrestrial Television and Satellite Television provided that the signal is fully encrypted as contemplated by the agreement] during that period"

            The above clearly demonstrates that the language provision of the Definitions section was intended to clarify the modes of transmission that Charlton was permitted to use in broadcasting the games in Arabic in the geographical area over which it was granted exclusive broadcasting rights. It is not intended to limit or deny the geographical exclusivity, but rather to clarify contractually between Charlton and ISMM what broadcasting media were permitted to Charlton for its Arabic broadcasts (bearing in mind that other broadcasting media were permitted for Hebrew and English broadcasts). In other words, the Agreement states that Charlton, and only Charlton, has the right to broadcast the games in Israel, and further clarifies that Charlton’s Arabic broadcasts are limited to cable television and satellite television broadcasts (provided that the signal is encrypted), and terrestrial television. Therefore, Telran’s arguments in this regard must be dismissed, and the conclusion of the District Court in regard to the interpretation of the agreement is affirmed.

Did Telran infringe the Copyright to the Mondial Broadcasts?

13.       Intellectual property rights in general, and copyright in particular, are the result of a complex balancing of the various interests that form the background of the legal regime that the legislature chose to establish: the public interest in encouraging creativity, as well as access to it; the interest of the creator in monetary reward for his creation, as well as recognition and appreciation for it; the interest of future creators and various users in an appropriate “creative operating space”, etc. (CA 513/89 Interlego A/S v. Exin-Line Bros. S.A., 48 (4) IsrSC 133, 163-164 (1994); Explanatory Notes to the Copyright Law Bill, 5765-2005, H.H. Government 196). This requires the delicate, complex balancing of sometimes-conflicting public needs and worldviews. Therefore, copyright extends only as far as the limits defined by law. The legislature made a positive choice to include certain rights, and a positive choice to exclude others in the course of that balancing. Over-extending copyright comprises a serious potential for upsetting the balance established by the Act, as does restricting copyright. This fundamental understanding of copyright law should guide us in examining issues concerning the scope of copyright protection. We must further bear in mind that daily technological advances often present a complex challenge in identifying those limits and preserving that balance. This is all the more so when we are confronted with a “new” issue that we must address with an “old” tool – the Copyright Act, which was drafted over a hundred years ago in an entirely different technological reality. It is with this basic understanding that we embark upon the examination of whether Telran infringed Charlton’s copyright.

“Direct Infringement”

14.       A copyright grants the copyright holder the exclusive right to perform certain acts in regard to a work. These acts are set out in sec. 1 of the old Act (and in sec. 11 of the new Law). Performing any of those acts reserved by law to the copyright holder, without its permission, constitutes a “direct” infringement of the copyright, as provided in sec. 2 (1) of the Act. “Direct” infringement does not require a mental element of the infringer, but treats solely of the question whether one of the acts listed as exclusive to the copyright holder was performed (CA 1007/10 Cohen v. Medina, para. 7 (Feb. 17, 2013), hereinafter: the Cohen case). According to Charlton, Telran directly infringed its copyright. We will now examine that claim.

15.       Naturally, the old Act did not refer to the use of a work by means of broadcasting, and in order to adapt it to changing technological realities, the term “public performance” in the Act has been interpreted to include broadcasting (Tamir Afori, The Copyright Law 167 (2012) (Hebrew), hereinafter: Tamir Afori). It was held in the Tele Event case that the live television broadcasting of a tournament was, as a rule, reserved to the copyright holder (ibid., at p. 22, and see: Guy Pesach, “Broadcasting Rights – Incarnations of the Soap Dispenser [Ruling on] A.S.I.R. and Its Influence on the Communications Market”, 10 Hamishpat 131 (2005) (Hebrew)). Therefore, broadcasting the Mondial games in Israel was a “direct” infringement of Charlton’s copyright. But what is “broadcasting”?

16.       Section 1 of the Performers’ and Broadcasters’ Rights Law, 5744-1984, defines “broadcast” as follows:

Transmission or distribution to the public—by wire, wireless or any other means—of sounds and images or of a combination of sounds and images.

            It should be noted that sec. 14 of the new law includes a similar, if somewhat narrower definition (see: Tony Greenman, Copyright 238 (2^nd ed., 2008) (Hebrew) (hereinafter: Greenman)). For our purposes, this is of no practical significance. In CA 9138/09 The Football Association Premier League Limited v. Anonymous (May 13, 2012) (hereinafter: the Premier League case) it was held that “broadcast can be effected by various means, and broadcast is not contingent or limited, in substance, by the technological means for its transmission” (ibid., para. 14, emphasis added). The important words in our context are “transmission or distribution”. In order for a broadcast to made, there must be a transmission of sounds or images or their combination. In CA (TA) 149/94 Israeli Actors’ Pension Fund v. Paltiel, 5755 (3) IsrDC 151 (1995), the Tel Aviv District Court also addressed this matter, holding:

“Such transmission can be by technical, electronic or other means that science has developed or will develop, as long as there be transmission from one instrument, from which the sounds or images are transmitted, to another instrument that receives them and plays or displays the images and the sounds to the public” (ibid., emphasis added).

            We must examine whether the card that Telran sold “transmits” or “distributes” the Mondial broadcasts. In examining this matter, we should bear in mind that “the Law intends, in general, to adapt itself to modern means of transmission, and not to exclude precisely those advanced technological means” (the Premier League case, para. 14).

17.       The trial court held that the act performed by Telran was the commercial sale of cards that enabled the decryption of the encrypted broadcast. According to this holding, Telran did not “transmit” or “distribute” the broadcast. It indeed “distributes” a card that makes it possible to decrypt what another party broadcasts – the foreign networks – but that action cannot be interpreted as constituting “broadcasting” (or secondary transmission) within the confines established by law. We would note that Charlton agrees with that finding, and does not contend, so it would appear, that the very selling of the encoded card constitutes “broadcasting”, but rather that it enables the reception of the broadcasts of the foreign networks. According to Charlton, Telran created a platform for viewing the broadcasts. “Viewing protected content without a license” (by the end user – the viewers), it argues, constitutes an infringement (para. 37 of Charlton’s brief). In other words, even according to Charlton, the act performed by Telran is, essentially, the providing of a platform for (a purported) infringement by another. From the above, it appears that Telran did not perform an act that is reserved to the copyright holder – it did not broadcast the Mondial games (but rather provided the cards that made it possible to watch them). That being the case, its acts do not fall within the compass of sec. 2 (1), and it cannot be held to have performed a “direct” infringement of Charlton’s copyright. It would seem that this was also the opinion of the District Court in grounding its finding that Telran infringed Charlton’s rights upon sec. 2 (2) of the Act, which, as we shall immediately explain, treats of “indirect” infringement of the copyright.

“Indirect” Infringement

18.       Alongside “direct” infringement, sec. 2 (2) of the Act (now, sec. 48 of the Law) also recognizes “indirect” infringement – situations in which a particular act is performed that is related to a direct infringement, such as: renting, distributing or selling an infringing copy. Imposing liability for “indirect” infringement, as well, constitutes an additional ring of protection for the interests of the copyright holder, and its purpose is to widen the ambit of liability for the infringement of copyrights (see: the Cohen case, at para 7; Orit Fischman Afori, "Contributory Infringement in Israeli Copyright Law", 52 Hapraklit 3, 6-9 (2012) (Hebrew) (hereinafter: Fischman Afori)). The logic is clear: in order to enable effective enforcement of copyrights, the copyright holder must be able to prevent commerce in infringing copies, even when acting directly against the direct infringer is not relevant. Similar provisions can be found in other areas of intellectual property law. Thus, for example’ in design law (sec. 37 (1) (b) of the Patents and Designs Ordinance), trademarks (sec. 3 of the Trade Marks Ordinance), and patents (sec. 1 of the Patent Law, 5727-1967, although it should be noted that this law classifies the act as a “direct” infringement; and see: Fischman Afori, at p. 7). The Act thus distinguishes the commission of a direct act of infringement (subsec. (1)) from the commission of an indirect act of infringement (subsec. (2)). This Court has also recognized an act that contributes to an infringement as imposing liability for copyright infringement upon the “contributor” (CA 5977/07 Hebrew University of Jerusalem v. Schocken Publishing House Ltd. (June 20, 2011), hereinafter: the Hebrew University case; the Premier League case). We will treat more fully of contributing to an infringement (hereinafter: contributory infringement) below. An indirect infringement is the knowing commission of a prohibited act with an infringing copy (the Cohen case, para. 7). In other words, the commission of an indirect infringement requires that three conditions be met: the existence of an infringing copy, and the commission of one of the prohibited acts listed in the section, while the indirect infringer knew or should have known that the rights to the work belonged to another. We will now proceed to examine whether the actions of Telran met these conditions.

19.       The first condition that must be examined is whether there was a “direct” infringement by a third party. Only if the answer proves positive can we proceed to consider whether Telran performed an act with an “infringing copy” (created by the direct infringer), and whether it knew or should have known that the copyright belonged to Charlton. The act reserved to the copyright holder, Charlton, was the broadcasting of the Mondial in Israel. The act performed by Telran was the sale of the cards. The foreign networks broadcasted the Mondial games (for the sake of this examination, we will assume that the broadcast was lawful, although it is not clear whether this question is of consequence for the present examination, and in any case, Charlton does not claim that the foreign networks’ encrypted satellite broadcasts were unlawful). Those broadcasts were carried out by transmitting encrypted satellite signals. Those encrypted signals could also be received in Israel, but could not be decrypted without the card. Encrypting signals is, in effect, a “technological means of protection” by which the foreign networks sought to prevent unlicensed viewing of their broadcasts. As we have seen, such means of technological “protection” or “hedging” were required by the original holder of the copyright for the Mondial (at least from Charlton, although we may assume that this was required of every Mondial broadcast licensee). Telran’s customers watched the Mondial games that were broadcast by the foreign networks, but only thanks to the card that made decryption possible.

            What have we learned so far? The foreign networks did not “broadcast” the Mondial games to Israel unlawfully, inasmuch as lawfully transmitting encrypted signals that cannot be received without a “decrypter” is, for this purpose (and in this specific regard), like not transmitting to Israel. Even Charlton did not claim that the foreign networks performed an act reserved to it. Telrad’s customers watched the games, but did not broadcast them, and did not use them in the performance of any act reserved to the copyright holder. Although Charlton claimed that “watching protected content without a license is, of course, an infringement of copyright” (para. 37 of its brief), that claim is incorrect. Viewing protected content is not one of the acts that the Act reserves to the copyright holder, it does not require a license under the act, and doing it does not infringe the Act. Therefore, in the instant case, we cannot say that the viewers committed a direct infringement. Therefore, we have not found any infringement by a third party. In such a case, in the absence of any direct infringement by a third party, there can be no indirect infringement within the meaning of the Act, because, as explained above, finding that there was an indirect infringement is contingent upon there being a direct infringement. In light of the above, it would seem to me that we must rule that Telran did not indirectly infringe Charlton’s copyright.

“Circumventing” Technological Measures

20.       What Telran did was to supply a means for “circumventing” a “technological hedge”. Such an act, we have learned, does not constitute an indirect infringement, inasmuch as no right exclusively reserved to Charlton was infringed by a third party. However, Charlton argues that that is not sufficient, in that the act of supplying a device that enables an end user to “circumvent” the technological hedge is, itself, an infringement of copyright. We will examine that argument.

21.       The age of information technology has revolutionized the way copyrighted works are preserved. It is no longer necessary to obtain a hard copy in order to read a book. It can be “downloaded” by touching a button on a portable technological device. To hear music or watch a performance, only a keystroke is required, etc. This technology, for all its blessings, has made it very easy to infringe a copyright holder’s rights. Digital copying devices were not slow to follow. In order to protect their works, copyright holders developed technological measures, essentially “technological fences” or “technological locks”, that permit access only to those who hold a key, and thus prevent infringement of copyrights or of user licenses (see: Niva Elkin-Koren, “Self-Regulation of Copyrights in the Information Age”, 2 Aley Mishpat 319, 332 (5762) (Hebrew), hereinafter: Elkin-Koren;  Anne Barron, “Copyright Infringement, 'Free-Riding' and the Lifeworld”, in Copyright and Piracy: An Interdisciplinary Critique 93, 98 (Lionel Bently, Jennifer Davis & Jane Ginsburg, eds., 2010) hereinafter: Barron). Thus, for example, it is possible to distribute a work in a format that permits only a single viewing or reading, music discs that prevent copying the files to a computer, encrypted satellite signals that can only be decrypted by means of an encoded card, and so forth. Such technological measures constitute “self-regulation” in a double sense – they make it possible to enforce lawful copyrights, and they make it possible to enforce contractual agreements that, at times, are not part of the law (for example, although the law may permit certain uses, technological measures may prevent such uses). However, the introduction of technological measures saw the almost simultaneous development of “cracking” technologies intended to circumvent them (like the “anti-eraser” of the seventies of the last century, which was intended to overcome the “erasure” of color from Israeli public television broadcasts, and restore the color to the television of the end user).  In response to the technological “locks” came technological “keys” that could “pick the locks” without the owner’s permission. Such codebreaking methods have the potential of rendering defenses worthless, and return creators to square one – “classic” defense through the law, without self-regulation by technological means. The question before us is, as stated, whether such technological measures are protected by copyright law.

22.       To illustrate the point, let us imagine a situation of a person who writes a book in invisible ink. What is written is not visible to the naked eye, but can be read by wearing “miracle glasses”. For the sake of this illustration, let us say that a person who purchases the book is under no contractual obligation to the author to refrain from purchasing a pair of “miracle glasses” from a third party, and the relationship between author and buyer is solely governed by copyright law. A third party then sells a pair of “miracle glasses” that he manufactured to the buyer (who, we presume, purchased the book lawfully). The sole purpose of the glasses is to make it possible to read the book. The question is, can the seller of the glasses be accused of an indirect infringement of the author’s copyright?

23.       Under Article 11 of the World Intellectual Property Organization Copyright Treaty, 1996, the parties to the Treaty are required to prohibit the circumvention of technological measures. The Treaty was not ratified by Israel (which signed it in 1997). Pursuant to the Treaty, various countries made legal arrangements making the circumvention of technological measures an infringement of copyright. The Directive of the European Parliament and the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society required that the member states provide legal protection against the circumvention of technological measures. Accordingly, the European states introduced legislation prohibiting technological circumvention, and that defines the related acts as infringements. For example, the British Copyright, Designs and Patents Act, 1988, was amended in 2003, adding sections 296ZA-ZF that make it possible to act against anyone who provides any service intended to circumvent technological measures, and defines such conduct as an offense. We would also note that sec. 298 of that law (added in 1991) specifically prohibits acts that enable access to protected transmissions without the permission of the copyright holder. In 1998, the United States enacted the Digital Millennium Copyright Act. Section 1201 (1) (a) provides:

No person shall circumvent a technological measure that effectively controls access to a work protected under this title.

            In addition, the above law comprises various provisions that prohibit the manufacture of devices intended to circumvent technological measures. These provisions broadened the scope of copyright beyond the primary cluster of rights in terms of adding a “right” to control access to the work; in making it possible to protect aspects that are not generally protected by copyright, such as data, and in preventing access to uses that the law – in balancing the various interests – intentionally left in the public domain (Elkin-Koren, at pp. 335-336; and see: Barron, at p. 117, who even suggests viewing certain “infringements” as desirable and worthy of support). It should be noted that the relevant legal arrangements included under the rubric of copyright do not treat of conduct that infringes the acts reserved to the copyright holder, but rather “infringement” of the protection of copyright. The legal literature therefore tends to refer to the rights that they confer as “digital rights” or “para-copyrights”; Barron, at p. 98). If we return to the example we provided above, then we would say that the countries that adopted this legal arrangement chose to prohibit not only acts involving the work itself, in regard to the book written in invisible ink (such as copying, reproducing, etc.), but also to prohibit the sale or distribution of the “miracle glasses” that enable reading it without the permission of the book’s copyright holder or its licensees.

24.       As opposed to that, the State of Israel has not, as noted, ratified the Treaty, and has not created a similar legal regime (and see: Michael Birnhack & Guy Pesach, “Introduction” pp. 21-22, in Authoring Rights – Reading the Copyright Law (Michael Birnhack & Guy Pesach, eds., 2009) (Hebrew)). The new Law, we should note, has been around for a relatively short time in legislative terms, and was enacted several years after the Treaty and the legislation in Europe and the U.S. In other words, although at the time the relevant legislation was enacted, the legislature was aware of the issue of technological protection measures and of the question of whether to prohibit their circumvention, it chose not to include that issue in the legal regime. This is also expressly clear from the “Call for Public Positions – Technological Protection Mechanisms for Copyrights,” which was published by the Counseling and Legislation Department, and the Law, Information and Technology Authority of the Ministry of Justice on Feb. 19, 2007, and from the responses to that call (the responses, as well as the call can be viewed on the Internet site: http://www.justice.gov.il/MOJHeb/ILITA/Pirsumim/docsforcomments/DRM/) [note to editor: this link appears to be no longer active]. Thus, in Israel there is no legislation under which circumventing technological measures constitutes an infringement of copyright. Recently, the Ministry of Justice published the Copyright Law (Technological Protection Measures and Electronic Information about Managing Copyrights) Draft Bill, 5772-2012, which again recommends enacting a legislative framework for preventing the circumvention of technological measures. To date, it has not been adopted, and it is not part of Israeli copyright law. This further emphasizes that, at the relevant time (and even now), the sale of technological “circumvention” measures was not deemed an infringement of copyright (of the copyright holder).We should note that even the British legislature took the trouble to add legislation prohibiting circumvention to copyright law in England. We may, therefore, conclude that it, too, did not believe that the British Act (of which the Israeli Copyright Act is an early version) deemed the circumventing of technological measures to be an infringement of copyright prior to it amendment. Let us return to our illustration. In Israel, the book written in invisible ink is a protected work. A prohibited act in its regard is an infringement of the author’s rights. As opposed to this, an act in regard to the “miracle glasses” would not be deemed an infringement of the author’s copyright (of course, it might be an infringement of the intellectual property rights of the inventor of the glasses, but that is not the issue before us).

25.       Thus we find that, for the time being, Israel has not chosen to define the circumventing of technological measures as an infringement of copyright. That is the case both in regard to the new Law as well as the legal situation at the time of the sale of the cards by Telran. We must not forget the fundamental principal according to which what has not been legally defined as comprised by copyright is not part of the corpus of protected rights. Therefore, we cannot accept the claim that the very sale of the cards that serve to circumvent the technological measures constitutes an indirect infringement of Charlton’s copyright.

            In light of the above, I am of the opinion that we must rule that Telran did not indirectly infringe Charlton’s copyright.

“Contributory” Infringement

26.       Another issue that we must address is the question of whether Telran’s actions constitute a “contributory infringement” of Charlton’s copyright. This issue, we note, was not addressed at all by the District Court due to its finding in regard to the existence of an (indirect) infringement by Telran.

            Before embarking upon this question, we should address Telran’s preliminary objection that Charlton raised the claim of contributory infringement only upon appeal, which constitutes an impermissible raising of a new issue. However, in paragraphs 27-35 of Charlton’s closing brief to the District Court, Charlton expressly raised this claim. In its closing brief to the District Court, Telran did not address this claim by Charlton. It is decided law that the flaw of first raising an issue in the closing brief is remedied if the opposing party does not object (CA 1184/04 Kreuzer v. Schwartz, para. 18 (April 15, 20017), hereinafter: the Kreuzer case; CA 685/81 Licenses and General Insurance Co. Ltd. v. Borchard Lines Ltd., 38 (3) IsrSC 421, 427 (1984); Yoel Sussmann, Civil Procedure, fn. 215 at p. 512 (7^th ed., 1995)). Above and beyond that, I would point out that if I were of the opinion (which I am not) that the claim of contributory infringement was a new claim, it could still be addressed in that it is not a new cause of action, but rather a legal conclusion that arises from the factual picture presented in the complaint (and see: the Kreuzer case, at para. 19).

27.       This Court, as noted, has recognized the contributory infringement doctrine in Israeli copyright law. The following conditions for the existence of a “contributory” infringement were laid out in the Hebrew University case: the existence of an infringement by a third party; actual, concrete knowledge of the infringement; and a significant, substantial contribution to its perpetration (ibid., at paras. 26-27; the Premier League case, para. 16 of the opinion of Deputy Chief Justice E. Rivlin). Before examining whether these conditions were met in the instant case, we should note that the contributory infringement doctrine has been applied both in regard to the old Act as well as to the new Law.

28.       In the Hebrew University case, it was stated that “the mere existence of protection does not negate the existence of the breach. Protection prevents the user from bearing responsibility, but does not eradicate the breach” (ibid., para. 24). Pursuant to that, it was stated obiter dicta in the Premier League case:

“Where a ‘permitted’ use is concerned, there is, indeed, no infringement according to the Act. But that does not suffice to eradicate the fact that, in substance, there is an infringement of the copyright, even if such infringement be permitted for various reasons. This is the case primarily where the combined effect of many protected infringements causes significant harm to the copyright holder. As has already been held, in such circumstances there is nothing to prevent us from recognizing the contributory responsibility of the intermediary that caused the infringement” (ibid., para. 16 of the opinion of Deputy Chief Justice E. Rivlin).

            That judgment goes on to explain that such permitted uses constitute a defense that the old Act chose to grant to users, and not a positive right of infringement (ibid., para. 18). I am of the opinion that it is necessarily a defense rather that a (positive) right of users, as some contend (see, e.g: Niva Elkin-Koren, “Users’ Rights”, p. 327, in Authoring Rights – Reading the Copyright Law (Michael Birnhack & Guy Pesach, eds., 2009) (Hebrew)). In my opinion, an end user who views an infringing copy of a work whose creator enjoys the protection of copyright law does not infringe any right (even if we are concerned with a “protected” infringement), but rather performs a permitted act. However, even without addressing this question, it would seem that we must, at the very least, hold that a “permitted use” is precisely what it says – a permitted use. In other words, even if it is not a positive right of the user, it still is not, and cannot be, an actual infringement (even if “protected”). That which the law itself permits, cannot be an infringement of the law.

29.       The decision that there are permitted uses is, in my view, a substantive decision, and not a technical defense (and see: Fischman Afori, at p. 47; Tamir Afori, at p. 189 fn 1). And note: Chapter D of the new Law, which regulates the permitted uses, is titled “Permitted Use” and not “Protected Use”. In other words, the Law takes the view that the action is permitted, and not that it is forbidden but that the actor is “immune” to sanctions. Let us consider an example from criminal law. A person has a defense to criminal sanctions when he perpetrates a proscribed act under certain circumstances (such as, self-defense, duress, or insanity). In other words, he transgresses the law, but he is not punished because the law protects him against sanctions (and note: the law does not permit him to commit the act). As opposed to this, when a person performs a permitted act, there is no need to ask whether or not to impose a sanction, inasmuch as he did not do anything that is subject to sanction ab initio. That is the case in all that concerns permitted uses of copyright. The user does not perform a proscribed act (i.e., an infringement) for which he enjoys a defense, but rather he performs a permitted act, such that no infringement ever occurred.

30.       Since no infringement ever occurred, there was no infringement to which to “contribute”. Thus, when the end users performed a permitted act, the intermediary “contributed” to a permitted act, and therefore cannot be said to have infringed the rights of the copyright holder, as they were not infringed. Let us return to our last example. Let us assume that A convinces B, who can claim the insanity defense, to commit a crime. B enjoys a legal defense, whereas A can be accused of solicitation (or some similar category). As opposed to that, if A were to permit B to do some permitted act (for example, lawfully walking down a city street), he could not be accused of any crime.

            The very fact that the copyright holder suffered a loss or “significant harm” due to a combination of a large number of permissible acts does not mean that a person who contributed to the commission of those permitted acts infringed a copyright (it is possible, without prejudging the present case, that one might argue that the legal requirements were met for seeking damages for unjust enrichment, as we will discuss below).

31.       In my opinion, the above leads to the correct interpretation of the term “permitted use”. However, I believe that even according to the approach that sees “permitted use” as a defense, one must agree that the defenses can also serve a contributory infringer (as Michael Birnhack suggests in “The Birth of a Tort: Contributory Infringement in Patent Law”, p. 219, in The Technology of Justice (Shai Lavi, ed., 2003) (Hebrew)). Section 18 of the new Law applies to “permitted uses” and not to “permitted users”. The Act permits acts, and is indifferent to the actors. The act performed by the contributory “infringer” is a contribution to an act of a “principal” who is protected by the defense that the Act grants to the conduct. In a certain sense, the “contributory” actor acts in concert with the “principal” in committing the “protected” infringement. In such a case, if the principal is “protected” by virtue of the act, then his accessory is all the more so.

            We will again illustrate these matters with the examples given above. The insanity defense is a defense that applies to a specific person – the person found not to be responsible for his conduct. In other words, the person enjoys the defense by virtue of being insane. As opposed to this, a defense provided for a permitted act does not apply to a specific person, the actor, by virtue of the commission of the act. Therefore, A who permits B (who has been found to be insane) to do some act will not be entitled to a defense, inasmuch as the defense applies to B by virtue of his characteristics. As opposed to that, when A permits B to do some act in circumstances that are subject to a defense by virtue of the circumstances of its commission, then if the actor has a defense by virtue of the fact that the act invokes a defense for the actor, then it follows that the person who allowed him to perform that act will also have a defense.

            We state this only to emphasize that even if we follow the view that permitted use provides a defense, then the contributory infringer enjoys that defense a fortiori in cases of a “protected infringement”.

32.       All the above is somewhat obiter dicta. In the Hebrew University case, the direct infringer produced a course reader that was an infringing copy of the protected work. In the Premier League case, it was assumed that the end users created temporary copies of the broadcasts on their computers, and therefore, there as well, the situation was interpreted as a “protected infringement” (which, in my view, is no infringement at all). As opposed to this, in the instant case, there is no direct infringement at all. We will not repeat the entire analysis that we presented above in regard to indirect infringement, but merely point out that the action of the foreign networks does not constitute a direct infringement, nor does the action of Telran’s customers –the viewers. We would further note that Charlton, too, failed to identify a direct infringer. Its claim, in this regard, was that “watching protected content without a license is, of course, an infringement of copyright” (para. 37 of Charlton’s brief). As we stated above, the act of watching protected content is not one of the acts that the Act reserves to the copyright holder, it does not require a license under the Act, and doing it is not an infringement of the Act. Therefore, the instant case does not present a direct infringement, which is a precondition for a contributory infringement. Thus, in effect, there was no infringement at all (“protected” or otherwise). The above analysis was intended to make it clear that permitted use does not generate a “protected” infringement, but rather no infringement at all.

33.       To remove all doubt, we would make it explicitly clear that the above analysis does not repudiate the contributory infringement doctrine. That doctrine continues to hold in Israeli law, and it should properly be applied in appropriate cases (and see:  Birnhack, at p. 202; as well as Fischman Afori), for example, in parallel to acting against a direct infringer, or where, for various reasons (e.g., limitation of actions), it is not possible or practical to take action against the direct infringer, or in other examples that may come to mind. I would further add and emphasize that even according to the approach that deems “permitted use” as only creating a defense (which is not my view), that can, as noted, also be claimed by the contributory “infringer”, in situations in which the “defense” does not arise from the nature of the act (permitted use), but rather from something particular to the direct infringer (like limitation of actions), the defense can be claimed only by the relevant party, and will not serve the contributory “infringer”.

34.       We therefore find that there was no direct infringement. In other words, the first condition required for the existence of a contributory infringement was not met. Therefore, we need not consider whether the other conditions were met, and we find that Telran did not infringe Charlton’s copyright by a contributory infringement.

Summary in regard to the Infringement of Copyright

35.       In summary: Telran did not perform any of the actions reserved to the copyright holder Charlton. Therefore, it was not a “direct” infringer of Charlton’s rights. No third party directly infringed Charlton’s rights, and therefore Telran was neither an “indirect” infringer, nor a “contributory” infringer. In light of the above, I am of the opinion that we should find that there was no infringement of Charlton’s copyright by Telran. We would reiterate that, in trying to show an infringement, even Charlton argued: “What, therefore, is an infringement of rights? The matter is clear. Without the encoded cards that Telran distributed, those who refrained from purchasing a subscription to the sports channels of the broadcasters [licensed by Charlton] could not watch the Mondial broadcasts” (para. 32 of Charlton’s closing brief). Indeed, were it not for the technological circumvention medium that Telran made available to its customers, they could not have viewed the broadcasts of the foreign networks. The card was therefore a conditio sine qua non – a necessary condition. But the mere fact of its being a necessary condition for viewing the broadcasts of the foreign networks does not mean that its sale constitutes an infringement of copyright. As we saw, that was so in Israeli law as applicable at the time, and it remains so.

Unjust Enrichment

36.       In the District Court, Charlton argued that Telran’s actions constituted unjust enrichment. The District Court ruled that, having found that Telran had infringed Charlton’s copyright, there was no reason to address the tort under the Unjust Enrichment Law, 5779-1979, (hereinafter: the Unjust Enrichment Law) in regard to the infringement of rights, inasmuch a no remedy could be added to that already awarded under the Copyright Act.

37.       In LCA 5768/94 A.S.I.R. Import Manufacturing and Distribution v. Forum Accessories and Consumer Products Ltd., 54 (4) IsrSC 289 (1998), this Court recognized that, in certain circumstances, recourse can be made to the Unjust Enrichment Law in the field of intellectual property law (and see: CA 9191/03 V&S Vin Spirt Aktiebolag v. Absolut Shoes Ltd., 58 (6) IsrSC 869 (2004); Greenman, at pp. 60-72).

            In his book Unjust Enrichment (2^nd ed., 1998) (Hebrew), Professor Daniel Friedman considers a situation so strikingly similar to the facts in the instant case that it seems as though it were written especially for this case. We will cite the material as written:

“An additional question arises where programs are broadcast in code, and the broadcasting company sells its customers a decrypting device, thereby permitting them to watch or hear the broadcast.    The company’s business is based upon receiving payment from the buyers of the device or by collecting payments based upon a meter placed in that device. Someone comes along and manufactures a device that ‘cracks’ the code and enables him to watch the broadcast without paying. If a private individual ‘cracks’ the code and watches the broadcast, there may be no cause of action against him. However, this point is not entirely clear. The question is whether a distinction should be drawn between invading a closed space, like cable (as was the case in the Cablevision matter, above) and decrypting the code of a broadcast over the airwaves. One might argue that there is no reason for such a distinction, and that the Cablevision rule should apply, but that approach might go too far. In any case, the situation is different if the developer of the decrypting device acts in a commercial setting. In such a case, there are two basic possibilities. One is that the code ‘cracker’ transmits the broadcasts to his customers for payment. That act contravenes the provisions of the Performers’ and Broadcasters’ Rights Law, under which the rights of broadcasters were recognized, and I addressed this point above. The second possibility is that he sells the device to his customers, and they use it to watch another’s broadcasts without paying (while others are required to pay for such viewing). The question of whether, in such a case, there is a cause of action [for unjust enrichment – Z.Z.] against him is not simple. For the sake of the discussion, let us assume that the device he sells has no lawful use, and its only function is to decrypt the broadcasting code of the plaintiff. I tend to the view that in such a case we should recognize the broadcaster’s cause of action against the manufacturer and seller of the device, but the point is not clear” (ibid., at p. 79).

            As earlier noted, the sale of the device that “breaks” the code cannot be deemed “broadcasting” for the purposes of the Copyright Act. However, as Freidman points out, it is possible that, in such a case, the right holder may have a cause of action against the seller of the decrypting device (the card – the technological “circumvention” measure) by virtue of unjust enrichment. This question was not examined by the District Court, and in light of what was stated in that judgment, the point was not argued before us.

            In light of the above, I would recommend to my colleagues that we remand the case to the District Court on the cause of action for unjust enrichment.

Damages

38.       Above, we presented the findings and rulings of the District Court in regard to the extent of the damages incurred by Charlton and the amounts of compensation. Both sides attacked the judgment on this issue, each from its own perspective. In my opinion, there is no need for us to address these matters, in view of the decision to remand the case to the District Court to rule on the suit for unjust enrichment, which was not addressed. First, and with no intention to suggest the possible result of that hearing, it is possible that consideration of the issue may prove superfluous. Second, the parties should be permitted to make their arguments in this matter in accordance with the principles for awarding damages for the said cause of action. Third, inasmuch as the matter is remanded to the trial court, it can revisit its conclusions in the matter, including on the question of whether damages should be calculated on the basis of the income of Telran or its profits, or perhaps on the basis of the profits denied Charlton. In any case, it should be clear that if Telran is ordered to compensate Charlton, it will be able to appeal that award again, as well as the findings in the judgment, to the extent that they remain unchanged.

Conclusion

39.       Telran sold and distributed cards that made it possible to receive the broadcasts of the foreign networks in Israel. Those card were a technological “circumvention” measure. The sale of those cards did not constitute an infringement of Charlton’s copyright under the Copyright Act. Telran did not perform any of the acts reserved to Charlton under the Act. However, it is possible that by those acts Telran profited at Charlton’s expense. This matter was not addressed by the District Court or by us. Therefore, I propose to my colleagues that we vacate the judgment and remand the case to the District Court so that it may address the cause of action of unjust enrichment, as well as the issue of compensation under that head, should Telran be found liable for damages. The District Court is granted full discretion in all that relates to the submission of further evidence and supplementary arguments, after the parties are permitted to present their arguments on the matter. I would recommend that no order be made for costs at this stage, and that, inter alia, the District Court take the results of this appeal into account in awarding costs.

                                                                                                            Justice

 

Justice E. Rubenstein:

1.         My colleague Justice Zylbertal delved deeply into the complex matter before us in this case, and arrived at the conclusion that we are unable to offer relief to the Respondent (and the Cross Petitioner) in all that relates to the sphere of copyright, and that the path remains open in regard to the laws of unjust enrichment, whose effect remains to be examined. In doing so, he adopted a different course from that of the District Court, which found an infringement of copyright, and therefore did not address the head of unjust enrichment. I see no alternative but to concur.

2.         For some detail: My colleague analyzed the various options in copyright law, and reached the (unfortunate, in my opinion) conclusion that inasmuch as the legislature did not include protection against circumventing technological measures in the Copyright Law, 5768-2007, the sale of such does not constitute an infringement of copyright, either under the prior legal situation or under the new Law. In my opinion, this conclusion is legally correct, but not desirable in substance. Its significance for copyright law is that the sinner may be rewarded, and that what we are concerned with in this case is “doing business with his neighbor’s cow” (Mishnah Bava Metzia 3:2; Babylonian Talmud Bava Metzia 35b). Perhaps this decision will be a wake-up call for those responsible for legislation, bearing in mind that they already published the Copyright Law (Technological Protection Measures and Electronic Information about Managing Copyrights) Draft Bill, 5772-2012. The legislature may recall that its job is also to prevent injustice in a changing world in which, as my colleague also noted, technological developments are a daily occurrence – a “tsunami” that is like “waters without end”. In the absence of appropriate protection, the impulse to initiate and innovate may be harmed, as “for whom am I toiling?” (Ecclesiastes 4:8).

3.         As for unjust enrichment, my colleague naturally referred to this Court’s decision in the A.S.I.R. case (LCA 5768/94 A.S.I.R. Import Manufacturing and Distribution v. Forum Accessories and Consumer Products Ltd., 54 (4) IsrSC 289 (1998)). The result is that, in this case as well, the gates of recompense have not been sealed, but that is not the appropriate high road, but rather an escape route for times of legal distress.  I would add that the instant case differs from my comment in CA 9191/03 V&S Vin Spirt Aktiebolag v. Absolut Shoes Ltd., 58 (6) IsrSC 869, 888 (2004), where the matter could be addressed by the “high road”, inasmuch as it concerned a registered trademark, and the legal path was thus open, but the facts did not justify the suit. I therefore said in that case that “since the high road will not serve, neither will the side road”. That is not the case here, where the high road is blocked by a legal obstacle, and therefore recourse can be made to the side road of unjust enrichment. In this regard, also see Prof. Ofer Grosskopf’s enlightening article, “The Eagle and the Princesses – On the Relationship between the Law of Unjust Enrichment and Copyright Law”, in Authoring Rights – Reading the Copyright Law (Michael Birnhack & Guy Pesach, eds., 2009) (Hebrew) 201, and also see p. 224 and fn 85 (“When the intellectual property regime is not up to date in one or more of the aspects enumerated above (time, detail or conformance) there is room to allow judicial legislation”). I do not believe that there is relevance in this case to sec. 3 of the Copyright Law, by which “Copyright shall not subsist in a work other than in accordance with the provisions of this Law”, which has been construed to limit the scope of protection granted to creators (see: Y. Weisman, “Comparative Reading, Characteristics of the Copyright Law, 5768-2007”, in Authoring Rights 69, 80-81) (Hebrew). The example brought by my colleague (para. 37) from Prof. Friedman’s book speaks for itself, and is worth considering so that there not, in fact, be unjust enrichment.

4.         Out of a love for Jewish law, and having mentioned the statement in regard to doing business with one’s neighbor’s cow, I would note the halakha in the matter (Maimonides, Mishne Torah, Mishpatim, Laws of Hiring, 1:6): “If a person who hires a cow from his neighbor, then lends it to another person, and the cow dies of natural causes in the possession of the borrower, then, since the borrower is liable for every occurrence, he should return the value of the cow to its owner, for that hirer is not doing business with his neighbor’s cow. And so it is for all analogous situations”; and also see Shulhan Arukh, Hoshen Mishpat, Law of Hiring, 307:5, that goes beyond the obligatory rule of Maimonides: “And if he says to the hirer, if you like you may lend it (the cow – E.R.), your dispute will be with the borrower and my dispute will be with you, then the borrower must pay the hirer”, in other words, the owner will sue the hirer rather than the borrower. Thus, the law produces the remedy. And see: CA 3422/03 Krone v. Inbar, 59 (4) IsrSC 365, 379-380 (2005) for additional sources on intellectual property in Jewish law; and see N. Rackover, “Cursed is He who Trespasses upon his Neighbor, On Copyright and Publishers”, Parashat Hashavua (A. Cohen & M. Wigoda, eds.) 236 (Hebrew), in addition to his book Copyright in the Jewish Sources (5751) (Hebrew).  

5.         My colleague Justice Amit addressed the frustration of one who cannot reconcile himself to a situation in which it would appear that one who “does business with his neighbor’s cow” may fall through the cracks of copyright law and be a – dubious – beneficiary “within the limits of the law”, as in substance, we are concerned with a work that is not protected as it should be. He therefore creatively proposed the idea of recourse in situations like ours to the category of making something available to the public. It is, indeed, an attractive idea, but even this approach ultimately runs up against the history of non-legislation of technological measures, and the path is blocked. This may reinforce the above call to the legislature.

6. In the end, I concur in the opinion of my colleague Justice Zylbertal.

                                                                                                                        Justice

 

Justice Y. Amit

1.         My colleague Justice Zylbertal cast a wide net that touches upon many questions that were not considered or examined at all in the trial court or in extant case law, primarily the fundamental question of whether “cracking” technological measures constitutes an infringement of copyright.

            As my colleague concluded that Telran cannot be deemed to be a direct, indirect or contributory infringer under copyright law, I will address a few words to this subject. I would preface my comments by emphasizing that what I am about to say is strictly “heretical musings”, without any intent to establish any firm position on the matter in view of the operative conclusion recommended by my colleague, in which I concur.

2.         I will not deny that the result that the Respondent cannot find a remedy within the framework of copyright law raises some discomfort. The Petitioners failed to show any contractual agreement between themselves and any other body from which the decrypting cards were purchased, and failed to present any evidence of how they obtained the cards.

            If we were treating of a relay that redirected the transmission signal to another territorial area, and thereby made the broadcast available to the public for a fee without obtaining the permission of the rights holder, we would no doubt see that act as a “signal hijacking” of the broadcast. Is there really any significantly substantive distinction to be made between the results of such signal intrusion and the operation of the card? Without addressing the distinctions between secondary transmission and active conduct in the two examples, the protected work is placed at the disposal of the public contrary to the desire and permission of the owner of the rights or its licensees, and in both examples, the action is performed for commercial purposes (and compare to the opinion of Rivlin, J. in the Tele Event case, at p. 57).

            The case law has pointed out that the legal tools at our disposal do not correspond with the technological developments in the field of information and communications. This is particularly true of the old Act, which forced the courts to fit new technologies into old molds that were created by the legislature ages before those technologies saw the light of day. In construing the Act, our interpretation must be purposeful rather than literal. In this way, it may be possible to include the sale of code “breaking” cards within the scope of the Act, as will be explained in paragraph 4, below.

3.         My colleague began his discourse by establishing that the term “public performance” has been interpreted in the case law as comprising broadcasting. He continued by addressing the question of whether the card sold by Telran “transmits” or “distributes” the Mondial broadcasts, and found that distributing the cards does not fall within the compass of broadcasting or secondary transmission. He therefore held that sec. 2 (1) of the Copyright Act 1911 (hereinafter: the Act) does not apply, but rather sec. 2 (2), which treats of indirect infringement. But in order to recognize an indirect infringement, an infringing copy is required, and my colleague goes on from there.

            Indeed, some are of the opinion that distribution under sec. 2 (2) (b) of the Act can only be accomplished through the distribution of a copy (and therefore does not include “secondary transmission” – see: Yuval Karniel, “Broadcasting Sporting Events on the Foreign Networks – Does Copyright Law require Screen Blackouts”, 6 Alei Mishpat 259, 274 (2007) (Hebrew)). Additionally, an indirect infringement by “public performance” under sec. 48 (4) of the new Law expressly speaks of an “infringing copy of a work”, which is not met in the matter before us. I would note on this point that an action that does not constitute an infringement under the new Law, is not actionable under the former Act, pursuant to the end of sec. 78 (c) of the new Law.

4.         I believe that one might propose an additional way to assess the matter. The “public performance” referred to as one of the copyright rights under the Act is divided into three separate categories under the new Law: public performance, broadcasting, and making available to the public. This last category is established in sec. 15 of the new Law, according to which, “Making a work available to the public means the doing of an act in relation to a work that shall enable members of the public to access the work from a place and at time chosen by them.” (for a comparison of the old arrangement and the new one, see: Rachel Aridor-Hershkovitz, “From Public Performance to Making Available to the Public: Innovation or Confusion under the New Law?” in Authoring Rights 405 (Michael Birnhack & Guy Pesach, eds., 2009) (Hebrew)). I would further note that nothing in the words “from a place and at time chosen by them” rules out an infringement in cases in which a live broadcast is involved (see the obiter dictum of Rivlin, J. in para. 13 of his opinion in the Premier League case).

            Purposive interpretation of the Act could also include making available to the public, since using the card makes the protected work available to the public. Sec. 1 (2) (d) of the Act establishes that copyright also includes any “other contrivance by means of which the work may be mechanically performed or delivered”, and sec. 2 (2) (b) establishes that infringement of copyright also includes “any person who … distributes - either for the purposes of trade or to such an extent as to affect prejudicially the owner of the copyright”. The term “performance” is defined under sec. 35 (1) of the Act as “any acoustic representation of a work and any visual representation of any dramatic action in a work, including such a representation made by means of any mechanical instrument”. And note: while copying a work requires making a copy (see the definition of “infringing” in sec. 35 (1) of the Act), that is not the case in regard to performance of a work. A creative, purposive interpretation could thus include a technological medium the use of which, like the miracle glasses mentioned by my colleague, leads to the result of making the work available to the public, even as a direct infringement and not an indirect one.

5.         As my colleague noted in his opinion, significant weight should be attributed to the fact that the legislature has not yet seen fit to address the subject of technological measures. Therefore, I see no reason to make any hard-and-fast statement in regard to the approach that would deem “performance” and “public performance” as also comprising making available to the public under the Act, as suggested in para. 4, above. In the final result, I therefore concur in the opinion arrived at by my colleague, but leave for further examination some of the issues that are not necessary for deciding the instant case, such as whether an end user will never be deemed an infringer, or whether a “copy” is required for an infringement under the Act.

                                                                                                            Justice

 

Decided in accordance with the opinion of Justice Z. Zylbertal.

Decided this 27^th day of Elul 5773 (Sept. 2, 2013).

 

HCJ 5228/14

 

 

Petitioner:                                B'Tselem - The Israeli Information Center for Human Rights in the Occupied Territories

 

                                                                        v.

 

Respondents:                          1. Broadcasting Authority

                                                2. Director General of the Broadcasting Authority   

                                                3. Appeals Committee under reg. 6 of the Broadcasting Authority Regulations

                                                4. Minister of Communications

 

Attorneys for the Appellants: Hagai Kalai, Adv.; Gilad Barnea, Adv.

Attorneys for Respondents 1 - 3: Moti Arad, Adv.; Meirav Eliahu, Adv.   

Attorney for the Attorney General: Shosh Shmueli, Adv.

 

The Supreme Court sitting as High Court of Justice

4 Av 5774 (July 31, 2014)

 

Before: Justice E. Rubinstein, Justice N. Hendel, Justice U. Shoham

 

Petition for an Order Nisi

 

Mini-Ratio: The infusion of political matter into advertisements should be limited to the utmost extent. Even under the approach that does not entirely preclude informational broadcasts as opposed to political persuasion, a broadcast of a partial list of the names of Palestinian children killed in Operation Protective Edge would clearly fall within the scope a “prohibited broadcast” under rule 2(7), as being “on a matter which is the subject of public political-ideological controversy”, inasmuch as it is intended for political persuasion and not purely informational.

Broadcasting – Content of broadcasts – Political advertisements

Communications – Broadcasting Authority – Commercials

Constitutional Law – Individual rights – Freedom of expression

 

A petition seeking to quash the decision of the Broadcasting Authority to preclude the broadcasting of a commercial by B’Tselem comprising a partial list of the names of Palestinian children killed in the course of Operation Protective Edge. The dispute concerned whether this commercial constituted a prohibited broadcast under rule 7(2) of the Broadcasting Authority (Radio Advertisements and Announcements) Rules, 5753-1993, concerning – inter alia – “a broadcast on a matter which is the subject of public political-ideological controversy”.

The High Court of Justice (per E. Rubinstein J., N. Hendel and U. Shoham JJ. concurring) denied the petition, holding:

In accordance with the case law, the infusion of political matter into advertisements should be limited to the utmost extent, in keeping with the view that paid advertising, per se, does not fall within the scope of freedom of expression. Even if the case law has not hermetically barred advertising of a political character that is not of a persuasive nature, that approach has been significantly restricted in holding that the dominant factor test must be narrowly construed so as to prevent the infiltration of a political current into advertising. At the end of the day, we are concerned with the “reasonableness and common sense” test, and there is no need for a new test. The ruling in the Hamateh Lehatzalat Ha’am Veha’aretz case is sufficient, and the narrower it is construed the better. Even under the approach that does not entirely preclude informational broadcasts as opposed to political persuasion, a broadcast of a partial list of the names of Palestinian children killed in Operation Protective Edge would clearly fall within the scope a “prohibited broadcast” under rule 2(7), as being “on a matter which is the subject of public political-ideological controversy”, inasmuch as it is intended for political persuasion and not purely informational. In this regard, Hendel J. added that the timing of the broadcast – during a period of combat – intensifies not only the purpose of the broadcast, but also its objective significance. In conclusion, the Court noted that the relevant authorities would be well advised to establish clear procedures in this matter.

 

 

Judgment

 

Justice E. Rubinstein:

1.            Does the broadcasting of an advertisement by B’Tselem that comprises partial lists of the names of Palestinian children killed in “Operation Protective Edge” constitute a prohibited advertisement under rule 7(2) of the Broadcasting Authority (Radio Advertisements and Announcements) Rules, 5753-1993, which concerns, inter alia, “a broadcast on a matter which is the subject of public political-ideological controversy”? That is the question before the Court in this petition.

 

Background

2.            On July 16, 2014, B'Tselem - The Israeli Information Center for Human Rights in the Occupied Territories (hereinafter: B’Tselem) requested that Shapam-Afikim Ltd. – through which the Broadcasting Authority carries out advertising on Israel Radio broadcasts – approve a broadcast on its behalf. This is the content of the broadcast:

In the course of Operation Protective Edge, the following children were killed: Muhammad Malekeh, two years old; Siraj Al-‘Al, 8; Basem Kaware, 10; Amal al-Batsh,2; Saher Abu Namus, 4. A partial list. B’Tselem.

Similarly, the requested broadcasts included additional lists of children.

3.            On July 17, 2014, a reply was sent to B’Tselem by Advocate Tomer Karni, Deputy Legal Advisor of the Broadcasting Authority, stating that he was of the opinion that the broadcast was prohibited as it fell within the scope of the prohibition established under the said rule 7(2). Advocate Karni’s decision stated:

While the broadcast comprises facts (on the assumption that the details are correct), nevertheless, we are clearly concerned here with part of a political campaign. The reporting of the names of casualties belongs in a news broadcast, where it is subject to the recognized rules for journalistic coverage and reporting, and not in the framework of an advertisement financed by a third party. It is also clear that the purpose of the broadcast is not merely journalistic reporting, but the communication of a particular political message. The war situation further emphasizes this. In light of the above, I am of the opinion that the broadcast falls within the scope of the prohibition under rule 7(2) of the advertisements rules, a broadcast which is the subject of public political-ideological controversy.

4.            Pursuant to that decision, B’Tselem filed an appeal under rule 6 of the Broadcasting Authority Rules. We would note procedurally that – under rules 3-5 – the decision is to be made by the Director General, and the appeal is to be submitted to an appeals committee (rule 6). The appeal argued that while it would be proper for the names to be reported in the news broadcasts, the various Israeli media outlets, among them Israel Radio, “are absolutely and unreasonably strict in not identifying Palestinian casualties by name”, and therefore B’Tselem must purchase advertisements “in order to inform the public of these facts”.

5.            Rather than conduct a hearing of the appeal, on July 22, 2014, in a letter headed “Appeal of the Prevention of a Broadcast on Israel Radio and Unlawful Rejection of the Broadcasting of the names of Killed Palestinian Children”, the Director General of the Broadcasting Authority, Mr. Yoni Ben Menachem, rejected the appeal, under unclear authority (unless it is seen as a reconsideration of the decision of Advocate Karni) for the stated reason that “although the advertisement comprises facts, the context of the matter is the subject of political controversy, and it is therefore my opinion that the requested advertisement cannot be broadcasted.” It was noted that the decision was based upon rule 7(2), and that B’Tselem had the right to appeal the decision before the appeals committee headed by the Chairman of the Authority, Dr. Amir Gilat. An additional appeal was submitted that very day.

6.            On July 23, 2014, the appeals committee held an urgent telephone conference with the participation of: Amir Gilat, Geulah Avidan and Yaakov Borofsky, together with the Director General of the Broadcasting Authority and Advocate Karni. The committee decided to reject the appeal, holding that, for the following reasons, there was no defect in the Director General’s decision: we are concerned with a political broadcast intended to circumvent the news broadcasts; the seemingly neutral reading of the names has a political cast due to B’Tselem being political in character; it is highly probable that the broadcast will raise political controversy in a time of war; the broadcast impliedly supports the position of the Hamas that Israel is responsible for the deaths of civilians in the Gaza Strip; the absence of mention of Israeli casualties, and the statement “partial list” point to a lack of objectivity or, alternatively, to political protest; broadcasting the advertisement would open the door to demands by other parties seeking to use the advertising platform; the use of advertising to circumvent the news broadcasts should not be permitted.

               In light of the appeals committee’s decision, on July 28, 2014, B’Tselem submitted the current petition asking to quash the Broadcasting Authority’s decision to forbid the broadcast.

 

Pleadings

7.            The petition argues that the dominant factor of the precluded broadcast is factual, that therefore the broadcast meets the test established in the case law, and Respondents 1 -3 do not have the authority to prevent its broadcast. B’Tselem also disagrees with defining the broadcast as “controversial” inasmuch as, in its view, the broadcast is purely informative. It is argued that since the Broadcasting Authority does not fulfill its duty to provide balanced public broadcasting, B’Tselem seeks to expose the public to relevant information by means of the advertisement. It is further argued that disallowing the broadcast breaches the public’s right to know and receive information needed to form its opinion and position. It is further stated that the decision to preclude the broadcast is discriminatory, inasmuch as similar broadcasts were recently made on behalf of the Mateh Lehosen Leumi, supporting the fighting, and by the Chabad-Lubavitch Youth Movement, calling for donning tefillin [phylacteries]. From a legal perspective, it is argued that, in accordance with the case law, freedom of expression and the public’s right to know justify the broadcast. We are not concerned with the portrayal of a spectrum of opinions in accordance with the “fairness doctrine”, but rather with revealing information without any attempt at persuading, and therefore the matter does not deviate from the bounds of the case law. It is argued that the very fact that revealing the information may lead to controversy does not constitute grounds for preventing it, and in any case, we are concerned with giving the public access to information that is not provided to the public by the majority of communications media.

8.            On July 28, 2014, Justice Zylbertal scheduled the appeal for a hearing on July 31, 2014, and the Respondents were asked to respond to the petition by July 30, 2014.

9.            In their preliminary response (July 30, 2104), Respondents 1 -3 argued that freedom of expression does not grant a right to its realization specifically by means of paid political advertising, and that the high road for airing political expression – as established by the case law – is by means of the broadcasts themselves and not by means of advertising. It was further argued that on July 23, 2014, B’Tselem uploaded the advertisement on YouTube and garnered some 300,000 views and some 900 shares, such that B”Tselem cannot claim an infringement of freedom of expression. It was also argued that the broadcast was purely political and therefore prohibited under the provisions of the law and by the case law. Moreover, inasmuch as the broadcast is intended to agitate the public and bring about a change in Israeli public opinion in regard to the operation, it was argued that the broadcast did not meet the test of a predominantly non-political character, that is, the requirement that the primary purpose of the broadcast be the providing of information and not an attempt to persuade. As for the claim of discrimination as compared to other broadcasts (of Chabad and the Mateh Lehosen Leumi), it was stated that upon review, it was decided that they would not be rebroadcasted.

10.          The petition was originally filed against the Minister of Communications, who is responsible for the Broadcasting Authority. The state requested (July 30, 2014) that the Minister be removed from the petition due to a lack of authority in regard to the content of broadcasts (the Minister was removed in our decision following the hearing on July 31, 2014). In a decision handed down on July 30, 2014, it was decided that the state would be represented by the Attorney General.

11.          In the hearing, B’Tselem’s attorneys argued that the broadcast was intended to balance and provide a more complete report, particularly in regard to uninvolved children who are harmed, as a moral consideration. It was contended that the purpose was the humanization of the narrative, and that B’Tselem has no agenda, and that its sole interest is in human rights and a voice that must be heard. The broadcasts meet the case-law criteria, and moreover, other broadcasts were permitted, as noted. It was further argued that the case law permits purely factual presentations, as opposed to political advocacy, in broadcasts, and that the Petitioner’s emphasis is upon freedom of expression and human rights.

12.          The Broadcasting Authority argued that the legality of the rules having already been established, the construction of rule 7(2) is that of a reasonable person listening to the broadcast. In this case, it is clear that the purpose was political shock. Moreover, even facts can be politicized. Thus, following the reasoning of the Petitioner, it would be conceivable to request a that a broadcast about the children killed by terrorism be aired on the eve of a release of terrorists, or that in another context, a list of Arab villages destroyed in 1948 be read. The rules, it was argued, prohibit broadcasts with such connotations. Moreover, information concerning the children killed in the course of the operation are, in any case, the subject of vast coverage on media sites and social networks. In addition, the prior broadcasts regarding which a claim of discrimination was raised (of Chabad and the Mateh Lehosen Leumi) were broadcast by mistake – although in response to our question, we were informed that there is no examination procedure for such cases. It was further argued that the source of B’Tselem’s data is unclear.

13.          The State Attorney’s Office requested time to consult with the Attorney General in person.

14.          The parties agreed that the hearing would be deemed as if an order nisi had been granted.

 

Response of the Attorney General

15.          In presenting his position, the Attorney General stated (Aug. 4, 2014) that there are no grounds for intervention in the decision to preclude the broadcast. It was argued that political expression should not be permitted in advertisements inasmuch as it is not possible to ensure balanced broadcasting in that context, as required by the “fairness doctrine”, and the fear that only money will talk. It was further argued that the requested broadcast also does not meet the “dominant factor” test in light of the politically freighted message delivered by the “dry” facts. It was argued that it is proper that the dominant factor test be narrowly construed, perhaps even more so than in the past (para. 27), and that this construction is grounded upon the narrow approach presented in HCJ 7192/08 Hamateh Lehatzalat Ha’am Veha’aretz v. Second Authority for Television and Radio (2009) (hereinafter: the Hamateh Lehatzalat Ha’am Veha’aretz case). “Thinner than thin” distinctions should not be made in regard to different types of information, and the “dominant factor” test should be left for clear cases of actually manipulative information, and not applied to broadcasts intended to deliver a message about a controversial issue (para. 28).

16.          In its response to the position of the Attorney General (Aug. 6. 2014), B”Tselem stated that, in effect, the Attorney General and the Respondents were seeking to change the rule set down in HCJ 10203/03 Hamifkad Haleumi v. Attorney General, IsrSC 62 (4) 715 (2008) [English translation: http://versa.cardozo.yu.edu/opinions/hamifkad-haleumi-v-attorney-general] (hereinafter: the Hamifkad Haleumi case) which established the legality of the  Broadcasting Authority (Radio Advertisements and Announcements) Rules, inasmuch as that case stated, per (then) Justice Naor writing for the majority (para. 59 at p. 795), and pursuant to a previous case (HCJ 10182/03 T.L. Education for Peace Ltd. v. Broadcasting Authority, IsrSC 59 (3) 409 (2004)), that “the proportionality of the Rules is reinforced by the interpretation of the Rules in HCJ 10182/03 Education for Peace, which permitted the broadcast of political advertisements provided that the focus be exclusively on the factual message”. It was averred that HCJ 7144/01 Gush Shalom v. Broadcasting Authority, IsrSC 56 (2) 887 (2002), which adopted the test of the interpretation that the hearer might give to the broadcast, was overturned pursuant to the Education for Peace and Mifkad Haleumi decisions. As argued, the test is therefore that of the dominant factor, and there is no room for the claim that a broadcast should be precluded for being contrary to the government’s position, and the same applies in regard to the claim that BTselem is a political organization, which would constitute an attempt to categorize advertisers in accordance with their ideological views. It was further argued that the “actual informational content” test suggested by the Attorney General, would infringe freedom of expression inasmuch as “the right to deliver a political message in a commercial broadcast is grounded in the constitutional right to freedom of expression” (para. 18), and “it is unacceptable to construe the Broadcasting Authority Rules as permitting the preclusion of presenting information to the public simply because publicizing the information might led to public debate or criticism of governmental actions”. It was argued that the test recommended by the Attorney General raises constitutional problems, is discriminatory, and infringes the rights of equality and freedom of expression. Further arguments also concerned a double standard for various broadcasts (from the right as opposed to the left) in light of the aforementioned broadcasts that were permitted. In conclusion, it was argued that the Respondents and the Attorney General are attempting to overturn or change the Hamifkad Haleumi rule, and their position is liable to prevent the exposure of facts “that might arouse public debate, because they are inconvenient for the government and raise doubt as to the justification of its action” (para. 36). It was stated that insofar as the intention is to overturn the Hamifkad Haleumi and Education for Peace rules, an expanded panel is requested. In the opinion of the Petitioner, the test is that of influence, i.e., if the Authority intends to preclude a broadcast due to controversy, it must bear the burden of proving that the information was fairly expressed in public broadcasts. It was further stated that the broadcast in question meets the dominant factor test, that it concerns facts, and also that there is no requirement of balance in broadcasts (in response to the Respondents’ claim that the broadcast concerns only Palestinian casualties). It was further argued that B’Tselem is willing to present all of the Palestinian casualties and not just a partial list, and that the broadcast would not state the name “B’Tselem”. The Petitioner requested that it be awarded costs for its contribution to improving the procedures of the Broadcasting Authority.

 

Decision

17.          We will begin by stating that we have reached the conclusion that the petition should be denied, as the requested broadcast – which we listened to attentively – falls within the scope of a “prohibited advertisement” under rule 2(7) of the Rules, in that it concerns “a matter which is the subject of public political-ideological controversy”. In accordance with the case law, which will be presented in brief below, the infusion of political matter into advertisements should be limited to the utmost extent, inasmuch as they are a commercial tool intended for commercial purposes, i.e., subsidizing the budget of the Broadcasting Authority. This Court has addressed this matter in the past, and the trend of the case law is to distinguish, as far as possible, between commercial advertisement and advertisement of political matters that are by their nature – as is the nature of politics – the subject of controversy. And even if they are presented from a viewpoint that appears innocent and purely factual, they generally have an inherent message, and that message is the spirit of the broadcast, which is to say, the words of the message must be take account of their spirit in order to understand whether or not the broadcast is controversial. Indeed, even if the case law has not hermetically barred advertising of a political character that is not of a persuasive nature, such an approach has been largely limited such that the crack in the doorway is very narrow. As we shall explain, the trend of the case law shows a limiting tendency that we see as very appropriate in every way. Moreover, even under the approach that does not entirely preclude informational broadcasts as opposed to political persuasion, when one listens to and watches the broadcast under discussion in terms of its nature and message, and not merely in terms of its “dry” words, it is plainly and clearly controversial in that it is intended on its face to persuade, and thus falls within the scope of rule 2(7). In our view, there is no need for a new test. The construction of the Education for Peace rule given in the Hamateh Lehatzalat Ha’am Veha’aretz case, decided in 2009 (incidentally, in regard to “a broadcast from the right” as opposed to the current “broadcast from the left”) is, at present, the last word in the case law in this field – which incidentally, receives no mention in the Petitioner’s response other than noting that a particular, factual broadcast was permitted therein – and is sufficient for the matter at hand. Moreover, we are not of the opinion that the Gush Shalom case has been consigned to the dung heap of history following the decisions in the Education for Peace and Hamifkad Haleumi cases, as we shall address below. Advertising is not part of the marketplace of ideas, which is the role of the broadcasts themselves, and the borderline between information and persuasion, more often than not, marks a distinction without a difference.

18.          This is the place to state clearly, first, that as human beings we are deeply saddened by the death of innocents in Gaza, and all the more so of children. I had the opportunity to write in the past (see my 2002 article “Public Law in Times of War and Crisis” in my book Netivei Mimshal Umishpat (5763 – 2003) (Hebrew) following Operation Defensive Shield and the claims about a massacre in Jenin:

Combat in which the enemy employs civilians in various ways, is particularly difficult. However, the IDF, which conducted a hard battle and paid the price in its soldiers’ blood, did not massacre Palestinians. Those who say so are guilty of a blood libel in the best tradition.

Indeed, there must be empathy for the Palestinians and their losses. A compassionate person feels the pain of others. They pay a high price for their leadership, such as it is. Their losses, too, are to be regretted. Anyone who daily sheds tears for the bereavement of the daughters of his nation, anyone who cannot but join in the pain and grief of the people of his nation, must also feel the pain of others … but the real, moral, public and legal address guilty of those crimes is Yasser Arafat, who sent people to butcher Israeli citizens mercilessly and with chilling cold heartedness. It is important to state this in a clear voice.

Israel, a Jewish and democratic state fighting a cruel enemy that treats the blood of Israeli and Palestinians with equanimity, fights in self-defense and in the defense of its citizens, its cities and their security, and as we see in the fighting in Operation Protective Edge, for the defense and security of large parts of the state. However, Israel is also aware, and must be aware, of the suffering of innocents on the other side, among them children, both in the planning and operational stages, in the proportionality of military operations as far as possible, and in terms of humanitarian relief. Educating the military forces in this regard has always been the duty – and I, myself, devoted considerable time to this as Attorney General – of the civilian and military legal advisers of the government and the IDF. Indeed, the distress of citizens who are used, along with their homes, for military purposes by terrorist organizations, and who are therefore harmed in the course of battle, is not unknown to Israel, and Israel cannot but address it. Even if some of those citizens are not innocent, and offer aid to the terrorists, it is reasonable to assume that many others do so under duress and in fear, or have no interest in the fighting, and see the words of Deputy President H. Cohn in HCJ 320/80 Kawasmeh v. Minister of Defense, IsrSC 35 (3) 113, 132, and see HCJ 5290/14 Kawasmeh v. Military Commander (Aug. 11, 2014), para. 25, per Danziger J.

19.          In the context of Jewish law, I would add that Rabbi Shlomo Goren writes (Meishiv Milhama, v. I (5743) (Hebrew) in the chapter “Combat Morality in light of the Halakha”, 3:14): “However, notwithstanding the express biblical commandment to do battle, we are commanded to show compassion for the enemy and not kill even in war, except when there is a self-defense need that requires conquest and victory, and not to harm the non-combatant population, and it is certainly prohibited to harm women and children who do not take part in the fighting”. And see the words of Rabbi Shaul Yisraeli in “Reprisals in light of Halakha” (Hebrew) (following the Qibya operation in 1953) in Tzomet Hatorah Vehamedina 3 (5751 -1992), 253, which addresses all the aspects of the question. Similarly, in a recent lecture on “Harming Innocents in War” (Mas’ei, 5774) (Hebrew) in which Rabbi Asher Weiss addressed the subject in light of recent events, he stated his view that even if “in principle, one need not refrain from killing the murderers even if innocents may be killed alongside them, nevertheless, one must endeavor to prevent the deaths of those who did no wrong, although when it is not possible, they too will be killed with those who must be killed…” (pp. 7-8). And see Yosef Achituv, “The Wars of Israel and the Sanctity of Life,” in I. Gafni & E. Ravitzky, eds. The Sanctity of Life and Martyrdom - Studies in Memory of Amir Yekutiel (5753 -1992), 255, 259-260.

20.          It is also our impression that no inconsiderable expression has been devoted to the suffering of the Palestinian population and to what is happening in Gaza in the Israeli media, in all its forms, on the Internet, and as noted, on social networks, even if there are those who are of the view that, in the framework of freedom of thought and expression, broader media coverage is needed. No one is hiding the destruction and the death of civilians. Details of the number of casualties in the Gaza Strip, even if generally without their names, are regularly provided by the media as supplied by official medical sources in Gaza, as far as we can tell, and this Court dwells among its people [2 Kings 4:13] and it, too, listens and watches.

21.          We will take the bull by the horns, i.e., does reading the names of killed children in a broadcast fall within the scope of “a matter which is the subject of public political-ideological controversy”, which is prohibited under rule 7(2)?

22.          In the Education for Peace decision, given some ten years ago (2004), the opinion of Justice Hayut, following the decision in HCJ 1893/92 Reshef v. Broadcasting Authority, IsrSC 46 (4) 816, 820 (1992) (per Barak J.), addressed the “dominant element” of a broadcast, that is, whether it is primarily composed of information without presenting a position or an element of persuasion (see pp. 418-419). The subject was addressed in the Hamifkad Haleumi case, and in the main opinion, per Justice Naor writing for the majority, it was noted, inter alia, (as was more extensively quoted in HCJ 7192/08 Hamateh Lehatzalat Ha’am Veha’aretz v. Second Authority for Television and Radio (2009), para. 29, and see the following paragraphs there), that “the means adopted by the Rules to realize this goal [of the fairness doctrine – E.R.]  is the total prohibition of the broadcast of political messages in the framework of advertisements”. The constitutionality of the rules with which we are concerned was established in the Hamifkad Haleumi case, in which several justices – including dissenters – pointed out the circumscribed approach to the application of freedom of political expression to advertising broadcasts. It was stated that – on the contrary – the broadcasting of political advertisements might infringe equality (“the wealthy will broadcast”), both in regard to the fairness doctrine (with which we are not directly concerned in this case), and in regard to the commercial purpose of advertising (see, e.g., para 3 (p. 797) per Levy J., para. 3 (p. 842) per Hayut J., and para. 43 (p. 869) per Procaccia J.).

23.          In the Hamateh Lehatzalat Ha’am Veha’aretz case, there were broadcasts related to the remembering of Gush Katif that referred to the “Gush Katif expulsion”, and we stated (para. 25 of my opinion) that “we are not concerned with commercial advertising at all – it is saturated with political content, which is its dominant factor… we are concerned with the disengagement from Gush Katif, which is undisputedly a matter of public controversy, legitimate, painful controversy that has not yet ended … that being the case, it is beyond our comprehension how the authorities originally considered permitting the broadcasts: were they thinking of the monetary consideration, did they do it in order to avoid dispute with political bodies and in the pursuit of peace? Under them – the provisions of the law – commercial advertising and political controversy are mutually exclusive …”. The judgment extensively surveyed the prior case law, and it can be read there.

24.          We are not of the opinion that the aforementioned quote of Justice Naor in para. 59 (p. 795) of the Hamifkad Haleumi case should be understood, as suggested by B’Tselem, as a conclusive, “final” interpretation granting “authorization of political advertising”. The Hamifkad Haleumi case concerned the constitutionality of the Rules, and that statement was part of reasoning in that context. The statement did not “adopt” political advertising, but rather addressed the “dominant factor” test in the Reshef and Education for Peace cases, distinguishing between facts and attempts to persuade in those contexts within the boundaries of freedom of expression. However, as opposed to B’Tselem’s claim, several judges, as noted, took exception to political advertising in the Hamifkad Haleumi case.

25.          At the end of the day, we are concerned with the “reasonableness and common sense” test (HCJ 524/83 Association for the Wellbeing of Israel's Soldiers v. Broadcasting Authority. IsrSC 37 (4) 85, 89 per S. Levin J.); and see Gush Shalom v. Broadcasting Authority at p. 893, where Justice Strasberg-Cohen noted in a related matter – a petition to broadcast advertisements warning IDF soldiers against the perpetration of war crimes – “The connotation of the advertisements is political-ideological and not, as the Petitioners claim, purely informational." Reasonableness and common sense have not yet, we hope, abandoned us, and there is not an iota in the Hamifkad Haleumi judgment to the contrary. Indeed, as noted, the doorway has not been hermetically sealed before informational advertisements as opposed to persuasion, but the differences between the two are slight, and they require that, in the scope of that reasonableness and common sense, we act with utmost restraint.

26.          I will quote para. 35 of the Hamateh Lehatzalat Ha’am Veha’aretz case, which summarizes the approach adopted by the Court and which should also guide us in the matter before us:

In my opinion, what arises from the majority opinion in the Hamifkad Haleumi case, with which I humbly agree, is as we stated above – the restriction of the “political space” in advertising to a minimum, in accordance with the view that paid advertising does not, in and of itself, fall within the sphere of freedom of expression. I would add that, in my opinion, in light of the Hamifkad Haleumi rule, the rule established in the Education for Peace case should be narrowly construed. Indeed, that does not infringe the essence of freedom of expression, and we are not concerned here with Orwell’s Big Brother (1984). Freedom of expression, which is dear to all who seek democracy and a free marketplace of ideas, remains as it was, protected and encouraged as far as possible, even in the spirit of the prophets of Israel quoted by the Petitioner, and other prophets who courageously railed at the gates against power, and there is no need to elaborate. But the field of advertising, which is not a level playing field – and this must be particularly emphasized – and where the wealthy can control the message absorbed through repeated broadcasts, is not its natural place. As for myself, I would be contented if political subjects would not be granted a foot in the door of advertising, as some of my aforementioned colleagues expressed it, and no more need be said. This, as such matters are generally controversial by their nature. But even under the approach that permits informational advertising, that is not what we are concerned with here. In any case, in my opinion, looking to the future, in view of the Hamifkad Haleumi judgment, the authorities must narrowly construe any intrusion of political matters into commercial advertising, by scrupulously examination … as stated, this is the approach that should be adopted in similar cases, to the right and to the left, center, religious, Haredi [ultra-Orthodox], secular, Arabs, or any other body or party, for if not, there will be no end to the matter, and it is clear to all what type of “commercial” advertisements might result. The basic question is not, therefore, this or that terminology, but the nature of the advertisement.

My colleagues Justices Joubran and Danziger concurred.

27.          As for the matter at bar, knowledge is easy for one who understands [Proverbs 14:6], and it is clear that, although we are deeply saddened by their deaths, reading a list of the names of children killed serves a political rather than purely informational purpose. Its purpose, which requires no arcane knowledge to ascertain, is to urge the public to cause the government to end the IDF’s operation in Gaza due to the casualties among the civilian population, and among children in particular. Can one say that this – i.e., the continued combat – is not a matter of political controversy? Even under the dominant factor test – which, as noted, must be narrowly construed so as to prevent the infiltration of a political current into advertising – that factor in the matter before us is plainly public-political persuasion, and saying that it is purely informational is, with all due respect, preposterous. Justice Strasberg-Cohen’s aforementioned statement in the Gush Shalom case is appropriate here. The context is as clear as the noonday sun. We repeat: the place for such political matters is not in advertising, and the Broadcasting Authority must avoid such matters by a very wide berth. There is, therefore, no need for a new test, but rather the ruling in the Hamateh Lehatzalat Ha’am Veha’aretz case is sufficient, and the narrower the better. The facts of the matter at bar thus fall clearly within the scope of the existing rule. The proper place for the matter raised by B’Tselem is in the regular media broadcasts that now inundate us, and there is no reason to assume that opinions at odds with that of the government and its approach will not be heard, as they are indeed heard.

28.          Before concluding, we should address the Petitioner’s claim, which the Respondents acknowledge to be of merit, that the Authority broadcasted two commercials of a “persuasive” nature by the Mateh Lehosen Leumi and Chabad. As noted, the Authority’s legal advisor informed us that this was an error and that they would not be rebroadcasted. Without addressing the fine points of the content of those broadcasts, and to each his own tastes, the question that must be asked is how the Authority – which is bound by the precedents of this Court – and its legal advisors did not apply the rulings in the Hamateh Lehatzalat Ha’am Veha’aretz case and its predecessors under which advertisements must be scrupulously examined.  How can such “scrupulous” examination be conducted without a simple review procedure in an authority that has – if we understood correctly – placed the matter in the hands of a commercial company? The absence of such a review procedure leads to the type of blunders that occurred here. We reiterate that we do not know if the motive of the Authority and its proxies in accepting commercials is financial or otherwise, but it is obligated to uphold the rules under which it operates, and not selectively. We require that a procedure be established within 60 days. In this regard we would note that just recently the Knesset adopted the Public Broadcasting Law, 5774-2014 (S.H. 2471, 15 Av 5774, Aug. 11, 2014), and Chapter 12 thereof treats of commercials and sponsorships. Section 70 concerns the broadcasting of paid commercials and sponsorship notices that that the Public Broadcasting Corporation is permitted to broadcast on the radio (ss. (a)), and the Council, in consultation with the Director General, is required to establish rules, inter alia (ss. (b)(1)), “in regard to prohibitions and restrictions upon commercials and sponsorship notices”. In accordance with sec. 75, the Council is to establish rules “in regard to prohibitions and restrictions” inter alia, for commercials, as detailed there. Section 76 establishes the appointment of a supervisory subcommittee, inter alia, in regard to commercials. One may hope that what we have stated here will be taken into account in the framework of those new rules, and the supervision established under the Law.

29.          In view of all the above, we do not grant the petition, and we make no order for costs.

 

Justice N. Hendel:

               The subject requiring our decision is whether it would be appropriate to intervene in the decision of the Respondents not to broadcast a commercial by the Petitioner that comprises a reading of the names of Palestinian children who were killed in the course of Operation Protective Edge. The legal question before us is whether such a broadcast is prohibited for being “a broadcast on a matter which is the subject of public political-ideological controversy” (rule 2(7) of the Broadcasting Authority (Radio Advertisements and Announcements) Rules, 5753-1993.

               Needless to say, the Court takes no pleasure in expressing a position in regard to a “public political-ideological controversy”, and all the more so in all that regards a military operation and the resulting questions that naturally arise among the public. However, there is a clear difference between the Court’s taking a position in regard to a political or ideological controversy – which, in my opinion, is not required by this Petition – and the decision required in the framework of High Court review of whether a particular broadcast concerns a political or ideological controversy that, therefore, must be precluded. Taking a stand on a controversy is one thing, and recognizing the existence of a controversy is something else.

               The matters that are being publicly addressed as a result of the operation in Gaza are, indeed, important and complex. But the Court’s room and realm rightly stand beyond the theater of this dispute. Precisely because, at times, the Court is called upon – pursuant to its function – to decide agonizing matters, it must, I believe, exercise restraint in its approach to such matters, which need not be decided in the Petition at bar.

               Broadcasting a commercial is not a regular aspect of freedom of expression. We should bear in mind that the Authority’s broadcasts belong to the public sphere. This collective proprietorship supports an approach that would preclude controversy from this arena. We are not concerned, for example, with a privately owned newspaper or with a demonstration. This refraining from political and ideological controversy in the framework of the Authority’s broadcasts was subjected to the constitutional review of this Court (HCJ 10203/03 Hamifkad Haleumi v. Attorney General, IsrSC 62 (4) 715 (2008) [English translation: http://versa.cardozo.yu.edu/opinions/hamifkad-haleumi-v-attorney-general]), and the Petitioner does not argue against it.

               The Petitioner’s claim is that because what is concerned is the providing of information – names and ages – the broadcast should not be characterized as controversial. In rejecting this argument, and in addition to the case law summoned by my colleague Justice Rubinstein, one may refer to the context test. Words and facts have power. Selecting only particular facts from the entire mosaic was not performed randomly. Its purpose was to deliver a message and connect with the public. Another aspect of context, which in my view facilitates this decision, is the timing of the broadcast – during a period of combat. This is not to say that timing alone constitutes a condition. However, it intensifies not only the purpose of the broadcast, but also its objective significance. It would appear to me that a different conclusion, that we are concerned, as it were, with purely providing information, would bear the taint of willful blindness and deafness.  Of course, the Petitioner has the right to present facts and positions in accordance with its views. But the issue here is whether the Broadcasting Authority is the “forum conveniens” for that under the law.

               In conclusion, I concur with my colleague that the Petition must be denied, and that the relevant bodies would do well to establish a procedure (and see secs. 75-76 of the Public Broadcasting Law, 5774-2014, which was just recently enacted). Even if it will be a general procedure, it would be preferable to ongoing case-by-case decisions.

 

Justice U. Shoham:

               I concur in the opinion of my colleague Justice E. Rubinstein, and with the comments of my colleague Justice N. Hendel to the extent that they are statements of principal, although I do not believe that they are entirely necessary for the instant case.

               I, too, am of the opinion that the Petition must be denied, both due to the content of the requested broadcast and due to its timing, at a time when the roar of combat has not yet subsided.

               Like my colleagues, I believe that clear procedures should be established in this matter, and the sooner the better.

 

Given this 17^th day of Av 5774 (Aug. 13, 2014).

 

 

 

 

CA 2082//09 CA 2414//09

And counter-appeal

 

 

Appellant in CA 2082/09 (Respondent    2              in            CA 2414/09 and in the Counter

Appeal):              

 

Eurocom DBS Ltd.

v.

Respondent 1 in CA 2082/09 and in CA 2414/09 (and Counter- appellant in CA 2414/09): Bezeq   the         Israel                Telecommunications Corporation Ltd.

 

Respondent 2 in CA 2082/09 (and Appellant in CA 2414/09 and Respondent 1 in the Counter-appeal):    

General   Director   of   the   Israel   Antitrust Authority

 

 

The Supreme Court sitting as the Court of Civil Appeals [8 June 2009]

Before Deputy-President E. Rivlin and Justices E. Rubinstein, E. Hayut

 

 

Appeal of a ruling of the Antitrust Tribunal in Jerusalem in AT 706/07, issued on 3 February 2009 by the Honorable Judge  M. Mizrachi, Professor

R.            Horesh and Mr. N. Lisovsky

 

Facts: Bezeq, the Israel Telecommunications Corporation Ltd., held 49.78% of the shares of “Yes” D.B.S. Satellite Services (1998) Ltd. Another 32.6% of the Yes shares are held by Eurocom D.B.S Ltd. Yes is one of only two providers in the multi-channel television broadcast infrastructure market and in the multi-channel television broadcasting market. The other multi-channel

 

 

 

television provider in the market is “Hot”. Bezeq is a public company licensed to provide internal fixed line services, including fixed line telephony and Internet infrastructure. Bezeq also provides the public with a wide variety of communications services through its subsidiary and affiliated companies, including international telecommunications services and Internet service provision, cellular telephony, and endpoint equipment for telephony. On 27 June 1995, Bezeq was declared to be a monopoly in a number of communications markets, and on 10 November 2004, it was declared to be a monopoly in high-speed Internet service provision. On 2 August 2006, Bezeq and Yes submitted a notice of merger pursuant to the Restrictive Trade Practices Law, 1988, declaring Bezeq’s intention to exercise options that it held and that would give Bezeq 58.36% of the shares of Yes, making it the controlling shareholder of Yes. The General Director of the Israel Antitrust Authority objected to the merger as presenting a reasonable risk of significant harm to competition from both a horizontal and vertical perspective. Bezeq filed an appeal with the Antitrust Tribunal. Eurocom joined the proceedings in support of the General Director’s decision. The Tribunal overturned the decision of the General Director, ruling that the merger would be permitted subject to certain conditions. The General Director and Eurocom filed the current appeal against the decision of the tribunal. Bezeq filed a counter- appeal in regard to the amount of the bank guarantee that the tribunal required of it as one of the conditions for the merger.

 

Held: Justice E. Hayut (Deputy President E. Rivlin and Justice E. Rubinstein concurring) delivered the opinion of the Court. Companies may not merge without the consent of the General Director of the Antitrust Authority. The test for exercising the General Director’s authority under s. 21 of the Restrictive Trade Practices Law is the existence of a “reasonable risk” – i.e., estimation that there will be a significant damage to competition due to the proposed merger, or damage to the public with respect to one of the matters listed in the section. The basic assumption of the Law is that mergers are desirable, in that they increase business efficiency and benefit consumers. However, because mergers can harm competition due the increase in the power or market share of the merging companies, the legislature saw fit to review them, and in certain cases, even to limit them in order to protect the public against economic distortions resulting from excessive concentration of certain markets. Protection of competition in the communications industry is of special importance, as the media carries out an essential function for our existence as a democratic society, and serves to realize fundamental rights such as freedom of expression and the public’s right to know.

 

 

 

Historically, the Israeli multi-channel television industry has been characterized by a lack of direct, effective competition. In 2000, a satellite television company entered the market. The technological innovation changed the market from a monopoly to a duopoly. The current reality in the Israeli multi-channel TV broadcast industry is that there are only two players

–             Hot and Yes – in the infrastructure market and in the content market, and each of them maintains full vertical integration between the infrastructure and broadcasting levels. The merger under discussion is not a horizontal one because Bezeq itself is not currently a competitor in any of the markets that are relevant to this case (i.e., the infrastructure market or multi-channel TV broadcast the content market). Additionally, this is not a vertical merger between companies operating at different stages of production or marketing in the same industry, since Bezeq’s activity in the multi-channel TV broadcast industry consists only of holding of the Yes shares that it currently holds. This merger, which is neither vertical nor horizontal, can be referred to as a conglomerate merger. Conglomerate mergers are not infrequently considered to be mergers whose effect on competition is neutral, and occasionally, even beneficial, but there are a number of dangers to competition involved in a conglomerate merger. The doctrine that is relevant to this case is that of actual potential competition. This doctrine refers to future harm that will be caused to the market because a potential competitor will be removed from it as a result of the merger. In our case, the General Director based her objection to the merger on this actual potential merger doctrine, and the essence of her argument in this context is that without a merger, Bezeq can be expected to enter into the infrastructure market and the content market for multi-channel TV broadcasts as an independent competitor. Therefore, according to the General Director, the merger’s approval will lead to the loss of Bezeq as a potential competitor in these markets or in one of them, and will fix them as duopolistic markets.  The Court found that two of the key conditions for establishing the potential competitor doctrine are present here – there is a reasonable likelihood that Bezeq, as a potential competitor, will enter into the multi-channel television infrastructure market and will provide IPTV services, and it has been proven that it has the technological ability and the economic incentive to do so in the short term. Additionally, it appears that Bezeq’s entry into the multi-channel television infrastructure market presents considerable advantages over the situation that would develop in the market if the merger were approved.

The Tribunal, when adjudicating an appeal of a General Director’s decision, does not have absolute discretion to order as it wishes and it cannot

 

 

 

stipulate conditions of a merger’s approval which, according to its own determination, does not give rise to reasonable risk of significant damage to competition in the relevant industry. The Tribunal therefore erred in subjecting merger to conditions after it found that the merger between Bezeq and Yes would not cause significant damage to competition. The Tribunal also erred in finding that the merger would not significantly damage competition. Such a risk does exist in this case. The main purpose achieved in preventing the merger is the addition of a competitor in the infrastructure market. This is a contribution to competition from a horizontal perspective through the weakening of the concentration in the existing duopolistic market, and it is hard to think of a structural condition in this case that would achieve this purpose. The behavioral conditions stipulated by the Tribunal cannot resolve the competition risk, because of the structural difficulty in ensuring such an arrangement where a single party (Bezeq) controls two out of three infrastructures in the market. The Court, therefore, cancelled the Tribunal’s decision and restored the General  Director’s original determination opposing the merger.

 

 

 

 

Appeal allowed.

 

Legislation cited:

Restrictive Trade Practices Law , ss.21 (a) .

Insurance Contract Law, 5741-1981, chapter 1, article 6, ss. 33, 33-35, 35, 36.

 

Israeli Supreme Court cases cited:

[1]          CA 2247/95 General Director v. T’nuva [1998], IsrSC 42(5) 213.

[2]          CA 3398/06, Israel Antitrust Authority v. Dor Alon Energy Israel (1988) Ltd (2006)

[3]          FHC 4465/98 Tivol (1993) Ltd. v. Chef of the Sea (1994) Ltd., [2001] IsrSC 56(1) 56.

[4]          HCJ 7200/02 DBS Satellite Services (1998) Ltd. v. the Cable and Satellite Broadcasts Council, [2005] IsrSC 59 (6) 21

[5]          HCJ 508/98 Matav Cable Communications Systems v. Knesset, [2000] IsrSC 54(4) 577.

[6]          CFH 4465/98 Tivol v. Chef of the Sea (1998), IsrSc 46 (1) 56, [7]    CA 6222/97 Tivol v. Minister of Defense, ISRSC42(3), 145

 

 

 

[8 ]         LA 4224/04 Beit Sasson v. Shikun Ovdim (2004) IsrSc 59 (6) 625.

[9]          CA 8301/94,  Assessing Officer for Large Enterprises v. Pi Glilot

(unpublished)

[10]        CA 458/06 Stendahl v. Bezeq International Ltd. (unpublished)

 

District Court cases cited

[11] CA 1/00 (Jerusalem), Food Club Ltd. v. General Director (2003)

 

Antitrust Cases:

[12] AT 8006/03 Yehuda Pladot Ltd. v. General Director

 

American cases cited:

[13 ]FTC v. Procter & Gamble, Co., 386 U.S. (1967) 568.

[14 ]   United States v. Falstaff Brewing Corp., 410 U.S. 526 (1973); [15]  United  States  v.  Marine  Bancorporation,  Inc.,  418  U.S.  602

(1974)

[16] Yamaha Motor Co., Ltd. v. FTC, 657 F.2d 971 (8th Cir. 1981);

[17] Tenneco, Inc. v. FTC, 689 F.2d 346 (2d Cir. 1982),Mizuho [18] Re El Paso Energy Corp., 131 F.T.C. 704 (2001);

[19] United States v. AT&T Corp. and MediaOne Group, Inc., Proposed Final Judgment and Competitive Impact Statement, 65 F.R. 38584 (2000);

[20]  In re Applications of NYNEX Corp. & Bell Atlantic Corp., 12 F.C.C.R.

19, 985 (1997)).

[21] BOC International, Ltd. v. FTC, 557 F.2d 24, 25 (2d Cir. 1977) [  ];

[22] FTC v. University Health, Inc., 938 F.2d 1206, 1222 (11th Cir. 1991)

[23] FTC v. Atlantic Richfield Co., 549 F.2d 289, (4th Cir. 1977)). [24] United States v. Siemens Corp., 621 F.2d 499 (2d Cir. 1980))

[25] Mercantile Tex. Corp. v. Bd. of Governors, 638 F.2d 1255, 1271- 1272 (5th Cir. 1981))

[ ] In the Matters of Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer to Peer Applications, 23 F.C.C. Rcd 13028 (2008)).

English Cases cited

[ ] Case T-5/02, Tetra Laval BV v. Comm'n, 2002 E.C.R. II-4381

 

JUDGMENT

 

Justice E. Hayut:

 

 

 

We have before us two appeals and a counter appeal regarding a ruling of the Antitrust Tribunal (the Honorable Judge M. Mizrachi, Prof. R. Horesh and Mr. N. Lisovsky) (hereinafter: “the Tribunal”), dated 3 February 2009, which had approved, subject to the conditions it established, the merger of Respondent 1, Bezeq, the Israel Telecommunications Corporation Ltd. (hereinafter: “Bezeq”) and D.B.S. Satellite Services (1998) Ltd. (hereinafter: “Yes”), through the exercise of Yes options held by Bezeq. In this ruling, the Tribunal granted Bezeq’s appeal against the decision of the General Director of the Israel Antitrust Authority (hereinafter: “the General Director”), dated 31 December 2006, disapproving the merger. (The grounds for the objection were published on 18 February 2007).

 

Background and the General Director’s decision

 

1.            Bezeq is a public company which, pursuant to the Communications Law (Telecommunications and Broadcasts), 1982 (hereinafter: “the Communications Law (Telecommunications and Broadcasts”)) is licensed to provide the public with internal fixed line services, including fixed line telephony and an Internet infrastructure, through a national system of telecommunications facilities (hereinafter: a public telecommunications network). Bezeq also provides the public with a wide variety of communications services through its subsidiary and affiliated companies, including international telecommunications services and Internet service provision (through Bezeq International Ltd.), cellular  telephony (through Pelephone Communications Ltd.), and endpoint equipment for telephony (through Bezeq Cal Ltd.). Further, on June 27, 1995, Bezeq was declared to be a monopoly in a number of communications markets and on November 10, 2004 it was declared to be a monopoly in high-speed Internet service provision. In the field of multi-channel television broadcasting, Bezeq currently holds 49.78% of the shares of Yes and 32.6% of the shares of Respondent 2, Eurocom D.B.S Ltd. (hereinafter: Eurocom). Yes is one of only two providers in the multi-channel television broadcast infrastructure market and in the multi-channel television broadcasting market, and it uses a satellite infrastructure. The other multi-channel television provider in the market is known to the public by the name “Hot,” and it includes “Hot – Communications Systems Ltd.” whose transmissions are provided through a cable infrastructure and “Hot Telecom Limited Partnership” (hereinafter,

 

 

jointly: Hot). Eurocom, which, as noted, holds 32.6% of the shares of Yes, is also involved in the communications field and provides telephony, data transmission and Internet services (through 012 Smile Communications Ltd.), and it also operates in the satellite infrastructure field with respect to multi- channel television broadcasts (through Spacecom Communications Company Ltd. - hereinafter: Spacecom Company), in the field of satellite services (through Satlink Communications Ltd. and Gilat Satcom Ltd.), and in the field of endpoint telephony equipment imports (the Nokia and Panasonic brands). It is also a partnership in portals and regional radio stations.

On 2 August 2006, Bezeq and Yes submitted a notice of merger to the General Director pursuant to the Restrictive Trade Practices Law - 1988 (hereinafter: Restrictive Trade Practices Law), with respect to a transaction (hereinafter: the merger) in which Bezeq seeks to exercise six options which it holds. The significance of the exercise of these options is that Bezeq would become the controlling shareholder of Yes and would hold 58.36% of the shares therein, as opposed to the 49.78% of the shares which it currently holds.

2.            On 31 December 2006, the General Director announced her objection to the merger transaction and on 18 February 2007 she published the grounds for her objections. In her decision, the General Director noted that that her objection was based on an analysis of the competition map in the multi- channel television broadcasting field in [both] the infrastructure market and in the content field, in light of the expected entry of a third and new broadcasting technology (in addition to the cable technology used by Hot and the satellite technology used by Yes) – i.e., the IPTV (Internet Protocol Television) technology. The General Director noted that she saw this merger as giving rise to a reasonable risk of significant damage to competition from both a horizontal and vertical perspective. From a horizontal perspective, the General Director noted that the merger is expected to significantly restrict the possibility that Bezeq would in the future enter the multi-channel television broadcasting market as a third player using IPTV technology, either as a player in the infrastructure field only or in the field of the provision of broadcasts as well. The General Director noted that “the expansion of Bezeq’s holding in the shares of the satellite company [Yes] up to the level of control, will inflict horizontal harm in two ways: first, it will exclude a potential significant competitor, such as Bezeq itself, from  the content market,   and   second   –   it   reduces   Bezeq’s   incentive   to   upgrade   its

 

infrastructure in order to support IPTV transmissions, and effectively delays the development of the infrastructure (development which would promote competition) in the coming years.” In terms of vertical harm, the General Director went on to determine, the merger gives rise to a risk that Bezeq will supply Yes, which it will control, with the IPTV infrastructure that it owns and will make it very difficult for other broadcasters to enter into the market. The General Director noted that an investigation had shown that there was a very high likelihood that Bezeq would develop the IPTV technology in the short term, and that this is not a theoretical matter but rather a “competitive development which will happen soon.” The General Director determined that the merger, “if it were to take place, would withhold another multi- channel television broadcasting platform from consumers and from the Israeli public.” The General Director emphasized that beyond the economic- consumption damage involved in the merger, it was also likely to lead to the denial of a public platform for the expression of views and for delivery of messages to the public. She added that a merger should not be approved if one of its results will be the preservation of the existing structural situation in which there are only two platforms for multi-channel television broadcasting and no real chance that in the foreseeable future either the public or the content producers will see a third competitor in the industry. Under these conditions, the General Director determined that the merger creates a reasonable risk of significant damage to competition and to the public, and, for this reason, as stated, she objected to it.

To complete the picture, we note that two years earlier, in July of 2004, a notice of a merger was submitted in which Bezeq had sought to exercise its options so that its holdings in Yes would amount to some 55% in the first stage and some 60% in the second stage. This merger was conditionally approved on January 2, 2005, with the main condition being a prohibition against the transfer of financing from Bezeq to Yes in a proportion exceeding Bezeq’s relative share in Yes, for a period of nine months. (Regarding this matter, see “Decision Regarding Conditional Approval of a Merger: Bezeq the Israeli Telecommunications Corporation Ltd. and DBS Satellite Services (1998) Ltd. (Decision 500045, dated 14 March 2005) (hereinafter: the 2005 Decision); Appeals 604/05, 605/05 and 606/05 which were filed against this decision were eventually withdrawn by the parties.) Bezeq was given a period of a year to complete the merger, but for its own reasons, it did not exercise the options at that stage.

The Antitrust Tribunal’s Ruling

 

 

3.            Bezeq filed an appeal against the General Director’s decision to oppose the merger to the Antitrust Tribunal on 15 May 2007, an appeal that was allowed on 3 February 2009. It should be noted that Eurocom also joined the proceeding before the Antitrust Tribunal, at its request, and supported the General Director’s position according to which the merger creates a reasonable risk of significant damage to competition.

In its ruling, the Antitrust Tribunal noted the fact that the multi-channel television market is composed of two markets – the broadcasting infrastructure market and the television broadcasts market, each of which are characterized by substantial barriers to entry (these barriers are even more significant in the infrastructure market). The Tribunal added that the two players currently operating in the multi-channel television market – Hot and Yes – both serve as broadcasters and as infrastructure providers. The Antitrust Tribunal further noted that Yes’ satellite infrastructure is limited compared with the cable infrastructure (and compared to the IPTV infrastructure) and it therefore cannot fully compete with them. The Tribunal stressed that the General Director’s position is based on the supposition that an additional platform for television broadcasts – with IPTV technology, to be established on Bezeq’s ADSL infrastructure – will be added during the coming years. The Tribunal noted that the assumption, from both a technological and a feasibility perspective, that Bezeq would enter into the multi-channel television broadcasts market, was based on a series of assumptions that have not yet become reality. In this context, the Tribunal found that it had not been presented with sufficient evidence to establish that Bezeq had made a business decision to make the investment required for a significant upgrading of its technology that would enable the provision of IPTV services. The Tribunal further held that even if the General Director’s assumption regarding Bezeq’s technological ability to construct an IPTV network in the near future is a realistic one (noting that “there is a certain distance that must still be travelled”), the technological perspective is not the only relevant one, and that it is necessary to examine the existing regulatory restrictions in the communications field as well as the economic feasibility of the construction of the infrastructure, from Bezeq’s perspective – particularly in light of its current holdings in Yes (49.78%).

The Tribunal rejected the General Director’s position that there are no substantial legal or regulatory barriers preventing the realization of the main part of the forecast on which her objection had been based, and it noted that

 

Bezeq is faced with a number  of legal restrictions, including the cross- ownership rules which prevent Bezeq from obtaining a broadcasting license in light of the size of its holdings in Yes. It further noted that each of Bezeq’s subsidiaries is also prohibited from obtaining a broadcasting license so long as Bezeq holds more than 24% of the means of control in Yes. The Tribunal also noted that the likelihood of a change in the statutory provisions regarding cross ownership is very low, and that the power that the law grants to the Minister of Communications (with the approval of the Cable and Satellite Broadcasts Council of the [Knesset] Finance Committee) to issue a broadcasting license to a Bezeq subsidiary – so long as such a move furthers competition and variety regarding the supply of broadcasts to subscribers – creates a hurdle which will not be easily removed. The Tribunal noted that it is hard to imagine that a reasonable regulator would allow the subsidiary of a company which is the largest shareholder in one of the competitors in the market to enter into the content field and thus to effectively control two out of three content platforms. Regarding the question of whether the completion of the infrastructure is economically viable for Bezeq, the Tribunal noted that the General Director’s position does not give appropriate weight to the fact that the critical starting point for the discussion is the situation regarding Bezeq’s current holdings in Yes. The Tribunal emphasized that it appears that Bezeq will indeed continue to develop the NGN (Next Generation Network – a generic term for communication networks based on Internet protocol technology, the main characteristic of which is the possibility of integrating different types of telephony, Internet, contractual, etc. services in one network – hereafter: NGN) but it cannot be assumed that it will do the necessary work which will enable [the provision of] IPTV services on this infrastructure – work which involves additional costs. This would be the case even if the General Director’s position that Bezeq’s investments in Yes are sunk investments and that Bezeq therefore developed interests following such investment, it is not likely – the Tribunal held - that economic feasibility considerations will lead Bezeq to complete the infrastructure [for IPTV]. The Tribunal further noted that the General Director had not submitted economic calculations which would support the claim that under current conditions, it is economically worthwhile for Bezeq to compete with its subsidiary (Yes) in the field of multi-channel television because of the benefit it would achieve from this by holding on to its telephony and Internet infrastructure customers. An additional factor that makes it doubtful that Bezeq would, in the Tribunal’s view, enter into the content market, is that the multi-channel television market is a saturated market and even if Bezeq could reduce the

 

 

infrastructure costs, the content costs are ongoing and it would need to reach a very large number of customers to reach a balance between ongoing expenses and incomes – something that would be very difficult for Bezeq to do. The Tribunal held, therefore, that it was likely that Bezeq did not have a real interest in entering the digital multi-channel television market in its current condition.

The Tribunal added that the General Director assumed that in the foreseeable future only one infrastructure – i.e., the IPTV – would be joining the multi-channel television market, but that it appears that in the more long- term future, additional technologies (Internet television, DTT and WIMAX) could also constitute alternatives to the existing technologies (although the Tribunal also noted that in the coming two or three years, none of these technologies could constitute a real alternative). It further noted that a not insignificant amount of time would be required even for the purpose of establishing a full IPTV technology. The Tribunal went on to reject the General Director’s position regarding the significance to be attributed to Bezeq’s acquisition of control in Yes as a result of the merger, noting that even though the General Director’s position that after the construction of the IPTV infrastructure Bezeq will (through the directors that it will appoint) raise the usage fees or the transfer fees that it will collect from Yes and from others even if open access conditions are established for the IPTV services (because in the case of Yes, the payment of such fees would be a transfer of funds from one pocket to the other) cannot be ruled out, this risk is not significant in light of the fact that raising such fees will not be worthwhile, and in light of the regulatory prohibition that the Tribunal had mentioned. The Tribunal further noted that this risk can be prevented through the drafting of conditions which would prevent Bezeq from having such a resolution adopted by the Yes board of directors, and which would impose controls on the prices that Bezeq will charge.

4.            The Tribunal reached the conclusion that the “General Director’s forecast according to which an independent competing infrastructure for television broadcasts will be established if the merger does not take place, is not sufficiently established.” In this context, the Tribunal referred to the provisions of s. 21 of the Restrictive Trade Practices Law -1988 (hereinafter: the Restrictive Trade Practices Law), and to the case law, which holds that only a reasonable risk of significant damage to competition or to the public will justify an objection to a merger, adding that in its view, the burden of

 

proof regarding the existence of such a risk is to be imposed on the General Director, although this issue had in the past been left unresolved as requiring a review of the Supreme Court’s rulings.  The Tribunal held that in this case, it was necessary to determine whether the data regarding the relevant market provide a basis for “a reasonable risk” according to the civil law standard of probability, such that the merger would lead to significant damage to competition. According to the Tribunal, the economic analysis on which the General Director had based her position assumes future developments regarding at least some of which there was only a low probability of less than 50% and it was therefore not possible to determine that there was a reasonable risk that the merger would do significant damage to competition. The Tribunal nevertheless pointed out that if Bezeq had sought approval for the merger without having existing holdings in Yes, it would not have approved the merger. This was, in the Tribunal’s view, due to the clear competitive advantages in Bezeq’s independent entry into the market. However, the Tribunal held, in light of the current size of Bezeq’s holding in Yes, that it is already not possible to ignore the level of Bezeq’s interest in Yes’ success and it is already difficult to imagine Bezeq acting as Yes’ competitor. Therefore, the Tribunal noted, the competitive difficulty in the multi-channel television market lies in the current situation, and even if the merger could sharpen the problem, it would not create it.

5.            The Tribunal further noted that even if it has not been proved that there is a reasonable risk of significant damage to competition, the occurrence of such damage cannot be ruled out given the fact that the increase in the size of Bezeq’s holding in Yes strengthens its interests in Yes and will also grant it control of the company. For this reason, and because of the importance of the construction of the IPTV infrastructure and of its being made available to other entities which will compete with Yes, the Tribunal saw fit to establish conditions for allowing the merger. In this context, the Tribunal noted that during the course of the deliberation, the parties were offered a settlement proposal regarding the conditional approval of the merger and that Bezeq did not raise any difficulty in terms of the Tribunal’s authority to order such and agreed that the  merger would be conditionally approved. (The General Director objected to this, and Eurocom believed that the merger could be approved with the conditions which it had specified, which were different than those proposed by the Tribunal). The Tribunal further noted that there was a basis for the concern raised by the General Director, according to which technological and economic considerations could lead Bezeq to prefer the IPTV infrastructure for Yes, if it is constructed, rather than the satellite

 

 

infrastructure, which could cause that infrastructure to atrophy. But according to the Tribunal’s view, this concern can be negated through the use of conditions which will inflict less damage on the primary property right involved in the exercise of the option. The Tribunal added that the conditions which it ordered are, primarily, behavioral conditions, which are directed at affecting the manner in which the relevant bodies operate, and not structural conditions. The imposition of structural conditions would not, the Tribunal stated, be proportionate, in light of the Tribunal’s determination regarding the absence of a reasonable risk of significant damage to competition. The Tribunal further noted that additional goals can be reached beyond the prevention of damage to competition, through the outlining of behavioral conditions. The primary one of these goals would be the securing of the construction – within a short time - of a third infrastructure for multi- channel television broadcasts. This infrastructure would be open, at a reasonable cost, for use by content providers who wish to use it, and it would be properly maintained. The Tribunal noted that the conditions it was establishing would not only reduce the damage to competition, they would also serve to remove part of the competitive difficulties existing in the market even without the merger, and would bring the “market’s condition to that of a market whose structure was good for competition.” The Tribunal stressed, in this context, that the conditions dealing with the improvement of competition are accompaniments to conditions that prevent damage to competition and that they are not the primary conditions. For this reason the General Director’s claim that the Tribunal acted without authority must be rejected. The Tribunal reasoned, with regard to the conditions to be attached to the merger, that Bezeq would have an interest in utilizing the IPTV technology it owned through granting usage rights for other broadcasters at a reasonable price which would take its investment [costs] into consideration. It is true, the Tribunal noted, that any such user would be a Yes competitor, but after the infrastructure is already constructed Bezeq would have an interest in taking advantage of it through the charging of usage fees. The Tribunal therefore believed that the imposition of a condition according to which the usage fees would be determined by a regulator would reduce the risk that as the party controlling the infrastructure, Bezeq would charge unreasonable prices. Nevertheless, the Tribunal added, Yes should be allowed to use the IPTV at the same price for the purpose of providing those services (such as VOD) which cannot be provided through a satellite, in order to allow it to

 

compete with the others.

These are, in the main, the conditions that the Tribunal ordered: giving Bezeq the option of choosing, within 90 days, whether it wishes to carry out the merger. If Bezeq were to choose that the merger be carried out, it would be required to establish the IPTV infrastructure in full, such that it would be available to 30% of the population within one year, to 50% of the population within two years and to 80% of the population within three years. Bezeq was also prohibited from transferring Yes programming to the IPTV infrastructure, other than for the purposes of providing services that cannot be provided through a satellite infrastructure. This condition is to apply for six years from the approval of the merger, unless there is an additional competitor in the market for the transmission of television programming is on the Bezeq network – and that competitor has, together or with others, at least 100,000 active subscribers or its income from its broadcasts amounts to NIS 10,000,000 per month for three continuous months. Bezeq was also required to allow other parties in the market open access to the IPTV infrastructure that it owns, in exchange for usage or transmission fees to be determined by the regulators. It was also required to properly maintain the infrastructure that is established. (The definition of the word “properly” is to be determined by the regulator). The Tribunal further ordered that Bezeq is not to supply or provide service or products to Yes or from it unless a resolution regarding the receipt or provision of such services or products has been adopted by at least a 75% majority  of the members of Yes’ board  of directors, and  that a structural separation between Bezeq and Yes be maintained in accordance with the currently established conditions. Finally, the Court ordered that if Yes was to transfer to broadcasting on the IPTV infrastructure and does not use the satellite infrastructure, Bezeq would be required, by virtue of its holdings in Yes, to cause that infrastructure to be leased out for satellite television broadcasts, and to maintain it at a price and in a manner to be determined by the regulator. (Bezeq would be entitled to ask the Tribunal to be released from the maintenance requirement if no new user is found). The Tribunal also ordered Bezeq to provide an irrevocable bank guarantee, to be approved by the General Director and to be provided to her, in the amount of NIS 200 million, in order to ensure the fulfillment of the conditions, until the end of the current agreement between Yes and Spacecom (with which Yes had contracted for the purpose of the Spacecom’s segments required for the maintenance of the satellite broadcasts), but for no longer than eight years.

For the reasons specified above, the Tribunal granted the appeal, cancelled the General Director’s ruling and approved the merger subject to

 

 

the conditions it had established.

6.            After the ruling was issued, the General Director, on 5 February 2009, filed a petition to stay  its implementation, but the Tribunal rejected the petition. In its ruling of 18 February 2009, the Tribunal noted, inter alia, that its key holding that the merger does not give rise to a reasonable risk of significant damage to competition had been based on considerations of logic and on the evidentiary material presented to it, and not on its position regarding the burden of proof. The Tribunal further noted that the granting of the petition for a delay in the implementation would damage the public interest in that it would delay the fulfillment of the conditions, which include the construction of the IPTV infrastructure, and the Tribunal believed that the delay of the exercise of the options held by Bezeq would cause financial damage to it. On 22 February 2009, even before filing this appeal, the General Director submitted an additional petition for a stay of implementation (Civil Petition 1665/09) to this Court. At the Court’s recommendation, the parties reached an agreement on 23 March 2009, which was given the force of a ruling, dealing with the delay of the implementation of the ruling, and on 3 May 2009, Bezeq gave notice, as required by the Tribunal’s ruling, that it intends to carry out the merger (although on its part, it had appealed the amount of the bank guarantee it had been required to provide).

The appeals before us were submitted by Eurocom (Civil Appeal 2082/09) and by the General Director (CA 2414/09) (hereinafter: the Eurocom appeal and the General Director’s appeal, respectively), and the counter-appeal filed by Bezeq refers, as noted, to the amount of the bank guarantee that the Tribunal had required that it provide (hereinafter: the Bezeq appeal). The deliberation of the appeals was combined in this Court’s ruling dated March 23, 2009 (CApp 1665/09).

The parties’ arguments

The General Director’s appeal

7.            The General Director argues that the Tribunal’s ruling denies the Israeli public a significant competition benefit with respect to the loss of a third infrastructure for the transmission of multi-channel television broadcasts and that the circumstances in which a company that has the ability to become the owner of a multi-channel infrastructure takes control of a company with a different multi-channel infrastructure, in a market in which there is only one additional infrastructure (the cable infrastructure) impairs

 

competition in a manner that cannot be negated by way of imposition of behavioral conditions. The General Director insists on the supremacy of “facility-based competition” as compared with “competition over the same infrastructures” in infrastructure based markets , and she further argues that competition between infrastructures gives rise to a substantial benefit for consumers, not only from the perspective of the price for consumers but also in terms of other perspectives such as the quality of the broadcasts, the variety thereof, the adoption of technological innovations and the correlation between consumer demand and supply - all of which are dependent on the infrastructure’s technology and on its capacity. The General Director believes that the solution proposed by the Tribunal – the opening of the IPTV infrastructure to competitors, which assumes that the competition that will develop between the broadcasters would be equal to the competition which would have developed between broadcasters with different infrastructures – is an artificial one that seeks to imitate free competition through regulation. The General Director further argues that the relevant considerations with respect to mergers are established in s. 21(a) of the Restrictive Trade Practices Law, which distinguishes between two types of mergers: mergers that raise a risk regarding competition, which can be made conditional or which can be opposed, and mergers that do not give rise to a competition risk, which are to be approved.  She notes that once the Tribunal determined

–             erroneously in her opinion, - that this merger does not give rise to a reasonable risk of significant damage to competition, then at all events it was not authorized to impose conditions on an approval of the merger, even if Bezeq had agreed to such. The General Director further stressed that the sole purpose for which, according to the Law, conditions may be imposed with respect to a merger is for the removal of a risk that the merger creates with respect to damage to competition, and the Tribunal is not authorized to set conditions for a merger only for the purpose of promoting industry-wide reforms, if it believes that no risk of damage to competition exists. The General Director stresses that there is no parallel within comparative law among merger review regimes to such a proceeding in the Tribunal, and it fundamentally changes  the set of balances established in the Restrictive Trade Practices Law and deviates from the Tribunal’s own previous rulings.

The General Director emphasizes what she views as a logical defect in the Tribunal’s decision: The Tribunal held that it is not reasonable for Bezeq to construct an IPTV infrastructure when it is a minority shareholder in Yes, and it therefore allows Bezeq to acquire control of Yes; at the same time, the Tribunal chose to condition the merger on the implementation of that very

 

 

expensive and not worthwhile process, which in the Tribunal’s view, lacks competitive significance. In this connection, the General Director notes that the Tribunal went even further in the context of its decision regarding the application for a stay of the implementation of its ruling, in which it noted that a stay of its implementation would harm the public interest because of the delay it would cause in the construction of the IPTV infrastructure. But according to the General Director, the Tribunal did not derive the necessary conclusions from this with respect to the implications that the construction of this infrastructure would have for competition. The General Director also noted that accumulated experience indicates that new providers receive only minimal cooperation from infrastructure owners who are themselves service providers, and that in this case, and if the merger does take place, any additional broadcaster that uses the IPTV infrastructure will not only compete with Bezeq’s subsidiary, but will also threaten Bezeq’s monopoly in the areas of telephony and Internet. This is an especially bad starting point for implementation of an open access model such as the Tribunal had sought to design. The General Director further argues that the Tribunal  erred  in placing the burden of proof on her, since even though this Court has left this issue as one that requires further review, it has more than once noted that there are good reasons for imposing that burden on the parties seeking a merger. She also argues that, like any administrative authority, she enjoys a presumption of propriety regarding her actions.

8.            The General Director argues that in order to properly estimate the economic feasibility for Bezeq to construct the infrastructure, a broader picture needs to be examined. This would include a review of the variety of markets in which Bezeq competes with other communications groups, including the telephony and Internet markets, in which it is a declared monopoly. According to the General Director, the construction of an IPTV infrastructure constitutes, for Bezeq, a defensive strategy for the purpose of preventing the loss of Internet and telephony customers, and following the merger, Bezeq will be able to market “communications packages” to its customers – packages which also include multi-channel television broadcasts. The General Director further notes that even though the Tribunal accepted the main position that she presented in this context, it rejected her claims themselves, holding that they were not proven through appropriate economic calculations, an approach that testifies to a mistaken reversal of the burden of proof.     Essentially,  the  General  Director  argues  that  internal  Bezeq

 

documents were presented to the Tribunal which describe the process of the construction of the IPTV infrastructure as a “defensive process.” She claims that the Tribunal dismissed these documents rather casually, and she further argues that these documents prove that a financial consulting firm hired by Bezeq had presented Bezeq with only one option in the event of the merger not being approved –the construction of an IPTV infrastructure and entry into the content market. Under these circumstances, the General Director argues, it is unclear how the Tribunal reached the conclusion that the possibility of Bezeq competing with Yes is “one of a number of likely options” regarding which it had not been determined whether the investigation was complete. The General Director further claims that the Tribunal should have dealt with the objective economic feasibility of the construction of an IPTV infrastructure – a subject regarding which Bezeq brought no evidence – and should not have focused on the subjective question – i.e., the mode of action which Bezeq had decided or would decide to follow At any rate, [she argued,] and to the extent subjective evidence is required, the Court should have attributed significant weight to the fact that Bezeq itself, at the start of 2007, had submitted a position paper to the commission established by the Ministry of Communications (see: “Report Regarding the Formulation of Detailed Recommendations Regarding Israeli Competition Policy and Rules in the Field of Communications”, headed by Professor Reuven  Grunau, March 2008, hereafter: the Grunau Commission), in which Bezeq noted the significance of the construction of the IPTV infrastructure for competition, while relying on the position presented by the General Director to the Tribunal in this connection. The General Director further argued that Bezeq made a false  presentation regarding the technological ability of its infrastructure. She added that Bezeq is currently at the height of a significant and expensive process regarding the upgrading of its existing infrastructure into an advanced NGN type of infrastructure that can be used for the implementation of the IPTV technology after an additional investment is made, which is ten times smaller than the investment already made in that infrastructure. The General Director also notes that according to the case law of this Court, if there is a doubt regarding the damage that a merger will inflict on competition, the doubt is to be resolved in favor of competition and the public and against the merger, and she argues that the Tribunal ignored her supposition that if Bezeq is not allowed to exercise its options and purchase the control of Yes, another party will acquire such control – for example, Eurocom – which had even declared its wish to do so in the context of its petition to be joined in the proceeding.   The General Director also

 

 

argues that the Tribunal’s expert did not analyze the size of the investment involved in adjusting Bezeq’s network to the IPTV technology, and the Tribunal’s determination that this adjustment “involves a significant financial investment” has no foundation.

The General Director notes that the Tribunal’s position that the merger can be approved given the already difficult situation in the multi-channel television market is not consistent with the rule established by this Court in CA 2247/95 General Director v. T’nuva, [1], at 240-241 (hereinafter: General Director v. T’nuva), according to which an entity which is at any rate dominant in a particular field nevertheless does not enjoy immunity from the General Director’s control. Regarding the regulatory restrictions that the Tribunal noted in its finding that the likelihood of the damage to competition is low, the General Director argues that the Tribunal ignored the fact that in the infrastructure field, there is no regulatory restriction preventing Bezeq from establishing a third infrastructure. She further noted that regulation, by its nature, can be subject to frequent changes (especially, she claims, in the communications market), and she repeated that no change in the statutory situation is required for granting of a broadcasting license to a full Bezeq subsidiary as the matter is within the authority of the Minister of Communications in situations in which competition considerations justify it. Regarding the existence of additional alternative technologies other than the IPTV technology, the General Director argues that the Tribunal’s holding regarding the abilities of the DTT and Internet television technologies to constitute infrastructures for multi-channel television broadcasts is inconsistent with the findings of the Tribunal’s expert’s findings - and that at any rate, Internet television does not constitute an additional infrastructure for multi-channel television broadcasts, as these are broadcasts that are transmitted on one of the two currently existing broadband infrastructures. According to the General Director, there are also defects in the conditions stipulated by the Tribunal [for the merger], including the fact that these conditions lack a minimal specification regarding the manner in which the purpose for which they have been imposed will be achieved. The General Director further noted that in effect the Tribunal has removed its own discretion and transferred the main legal determination – the regulation of the establishment of  the  IPTV  infrastructure – to  the  Ministry  of Communications, which the Tribunal is not authorized to do and which should not be done in light of the fact that the Ministry of Communications

 

weighs other considerations in addition to that of guaranteeing competition in the economy. Finally, the General Director asks for the cancellation of the awarding of legal expenses of NIS 20,000 against her in the context of the petition for a stay of the ruling’s implementation.

Eurocom’s appeal

9.            Eurocom’s appeal is directed at the [Tribunal’s] failure, allegedly, to impose effective structural conditions for the approval of the merger. Eurocom argues that the ruling attributes a central place to Bezeq’s right to acquire the control of two out of the three multi-channel television infrastructures in Israel and it believes that in light of the concentration of control of competing infrastructures under a “single hand” as a result of the merger, the Tribunal should have given Bezeq the choice of either one of the infrastructures and should have then required it to abandon the other one. Eurocom argues that this merger has unique characteristics, including: Bezeq being the largest communications group in Israel, having been a declared monopoly in the field of telephony and Internet for many years; Yes, which broadcasts to more than 500,000 households in Israel, being the only company using a satellite broadcast infrastructure and being contractually bound to this technology until 2016; the fact that no additional competing infrastructures are expected to enter the market, other than the IPTV infrastructure which has special competitive abilities that the Grunau Commission recognized as “the most significant competitive threat to the multi-channel television companies”; and the fact that the Grunau Commission found that the level of competition in the multi-channel television market is unsatisfactory and that the market is not a sophisticated market, which is reflected in the price paid by the consumer and in the absence of competition between the content which is broadcast to the public. Eurocom emphasizes that an approval of the merger paves the way for Bezeq to obtain 100% control of Yes without requiring any additional approval from the General Director and that under these circumstances, the approval of the merger contains some degree of a direct and significant increase of the concentration in the infrastructure field, a raising of the barriers to entry into the multi-channel television market and likely significant damage to the potential competition between infrastructures. In this context, Eurocom notes that the ability not to develop a specific technology and, at the least, to use it to harm other competitors, constitutes control.

Eurocom  argues  that  the  behavioral  conditions  imposed  by  the Tribunal are ineffective since Bezeq has been given the ability to operate on

 

 

the basis of two infrastructures and to transfer between them as it wishes, that the obligation imposed on Bezeq to establish an IPTV infrastructure lacks specification regarding the required professional standards, and that the Tribunal left the work for the Ministry of Communications, which had not been a party to the proceeding, did not undertake to carry out this task and is also guided by different considerations than those by which the Tribunal is supposed to be guided. Eurocom also argues that these conditions are opposed to basic principles of antitrust law, that they enable Bezeq to carry out a “targeted killing” of the satellite infrastructure, that no substantive arrangements were established regarding enforcement and that the Tribunal limited itself to requiring that Bezeq post a bank guarantee, the size of which Bezeq is appealing to this Court. Eurocom emphasizes in its arguments that the fact that Bezeq is now “volunteering” to establish the IPTV infrastructure in accordance with the conditions established by the Tribunal – a measure which Bezeq had, during the deliberation before the Tribunal, termed an “hallucinatory scenario” on the part of the General Director – itself indicates that that merger involves a risk of damage to competition. Eurocom further argues that the construction of the infrastructure will continue for a number of years and that therefore the condition requiring that Bezeq itself can transmit on the IPTV infrastructure only six years from the approval of the merger by the Tribunal does not provide any protection to new competitors. According to Eurocom, this situation constitutes “competitive overlap” following a merger, and it necessitates the involvement of the competition authority through opposition to the merger or, as stated, through the imposition of a structural condition, such as a requirement that the merging companies sell one of the “overlapping” assets to a third party (divestiture). According to Eurocom, the imposition of a structural condition such as this is to be preferred to alternative behavioral conditions that are inferior in their nature and which cannot, under the circumstances, lead to a solution of the competitive difficulty. In its appeal, Eurocom therefore asks that the following structural conditions be imposed with regard to the merger’s approval: (1) Bezeq should be required to choose, before the merger takes place, between [a] obtaining full control over Yes and operating it on the basis of the satellite infrastructure or [b] operating as a broadcaster external to Yes, on the IPTV infrastructure, without being allowed to transfer between the two infrastructures; (2) the establishment of a significant “protective period” for new competitors in the market (longer than the six years set by

 

the Tribunal) which will apply only from the day that the IPTV network is fully launched.

10.          On its part, Bezeq supports the Tribunal’s ruling. According to Bezeq, the ruling is based on the evidence presented to it and on factual findings resulting from such evidence, and it stresses that even now it is the largest shareholder in Yes, noting that over the years it has transferred substantial capital to Yes even though Yes is not yet a profitable company, and under these circumstances it is clear that it has no interest in damaging Yes through the construction of a third multi-channel television infrastructure. Bezeq claims that the said merger is not a horizontal one between competitors, since as of now it is not a competitor either in the infrastructure field or in the programming field, and it is not a vertical merger between a party that sells infrastructure services and a broadcasting party, and it therefore gives rise to no competition risk. Bezeq argues that the Tribunal’s holding that there is a low probability that it will establish an IPTV infrastructure if the merger is not approved is one which is based on objective factual findings. These include the legal prohibition preventing Bezeq from being a multi-channel television broadcaster; the regulatory prohibition against a Bezeq subsidiary becoming a multi-channel television broadcaster; the additional investments that Bezeq would be required to carry out in order to establish the IPTV infrastructure; the lack of economic feasibility for its entry into a saturated market as an independent competitor alongside Yes; and the fact that none of the telecommunications companies that have, throughout the world, established such an infrastructure, have been prohibited from transmitting on it or from providing discounted “service packages” through such an infrastructure. Bezeq further points to the second factual finding on which the Tribunal based its ruling, according to which it can be estimated that within three years there will be additional platforms for multi-channel television other than the existing ones and the IPTV infrastructure, and it notes that this supposition is based on the Tribunal’s experts opinion, and it is to be expected in a dynamic market such as the communications market. Bezeq further argues that even on the assumption that it will establish an IPTV infrastructure in any case, it is not clear how the merger will damage competition – noting that at any rate there will not be any competition in the infrastructure area, as the satellite infrastructure serves Yes exclusively, and satellite infrastructure services cannot be sold to additional broadcasters. In the area of content, Bezeq argues that there will be no competition as it and its subsidiaries are prohibited from being a content provider and from broadcasting  and  even  the  General  Director  herself  had  argued,  in  her

 

 

objection to the merger, that so long as Bezeq has holdings in Yes, there will be no competition between infrastructures even if Bezeq chooses to develop an IPTV infrastructure. In this context, Bezeq further notes that a vertical merger is perceived, in the literature and in the case law, as a “desirable economic phenomenon” and that in any event, in light of the fact that the IPTV technology has no limit in terms  of capacity, once  the merger is approved and the said infrastructure is established, other competitors as well as Yes will be able to make use of it, without a risk that the market will be foreclosed. Bezeq also argues that there is no risk of an oligolopic coordination in this case, because the large disparity between the market share held by Hot - a declared monopoly in the area of multi-channel television and the holder of a small telephony market share - and the low market share held by Yes (and Bezeq) in multi-channel television along with Bezeq’s large market share in the field of telephony, negates (and at least significantly reduces) the risk of such coordination.

11.          Bezeq argues that the General Director’s sweeping objection relies entirely on the thesis of the potential competitor – an exceptional doctrine in antitrust law that has never been used in the manner that the General Director seeks to use it, and which has been rejected in Israel in the few cases in which it has been argued. Bezeq further argues that three days before the General Director’s announcement of her objection to the merger, the General Director sought an extension for the purpose of formulating conditions for the merger’s approval, and in this context, she pointed out that she intended to establish conditions that were similar to those that were eventually established by the Tribunal, and that it was only when Bezeq  objected to granting the requested extension that the General Director announced her objection to the merger. According to Bezeq, the General Director’s authority to condition the approval of a merger is left to discretion, and where the injured party agrees to the Tribunal’s imposition of the conditions, as it has, the question of the Tribunal’s authority to impose such conditions does not arise at all, and at the most, what is being discussed here is a mistake of law and not an ultra vires act [on the part of the Tribunal]. Alternatively, Bezeq argues that even if the Tribunal’s imposition of conditions is tainted as an ultra vires act, it is not necessary to strike the ruling for that reason, as the doctrine of relative invalidity can be implemented. Bezeq argues that its agreement to the merger being made conditional was given in order to have the matter concluded quickly, to ensure certainty and to lessen the General

 

Director’s concerns, and at any rate, in light of Bezeq’s being subject to a regulatory regime that applies to the entire industry, it is in any event obligated to carry out most of the conditions that were established. Bezeq further argues that an analysis of its interests in light of its existing holdings in Yes is one consideration out of several that were weighed by the Tribunal when it rejected the General Director’s position and in light of the stipulation reached at the Tribunal, according to which Bezeq’s holdings in Yes will not change even if the merger is not approved, the General Director was required to prove that in terms of the economic interests, of the regulations applying to it and of the future state of competition in the market, a situation in which Bezeq holds more than 49% of the shares in Yes is equal to a situation in which Bezeq holds no shares whatsoever in Yes, and the General Director would not have been able to prove this.

Bezeq also notes that its option rights regarding Yes shares will not expire even if the merger is not approved, and it will in any event be able to decide to whom to sell such rights. Bezeq points out that there is no global precedent for a situation in which a telecommunications company has been prohibited from using an IPTV infrastructure that it constructed to broadcast or to provide a “services package”; that the market shares held by IPTV throughout the world are minimal and that it is not clear how well it will succeed in Israel; and that factors relating to the Israeli economy such as the relatively small number of households, the especially high penetration of multi-channel television, the high degree of digitization, the especially high number of people per household and the high percentage of households with two television sets all serve to render the General Director’s claim that “Bezeq will in any event construct the IPTV infrastructure” completely erroneous. Bezeq further argues that it has been proven that there is no party in the Israeli market that is seeking to provide IPTV services and that the General Director did not question Bezeq’s witnesses regarding the “internal documents” on which she now wishes to base her appeal. According to Bezeq, the position paper that it submitted to the Grunau Commission conditions its willingness to establish an IPTV infrastructure on a series of conditions, including the cancellation of the regulatory restrictions and the exclusivity regarding use of the infrastructure and the provision of services – conditions which currently have not been met. Bezeq also argues that the presentations that were prepared at its request by an outside consultant do not constitute financial opinions, that one of them was never even presented to the company’s board of directors and that they never served as a basis for the adoption of any operative resolution – yet, nevertheless, the General Director

 

 

relied on these presentations, and did this only at the stage of presenting closing briefs to the Tribunal and primarily at the appeals stage.

Regarding the General Director’s argument that the Tribunal deviated from the rule of laid down in General Director v. T'nuva [1], Bezeq notes that unlike the situation in that case, the Tribunal here has not approved a small addition to the damage to competition that exists in any event – instead this is a situation in which the Tribunal has not been persuaded that there is any damage, large or small, which is being done to competition, in comparison to the situation without the merger. Bezeq further argues that there is no basis for the General Director’s claim that the Tribunal decided the appeal on the basis of burdens of proof, and Bezeq insists that this question is only relevant where the evidence produces a “tie” result – which did not happen here. Bezeq argues that the Tribunal’s holding relies on “a set of logical considerations and an examination of the reality in light of the evidentiary material” and not on burdens of proof, as the Tribunal itself noted in its decision of February 18, 2009 regarding the stay of implementation. Bezeq further argues that the Tribunal was aware of the fact that there are no regulatory restrictions on the establishment of an IPTV infrastructure, but according to Bezeq, the prohibition against broadcasting on the infrastructure undermines the rationale for constructing it, and an objection to a merger cannot be based on future scenarios that are conditional upon changes in the statutes and regulations, when the chances for those changes taking place are non-existent or at best, low. In this context, Bezeq argues that the General Director’s objection relies on a claim regarding a future change in the market’s structure - a change regarding which there is no indication of the likelihood of its occurrence - and that the Tribunal was persuaded that the choice it faced was between one inferior infrastructure (the satellite) and two infrastructures that are restricted by conditions, if the merger is approved.

12.          Bezeq further argues that additional technologies are expected to enter the market shortly and that all the parties and the Tribunal’s expert attributed some importance to these technologies as potential competitors.  Bezeq further argues that past experience shows that where it has been allowed to establish an infrastructure that is open to other users under open access conditions, competition is not damaged and that the General Director acknowledges that she did not carry out an economic analysis that indicated a vertical risk, which would not exist as Bezeq is not a monopoly regarding infrastructure for multi-channel television programming.  Bezeq argues that

 

the General Director does not clarify what “reform” the Tribunal was allegedly advancing through the conditions it imposed on Bezeq, and that the conditions are closely tied to the risks that the General Director had indicated: the risk of the non-construction of an IPTV infrastructure and the risk that the satellite infrastructure will “atrophy.” According to Bezeq, the General Director did not hesitate in the past to impose conditions that “promote competition” (in contrast to conditions that are meant to rectify damage done to competition) and according to Bezeq it is accepted in European antitrust law as well. Bezeq argues that there is no normative hierarchical ranking among different types of remedies and the matter is dependent on the facts and circumstances of the particular case. However, in Bezeq’s view, in light of their rigidity, structural conditions the last resort and behavioral conditions are to be preferred to them, to the extent possible. This is especially true, Bezeq claims, in a small economy such as Israel’s, which is any event characterized by massive industry regulation. Bezeq further points out that the principle of open access is an accepted one in the communications industry and has been recognized in this Court’s decisions, and that in the absence of an ability to ensure the construction of an additional infrastructure, the Grunau Commission also determined that the way to ensure competition is through [the preservation of] transmission rights on existing infrastructures. According to Bezeq, the significance of a delay in the merger until the completion of the construction of the infrastructure is that Yes and the entire multi-channel television industry will be left “hanging in the air” for a period of a number of years – and this is against the [recognized] interest in promoting certainty in the market. It also argues that the Tribunal had established the outline of the conditions and that it only left the determination of specific-professional details to the Ministry of Communications – details which at any rate are within the jurisdiction and expertise of that Ministry. Bezeq notes that the Tribunal even determined that if the Ministry of Communications does not establish such conditions, the General Director is to establish them. Bezeq notes that the General Director preferred not to assist with the drafting of the conditions and thus created great difficulty for the Tribunal in their formulation. Finally, Bezeq argues that the industry regulator’s involvement in the establishment of technical-professional conditions and in supervising their implementation presents many advantages in light of the regulator’s knowledge, experience and expertise in this area.

13.          Regarding Eurocom’s appeal, Bezeq argues that Eurocom’s position is flawed in the same way that the General Director’s is, and it further argues

 

 

that Eurocom joined the proceeding at a late stage, did not present evidence and did not question witnesses. Therefore, it does not have a right, at the appellate stage, to argue against factual findings determined by the Tribunal. According to Bezeq, no significance should be attributed in this context to the affidavit that Eurocom attached in the framework of the interim proceeding regarding its joining the appeal to the Tribunal as a party. Bezeq argues that Eurocom is attempting to bring about a situation in which Bezeq is required to engage in price negotiations regarding its shares in Yes, but Eurocom does not have a right to [force] such [negotiations], pursuant either to the Yes by-laws or the agreements between its shareholders. Bezeq also points to the fact that Eurocom is the controlling shareholder in the Spacecom Company, from which Yes leases the segments required for its satellite broadcasts, and that Eurocom therefore has a clear interest in Yes continuing to broadcast through a satellite infrastructure under any conditions and at any price – whether or not that is economically efficient. Bezeq also notes that in its notices of appeal, Eurocom asked to have Bezeq permanently prohibited from transmitting on the IPTV infrastructure (other than with respect to VOD services), but in its summary, it withdraws that request as well as the demand it made in the notice of appeal, to obligate Bezeq to train the employees of competing companies in the use of the IPTV infrastructure and to allow them access to the infrastructure in order to maintain it and repair it. Finally, Bezeq argues that the purpose of the six year restriction imposed on Yes regarding the use of the IPTV infrastructure is not to protect a new competitor in the market, and that it is [actually] intended to respond to the risk of the satellite’s infrastructure’s early erosion. According to Bezeq, the period established by the Tribunal ensures that Yes will remain committed to its existing agreements with the Spacecom Company, which will end in the year 2016 – agreements from which Yes cannot at any rate free itself without the consent of the Spacecom Company.

The Bezeq appeal

14.          Bezeq’s appeal is directed against the size of the bank guarantee (NIS 200 million) which it has been required to produce pursuant to the Tribunal’s ruling in order to ensure the fulfillment of the merger conditions. According to Bezeq, there is no need at all for a bank guarantee to ensure the fulfillment of the merger conditions, as their fulfillment can be ensured through remedies established in the penal code, in tort law and in administrative law, but in light of its agreement to provide such a guarantee it does not appeal the fact

 

that it is being required to provide a guarantee, but only the amount thereof, and it proposes to provide the guarantee for NIS 50 million. It argues that the amount established for the guarantee is not proportionate or reasonable, and that it ignores the variety of alternate means of enforcement that are available in this case, the ongoing cost of providing a guarantee of this amount, and the costs of the significant investments that Bezeq is required to make as part of the merger conditions – which could affect its ability to raise the required guarantee, in light of the Israeli banking system’s limitations. Bezeq further notes that it is required to provide a ten million dollar guarantee for the purpose of complying with the terms of its general license, that the merger of the cable companies which created a monopoly was conditioned on a bank guarantee of fifteen million dollars (and that after time the amount was reduced to two million dollars), and that under these circumstances the amount that was imposed on Bezeq is unprecedented. Finally, Bezeq proposes that if the NIS 200 million amount is left in place, that an alternative arrangement be established, such as [the deposit of] a company check or a promissory note – instead of the bank guarantee which it has been ordered to provide.

15.          The General Director, on her part, argues that Bezeq seeks to detract from the effect - limited as it is - of the mechanism established by the Tribunal in its holding. The General Director notes that the open access model established by the Tribunal does not constitute a solution to the horizontal risk that she had noted, which deals with the loss of a competing infrastructure, and only deals with the vertical risk - the risk that Bezeq, as the controlling shareholder of Yes, will use economic measures to block Yes’ competitors from making use of Bezeq’s new infrastructure. According to the General Director, the guarantee mechanism seeks to create a deterrence mechanism in the face of Bezeq’s large scale interests and ability to disrupt any attempt to compete with Yes, which Bezeq will control. In this context, the General Director argues that the control over the infrastructure creates an absolute and problematic dependence, for each of Yes’ future competitors, on Yes’ controlling shareholder. This will be due to Bezeq’s ability to damage the quality of their broadcasts through the infliction of damage to the infrastructure – which will lead to significant flaws in the product provided by the Yes competitors. The General Director notes that damage of this type is very difficult to locate and even took place recently in the United States. Nevertheless, the General Director believes that the guarantee mechanism which has been set up is significantly flawed in that it does not refer to the limitations  of  supervision  and,  primarily,  not  to  the  significant  costs  of

 

 

supervision created by the conditions established by the Tribunal; it does not provide a solution to the technical difficulties in locating the occurrence of a breach; and it ends specifically at the time at which Bezeq is expected to transfer Yes from the satellite infrastructure to the IPTV system.  The General Director also notes that in other circumstances, and as a product of a criminal investigation conducted against Bezeq, it has already been revealed that Bezeq has an organizational culture which is not sufficiently careful with respect to preventing improper harm to competitors that use its network. Under these circumstances, the General Director believes that if the appeal is denied, then at the least, the partial deterrence measure established by the Tribunal should be left in place.

16.          Eurocom claims that the character of the conditions that have been imposed on Bezeq – a complicated behavioral arrangement which requires long-term regulatory supervision requires an “appropriate deterrence incentive” and an immediate and significant sanction which is not dependent on a legal proceeding, which conforms to the scope of Bezeq’s obligations and the “cost of an error” that the public will pay if it transpires that Bezeq is not meeting those obligations. Eurocom further argues that the Tribunal chose one security for the fulfillment of the conditions – the presentation of a bank guarantee – and that in these circumstances the amount is reasonable and even necessary, as legal proceedings will not be able to lead to a rectification of [a breach] situation in real time, and Bezeq’s arguments in its appeal serve as a warning signal regarding the [potential for the] erosion of the Tribunal’s conditions. Eurocom also argues that the conditions established by the Tribunal constitute “a single block” and that not one of the conditions in this set should be changed without opening up the entire conditions framework. Finally, Eurocom argues that, without obtaining permission to do so, Bezeq included in its closing briefs several factual arguments regarding its contacts with various banks and that these arguments should be ignored.

Discussion

The normative framework: the Israeli regime of merger supervision

17.          Section 1 of the Restrictive Trade Practices Law defines a companies merger as follows:

“Companies Merger” - Including the acquisition of most of the assets of a company by another company or the acquisition of shares in a company by another company by

 

which the acquiring company is accorded more than a quarter of the nominal value of the issued share capital, or of the voting power, or the power to appoint more than a quarter of the directors, or participation in more than a quarter of the profits of such company; the acquisition may be direct or indirect or by way of rights accorded by contract;

It is undisputed that Bezeq’s exercise of the options in this case will constitute a “companies merger” in accordance with that term’s definition in the Restrictive Trade Practices Law, described above – since due to the said exercise, Bezeq, which currently holds 49.78% of the shares in Yes, will cross the line of 50% of the holdings in Yes and become the owner of 58.36% of the Yes shares. As an aside, we note that the Israel Antitrust Authority does not generally require a notice of merger from a party that holds more than half of the rights in a company and which seeks to increase its holdings of any right whatsoever to a level exceeding 75%. This is because the Restrictive Trade Practices Law will in any event view a firm and a person holding more than 50% of the rights in that firm as constituting a “single substantive entity,” which leads to the perception that in these circumstances there is no real change in the relationship between the decision making mechanisms of the parties involved in the transaction. (See:  The Antitrust General Director’s Instructions Regarding the Reporting and Review Processes for Companies Mergers pursuant to the Restrictive Trade Practices Law – 1988 (hereinafter: General Director’s Instructions)). Therefore, the crossing of the 50% line regarding the holdings in a company, as in our matter, is generally the last point of supervision in this area, in accordance with the General Director’s Instructions.

Chapter C of the Restrictive Trade Practices Law establishes the regulatory framework for merger review, and it applies only to companies mergers in which one of the conditions established in s. 17 of the Restrictive Trade Practices Law is present – conditions which relate primarily to the size of the merging companies’ sales turnovers; to the fact that one of them is a monopoly as defined in s.26 of the law; and to the creation of a monopoly as a result of the merger. (See also s.18 of the Law, which establishes conditions regarding a merger with a company that conducts business both in Israel and outside of Israel.) Section 19 of the Restrictive Trade Practices Law prohibits the implementation of a companies merger if the conditions listed in the above-mentioned s.17 are present, unless a notice of merger has been sent and the General Director’s consent has been obtained. The section provides as follows:

 

 

Companies may not merge unless a Merger Notice is issued and the consent of the General Director to the merger is obtained and, if such consent is conditional- in accordance with such conditions, all as provided in this section.

Section 21 of the Restrictive Trade Practices Law lists the situations in which the General Director will object to a merger or will condition its approval, and provides as follows:

 

„The General Director shall object to a merger or stipulate conditions for it, if he believes that there is a reasonable risk that, as a result of the merger as proposed, the competition in the relevant sector would be significantly damaged or that the public would be injured in one of the following regards:

(1)          The price level of an asset or a service;

(2)          Low quality of an asset or of a service;

(3)          The quantity of the asset or the scope of the service supplied, or the constancy and conditions of such supply.’

 

The test for exercising the General Director’s authority is thus the existence of a “reasonable risk” – i.e., an estimated likelihood, which is determined ex ante, that there will be significant damage to competition due to the proposed merger or damage to the public with respect to one of the matters listed in the section. (See CA 3398/06, Israel Antitrust Authority v. Dor Alon Energy Israel (1988) Ltd par. 30.[2] (hereinafter: Antitrust Authority v. Dor Alon) The examination of the merger is thus a two stage one: first, the market which is relevant to the matter under discussion must be identified and defined; second, it is necessary to determine whether there is a reasonable risk that the proposed merger will lead to significant damage to the public in that market or that it will lead to such damage to the public (General Director

v. Tenuva) [1] at 229.

This statutory arrangement for merger review is a late development in Israeli law (as in United States antitrust law and European Union competition law – see, regarding this matter, Y. Yagur, Antitrust Law, 411-412 (3rd ed., 2002) (hereinafter: Yagur). The Restrictive Trade Practices Law, 1959, in its original version, did not contain any provisions regarding company mergers, but during the first half of the 1970’s it became clear that the attempt to

 

encourage mergers through government incentives, together with the absence of a review mechanism, had led to a high level of concentration in many areas within the Israeli economy, and in 1975 a Committee For the Review of the Restrictive Trade Practices Law was established, headed by Professor Joseph Gross, whose recommendations were the basis for the enactment of the new Restrictive Trade Practices Law in 1988. (See: Barak Orbach, “Objectives of Antitrust Law: Practical Rules” Legal and Economic Analysis of the Business Antitrust Laws 83-85 (Vol. 1, Michal (Schitzer) Gal and Menachem Perlman, ed. 2008) (hereinafter: Legal and Economic Analysis of the Antitrust Laws); Report of the Committee on Mergers and Conglomerates, 6, (1978)). The basic assumption at the foundation of the new 1988 law was that mergers are primarily desirable, to the extent that they relate to business efficiency and benefits of size, and that they can have the effect of lowering prices for consumers. Nevertheless and because in certain circumstances mergers can lead to damage to competition as a result of the increase in the power or market share of the merging companies, the legislature saw fit to review them and in certain cases even to limit them. (See: Explanatory material for the Proposed Restrictive Trade Practices Law, 1983, Proposed Bill 1647, 39-40; General Director v. T’nuva [1 ], at 227; Antitrust v. Dor Alon [2] paras. 29-31). This review is intended to realize the objective that is the basis of the Restrictive Trade Practices Law, which is “protecting the general public against economic distortions the source of which is in excessive concentration in certain markets.” (General Director v. T’nuva [1], at 229). This is done through protecting and promoting competition in order for it to constitute an incentive for development and innovation and in order to increase the efficient use and utilization of resources and to secure the best quality product for the end consumer at the most reasonable price. Free competition, as a value which the Restrictive Trade Practices Law is intended to protect, is also perceived as “a foremost sign of the individual’s freedom to realize his autonomy,” (ibid, [1] at 229), which contributes to the dispersion of centers of power and decision-making, prevents excessive concentration of power in the hands of a few entities and protects additional fundamental rights including freedom of occupation (ibid. [1], 229-230; Antitrust Authority v. Dor Alon [1] para. 29); FHC 4465/98

Tivol (1993) Ltd. v. Chef of the Sea (1994) Ltd., [3] at 56, 79-80 (2001). In the communications industry, the protection of competition has special importance. It would appear that no one disputes the fact that in a free society, the media serves as a key platform for the expression of views and opinions  and  as  a  critical  tool  for  the  delivery  of  information  and  the

 

 

disclosure of details that are of public importance. In this way, the media carries out a function which is essential for our existence as a democratic society and serves to realize fundamental rights such as freedom of expression and the public’s right to know. (See HCJ 7200/02 DBS Satellite Services (1998) Ltd. v. the Cable and Satellite Broadcasts Council [4] (hereinafter: DBS Services v. Cable and Sattelite Broadcasts) at 34-35; Dafna Barak-Erez, “Freedom of Access to the Media Balancing of Interests in the Areas of the Right to Freedom of Expression,” Iyunei Mishpat 12, 183 (1987). The existence of competition in this industry thus contributes to the development of a varied and pluralistic public discourse and reduces the risk that information with public importance will remain undisclosed because of the economic or other interests of any party whatsoever.

Does this merger give rise to a reasonable risk of significant damage to competition?

18.          Section 21 of the Restrictive Trade Practices Law which was cited above authorizes the General Director to object to a merger or to condition its approval if, in his opinion, there is a reasonable risk that the merger as proposed will significantly damage competition in that industry (market). A determination of the damage is carried out in relation to the relevant market – i.e., the market in which the control of a particular firm (according to the hypothetical monopoly test) can allow that firm to restrict production and raise the price beyond the marginal cost, while reaping a profit. (General Director v. T’nuva [1] at 232; M. Perlman, “Definition of Markets,” Legal and Economic Analysis of the Antitrust Laws, 167). The delineation of the relevant market at the first stage is therefore critical for the purpose of determining the existence of a reasonable risk of significant damage to competition, and we will now turn to this matter.

Definition of the relevant markets

19.          Two markets in the area of multi-channel television are relevant to our case: the infrastructures market (the technology through which content is transmitted) and the content market (the services and content transmitted on the infrastructure). These markets are part of the vertical chain in the field of multi-channel television, which is, according to the General Director’s definition, composed of four factors: (1)  the producers of content who create the broadcasted content and who contract for this purpose with relevant professionals and manage the production, (2) the producers of channels who construct a programming schedule, brand and market the channels (some of

 

whom also produce the content that they broadcast); (3) broadcasters who acquire the various channels, “package” them as broadcast packages, market the brand to end customers and who are responsible for providing the service to customers; and (4) the providers of the infrastructure on which the content is transmitted from the broadcasters’ base to the customers’ home.

Historically, the Israeli multi-channel television industry has been characterized by a lack of direct and effective competition, since for many years this industry was controlled by regional monopolies – cable companies

–             who had been given exclusive franchises to provide television broadcasts via cable in a specific geographic region. (See the Monopoly Declaration Pursuant to s.26 of the Restrictive Trade Practices Law, 1988 for the cable franchises in Israel, dated November 8, 1999). This exclusivity led to the fact that the competition in the market was limited to yardstick competition, which is characterized by the fact that a low price level and a high level of programming in a particular region can create public pressure on broadcasters in other regions. But this competition is, by its nature, limited, since the only risk from the perspective of the franchisees is that the consumer will stop consuming the product (a measure which will bear a cost from the perspective of the individual consumer) and there is no risk that the consumer will transfer to a different company (such a transfer would involve in a change of residence). During the second half of 2000, an additional player with national deployment entered the market – a satellite television company. The technological innovation led the market from a condition of perfect monopoly to a condition of a duopoly. The activity of the satellite television company required an amendment of the legislation and was even scrutinized by the Supreme Court. (See HCJ 508/98 Matav Cable Communications Systems v. Knesset [5] (hereinafter: Matav v. Knesset) at 577. The entry of this additional broadcasting platform was accompanied by beneficial competition effects and significant improvements regarding the offerings to consumers. In 2002 the regional cable companies applied to the General Director for approval of a merger, which was given subject to conditions that included the maintenance of a structural separation within the Hot company, between the infrastructure company (“Hot Telcom Limited Partnership”) and the broadcasting company (“Hot Cable Communications Systems  Ltd.”). Appeals filed against this ruling were primarily rejected by the Tribunal (See DBS Services v. Cable and Sattelite Broadcasts [4]) and the full merger of the cable companies was completed on December 31, 2006.

As a practical matter, the reality in the current Israeli multi-channel TV broadcast industry is that there are only two players  - Hot and Yes - in the

 

 

infrastructure market and in the content market, and each of them maintains full vertical integration between the infrastructure and broadcasting levels. (Hot holds between 55% and 65% of the market and was declared to be a monopoly in November of 1999. The rest of the market is held by Yes.) With respect to Hot, the Grunau Commission noted that despite the structural separation that Hot was required to create in the framework of the approval of the cable companies’ merger, in actuality, both Hot’s infrastructure company and its broadcasting company (the latter of which operates pursuant to a license given to it by virtue of Chapter B-1 of the Communications Law (Telecommunications and Broadcasting) are controlled by identical shareholders and they operate as a single commercial-financial entity (see the Grunau Commission Report, 110-111). Yes, as noted, holds and operates a satellite infrastructure (purchasing the space segments from the Spacecom Company controlled by Eurocom) and it also operates under a single corporate roof as the broadcaster on that infrastructure (by virtue of a license given to it for this purpose by Chapter B-2 of the Communications Law (Telecommunications and Broadcasting)).

20.          The market for the multi-channel TV broadcast infrastructure is characterized by high barriers to entry, of which the primary ones are: the especially high cost involved in establishing an infrastructure for a broadcast center; a distribution system; the provision of converters which decode the broadcast signal. In Israel there are two technologies through which multi- channel TV broadcasts are transmitted: an infrastructure based on satellite broadcasts and a cable line infrastructure. The technological abilities of these two technologies are not identical. The satellite broadcast method does not allow for broadcasted content to be differentiated in accordance with the geographical location of customers. Therefore, this technology does not support repeat channel broadcasts, which is an essential condition for the provision of video on demand (VOD) services – i.e., the broadcast of a dedicated channel according to the customer’s request, out of a store of programs that are maintained on the broadcast company’s servers. Yes, which operates on the satellite infrastructure, is therefore unable to offer VOD services and these are provided to the market only by Hot, which – as noted – operates on a cable infrastructure. (As an aside, we note that Yes is able to offer a similar service called Push-VOD, which is based on a converter with a given memory capacity). On the other hand, the satellite technology has its own advantages which include the relative ease with

 

which the satellite can broadcast to sparsely populated distant areas, without incurring the costs involved in laying a line-based infrastructure.

An additional technology which has been used throughout the world since 2004 for multi-channel TV broadcasts is the IPTV (Internet Protocol Television) technology, which has been mentioned above. This technology operates on the basis of a stationary network. The home viewer operates a converter through a remote control which connects to the IP address of the source of the broadcasts through a managed closed network. The technology allows for the transmission of a large number of channels on the infrastructure without a particular collection of channels being sent at the expense of a different collection (unlike the limited capacity that can be offered by the satellite or cable infrastructures), and it has the ability to block certain channels and to not broadcast the same signal to all subscribers. These advantages are made possible by the efficient utilization of a broadband access infrastructure on which differentiated broadcasts are transmitted to the customer, who watches them in accordance with his or her choice. In contrast, on the cable and satellite infrastructures, the same signal is broadcast at all times to all subscribers, and the channels that the customer cannot view are blocked by a conditional access management system. Worldwide, the IPTV services are supplied by telecommunications companies, in light of the deployment of the infrastructures they own, or through sub-operators who lease the infrastructure from the telephony companies. This technology does not currently exist nor is it currently operated in Israel.

21.          The content market is also characterized by barriers to entry, although these are significantly lower than those that characterize the infrastructure market. These include the need to establish a brand-name and to maintain it; the entry into  agreements with  content  [producing] parties in Israel  and abroad; the need to obtain a general broadcasting license and the regulatory rules that apply to this field. (See DBS Services v. Cable and Sattelite Broadcasts [4] at 37-38). As noted, there are only two players operating in the content market – Hot and Yes – and the full vertical integration that each of them maintains between the infrastructure and broadcasting levels makes the barriers to entry in the content market even higher. Note that the Communications Law (Telecommunications and Broadcasting) makes it possible to obtain a special license for cable broadcasts on the cable infrastructure for the purpose of transmitting single channels (through the open access method). But demand for such a license has been, until now, very limited, and there has been no successful business model in this field, in

 

 

light of the regulatory and technological restrictions that are imposed on such a broadcaster.

Damage to competition and the actual potential competitor doctrine

22.          The merger under discussion is not a horizontal one because Bezeq itself is not currently a competitor in any of the markets that are relevant to this case (i.e., the infrastructure market or multi-channel TV broadcast the content market). Additionally, this is not a vertical merger between companies operating at different stages of production or marketing in the same industry, since Bezeq’s activity in the multi-channel TV broadcast industry consists only of holding of the Yes shares that it currently holds. The merger under discussion involves the merger of six option warrants in Yes that Bezeq holds, upon the exercise of which Bezeq will increase its holdings in Yes from 49.78% today to 58.36%. This merger, which is neither vertical nor horizontal, can be referred to as a conglomerate merger. (In this context, see, DBS Services v. Cable and Sattelite Broadcasts [4] para. 12; CA 1/00 (Jerusalem District), Food Club Ltd. v. General Director [11], para. 71 (hereinafter: Food Club v. General Director). Regarding conglomerate mergers, see also FTC v. Procter & Gamble, Co. at 568, 578 (1967) [13] (hereinafter: FTC v.Procter & Gamble)). That is, it is a merger which relates to a party – in this case, Bezeq – which holds economic power and is composed of various business units that operate in a variety of markets and specialize in the production of products or the provision of services which do not necessarily have a common element and which are not similar or related to the acquiring company’s area of specialization. (See Food Food Club v. General Director [11] para. 72. See also Keith N. Hylton, Antitrust Law: Economic Theory And Common Law Evolution, 344 (Cambridge Univ. Press 2003) (hereinafter: Hylton, Antitrust Law)). There are a number of dangers to competition involved in a conglomerate merger. (See: Phillip Areeda & Donald F. Turner, Antitrust Law: An Analysis Of Antitrust Principles And Their Application, Vol. 5, s.1100 et Seq. (1980) (hereinafter: “Areeda & Turner, Antitrust Law”); Earl W. Kintner, Federal Antitrust Law, Vol. 4,

s.36.4 (1984)). Generally, the conglomerate structure enables each company in the group to benefit from the advantages of size and from convenient sources of financing. A conglomerate merger can therefore have pro- competition effects, such as the utilization of the conglomerate’s financial strength in order to prevent the elimination of an acquired company and to increase its efficiency, and thus to prevent its removal as a competitor from

 

the market. Conglomerate mergers are not infrequently considered to be mergers whose effect on competition is neutral and occasionally even beneficial. See Case T-5/02, Tetra Laval BV v. Comm'n, 2002 E.C.R. II-4381 [25] at para. 155; Food Club v. General Director [11]para. 73; but see Yagur, 502-503.)

23.A typical risk of damage to competition arising due to a conglomerate merger is the risk of damage caused by such a merger to potential competition. )See United States Department of Justice Non-Horizontal Merger Guidelines 1984, s.4, s.4.11 (hereinafter: U.S. Non-Horizontal Merger Guidelines)) American law distinguishes in this context between two doctrines: perceived potential competition and actual potential competition. Damage to perceived potential competition exists when the fact that a potential customer exists, even if it is not currently in the relevant market, restrains the market power of the firms that are active in that  market. Damage to perceived potential competition is, thus, damage which takes place in the present time and which results from the removal of the threat of the entry of the potential competitor into the market. In the absence of other potential competitors, the entry of such a potential competitor in the framework of a merger with a different company which is in the relevant market (rather than an entry as an independent competitor) can reduce the competitive pressure which the competitors that are active in the market feel due to this threat. (See Food Club v. General Director [11], para. 47; DBS , para. 13; U.S. Non-Horizontal Merger Guidelines, s.4.111; ABA Section of Antitrust Law, Antitrust Law Developments, 354 (5th Ed., 2002) (hereinafter: Antitrust Law Developments)). In order to establish the presence of perceived potential competition, it is necessary to prove that the existing competitors in the market do see the merging company as a potential competitor, and that its existence restrains their business behavior. (See Food Club v. General Director [11], para. 47; Areeda & Turner, Antitrust Law, at s.1116a).

In the case before us, no claim has been made regarding damage to perceived potential competition, and at any rate, no such claim has been proven. The doctrine which is relevant to our case is that of actual potential competition, and we will discuss it below.

24.          The actual potential competition doctrine deals with  competition which is likely to develop in the market in the absence of the merger’s occurrence, because one of the merging companies, which is not currently a competitor in the market, enters into the market, independently, in the future.

 

 

This doctrine therefore refers to future damage which will be caused to the relevant market because a potential competitor will be removed from it as a result of the merger.  The doctrine is recognized in the United States (See:

U.S. Non-Horizontal Merger Guidelines, s.4.112; United States v. Falstaff Brewing Corp [14] (hereinafter: U.S. v. Falstaff); United States v. Marine Bancorporation, Inc. [15](hereinafter: U.S. v Marine Bancorporation); Yamaha Motor Co., Ltd.  v.  FTC,  [16]  ;Tenneco, Inc. v. FTC, [17], and it has been used there by the Federal Trade Commission, the Department of Justice and the Federal Communications Commission, in accordance with the distribution of powers among them regarding the approval of mergers. (See, for example In re El Paso Energy Corp., [18]; United States v. AT&T Corp. and MediaOne Group, Inc., Proposed Final Judgment and Competitive Impact Statement, [19]; In re Applications of NYNEX Corp. & Bell Atlantic Corp., [20]). The question as to whether the actual potential competitor doctrine can be the sole ground for opposition to a merger has been left as a question for further review by the United States Supreme Court. (Falstaff [14] at 537; Marine Bancorporation [15] at 639).

The view that the loss of a potential competitor as a result of a merger constitutes damage to competition is also recognized in Canada (Canadian Competition Bureau Merger Enforcement Guidelines, part 2 (2004)) and in the European Union (EU Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings 2008/c 265/07, article 7 (2008); EU Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings 2004/c 31/3, articles 58-60 (2004)) and in Great Britain (Mergers: Substantive Assessment Guidelines, Enterprise Act 2002, article 4.8 (Office of Fair Trading 2003). (See also, Consultation Document, s.4.24, April 2009). The actual potential competition doctrine has been mentioned by the Antitrust Tribunal in Israel. (See Food Club v. General Director [11] paras. 49-51; DBS, paras. 14-15) and the Tribunal has recently even approved the General Director’s opposition to a horizontal merger because of, inter alia, grounds that were based on the doctrine by way of analogy. (AT 8006/03 Yehuda Pladot Ltd. v. General Director) [12] (hereinafter: Yehuda v. General  Director).  In relating to the doctrine and on the tests for its application, the Tribunal held there that:

 

In this situation, we believe that there is nothing to prevent the inclusion of a consideration of potential damage to competition as one of the considerations for opposing a merger. This can be compared, by way of analogy, to the potential damage to competition doctrine in non-horizontal mergers. The Tribunal has dealt with this doctrine in the past when separating between actual damage and potential damage to potential competition.

„[ . . . ] In our case, the relevant issue is damage to actual potential competition, i.e, the competition that would have developed in the market but for the merger, upon one of the merging companies entering into activity in the relevant market. In order to disqualify a merger on the basis of this doctrine, it is necessary to prove that a competitor that enters the market by way of a merger has the financial ability, interest and motivation and practical ability to enter into the market other than through the merger. It is necessary to present objective proof of such a possibility, and in addition to show that this possibility presents competition-related advantages as compared to the merger (Appeal 1/99 Food Club v. General Director [11] at s.49).

In accordance with our case, Hod is an actual potential competitor which sought to enter the market in the place of Mapam.’

(Paras. 60-61, emphases added).

25.          In the United States, the courts have pointed to a number of criteria in the presence of which the doctrine can be applied: first, the market in which the merger is taking place must have a concentrated structure. (See:BOC International, Ltd. v. FTC, 557 F.2d 24, 25 (2d Cir. 1977) [21]; Marine Bancorporation, 418 U.S. at 625 [15 ] Second, it must be shown that the company that is not in the industry has the characteristics, the ability and the economic motivation to enter into the industry by itself and not through the merger. (Marine Bancorporation, 418 U.S. at 633.) Third, it must be shown that the independent entry of the company which is not in the industry is expected to significantly reduce the concentration in the market or to lead to other significant pro-competition advantages as compared to the merger. (Ibid.) The  U.S. Non-Horizontal  Merger Guidelines add additional considerations, that are not unique to the above-mentioned doctrine, and they include the size of the barriers to entry into the relevant market, the number of additional potential competitors that are likely to enter into the market in

 

 

the future, and the acquired company’s market share. (Sections 4.132-4.134, and see also Areeda & Turner, Antitrust Law at s.1119c-f; Antitrust Law Developments, 355). An additional consideration which is relevant according to the U.S. Non-Horizontal Merger Guidelines which is also not unique to the above-mentioned doctrine examines the question of whether the efficiency involved in the merger exceeds the competition dangers that it presents. (s.4.135 of the U.S. Non-Horizontal Merger Guidelines; Revised s.4 Horizontal Merger Guidelines Issued by the U.S. Department of Justice and the Federal Trade Commission (April 8, 1997); FTC v. University Health, Inc., 938 F.2d 1206, 1222 (11th Cir. 1991) [22]; Yehuda Pladot [12], para. 64). In light of the requirements established in the United States for the application of the doctrine there are those who believe that this is an endangered doctrine which cannot be implemented. (See Herbert Hovenkamp, Federal Antitrust Policy: The Law Of Competition And Its Practice s. 13.4b (West Publishing Co. 1994); Andrew S. Joskow, Potential Competition: The Bell Atlantic/NYNEX Merger , Review of Industrial Organization, 185, 189 (2000); Darren Bush & Salvatore Massa, “Rethinking the Potential Competition Doctrine,” 2004 Wis. L. Rev. 1035, 1037 (2004) (hereinafter: Bush & Massa, Rethinking the Potential Competition Doctrine.)

26.          Indeed, it is a doctrine that if incautiously implemented could lead to damage to the efficiency achieved through mergers and in certain circumstances could even lead to damage to competition (to the extent that the analysis carried out regarding the independent  entry of the merging company in the market is erroneous). The use of the doctrine can increase the cost of entry into new markets (as independent entry is generally more expensive) and thus deter companies from attempting to enter them. The doctrine also has a significant ability to impose on companies in the market a positive obligation to “improve competition” as distinguished from an obligation to refrain from damaging competition, and this is a non-negligible expansion of the merger review regime. (See Hylton, Antitrust Law, p. 345- 346; Areeda & Turner, Antitrust Law at s. 1118).

In our case, the General Director based the grounds for her objection to the merger on this actual potential merger doctrine, and the essence of her argument in this context is that without a merger, Bezeq can be expected to enter into the infrastructure market and the content market for multi-channel TV broadcasts as an independent competitor.   Therefore, according to the

 

General Director, the merger’s approval will lead to the loss of Bezeq as a potential competitor in these markets or in one of them, and will fix them as duopolic markets. In referring to the General Director’s comments, the Tribunal did not examine the question of the conformity of the actual potential competitor doctrine to Israeli law and to the relevant provisions in the Restrictive Trade Practices Law relating to the approval of mergers. The Tribunal examined the application of the doctrine itself, and the lion’s share of its ruling is dedicated to an examination of the likelihood that Bezeq will enter into the infrastructure market or into the content market if the merger does not take place. For this reason, it can be assumed that it did not object to the principle of the approach presented by the General Director, according to which this doctrine should be adopted in the Israeli law. It seems to me that the assumption that the doctrine applies under Israeli law is not a trivial one, and that before we do so we should first examine whether it is consistent with the provisions and purpose of s.21 of the Restrictive Trade Practices Law, which establishes the criteria for the approval or disqualification of a merger to which Chapter C of the law applies. More specifically, it is necessary to determine whether the damage to competition or to the public discussed in the above-mentioned s.21 also refers to future damage in that industry, due to the loss of a potential competitor that would have entered the market but for the merger. Justice Naor, in her introduction to the first volume of the treatise Legal and Economic Analysis of the Antitrust Laws, edited by Michal Gal and Menachem Perlman, dealt with the need to adjust doctrines and rules taken from comparative law in the field of antitrust (and in general), before they can be adopted in Israeli law. She noted that a wealth of literature and many rulings can be found in comparative law relating to antitrust law, but she also added that “in seeking to implement in Israel what has been read and learned from American or European law, one necessarily encounters an barrier. The question necessarily arises as to whether the solution found in another location is appropriate for “the conditions in Israel and of its residents” and to the Israeli law?” (Ibid., 15).

The potential competitor doctrine and Israeli law

27.          In the Dor Alon [2] case, Justice Procacia noted that “given the purpose of the Restrictive Trade Practices Law to encourage competition and to protect the consumer, a substantial expectation of a future change in the relevant market should have some importance in the context of an estimation of the competitive nature of this market in the coming times.” (Dor Alon, para. 56). In that case, it was held that according to the market’s condition at the time of the petition’s adjudication, the horizontal merger that was under

 

 

discussion, between Dor Alon Energy in Israel (1988) Ltd. and Sonol Israel Ltd., presented a reasonable risk of significant damage to competition in the fuel industry (in markets that had been defined for this purpose). However, the companies seeking to merge made the argument that future developments (the privatization of the refineries) which were expected to take place in the fuel industry, having no connection to the merger, would be able to reduce this damage and even to eliminate it because of, inter alia, the benefit that the merger would create for them in terms of the ability to compete in an effective manner and for the consumer’s benefit against parties that were stronger than them, following the change that was expected to take place in the system of powers within the industry. The Court was ready to take these future changes into consideration as part of the necessary considerations for determining the damage to competition and the likelihood of its occurrence, but regarding the matter itself, the Court believed that these were changes regarding which there was uncertainty as to the fact of their occurrence, their size, and the range of time in which they would take place, and the Tribunal therefore believed that these changes were not sufficient to affect the conclusion regarding the existing reasonable risk regarding significant damage to competition, which justified the disqualification of the merger.

The argument made by the General Director in our case differs from the one made by the petitioning companies in the Dor Alon case. The main part of her argument is that future damage is expected to take place if the merger is approved, because of what she claims is the high probability that without the merger Bezeq will enter the multi-channel television broadcast infrastructure market and content market and that this will improve the competition in the industry. At the same time, I believe that s.21 of the Restrictive Trade Practices Law can, both in terms of its language and the goal that it seeks to achieve, be interpreted so as to make it possible to take into account the reasonable risk of future harm to competition, as stated. The common denominator between the claims raised by the General Director in this case and the claims raised by those seeking the merger in Antitrust v. Dor Alon [2] relates to the fact that in both cases, in order to achieve the purpose at the basis of the antitrust laws – encouragement of competition and protection of the consumer – future developments are taken into account, developments the probability of which can be estimated, and which impact on the General Director’s decision as to whether the merger should be approved or opposed.   (Regarding the estimation of future developments as

 

an integral part of the economic analysis of mergers and of the effects on competition that such developments involve, see and compare: Menachem Perlman “Merger Review in Israel: An Examination of the Dor-Alon –Sonol Decision,” Ta’agidim 5/2, 98, 105-107 (2008); Grounds for the General Director’s Objection to Merger Between Orlight Industries (1959) Ltd. – Inbar Reinforced Polyester Ltd., Chapter D.1 (November 9, 2006)). As we have now held that the actual potential competitor doctrine can be applied in Israeli antitrust law, we need to add that this should be done with the necessary caution, keeping in mind that this is a doctrine that expands the scope of the supervision of mergers and the damage to the fundamental rights of the merging entities, and further keeping in mind the local market conditions and the fact that the Israeli economy is primarily a small and concentrated one. In this type of economy, a too strict merger control may overshoot its purpose and lead to the loss of the efficiency benefits that can be inherent in mergers. (See, Michal S. Gal, Competition Policy For Small Market Economies 195 (Harvard Univ. Press 2003)).

28.          Because we cannot immediately reject the General Director’s reliance on the actual potential competitor doctrine, we will now examine whether the conditions for the application of the doctrine are present here in this case and whether they justify the disqualification of the merger, or whether, as the Tribunal saw, the existence of such conditions have not been proven and the merger should therefore be approved. (Later, we will refer to the fact that the Tribunal established conditions [for the merger] even though it concluded that there was no reasonable risk in this case of damage to competition, and to the difficulty presented by this establishment of conditions [for the merger]). But before we examine the existence of the conditions for the application of the doctrine in this case, we must first note that the condition relating to the company’s characteristics, ability and economic incentive to enter into the relevant market but for the merger is a condition that needs to be examined in accordance with objective evidence and an economic analysis of the company’s relevant conduct under market conditions. It is therefore unnecessary in this context to introduce the testimony of the company’s senior officials or its internal documents which indicate that it intends to enter the market as an independent competitor if the merger is not approved. At the same time, to the extent that such subjective evidence does exist, it can assist the Court in making a determination regarding this issue. (See: Bush & Massa, Rethinking the Potential Competition Doctrine, Wis. L. Rev. at 1069 (2004); FTC v. Atlantic Richfield Co. [23] at 297-298. We also need to point out that the probability that needs to be proven with respect to the firm’s

 

 

independent entry into the market must be at the level of a reasonable probability (see and compare, United States v. Siemens Corp. [24] at 506-

507 (2d Cir. 1980)), and in my view it is not necessary to use an insurmountable threshold, given that this is an estimation of future developments. The period of time in which, according to the estimation, the potential competitor could enter the market is another significant detail, which is derived to a substantial degree from the characteristics of the market under discussion. (See and compare: Orit Farkash-HaCohen “Technological Innovation Considerations in Examining Reviews according to the Antitrust Laws – the Bezeq-DBS Case,” Ta’agidim 5/3 135, 165 (2008) (hereinafter: Farkash-HaCohen)). Thus, for example, the United States Court of Appeals for the Fifth Circuit found that if it had been proven that a company seeking to merge would have been able to enter the market within a period of two to three years, the Court would have been willing to see it as an actual potential competitor (Mercantile Tex. Corp. v. Bd. of Governors , 638 F.2d 1271- 1272 (5th Cir. 1981) [25]). In another case, the United States Court of Appeals for the Fourth Circuit stated that the potential for entry into the market within a period of 10 to 19 years, did not, inter alia, transform a company into a potential competitor (FTC v. Atlantic Richfield Co) [23] at 295.

Finally, I will point out that I tend towards the view that a General Director who seeks to object to a merger because of a reasonable risk of damage to competition bears the burden of proof that such a risk does exist (see: Michal Halperin, “Dor Alon-Sonol Case – How Should a Litigation in the Antitrust Tribunal Appear” Ta’agidim 5/2, 60, 75-82 (2008); Shlomi Prizat, “The Dor-Alon Decision: The Right Result – Dangerous Rationale,” Ha’aretz (December 11, 2006)) It appears to me that this approach is appropriate and even more so when the General Director seeks to apply the actual potential competitor doctrine, which relates to future damage to competition. And note – in the Dor Alon case, the Court tended towards the approach that the burden of proof was imposed on the party seeking to the merger to show, through its estimations, that in light of the market’s future condition, the merger will benefit competition and this is a burden of proof of the positive estimations that support the position of the party seeking the merger. In contrast, in our case, the General Director claims that the disqualification of the merger will benefit competition in the future, and it appears to me that the burden of proving this claim is imposed on her. Either

 

way, this case, like its predecessors, does not justify a rigid determination of the matter of the burden of proof, which has more than once been held to be “a matter that goes both ways” (General Director v T’nuva [1] at 231; Antitrust Authority v. Dor-Alon [2] at para. 27), since, unlike the Tribunal’s holding and as shall be described below, the General Director did present sufficient evidence which establishes that, as she claims, there is a reasonable risk of damage to competition.

Can Bezeq be seen as an actual potential competitor in the multi-channel TV broadcast market?

29.          The Israeli multi-channel TV broadcast infrastructure market and content market are, as stated, duopolistic markets and in effect, Yes and Hot currently compete while each maintaining an integration between [their operations in] these two markets. In this situation, the markets are characterized by high barriers to entry and the Grunau Commission noted this as follows:

„The multi-channel TV broadcast sector is controlled by a duopoly. This control is reflected by high prices for service as compared to the rest of the world, and by barriers to entry faced by independent content providers

[ . . . ]

 

Consequently, the duopoly in the infrastructure area becomes a duopoly in the multi-channel TV broadcast area. The owner of the infrastructures determines not only the content of the channels that it produces, but can also impact on the content of independent producers while damaging the range of choice available to the consumer.’

(Grunau Commission, pp. 76, 103).

In the terms of the infrastructure market, Bezeq is currently the only company in the Israeli economy which has the ability to construct, within the foreseeable future, an additional infrastructure (in addition to the cable and satellite infrastructures) using Internet Protocol Television technology and using its fixed telephony network, which, because of the scope of that network’s deployment, gives Bezeq access to most households in Israel. Such an infrastructure requires the laying of copper and/or optic fiber cables reaching each household and it therefore constitutes a firm barrier to entry into the infrastructure market in the communications field. Bezeq does not face this barrier. In addition, Bezeq owns the longest public optic fiber

 

 

network in Israel and it has a customer base which already consists of almost a million customers who constitute two thirds of the subscribers to broadband access infrastructure services, which is used throughout the world for the transmission of IPTV broadcasts. Thus, Bezeq has unique starting data which allow it to advance the implementation of the IPTV technology. The Tribunal reached a similar conclusion, noting that “from a technological perspective, there is nothing preventing Bezeq from constructing a public broadband network which allows for the transmission of IPTV broadcasts or even the construction of a full IPTV infrastructure.” The expert appointed by the Tribunal, Engineer Daniel Rosen (hereinafter: Rosen), noted in this context, in his opinion dated May 27, 2008, that Bezeq can already enter the infrastructure market at the current time and provide IPTV services at Standard Definition (not High Definition) quality, along with high speed Internet access at the rate of 1.5 to 2 MB, although the provision of services at this quality will make it necessary to deal with the bandwidth limitations of the access network and with the fact that the network will be required to provide additional services that will weigh it down. The expert further noted that if Bezeq wishes to provide IPTV services based on Multicast at a significant level, together with high speed Internet access at the speed of 5 to

8 MB, Bezeq will need to make a certain investment in upgrading the infrastructure (including upgrading the network, construction of access networks, an appropriate core and attachments, and the establishment of service provision centers). And in contrast to Bezeq’s claim, Rosen noted in his opinion dated July 23, 2008, Bezeq had, in a notice which it delivered to the Israel Securities Authority on June 29, 2008 and in a press release dated June 20, 2008, stated that it had made a decision to continue with the NGN project, and this shows that Bezeq had made a strategic decision to “take the path of significant change in the access network, which will lead to a significant improvement in its operation, and not to take the path of small scale upgrades and improvements,” noting that it will be possible to use this network for the purpose of providing IPTV services. Rosen does not indicate an estimated date on which Bezeq is expected to be able to provide IPTV services in the context of this model, but his expert opinion [statement] indicates that this will be, at the latest, within a few years. This estimation is strengthened by the fact that according to the conditions established by the Tribunal in its ruling, Bezeq is required to construct an infrastructure that will make it possible to provide IPTV services to 80% of Israeli households

 

within three years, and Bezeq announced on May 3, 2009 that it accepts the conditions set by the Tribunal, including this one. This indicates that in terms of technology, Bezeq is able, within three  years, to construct the necessary infrastructure and to provide IPTV services at a level that covers most Israeli households. The Tribunal’s findings also indicate that within this time period, there will be no other technology which would be able to serve as a real alternative to the IPTV technology. As a side point, I note that I highly doubt that it would have been correct, to begin with, to define two out of the three additional technologies examined by the Tribunal in this context (DTT and Internet television) within the markets that are the subject of the merger ([i.e.,] paid multi-channel TV broadcasts).

Thus, Bezeq has the technological ability to provide IPTV services within three years, and there is no other party in the Israeli market that has the ability, within the said time period, to provide these services or other infrastructure services that can compete with cable or satellite infrastructures. Therefore, it is necessary to further examine, in terms of economic feasibility and of other matters, the likelihood that, but for the merger, Bezeq would constitute a potential competitor in the relevant markets. It is also necessary to determine whether Bezeq’s entry into these markets is expected to significantly reduce the concentration in those markets or to lead to other substantial pro-competition advantages, as compared to the merger.

30.          The Tribunal noted in its ruling that but for Bezeq’s holdings in Yes, there is no doubt that it would not have approved the merger, “even if the issue was [Bezeq’s] reaching a much lower share than 58% . . . a fortiori in a situation of acquiring control.” The Tribunal also noted that in a situation in which Bezeq would have  sought to first acquire  the shares  in Yes, the existence of an alternative buyer that is not the owner of an additional infrastructure, such as Eurocom which declared its interest in the context of the petition to join the proceeding that it filed on August 11, 2008, would have simplified the decision not to approve the merger because of the clear pro-competition effects of the control over Yes by a purchaser that does not own an additional infrastructure and without having the potential to construct such an infrastructure. Nevertheless, the Tribunal noted, this is not the case that was put before it when asked to deal with the merger under discussion. This is because the matter here is not, in the Tribunal’s words, an “ideal” one in which Bezeq seeks to acquire shares in Yes for the first time, but rather a situation in which Bezeq already has a serious interest in Yes. According to the Tribunal, “the competitive difficulty has already been planted in the current situation. Even if the merger increases the problem, it does not create

 

 

it.” Therefore, and even though it accepted the General Director’s key position that “such a control situation in a market of this type is worse, in terms of competition,” the Tribunal reasoned that the competition map described by the General Director without the merger is not a realistic one.

Indeed, the fact that Bezeq currently holds 49.78% of the shares in Yes creates a unique situation which is different than the regular case in which the actual potential competitor doctrine would apply. This is because even though Bezeq is not currently a competing party in the multi-channel television broadcasts infrastructure market or content market, the size of its current holdings in Yes certainly positions it, already, as an interested party in these markets. However, this fact does not, in my view, automatically negate the possibility of seeing Bezeq as a potential competitor in the markets in which we are dealing, nor does it justify the approval of the merger. This Court has, in the T’nuva case, rejected the view that in a market which is already defective in terms of competition, there is no ground for objecting to a merger, when it held as follows:

 

„The Tribunal held that in this case there has been no significant damage to competition because of, inter alia, the fact that the competition in the relevant industry is at any rate flawed and defective because of, inter alia, the respondent’s power and strength, and the proposed merger is therefore nothing more than a small addition of to a large degree of concentration. Such an addition, the Tribunal determined, does not constitute “significant damage” to free competition. We cannot accept his determination. Its practical significance would be that the controlling entity in a particular industry, or the entity which constitute a dominant component thereof, is “immune” from the General Director’s control because of the market power it holds. Such a conclusion is in absolute opposition to the goals of the antitrust laws, which we have noted above. Indeed, the General Director’s authority and the power granted to him do not refer only to the prevention of control in a particular industry as such, but also to the prevention of the strengthening of existing control, if such strengthening can lead to significant damage to competition. Thus, for example, it could be that  a  certain merger  will  not  bring  about  a  significant  increase  in  the

 

concentration in the relevant industry – because there is a significant level of concentration in that industry at any rate, prior to the merger – but it will nevertheless create significant damage to competition due to the existence and creation of significant barriers to entry for new competitors, barriers that will arise as a result of the strengthening of the dominant power in the market, and not necessarily only as a result of the creation of such a power.’

(General Director v. T’nuva [1] at 239-240. Emphasis in the original.)

 

The rationale at the basis of these remarks applies to our case as well. Nevertheless, the fact that Bezeq currently holds 49.78% of the Yes shares is certainly a significant detail for the purpose of analyzing the degree to which it would be economically worthwhile for Bezeq, absent the merger, to enter into the markets under discussion as an independent competitor, and we will discuss this below.

31.          The Tribunal’s holding that the competition map described by the General Director without the merger is unrealistic is based on two key foundations: one relating to the legal and regulatory prohibitions that apply to Bezeq in the content market, as a party holding shares in Yes, and to the view that Bezeq has no economic interest in constructing an IPTV infrastructure without the possibility of becoming a broadcaster. The other deals with the degree to which it is economically worthwhile for Bezeq, as a party holding shares in Yes, to establish an independent broadcasting arm or separate infrastructure. In this context, the Tribunal points out, inter alia, that Bezeq would need a critical mass of subscribers in order to justify direct competition with Yes, which is a difficult matter [to achieve] in the saturated Israeli market. The Tribunal further noted that the General Director did not present economic calculations which indicate that despite its current holdings in Yes, it would still be worthwhile for Bezeq to compete with Yes, even if one takes into consideration the incentives that Bezeq has, given its activities in additional markets (the telephony and Internet markets).

The Tribunal attributed significant weight to the existence of statutory and regulatory restrictions that apply to Bezeq in the content market in light of its holdings in Yes’ broadcasting platform, and noted the smalll probability that the statutory restrictions would change and that the ability to overcome the regulatory restrictions is unclear. I believe that in this regard,  the Tribunal  was  correct.    Indeed,  s.6H4(a)(2)  of  the  Communications  Law

 

 

(Telecommunications and Broadcasts) prohibits the granting of a general broadcasting license to a party that owns means of control in another broadcasting licensee:

„A general cable broadcasting license or a video on demand license will not be granted to a corporation regarding which one of the following is true, whether such condition is met directly or indirectly:

. . .

It is a corporation in which another broadcasting licensee holds any type of means of control, or which controls any type of means of control in another broadcasting licensee or in a newspaper.

A party owing means of control is defined at the definitions section of the Communications Law (Telecommunications and Broadcasts) as follows:

“means of control” in a corporation means any one of the following:

(1)          A right to vote in a company’s general meeting or in a comparable body in another type of corporation;

(2)          The right to appoint a director or general manager;

(3)          The right to participate in the corporation’s profits;

(4)          The right to share, at the time of the corporation’s dissolution, in the surplus of its assets after its debts have been discharged.’

This definition indicates that nowadays, and prior to the merger, Bezeq is an “owner of means of control” in Yes, which is a satellite broadcasting licensee by virtue of Chapter B-2 of the Communications Law (Telecommunications and Broadcasts), and under these circumstances, Bezeq is indeed prevented from obtaining a broadcasting license. The General Director claims that the many amendments (42 in all) that have been made to the Communications Law (Telecommunications and Broadcasts) since its enactment in 1982 show that a legislative amendment in this context cannot be ruled out even in the short term. . However, this approach is difficult to accept, especially in the short term in light of the absence of any indication whatsoever of an intention to make such an amendment. (See and compare the   Dor   Alon   [2]   case,   paras.   56-63).      Section   6H4(a)(5)   of   the

 

Communications Law (Telecommunications and Broadcasts) provides that the subsidiary of a company which is an interested party in another corporation which has obtained a broadcasting license is also prevented from obtaining an additional broadcasting license, but the Minister of Communications, with the consent of the Cable and Satellite Broadcasts Council and with the approval of the [Knesset] Finance Committee, may grant such a license if it is persuaded that [such a license] can benefit competition and the variety of the broadcasts offered to subscribers, in the following language:

 

„. . . A corporation that an interested party in which is also an interested party in another corporation which has obtained a general cable or video on demand broadcasting license, or regarding which a party holding more than 24% of any means of control whatsoever in it also holds more than 24% of any means of control in a corporation that has obtained a satellite television broadcasting license, unless the Minister has determined, with the consent of the Council, that it will benefit competition in the area of broadcasts and the variety of the broadcasts offered to subscribers, all in accordance with the provisions, conditions and restrictions established by the Minister after consulting with the Council and with the Committee’s approval.’

(Emphasis added.)

 

The General Director argues that the Tribunal erred in determining that it is unreasonable that the regulator in the field of communications would allow a Bezeq subsidiary, which is the largest shareholder in another company that has a broadcasting license, to enter into the content field and have substantive control over two out of three content platforms. According to her, the grant of a broadcast license to a Bezeq subsidiary does not involve a legislative amendment and such a grant is within the authority of the Minister of Communications, subject to the conditions established in the section. According to the General Director, there is thus no barrier blocking the receipt of such a broadcasting license, if the Minister of Communications is persuaded that this would mean the entry of a competitor into the content market, an entry which would be pro-competitive and would add to the variety of the broadcasts. Indeed, where the Minister of Communications is given  the  authority  to use  his  discretion  in  deviating  from the  statute’s

 

 

prohibition against granting a license to a subsidiary, with the approval of those bodies listed in the statutory section, it cannot be said that there is no probability that such a license will be given, but this is not sufficient for purposes of applying the actual potential competitor doctrine and it is necessary to show that there is a reasonably likelihood that such a license will be granted to a Bezeq subsidiary. Such a probability has not been proven in this case.

Thus, the Tribunal’s conclusion that there is only little likelihood that, due to the statutory and regulatory restrictions, Bezeq will, either itself or through a subsidiary, compete in the content market is a well-founded conclusion and we should not interfere with it.

32.          However, the General Director’s emphasis regarding the concern for competition is, to begin with, in the area of infrastructure. Mr. Roy Rosenberg, the deputy director of the Israel Antitrust Authority Economics Department noted this in his testimony:

„Q: In order for it, theoretically, to obtain a broadcasting company license, it is necessary to amend the law, correct?

A: Correct, but I would again state, the concern regarding competition is not from the content side, it comes from the side of the infrastructure for transmitting the content.’

(Transcript of the May 11, 2008 session, pp. 83-84. Emphases added.)

In the area of infrastructure construction, Bezeq is not subject to any statutory or regulatory restrictions. Therefore, it is necessary to determine whether, as the General Director argues, the Tribunal erred in holding that there is little likelihood , in terms of its economic feasibility, that Bezeq would compete in the infrastructure market, using the IPTV technology.

In making her arguments, the General Director points out that the degree to which it is worthwhile for Bezeq to compete in the infrastructure market results from, inter alia, the benefit that the construction of the IPTV infrastructure will give it in additional markets, such as the Internet and telephony markets, and she notes that it is worthwhile, in this context, to look at a broad picture which includes the varieties of markets in which Bezeq competes with other communications companies. According to the General Director, Bezeq’s most significant competitor is Hot, which offers its customers a “triple play package” of Internet, telephony and multi-channel

 

television broadcasts. This marketing option results from technological developments in the communications field as a consequence of which there has been a trend towards “product convergence” – i.e., the transmission of various products and services on infrastructure platforms which in the past had been dedicated to only a single product. This trend allows for the marketing of “packages” to consumers, and economic benefits to infrastructure owners because of the access to a variety of sources of income, while achieving benefits of scale and variety and savings in costs. The benefit that the market receives, from a competition perspective, results from the fact that the number of players operating in each branch can be increased and can lead to change in their relative weight.. This trend necessarily impacts on an analysis of the market in terms of competition, because of, inter alia, the increasingly significant importance attributed to business decisions made by players in the communications industry and to the impact of these decisions in a broader prism. (See, in this context: The 2005 Decision). In this context, it should be recalled that in the telephony and Internet field, Bezeq is a declared monopoly and the General Director believes that Hot’s increasing strength, which results primarily from its ability to offer the above-mentioned type of attractive “packages” comes, in these markets, at Bezeq’s expense, and Bezeq therefore needs a substantial television branch that it can control. The General Director also pointed to the additional incentives that Bezeq has for competing in the infrastructure market in this case. (For example, the differentiation offered through its infrastructure, as compared to the cable infrastructure). However, although the Tribunal accepted the General Director’s position in this matter at the level of principle, it found that “this claim was not proven through appropriate calculations or through an appropriate economic analysis.” The Tribunal therefore held that the “General Director has not carried the burden of proof on this topic.”

I cannot accept this conclusion. Indeed, the General Director did not present an economic analysis at the level of calculations and numbers regarding the economic feasibility for Bezeq of entering into the infrastructure market without the merger, given its holdings in Yes, and it may certainly be that if the General Director had not been able to present detailed subjective proof in this case showing Bezeq’s intentions in this context, it would not be possible to be satisfied with a general presentation of the benefits and economic incentives that Bezeq would receive from independent competition in the infrastructure market. But even if we start with the assumption that the burden of proof was on the General Director

 

 

(and as noted above, I tend towards accepting that view), it appears to me that the subjective proofs that the General Director did present in this case, along with her economic analysis, were sufficient to shift the tactical burden to Bezeq to show that despite such proof, it is not, in this case and in light of its holdings in Yes, have been economically worthwhile from Bezeq’s perspective to compete independently in the infrastructure market with the IPTV technology. In other words, the party that was required to present calculations and numbers regarding the lack of economic feasibility in this case was Bezeq, and it did not (present such calculations and numbers).

33.          The extent to which Bezeq is do so interested in entering the infrastructure market with the IPTV technology can be learned from the position paper that it presented to the Grunau Commission in March of 2007, and in which the following, inter alia, was stated by her:

Bezeq is prepared to be recruited to the cause of promoting the consumers’ benefit regarding this important subject as well, and to commit to and to invest the significant amounts required to establish the IPTV services. Bezeq is prepared to invest significant amounts in the construction of the IPTV system for the transmission of content to the customer’s home, including the hardware, and it will be willing to allow any content provider to transmit content on this platform on the basis of income sharing (or on any other transactional basis). . . .

Bezeq sees the investment in upgrading of its infrastructures and the expansion of its operations in the content area through the IPTV platform as an act that will expand the possibilities offered to the content and multi-channel television broadcasts consumer. In the presence of appropriate conditions for investment, Bezeq believes that the addition of a third  multi-channel television broadcast platform will help to significantly improve the Israeli consumer’s welfare, for the following reasons, inter alia:

„The IPTV technology has a technological advantage over the cable and satellite platforms in that it allows many content providing entities to offer their contents alongside each other on this infrastructure, with relative ease . . . their entry will contribute   to   increased   competition   in   the   multi-channel

 

television broadcast market and will lead to a reduction in the costs of the services that are currently offered in this market.

In addition, it is reasonable to assume that those providing content on the IPTV network will launch a wide variety of commercial offers and channel packages at varying prices. It is also reasonable to assume that the launching of the IPTV services in this spirit will force the existing competitors to respond and offer more “basic” packages of multi-channel television broadcast services . . .’

(Bezeq’s preliminary position regarding policy and competition rules in the field of Israeli communications, March 2007, pp. 170-18 (hereinafter: the Bezeq Grunau Commission position)).

 

Furthermore, Bezeq, for the purpose of presenting its position to the Grunau Commission, relied on the General Director’s approach in this context and noted the following:

 

"The Israeli Antitrust Authority [the IAA] has also recognized the importance of the IPTV platform for competition in the multi-channel television broadcast market in Israel, and has also recognized the fact that Bezeq is the only entity in Israel that has the ability to provide these services. This is also the ground on which the IAA based its objection to Bezeq’s application for an approval of a proposed merger with Yes, noting that this merger could affect the penetration of the IPTV services".

(Bezeq Grunau Commission position, p. 17)

 

Thus, Bezeq’s position to a government committee dealing with the communications market was that Bezeq would, without the merger, construct an IPTV network that would compete with the existing players in the market and would thus contribute to a reduction in prices, to an improvement of the variety and quality, and to the integration of additional players in the multi- channel television broadcast market. The conditions that Bezeq listed for this purpose in its position paper refer primarily to the regulatory horizon, but unlike its position before us today, the position paper does not mention the approval of the merger as a condition for the Bezeq’s construction and operation of the IPTV network.  To the contrary, its discussion there of the

 

 

General Director’s position, and its reliance on that position, indicates the opposite.  The Tribunal did not see fit to attribute any weight to this clear position taken by Bezeq before the Grunau Commission and was satisfied with finding that “there [when facing the Grunau Commission], Bezeq exalted the importance of the IPTV infrastructure’s implication for increasing competition in the multi-channel television broadcast field.”  It seems to me that the Tribunal erred in doing so and that in light of the correlation between the estimations presented by the General Director regarding the competition map without the merger and the position taken by Bezeq regarding this subject before the Grunau Commission, it was appropriate to attribute greater weight to these comments than the Tribunal did.   Similarly, and as noted above, Bezeq is already currently at the peak of an expensive upgrading process to the NGN network, without it having been promised the regulatory horizon which it sought to receive in the position paper that it had presented to the Grunau Commission.  Under these circumstances, I do not believe that Bezeq can rely on the conditions that it had presented to the commission (which, as stated do not include the approval of the merger) as the basis for an argument that it will not carry out another process that will put the NGN into use as an infrastructure for the provision of IPTV services as well.

34.          Additional subjective proofs that were presented, indicating that there is reasonable likelihood that Bezeq will compete in the infrastructure market by providing IPTV services without the merger, can be found in the two presentations made by the TASC consulting firm (hereinafter: the consulting firm), which summarize an economic paper that it prepared for Bezeq without any connection to the proceeding being conducted in the Tribunal. The presentations are dated May 2006 (a year before the submission of the position paper to the Grunau Commission and some three months before Bezeq’s application to the General Director for approval of the merger). The first presentation is entitled “Bezeq’s IPTV Strategy” (hereinafter: the "first presentation) and the second presentation is called “Bezeq and Yes: Future Ownership Alternatives (hereinafter: the  second presentation). The first presentation analyzes the share of paid multi-channel television broadcast in Israel compared with other markets in the communications field, and it notes that the trend in the market is beginning to indicate a turn in the direction of Hot. It also states that there is an urgent need to provide a solution to Hot’s abilities concerning VOD service, triple play service packages and content. The   presentation   further   indicates   that   many   fixed   communications

 

companies throughout the world have begun to enter into the multi-channel television broadcasts market through IPTV technology, primarily in order to protect their market share  in the  fields of telephony and Internet. The presentation describes Bezeq’s need to establish a television branch and Bezeq’s business possibilities in relation to Yes. The presentation reviews three possibilities in relation to Yes - the possibility of selling off the Yes holdings; the possibility of moving up to control of Yes; and the possibility of preserving the existing situation in the short run and taking action within a range of several years. In each model, the proposal is that Bezeq should establish an IPTV infrastructure and enter into the content field – either through the purchase of full control of Yes or through its independent entry into the market, in accordance with the strategy that Bezeq seeks to follow in relation to Yes. Regarding the last possibility - i.e., the preservation of Bezeq’s current holdings in Yes (the situation with is relevant for this matter in light of the stipulation reached by the parties regarding the possibility that the merger is not approved) - one option is presented, which is the establishment of an IPTV infrastructure along with independent entry into the content market with or without Yes – (“create retail TV operation (with or without) Yes.” The conclusion set out in the first presentation is that “a physical and commercial connection” between multi-channel television broadcasts and broadband services can improve and strengthen Bezeq’s share of the general market in the areas of its operation, and provide a solution to the encroaching of other communications companies on Bezeq’s market shares in telephony and Internet, even though the second presentation states that Bezeq’s activity in relation to its holdings in Yes will not have any impact on the telephony or Internet markets: “Under any of the options we don’t foresee a major impact to the telephony or broadband market share.” (Page 28 of the second presentation.) These documents, which were prepared for Bezeq from the strategic-economic perspective and not for the purpose of conducting the legal proceeding, can serve to indicate that according to the consulting firm, the logical economic option for Bezeq, if the merger is not approved, is to enter the field of multi-channel television broadcasts independently – both as the owner of the IPTV infrastructure and as a broadcaster.

 

The Tribunal did not attribute any evidentiary weight whatsoever to these presentations and noted: “We have not been persuaded that the presentations from Sh’chori (the CEO of the consulting firm) represent a decision made by Bezeq to do what is alleged, since   we have not been shown any  decision

 

 

made by the Bezeq board of directors as a consequence of the presentation.” It added: “It has not been clarified that from Bezeq’s perspective, Sh’chori was the party that exhausted the examination of economic feasibility, and that following his examination, a positive decision was made by the board of directors. As I noted above, this demand made by the Tribunal to find a “smoking gun” among the documents of the companies seeking to merge is unreasonable and unnecessary. There is no need and no obligation to show that the board of directors of a company seeking to merge has made a decision to carry out an independent competition move which was certainly not, at the stage of the submission of a notice of merger, its preferred option. There could be cases in which subjective evidence will not be found at all but it will still be possible to show, through objective proof, a reasonable likelihood of the existence of an actual potential competitor absent the merger. In the present  case, the presentations that were brought to the Tribunal – especially in light of the position taken by Bezeq regarding the same matter one year later before the Grunau commission – do indicate the fact that Bezeq carried out a serious economic analysis and examined, inter alia, the possibility of entering into the infrastructure market, and to the extent possible, into the content market as well, and it later on even adopted a position that promoted such a process, which it saw fit to present to the government commission dealing with the subject. (Regarding the existence of a serious examination of the possibility of entry into the market by an actual potential competitor as proof of the ability to apply the doctrine in a concrete case, see Areeda & Turner, Antitrust Law, s.1121b). In my view, all of these, along with Bezeq’s actions in promoting the construction of the NGN network, are enough to indicate a reasonable likelihood that without the merger, Bezeq is an actual potential competitor in the market of infrastructure for the provision of IPTV services, even given its current holdings in Yes. Since Bezeq did not, through any of its evidence, contradict the existence of this probability (and its general argument regarding the market’s being saturated is not sufficient for this purpose), the Tribunal should have held that such a likelihood did exist.

35.          An additional condition presented by the [application of the] actual potential competitor doctrine is that an alternative entry into the market, other than through the merger, is preferable to the merger from a competition perspective. In our case, the General Director indicated that Bezeq’s independent  entry   into  the  infrastructure   market   presents   remarkable

 

competition advantages: (a) it is expected to increase the number of the relevant players from two to three in the near future, and this is a real development in terms of reduction of concentration in this market, given that the entry of a different technology other than IPTV into the infrastructure market, in addition to cable and satellite, is not likely to happen in the short term; (b) in general, competition between infrastructures is preferable to competition on the infrastructures (even the Grunau Commission noted that this model naturally restricts the number of the relevant players to the number of infrastructure owners, and that in a saturated market characterized by a small number of competitors, it is not clear that this is the most effective model of competition, and according to the Commission the desirable solution in these markets is the development of a wholesale market in the context of which providers can lease or operate on other parties’ infrastructures – see: Grunau Commission Report, pages 5-6, 77; Rosen’s testimony on June 18, 2008, p. 58); (c) an additional independent infrastructure with new technology can contribute to the improved quality of the broadcasts (which is dependent on the capacity of the infrastructure and on the technology which it uses), improved variety of broadcasts (which is dependent on the capacity of the infrastructure and on the number of channels which it can bear), and the correlation between consumer demand and supply (uniform broadcasting, channel packages, a VOD channel, consumption of isolated channels, and more); (d) Bezeq’s independent entry into the infrastructure market only, using the IPTV technology, has advantages for the content market as well; to the extent that Bezeq will construe the IPTV network and will not be able to broadcast on it itself because of the statutory and regulatory restrictions discussed above, there is potential for an additional expansion of the number of broadcasters who can broadcast at the same time, in light of the technological abilities of the IPTV network, and this would reduce the barriers to entry into the content market; (e) Bezeq’s independent entry into the infrastructure field as a third and independent competitor can bring about a reduction in Hot’s and Yes’ market power in terms of purchasing contents from content and channel producers.

In contrast, if the merger is approved, Bezeq will become the controlling shareholder of Yes as the party holding 58.36% of the shares in it, and it will hold the right to appoint most of the members of the board of directors, compared to its current right as the owner of 49.78% of the shares to appoint only 5 out of 11 members of the board of directors. Bezeq’s crossing of the 50% holding line with respect to its holdings in Yes has a far- reaching significance in terms of its ability to steer Yes’ business’ program

 

 

and to make use of it as a tool for promoting its own interests, compared to the current situation in which Yes is free to be conducted according to its own economic interests, as distinct from Bezeq’s.

Section  278  of  the  Companies  Law,  1999,  provides  as  follows regarding this matter:

„(a) A director who has a personal interest in the approval of a transaction, other than a transaction as referred to in s.271, that is brought before the audit committee or the board of directors for approval, shall not be present during the deliberation and shall not take part in the voting of the audit committee and of the board of directors.

(b)          Notwithstanding the provisions of subsection (a), a director may be present at a deliberation of the audit committee and may take part in the voting if the majority of the members of the audit committee have a personal interest in the approval of the transaction; likewise, a director may be present at the deliberation of the board of directors and may take part in the voting if the majority of the directors of the company have a personal interest in the approval of the transaction.

(c)           Where the majority of the directors on the board of directors of a company have a personal interest in the approval of a transaction as aforesaid in subsection (a), the transaction shall also require the approval of the general meeting.’

 

Therefore, in the current situation, Bezeq’s directors [on the Yes board] could not take part in a vote relating to a transaction between Yes and Bezeq. However, an increase to control of beyond 50% of Yes and the appointment of the majority of the directors by Bezeq – upon the exercise of the options and the occurrence of the merger – would lead to a cancellation of the obligation to abstain pursuant to the above-mentioned s. 278 (b). It should be mentioned in this context that after the 50% holding line is crossed, Bezeq can increase up to a holding of 100% of Yes, apparently without an additional point of control on the part of the General Director (according to the guidelines that she follows). One possible scenario in this situation is that Bezeq will work to make the IPTV technology, instead of the satellite infrastructure, available to Yes. In terms of the relevant market, this does not

 

change the number of players in the market – the market in this situation was and will remain a duopoly, but instead of a satellite infrastructure, Yes will operate as a content brand on the IPTV infrastructure and this situation could lead to the atrophying of the satellite infrastructure. (Regarding this matter, see Farkash-Hacohen, 164-165). Even if it can be said that the exchange of one infrastructure (satellite) for a more advanced one (IPTV) has advantages in terms of the quality of the broadcasts and the level of customer service (a definite advantage is the possibility of adding VOD service on this infrastructure), the scenario described above will establish the current duopolostic structure of the market, as compared to the competition advantages that we noted above which the market will gain in the absence of the merger, upon Bezeq’s entry as an additional competitor with the IPTV technology.

An additional possible scenario that could take place if the merger is approved, which would have consequences from a vertical perspective (in contrast to the competition advantages we noted above regarding what would happen if the merger were not approved), deals with the foreclosure of content providers competing with Yes, who will seek to “ride” on Bezeq’s IPTV infrastructure. This would happen even if Bezeq were to open this infrastructure to third parties ([based on the] open access [model]) after the merger’s approval and the construction of the infrastructure. We refer here to substantive foreclosure in the form of damaging the quality of the broadcast (compare In the Matters of Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer to Peer Applications, 23 F.C.C. Rcd 13028 (2008)) or by way of the cost set for the service (a price squeeze) [- practices that Bezeq could adopt] in order to preserve the duopolistic structure of the multi-channel television broadcast market vis-à-vis the end consumer and in order to preserve the market power of Yes, which will be controlled by Bezeq following the merger, vis-à-vis the content producers and the independent channel producers. Although Bezeq already has an incentive for foreclosing the market given the size of its holdings in Yes, this risk will grow in the face of the proposed merger, which will give it control over Yes and will increase its ability and its interest in carrying out such a process.

To sum up: two of the key conditions for establishing the potential competitor doctrine are present here – there is a reasonable likelihood that Bezeq, as a potential competitor, will enter into the multi-channel television infrastructure market and will provide IPTV services, and it has been proven that it has the technological ability and the economic incentive to do so in the

 

 

short term. Additionally, it appears that Bezeq’s [independent] entry into the multi-channel television infrastructure market as stated presents considerable advantages over the situation that would develop in this market if the merger is approved.

We still need to examine whether such a similar result could be achieved through the approval of the merger with conditions. As may be recalled, the Tribunal stipulated conditions for the merger in this case, even though it believed that there had been no proof that there was a reasonable risk of significant damage to competition. The General Director and Eurocom as well both correctly noted in their appeals the difficulty that the ruling raises in this context, and I will discuss this below.

 

The Tribunal’s authority to stipulate conditions for a merger which does not create a reasonable risk of significant damage to competition

36.          The Tribunal, as stated, found that the merger under discussion does not give rise to a reasonable risk of significant damage to competition, as the Tribunal noted:

 

„After examining all the material before us, including the testimony of the expert Rosen, we have reached the conclusion that the General Director’s vision that if the merger is not approved, an independent competing television broadcast infrastructure will arise is insufficiently grounded . . .

The economic analysis at the basis of the General Director’s position assumes future developments for at least some of which there is only a low probability of their taking place. In our view, all together, even if it is possible to see a risk of significant damage to competition, it cannot be said that this is a risk for which the likelihood of its realization exceeds 50%. Therefore, we cannot agree with the General Director’s position that the merger will significantly damage competition.’

(Emphases added, paras. 9 and 11 of the decision.)

 

Nevertheless, the Tribunal saw fit to stipulate conditions for the merger’s approval, for a situation in which the assumptions that are at the basis of the General Director’s position are realized, even though, as stated, it found that

 

the  chance  that  these  assumptions  would  be  realized  is  low,  stating  as follows:

 

„We accept that increasing the percentage of Bezeq’s holding in Yes strengthens Bezeq’s interests in Yes, and we agree that it is important to first ensure the construction of the IPTV infrastructure, and if it is constructed, to ensure that it is made available to other entities that compete with Yes. Therefore, in the event that all suppositions at the basis of the General Director’s position – the probability of which we have held is low – are indeed realized, we have seen fit to establish conditions for the approval of the merger, based on our view that the significance of the process of Bezeq’s achievement of control over Yes can be significantly reduced. Furthermore, the appellant has agreed to the principle of their imposition, and has even agreed to several of them concretely.

. . .

At the basis of the conditions which we intend to stipulate for the merger is, therefore, our evaluation that even without the merger, there are competitive restrictions in the market with which we are dealing, due to Bezeq’s existing holdings in Yes. Therefore, the imposition of conditions – which is made possible by the fact that Bezeq and Yes need the Tribunal’s approval – makes it possible to prevent significant damage to competition, and even to improve competition in the market, even if, in the unlikely  event, all of the General Director’s concerns are realized.’

(Emphases added, paras. 11 and 69 of the Decision.)

 

The Tribunal was aware of s.21 of the Restrictive Trade Practices Law, which provides as follows:

 

"The General Director shall object to a merger or stipulate conditions for it, if he believes that there is a reasonable risk that, as a result of the merger as proposed, the competition in the relevant sector would be significantly damaged or that the public would be injured in one of the following regards:

 

 

(1)          The price level of an Asset or a Service;

(2)          Low quality of an Asset or of a Service;

(3)          The quantity of the Asset or the scope of the Service supplied, or the constancy and conditions of such supply".

 

Nevertheless, despite the section’s language, the Tribunal believed that it could impose conditions for the merger, for which it was necessary to presume “significant damage to competition for the purpose of imposing them.” It further believed that where the Tribunal does not completely rule out the possibility of the realization of risks that the General Director has pointed out, conditions can be presented for the merger’s approval which can promote a reform that benefits competition, provided that they “basically prevent the damage to competition.”

I believe that the Tribunal erred in doing this.

Section 21 of the Restrictive Trade Practices Law clearly distinguishes between a merger that does not raise a risk of significant damage to competition, which the General Director is required to approve and a merger that does raise a reasonable risk of significant damage to competition or to the public interest regarding one of the matters listed in the section, and in such a case, the General Director may act in one of two ways – she can approve the merger while stipulating conditions that remove the risk of significant damage to competition; and if such conditions cannot be established, the General Director must oppose the merger. Section 22(c) of the Restrictive Trade Practices Law provides that “the Tribunal may reaffirm the General Director’s decision, revoke it or amend it,” but its authority to do so is also subject to the provisions of s.21 of the Law and to the normative framework established there (see Yagur, 639). In other words, the Tribunal, when adjudicating an appeal of a General Director’s decision, does not have absolute discretion to order as it wishes and it cannot stipulate conditions of a merger’s approval which, according to its own determination, does not give rise to reasonable risk of significant damage to competition in the relevant industry. Any other approach changes the balances of clashing interests as established in the Restrictive Trade Practices Law that relates to them, and changes the statutory arrangement created in s.21 of the Law which expresses these balances. These interests are the encouragement of competition and the

 

protection of the consumer on the one hand, and the preservation of freedom of occupation and the property rights of companies seeking to merge, on the other hand. Bezeq’s agreement to the imposition of the conditions under the circumstances that developed is not sufficient to grant the Tribunal authority in a case in which it has not been given that authority. However, in light of the conclusion we have reached according to which, unlike the Tribunal’s determination, there is in this case a reasonable risk of significant damage to competition according to the actual potential competitor doctrine, I did not see a need to decide what would be the legal fate of the conditions established by the Tribunal if we had reached a different conclusion (given the fact that Bezeq has not filed an appeal against the stipulation of the conditions).

37.          The principle that we follow regarding the remedy was well defined by the Tribunal, by the honorable Judge M. Shidlovsky-Or in Yehuda Pladot

v. General Director [12] , in the following words: “It is necessary to exhaust the possibility of stipulating conditions for the merger before concluding that it should not be approved, by virtue of the principle of proportionate harm to basic rights – in this case, the [right to] freedom of occupation and freedom of property.” (Yehuda Pladot v. General Director [12] at para. 70.) Therefore, we need to examine whether it is possible to avoid the result of a merger disqualification through the imposition of conditions for its approval and we also need to examine whether, for this purpose, the conditions set by the Tribunal can be adopted. As a rule, there is a tendency among antitrust authorities throughout the world to prefer structural conditions over behavioral ones as a response to the risk of damage to competition. (See: UK Merger Remedies: Competition Commission Guidelines, para. 2.14 (Nov. 2008); EU Commission Notice on remedies acceptable under Council Regulation (EEC) No 4064/89 and under Commission Regulation (EC) No 447/98; U.S. Department of Justice Antitrust Division Policy Guide to Merger Remedies at III.A (2004)). But this is not a rigid rule. (See: Katri Paas, Implications of the Smallness of an Economy for Merger Rememdies, Juridica International XV (2008)). In the DBS v. Cable and Satellite Broadcasts Council [4], the Tribunal noted that the regulatory policy and the standard remedies in the communications industry are based on open access for independent content providers to subscribers, and on restrictions on the scale of ownership of channels, and not on absolute separation between transmission and content (DBS v. Cable and Satellite Broadcasts Council par. 60 [4]). In the case before us, the main purpose which is achieved in preventing the merger is the addition of a competitor in the infrastructure market.  This

 

 

is a contribution to competition from a horizontal perspective through the weakening of the concentration in the existing duopolistic market, and it is hard to think of a structural condition in this case that will achieve this purpose. The behavioral conditions imposed by the Tribunal in this case raise significant difficulties, and not only because they require continued supervision regarding the activities of the merging companies and because the supervisory mechanism established in these conditions is complex and inefficient and relies to a great degree on future regulatory determinations by “the parties authorized by the Communications Law” who are supposed to give it substance even though these parties were not at all involved in this proceeding and it is doubtful whether it is possible, in this way, to impose on them powers and duties to determine “regulatory conditions for an entity which is broadcasting television broadcasts to have open access to Bezeq’s infrastructure” and to determine “uniform and reasonable usage fees.” The General Director expressed her position to the Tribunal and before us, that under the circumstances of this case, the competition risk cannot be resolved through the imposition of behavioral conditions that seek to ensure open access, because of the structural difficulty in ensuring such an arrangement where a single party (Bezeq) controls two out of three infrastructures in the market ( the IPTV and the satellite infrastructures, following the merger and the purchase of control of Yes). After examining the conditions stipulated by the Tribunal and all the arguments made by the parties in this context, I have not been persuaded that we can avoid disqualifying the merger in this case through the imposition of conditions. I therefore propose to my colleagues that we grant the General Director’s appeal, order that the Tribunal’s decision be cancelled and restore the General Director’s determination opposing the merger. I also propose to cancel the order charging the General Director with expenses, which was included in the Tribunal’s ruling dated March 23, 2009 regarding the petition submitted by the General Director for a stay of the decision’s implementation. In light of the result that I have reached, Bezeq’s counter-appeal against the size of the bank guarantee it was charged to present as part of the Tribunal’s conditions has become irrelevant, and I recommend to my colleagues that we order its denial. Finally, I propose to my colleagues that we do not issue an order concerning expenses in this case.

 

 

Deputy President E. Rivlin

 

I join in the clear, comprehensive and thorough decision of my colleague, Justice E. Hayut. I also believe that once the Antitrust Tribunal found that the merger between Bezeq and Yes does not do significant damage to competition, it was not authorized to subject the merger to the conditions which it had stipulated.

I also believe that the Tribunal erred in its said conclusion that the merger does not significantly damage competition and I agree that for the purpose of determining this damage in this case, we need to take into consideration the potential competitor in the market doctrine.

Once we take into account the likely potential damage to competition due to the merger, we tend towards, in this case, a disapproval of the merger. It appears that the Israeli economy’s unique characteristics force us to add additional weights onto the scale – the scale that represents the burden of proof which is imposed, in my view, on the party seeking approval of an action which is suspected of causing damage to competition.

Indeed, certain mergers can contribute to a small-sized economy such as Israel’s, but it seems that specifically because of the harsh consequences involved in the reasonable possibility of damage to competition in such an economy, it is appropriate to increase the weight of the potential or actual damage to competition test, as an appropriate means of measurement with regard to an approval or disapproval of mergers. In this matter, I accept the position taken by the scholar Barak Orbach (“Practical Objectives of Antitrust Law” in Legal and Economic Analysis of the Business Antitrust Laws 84-85 (Vol. 1, M. Gal and M. Perlman, ed., Nevo 2008). The Restrictive Trade Practices Law of 1988 expressly adopted the business competition principle as a guiding criteria for examining company mergers (s.21 of the Law). Thus, alongside the damage to competition measurement, the Law also uses the damage to the public test, this damage being defined in the law as damage to price levels, product quality and the quantity of the asset or of the service provided – i.e., damage to specific competition characteristics. In this context of company mergers, the Restrictive Trade Practices Law did not adopt the economic efficiency measurement, and it is doubtful that it can be seen as a competing means of measurement as compared to the “membership principle”. (See B. Orbach, ibid., pp. 106- 107.)

As my colleague Justice E. Hayut wrote, there was sufficient evidence before the Tribunal to establish that the merger in this case could lead to future significant damage to competition, because it would take a potential

 

 

competitor out of the market as a result of the merger. The purpose of the merger here is suspect because of its potential for damage to competition and the burden which is imposed – in my view, on the appellant – to remove this reasonable suspicion has not been met. At any rate, as my colleague held, the positive evidence brought in this case proves the said likely damage – wherever the burden of proof is placed and however heavy it is. I agree, therefore, with the decision of my colleague Justice E. Hayut, that the IAA General Director’s decision should be re-instated.

Vice President

 

Justice E. Rubinstein

a.            After review, and not without some ambivalence, I join the comprehensive and scholarly opinion of my colleague Justice Hayut, both regarding the result that she reached and the main part of her reasoning, other than with regard to one subject which will be described below and which does not change the general picture. I wish to add several comments.

b.            As litigants who do their job, the parties did not leave any stone unturned, and for this purpose, freedom of expression, among other things, was recruited for the cause. I will first say that the subject before us is an economic one by nature - Bezeq’s efforts to earn profits, Eurocom’s efforts to make a claim for itself and the General Director’s efforts regarding the maintenance of competition so that the public can pay less. Not for nothing did my colleague Justice Naor write in the introduction to the book, Legal and Economic Analysis of the Business Antitrust Laws (Hebrew), Vol. A, 2008 at p. 15, that “in the field of antitrust, the legal analysis is entwined in the economic analysis, which will serve as a guide in examining the impact of business behavior on competition in the market, in light of the market’s structure and its conditions.” To the extent that we are dealing with economic entities, we are dealing with a war which although it does not involve a clash or swords, with the firing of shells, or the launching of fighter planes, it is nevertheless drenched in money, and it goes as a war does. The regulator’s function is not always a beloved one, and he is frequently presented as being heavy-handed, as placing burdens on businessmen, etc. However, it was the legislature that imposed on the regulator – in our case, the General Director – the job of the Flemish boy who put his finger in the dam – [i.e.,] the defense of the public interest, regarding either the area of

 

competition or the additional areas listed in s.21 of the Restrictive Trade Practices Law, 1988. As my colleague the Vice President noted, “the Israeli economy’s unique characteristics force us to add additional weights onto the scale – the scale that represents the burden of proof which is imposed, in my view, on the party seeking approval of an action which is suspected of causing damage to competition.” In using the phrase “the Israeli economy’s unique characteristics,” my colleague did not specify [the characteristics to which he referred], but as Justice Naor wrote, (ibid.) and as was also cited by Justice Hayut, we have to deal with “the conditions in Israel and of its residents.” “I sit among my people.” (Kings II, Chapter 4, Verse 13). “The conditions in Israel and of its residents” here mean that even if we do not use analyses from the social sciences, the Court must take a broad view regarding the public interest.

c.             My hesitation come from the fact that the lower Tribunal did very thorough work and gave detailed reasons for its decision, and the balancing effort it engaged in based on its belief that the setting of conditions for the merger and for Bezeq’s control of Yes would reduce the danger for competition, against which the Director was struggling, even though the Tribunal did not believe that a danger for competition had been sufficiently proven. I will note already here that in my view – and in this my view is different from my colleague’s, to a certain degree – the Tribunal could have established conditions such as this for the merger. In my view, sections 21 and 22 of the Law are to be interpreted broadly – i.e., where the Tribunal seeks to meet its responsibility regarding a doubt and to add an extra layer of security and thus to pacify the Director who believes there is a danger for competition, it should be allowed to do so, within the language of s.22(c): “The Tribunal may reaffirm the Director’s decision, revoke it or amend it.” We should recall that the Tribunal has acquired expertise over the years which could certainly constitute a legitimate and appropriate source for constructive changes in decisions, as needed. In my view, the decision in Director v. T’nuva [1] at 213 supports this (see the comments of President Barak at page 228); as may be recalled, in that case as well, the Tribunal also held that there was no significant damage to competition in the proposed merger, and the Tribunal nevertheless stipulated conditions and its decision was upheld. In this case, however, as we have found that there is a risk of damage to competition, it is not necessary to expand this point further, but I saw fit to note my opinion, and I believe that this does not contradict the position of the scholar Yitzchak (Tzachi) Yagur (Hebrew), in Antitrust Laws (Hebrew)(3rd ed. 2002), at 639, according to which it stands to reason that the

 

 

 

Tribunal should consider, in this context, those matters listed in s.21 of the Law.

d.            Why did I choose to join my colleague regarding the matter itself? Because of competition, in its purest form, the danger to which I do not believe the Tribunal’s decision sufficiently resolves.

e.            Indeed, different considerations are involved in the laws of mergers; see the recent discussion by Professor Michal (Shitzer) Gal of the substantive test for examining the approval of a merger, in her article, “Justinian’s Lesson: Required Reforms in the  Restrictive Trade Practices Law,” Hamishpat 13 (2009) (Hebrew), 67, at pages 83-87; the author supports (at pages 84-85) a broad interpretation regarding the subject of mergers, like the position taken by the Antitrust Tribunal as headed by Judge (previous title) Naor, in General Director v. T’nuva [1] . According to this approach, competition is not the only aspect [to be considered], and the General Director and the Tribunal may look at the economic advantages of the merger. In AT 2247/95, supra, this Court left this issue as requiring further review (at page 231 of the ruling). According to the author (at page 86), this interpretation should also be adopted in a statutory amendment. I mention this in order to point out the complexity in this matter. See as well, the words of the scholar B. Orbach, “Objectives of Antitrust Law: Practical Rules” in Legal and Economic Analysis of the Business Antitrust Laws  (Hebrew), supra, 63, 84-85, which my colleagues referred to, and his discussion (at page 79) of the report of the 1975 Commission on Mergers and Conglomerates, chaired by Prof. Joseph Gross, but it is clear that the Law’s main road, the first of its actions, and the core of the policy in these matters, is competition, and sometimes because of the public good, it is placed in preference to other subjects with important values. For example, I recall how, as Attorney General, I had great doubts in determining the State’s position in CFH 4465/98 Tivol v. Chef of the Sea  [6] at 56, when in my heart I began with the traditional values noted by Justice Tirkel in CA 6222/97 Tivol v. Minister of Defense, [6] at 167-68 - and see his comments in the rehearing at p. 112 - but I deferred to the principle that the legislature had preferred in this issue, that competition promotes the public good (and see the opinion of then Justice M. Cheshin in the majority opinion in the rehearing, at page 108 and at page 111.)

f.             And therefore, as the authors Gal and Menachem Perlman noted in their article “The Importance of Legal and Economic Analysis of the Restrictive Trade Practices Law,” in the book cited above, at page 22, “there

 

is no shortage of examples of the benefits of competition for the Israeli economy. Thus for example, when the international telephone service market opened to competition, Bezeq’s prices dropped by some 70% – Bezeq having been the only entity operating in the industry until competition opened up.” And see also the comments of President Barak in Civil Appeal 2247/95 supra, at page 231 (cited by the authors Gal and Perlman at page 26), that “free competition is a clear public interest . . .it is a cornerstone of the democratic legal system . . . antitrust laws are the „Magna Carta’ of consumer rights and free competition.” The standard of damage to competition was, at its core, adopted in the Law’s s.21, which placed this subject as the first and foremost matter to be considered in providing a ground for objecting to a merger, even though additional considerations were added such as damage to the public, which the author Gal proposes should be eliminated (“Justinian’s Lesson,” at page 86) as they are at any rate a part of damage to competition. In any event, the considerations involved in economic efficiency, which Professor Gal mentions in her article as part of the balancing picture, are not, at their core, relevant to this case. We are dealing with an issue of competition.

g.            In my view, as an end-of-the-day judicial policy, if there is a real risk of damage to competition, this must be expressed in the relevant decisions in order to be consistent with the legislative intent. And I dare to say that even where the scales are balanced or are close to being balanced – it could be that in this case they are close (given the lower’s court’s stipulated conditions but the risk nevertheless remains – the decision must be for the benefit of the interest of competition. Certainly, according to the actual potential competitor doctrine, which I will allow myself to join in supporting upon the fulfillment of its conditions, as my colleague wrote in paragraph 35 of her opinion, human nature does not change for the better, including when the matter under discussion is money. And we are dealing with a company, Bezeq, which has been declared a monopoly more than once – as my colleague described. I would add that in my view as well, the burden to prove that the merger will not benefit competition is imposed on the General Director, and in this case, the General Director has met that burden. I also do not believe that the expert opinion of Daniel Rosen contradicts this. I add a value-based perspective to this; even if we do not speak of the high value of freedom of expression and the impact on that value, it is easy for anyone with intelligence to see that the more competition there is, the better chance there is for freedom of expression to flourish.

h.            A key point of course in this matter is the construction of an IPTV

 

 

 

infrastructure. After reviewing the material, I believe that it is indeed of great importance that Bezeq enter the multi-channel television market through that infrastructure. I myself was persuaded that Bezeq’s position paper for the Grunau Commission (even if we do not attribute determinative weight to the presentation from the expert Sh’chori, although it should not be written off) speaks for itself. The position paper, as my colleague cited it, states that “Bezeq is prepared to be recruited to the cause of promoting the consumers’ benefit regarding this important subject as well, and to commit to and to invest the significant amounts required to establish the IPTV services. Bezeq is prepared to invest significant amounts in the construction of the IPTV system . . ..” Indeed, fairness requires us to point out it is also stated that there is a need for a “regulatory safety net” for this purpose – something which any cautious entity would have said, and which expresses a deep desire, if not an especially realistic one. However, I believe that the strength of the commitment regarding IPTV in the position paper certainly overcomes the reservation regarding the regulator, a reservation which is slightly similar to the “subject to the tender rules” language that we see in many advertisements regarding various different campaigns every day. I note that I have read the discussion of the Grunau Commission position paper in Bezeq’s closing briefs, including the explanation that Bezeq was caught between the hammer of one regulator and the hard place of another regulator; but I have not been persuaded that the position paper did not present a very serious commitment to the IPTV matter.

i.              I stress: I myself, here and in other cases, attribute great importance to the positions stated by the litigants. Indeed, the high and exalted words of recruitment to “the promotion of the consumer’s benefit” can be taken with a grain of salt. But the fact of the commitment creates, in my view, a sort of “judicial estoppel”; see LA 4224/04 Beit Sasson v. Shikun Ovdim [9]. Elsewhere (CA 8301/94, Assessing Officer for Large Enterprises v. Pi Glilot [10] I had the chance to say the following regarding a particular litigant:

 

„And it is therefore like the person who came to rent an apartment on Yarkon Street in Tel Aviv and asks the landlord, does the apartment get a sea breeze during the summer? And the landlord says: Certainly, here is the house and here is the sea, and then the renter asks, is there dampness in the winter from the sea? And the landlord responds: Of course not, where’s the house and where’s the sea? Similarly, the appellant holds both

 

ends of the rope as stated, and claims one thing and its opposite in different places . . . if we want, we have before us a judicial estoppel in full legal form.’

 

(See also my comments in CA 458/06 Stendahl v. Bezeq International Ltd

[10] (unpublished)

j.             In light of all these, I join in my colleague’s position (noting my above discussion regarding the interpretation of the Antitrust Tribunal’s powers regarding the stipulation of conditions).

Justice

 

 

Decided as stated in the ruling by Justice E. Hayut Given on August 20, 2009

 

Deputy President            Justice  Justice

 

 

Petition granted. 27 Elul 5768.

10 October 2007.

 

 

 

Justice U. Vogelman

Undoubtedly, information provided to a journalist with the intention that it not be published, and which could disclose the identity of the source, is protected by the journalist’s privilege discussed by President M. Shamgar in Citrin [1]. In my view, any other interpretation will render the principle of a journalist’s privilege, as outlined in Citrin [1], empty of substance. I therefore join in the determinations made in paragraphs 98 and 99 of my colleague Justice E. Rubinstein’s opinion, and in his holding that the state may petition the magistrate court to remove the privilege in accordance with the tests established in Citrin [1]. This does not mean that I take a position – in either direction – regarding the scope of the journalist’s privilege with respect to the handing over of information that will not necessarily lead to the exposure of the source of the journalist’s information, and I wish to leave that question for further review.

 

Decided per the opinion of Justice E. Rubinstein.

 

15^th of Kislev 5773

29 November 2012.

 

                                                                                    AAA 3782/12

 

The Appellants	1. Tel-Aviv Jaffa District Commander – Israel Police 2. Central District Commander – Israel Police 3. Israel Police
	v.
The Respondent	The Israel Internet Association
The Formal Respondents	1.      012 Smile Telecom Ltd. (pro forma) 2.      018 Xphone Ltd. (pro forma) 3.      Bezeq International Ltd. (pro forma) 4.      013 Netvision Barak Ltd. (pro forma)

 

In the Supreme Court sitting as the Court of Appeals in Administrative Matters

[24.3.2013]

Before: President A. Grunis, Justices E.Vogelman, N. Sohlberg

 

Appeal against decision of the Tel-Aviv- Jaffa District Court of 2 April 2012 in Case AAF 45505-10-10 handed down by Deputy President Hon. Judge Michal Rubinstein

 

Facts: In August 2010, the Israel Police ordered major Israeli Internet access providers to block access to eight gambling websites operating outside the State of Israel. The orders were based on section 229 of the Penal Law that permits the District Police Commander to order the closure of any illegal gaming, lottery, or gambling place. The access providers complied with the orders and the Israel Internet Association petitioned the Administrative Affairs Court against the District Commander, contesting the closure, in the interests of Israeli web-users and the general public. The Internet access providers did not petition against the closure of access to the gambling websites. On April 2, 2012 the Administrative Affairs Court (per Judge Michal Rubinstein) granted the petition, holding that the police had no authority to order Internet service providers to block access to gambling websites. 

 

In granting the petition, the Administrative Affairs Court ruled that the Israel Internet Association had an independent right of standing, given the important public interest in enforcing constitutional values and maintaing the rule of law, notwithstanding that no petition was filed by access providers themselves. Furthermore, the closure of Internet websites violated freedom of expression. Even if the content curtailed was of little social utility, websites closure can only be done with legal authority. Primarily the provision in the Penal Law allowed the closure of a physical “place” and did not include the closure of an Internet website. In this context no analogy can be drawn from the closure of prohibited physical places to the closure of prohibited websites, notwithstanding their similar purposes, because the potential for violating freedom of expression and freedom of occupation, and because blocking access to the Internet poses technical, political and legal difficulties, including the possibility of blocking legitimate websites and innocent users. Blocks by third parties – the access providers – also raises questions relating to liability, the manner of blocking and its costs. In view of all these factors the petition was granted.

An appeal was filed against the decision in the Supreme Court.

 

Held:

Regarding freedom of expression, the Supreme Court agreed unanimously that the content blocked on the gambling websites is limited in this case and hence the violation of free speech that resulted from blocking lawful content on gambling websites is of limited degree and lawful. Moreover, the primary infringement here relates to the website operators’ freedom of occupation. In this regard, the case law has already held that the infringement of freedom of occupation, the infringement satisfies the constitutional tests.

 

With respect to the concern that protected information on websites would be blocked, the Court noted that website owners can make such information available on alternative websites, or even on the same website while blocking only prohibited gambling.

 

Regarding standing, Justice Vogelman ruled that the Internet Association satisfies the conditions for recognizing a public petitioner, given that it seeks to promote the public interest of Internet users, an interest shared by the general public, or significant parts thereof, rather than protect its own special interest. Given this case presents a first attempt to define the boundaries of the district police commander’s authority under section 229 of the Criminal Law to block access to Internet gambling websites, the question is a fundamental one that justifies hearing through public petition. As to the sufficiency of the factual infrastructure, had the Appellants felt that any issue was not sufficiently clarified, they could have acted to remedy the situation. Moreover, the public petitioner is required to present the factual infrastructure sufficient for the proceeding. In the current case the factual infrastructure was indeed sufficient for purposes of judicial review.

 

The dispute and the result involved two basic issues: first, whether the language of the Penal Law authorizing police to close a “place” can and should be interpreted broadly to include a virtual Internet website, which is not a physical place, without a specific legislative amendment. The second and more important question was whether the police can and should be permitted to exercise their authority of closure with respect to a website by way of a third party, namely the access providers. 

Justice Vogelman (for the majority, with concurrence by President Grunis), wrote that a gambling website may be viewed as a “place,” and its blocking can also be viewed as its “closing” within the meaning of section 229(A)(1). Additionally, an online gambling site may be considered a “prohibited gaming venue,” under a purposive interpretation of the Criminal Law’s relevant provisions and in the context of time and advancing technology, which render section 229 of the Criminal Law applicable in the “virtual” world. Nonetheless, the main obstacle to such interpretation is the lack of express authority to order private third parties – access providers – to assist in implementing the authority to block websites. According to Justice Vogelman, when the law empowers a governmental agency, it is assumed that the legislature intended that agency, and not another, would implement that authority, and that the agency may act only within the boundaries of the authorizing law. Even if the authorization to close a place can be interpreted as authorizing closing websites, it is not identical to authorizing third parties to block access to websites.

 

This is consistent with the principle of administrative legality which only permits an agency to act within legislation that empowers governmental agencies to order third parties to assist in exercising that agency’s authority. Such authority is not even implied in the Penal law’s provision concerning police authority to order the closing of a place.  Absent explicit statutory source, it is impermissible to compel a person or private entity to act for the authorities. Hence the orders to access providers here violated the principle of administrative legality. The current statutory framework is insufficient because it lacks authorization to order a third party to assist enforcement agencies in exercising their powers.

Even though the rule is that the authority is permitted to receive assistance from private persons or entities as far as the technical aspects of fulfilling their task, there is also an interpretative presumption against delegating authority to private entities and in the absence of appropriate legislative framework, enforcement authority cannot be granted to those not part of the enforcement mechanism

Even if the access providers were not required to exercise discretion, and the police only requested help from them in the exercise of its authority – in the technical act of blocking a website identified through its IP address specified on the order – it is still necessary to prove that the access providers agreed to assist the police. Once the police imposed an obligation upon access providers, it can no longer be considered assistance – hence the need for explicit statutory authorization.

 

Justice N. Sohlberg, writing for the minority, found that as a rule the court will not grant a public petition where there is a private victim in the background who chose not to apply to the court for relief, and that in light of the website owners failure to file an appeal, it is doubtful whether the Internet association has standing. Furthermore, granting standing when the relevant party did not file a petition might mean that the required factual infrastructure would not be presented to the Court. Nonetheless under the circumstances, where the Administrative Court recognized the Internet Association’s standing and ruled on the merits, it would be inappropriate to reject the appeal for of lack of standing without examining the matter on the merits.

 

Regarding the substantive issue, though a specific legislative arrangement would be preferable, the law’s existing language provides a satisfactory solution as to the police authority to issue orders, and waiting for legislative authority frustrates appropriate response in law enforcement and service of justice.

Both in terms of language and purpose the word “space” should be interpreted to also mean virtual space, given that terms that serve in virtual space are borrowed from the tangible world. Accordingly there is no deviation from the principle of legality by finding that “place” also includes virtual space. As the damage wrought by gambling on the Internet is immeasurably greater than that which is caused in physical places and that the legislative purpose was to prevent illegal gambling regardless of its location, a purposive interpretation would and should interpret “place” as meaning virtual space. Accordingly, apart from certain, isolated exceptions, the rule should be that the Internet fits the definition of place.

With respect to the difficulty in using third parties for carrying out a criminal proceeding, the law recognizes the possibility to use a third party to present an object necessary for interrogation or trial. Considering the license the State has granted them, access providers bear public responsibility. It is therefore justified to use them to execute orders to restrict access, given that the order requires the technical acts that do not involve any discretion regarding the closing of a site with a particular IP address specified in the order. Regarding the requirement for third party consent, Justice Sohlberg analogized the status of the website owners to receptionist in a physical place whom the police would have been authorized to require to open.

 

Justice Sohlberg also found that failure to petition against blocking access may be viewed as the website’s owner’s consent to to being used to carry out the police order. Justice Sohlberg based this conclusion on the Talmudic rule of "silence is regarded as admission.”

 

Legislation Cited

Administrative Affairs Court Act, 5760-2000, s. 5 (1)

Basic Law: Human Dignity and Liberty

Civil Procedure Regulations, 5744-1984, reg. 3(a)

Criminal Procedure (Arrest and Search) (New Version) Act, 5729-1969, s.20 23

Criminal Procedure (Powers of Enforcement- Communication Data), 5768-2007, s.1, 3 (2)

Interpretation Act 5741-1981, s.17

Penal Law, 5737-1977 s. 224, 228, 229

Police Ordinance [New Version], 5731-1971, s. 3

Prohibition of Discrimination (Products and Services) in Entrance to Places of Entertainment and Public Places, 5761-2001, s.2

Regulation of Sports: Gambling Act, 5727 – 1967

 

Supreme Court Decisions Cited

[1] HCJ 243/62 Israel Films Studios Ltd v. Levi [1962] IsrSC 16 2407.

 

[2] HCJ 651/03 Citizens Right Bureau in Israel v. Chairman of Central Elections to the Sixteenth Knesset [2003] IsrSC 57 (2) 62.

 

[3] AAA 4436/02 Tishim Kadurim Restaurant, Member’ Club v. Haifa Municipality [2004] IsrSC 58 (3) 782.

 

[4] HCJ 8070/98 Citizens Rights Office in Israel v. Ministry of the Interior (10.5.04).

 

[5] LCA 4447/07 Mor v. Barak I.T.T. [1995] Society for the Bezeq International Services Ltd (25.3.10).

 

[6] CA 9183/09 The Football Association Premier League Limited v. Anon (13.5.12).

 

[7]  Cr.A 1439/06 Zaltovski v. State of Israel (28.3.06).

 

[8] CrA. 7430 /10  Anon. State of Israel (5.2.2010).

 

[9] LCrApp 787/79 Mizrahi v. State of Israel [1980] IsrSC 35 (4) 421.

 

[10]  (HCJ 131/85Savizky v. Minster of Finance [1965] IsrSC 19 (2) 369.

 

[11] HCJ 651/03 Citizens Rights Bureau in Israel v. Chairman of the Sixteenth Knesset Central General Elections Committee [2003] IsrSC 57 (2) 62.

 

[12] HCJ 3809/08 Citizens Rights Bureau v. Israel Police (28.5.2012).

 

[13] Association of Renovations Contractors for Restoration v. State of Israel (14.3.2011).

 

[14] HCJ 1/81 Shiran v. Broadcasting Authority [1981], IsrSC 35 (3) 365.

 

[15]  HCJ 910/86 Ressler v. Minister of Defense [1988], IsrSC 42 (2) 441.

 

[16] HCJ 287/91 Kargal Ltd v. Investments Center Council [1992], IsrSc 46 (2) 851,

 

[17] HCJ 962/02 Liran v. Attorney General(1.4.2007).

 

[18] HCJ 4112/99 Adalah Legal Centre for Arab Minority Rights in Israel v. Tel-Aviv Municipality [2002] IsrSC 56(5) 393.

[19] HCJ 80/70 Elizur v. Broadcasting Authority [1970],IsrSC 24 (2) 649.

[20] HCJ 852/86 Aloni v. Minister of Justice  [1987], IsrSC 41 (2) 1.

 

[21] HCJ 606/93 Kiddum Yezumot v. Broadcasting Authority  [1994], IsrSC 48(2) 1.

 

[22] HCJ  2303/90 Philipovitz v. Registrar of Companies [1992], IsrSC 46 (1) 410.

 

[23] (HCJ 2605/05 Academic Center of Law and Business v. Minister of Finance, (19.11.2009).

 

[24]  AAA 6848/10 Erez v. Giva’ataim (30.5.2012).

 

[25] HCJ 5031/10 Amutat Ir Amim v. Israel Nature and Parks Authority (26.3.2012).

 

[26]CA 630/97 Local Committee for Planning and Building Nahariya v. Shir Hatzafon Construction Company Ltd [1998] IsrSC 52 (3) at 399.  

 

[27]  HCJ 5394/92 Hoppert v ‘Yad Vashem’ Holocaust Martyrs and Heroes Memorial Authority [1994] IsrSC 48(3)353.

 

[28] 7368/06 Luxury Apartments Ltd v. Mayor of Yabneh (27.6.2011).

 

[29[ HCJ 6824/07 Mana v  Taxation Authority (20.12.2010).

 

[30]  HCJ 7455/05 Legal Forum for Land of Israel v. Israeli Government [2005] 905.

 

United States Decisions Cited

[[31] Center for Democracy & Technology cy & Technology v. Pappert, 337 F.Supp.2d 606 (E.D Penn. 2004).

 

 

For the Appellants: Advs. Yuval Roitman; Adv.Orli Aharoni

 

For the Respondent: Adv. Haim Ravia, Adv. Dan-Or Hof; Adv. Yossi Markovitz

 

Judgment

 

Justice N. Sohlberg

 

1.         The Israel Police issued orders restricting access to gambling websites on the Internet. The Tel-Aviv-Jaffa District Court, sitting as the Court for Administrative Affairs (Judge Michal Rubinstein) granted the petition by the Israeli Internet Association and ruled that the orders were issued ultra vires and should therefore be voided. The Israel Police appealed and requested the orders be resotred.

Background

2.         Crime is burgeoning and taking new forms. As a result, on 1 January 2006 Government Decision No. 4618 was adopted, establishing a Standing Committee for Direction and Coordination of Activity in the Battle Against Severe Crime and Organized Crime and their Offshoots. The Committee determined that because its far-reaching and grave consequences the phenomenon of Internet gambling would be a central enforcement target combining several tools – criminal, fiscal, and administrative. This is a growing crime-generating phenomenon that is accessible to a broad segment of the population. Within this context, with the knowledge of the Attorney General and the State Attorney, the Committee decided to restrict Israeli users’ access to gambling websites. Internet access providers were issued warning letters and given a list of gambling sites and their IP addresses to be blocked. The access providers and the website operators were also allowed the opportunity to object. In August 2010 the orders were issued. In October 2010 the Israel Internet Association petitioned to the Administrative Affairs Court to revoke the orders, and in April 2012 the petition was granted

The Ruling of the District Court

3.         The principle elements of the Administrative Affairs Court’s ruling are:

(a)        Locus Standi: The direct victims – the access providers and the website operators – chose not to exercise their right to petition against the orders. Nonetheless the court found there were grounds for recognizing the locus standi of the Israel Internet Association, given that it does not represent the interests of the access providers and website operators, which have primarily commercial interests, but rather as the representative of users in Israel and their rights to free expression and access to information. This is a matter of general public importance pertaining enforcing constitutional values and maintaining the rule of law. 

(b)        Restricting access to Internet gambling sites infringes freedom of expression: The Internet is an excellent tool for exercising the right to access information in a practical, efficient, cheap and reliable manner. It is a democratic tool that promotes equality, enables a decentralized and diverse discourse, facilitates economic growth, and is an excellent platform for business ventures. Access to information is a constitutional right and limitations on the use of Internet are therefore rare. yet, the Internet is also subject to abuse, to violation of copyright, publication of slander, pornography, encouragement of violence, drug abuse etc. The desire to minimize the harm caused by damaging uses of the Internet has led the authorities of different countries to adopt various means, including blocking access to websites that function as platforms for illegal activity, or use technological screening measures. The Israeli approach has been that freedom of expression is “all encompassing” and applies even to expressions that encourage illegal activity.  Still, freedom of expression is not an absolute right. When there are interests that justify it, such as security, or social, political and other interests, freedom of expression may be curbed. When applying a proportionality test, the balance may vary according to the type of expression and its inherent social value weighed against the benefit of restriction. The content of illegal gambling sites – for example game instructions, various lists, graphics and other audio-visual aides – are, generally speaking, of little social value. The expressions are of a purely commercial nature, encouraging acts restricted under criminal law. Conceivably, limiting access to such expressions may be justified by legitimate purpose. But the mere fact that an expression may be harm does not exclude it from protection. As such, restrictions on free speech, even on expressions with little social value such as those in illegal gambling sites, must pass constitutional muster and be legally authorized.  

(c )       The Police has no authority to order Internet access providers to restrict access to gambling websites.  The relevant sections of the Police Ordinance [New Version], 5731-1971 (“Police Ordinance”), and the Penal Law, 5737-1977 (“Penal Law”), through their language and purpose, authorize the Israel Police to order the closing of places where gambling is takes place, but these are only physical places, as opposed to preventing access to an Internet website. A website is not a “place” but rather an amalgamation of information and applications installed in a computer that communicates with other computers via the Internet. Information is transferred from the computer to the server. The police is authorized to order the closing of a “place” of prohibited games or a “place” where lotteries or gambling are held, but preventing access to a website is not equivalent to the closing of a place, and is not covered by that authorization, neither explicitly nor implicitly. That the law grants the police the power to shut down physical places cannot, in itself, be understood as legislative intention to broaden the authority to allow “censorship” power to the police, without clear guidelines for its exercise. Even if the purpose of the orders – reducing the prevalence of gambling – is identical to that of the authorizing closing down physical gambling places, blocked access to a website implicates freedom of expression and freedom of occupation differently.  Blocking access to the Internet poses technical, political and legal difficulties: the concern for possibly blocking legitimate websites or innocent users. Executing blocks by a third party – the access providers – raises questions of liability, methods for blocking and costs. The appropriate legal policy would be to wait for explicit regulation of restrictions to free expression on the Internet in primary legislation, following in depth public debate. “Acrobatic” interpretations should not be invoked to authorize the police to violate civil rights. Furthermore, over the past few years the legislature has considered proposals for legislative amendments on this issue, but the legislative initiatives were hindered for being insufficiently balanced. The subjective and concrete legislative intention indicates a desire not to authorize the police to block access to gambling websites at its own discretion.

In short, the orders to restrict access to gambling websites were issued ultra vires and should be voided. This was the ruling of the Tel-Aviv-Jaffa District Court, sitting as the Court for Administrative Affairs.

Principal Arguments of the Parties

4.         Attorneys for the State argue that the Administrative Affairs Court erred in determining that the Israel Internet Association has standing.  The latter is a public petitioner with no personal interest in the orders, and his petition should therefore have been dismissed in limine, especially given the existence of petitioners who could have presented the factual infrastructure required, yet they ultimately refrained from filing a petition. The petition seeks to permit illegal activity, rather than preserve the rule of law, and there was no justification for conducting a judicial hearing for this kind of petition by a public petitioner. Attorneys for the State further argue that the Administrative Affairs Court erred in holding the orders infringe freedom of expression. The websites subject to the orders do not serve as a venue for expression and their entire raison d’etre is conducting prohibited gambling. There is no justification to fully exempt the Internet from rules that apply to other media. Blocking access to gambling is accepted practice all over the world, and is necessary for crime prevention.

5.         The primary claim the State’s attorneys make is that the police is authorized to order blocking access to websites. The Administrative Affairs Court adopted a “rigid” interpretation that failed to fully account for the law’s language and purpose. The Administrative Affairs Court failed to consider a possible alternative in the authorizing statute. In any case the relevant provision can be seen to include Internet space, as well as physical space: a “place of gambling” is also a “virtual place”. The authority to close a place also encompasses orders to block access to virtual space. The attorney for the State argues that when the law was passed it was impossible to anticipate the existence of virtual space, but the purpose is the same: preventing illegal gambling, which causes immense harm to both the individual and the public. Waiting for primary legislation to explicitly grant parallel authority to virtual space means perpetuating Internet gambling, its grave consequences and its harm, while forcing the police to combat it with hands tied behind its back.

6.         On the other hand, the Israel Internet Association discussed the public interest in Internet access, and as a natural outcome, its right of standing in this petition vis-à-vis its activities to promote Internet use in Israel as a technological, research, educational, social, and business resource. The limited economic interest of website owners and access providers is not comparable to the public interest in having unfettered access to the Internet. This is the purpose of granting standing rights to a public petitioner, thus enabling judicial review in a matter of public and constitutional importance that implicates the rule of law. The Israel Internet Association also emphasized the right to know. “A governing authority which claims the right to decide what the citizen ought to know, will eventually decide what the citizen should think; and there is no greater paradox to true democracy, which is not ‘guided’ from above” (HCJ 243/62 Israel Films Studios Ltd v. Levi [1] at p. 2416). A website consists of layers of information, each of these a protected expression, including: the code, the graphic design, games, trailers, data and explanations. The suspicion of a criminal offense does not excuse limits on expression in advance.

7.         The Israel Internet Association further claims that the law does not authorize the Police to order a third party to block access to gambling websites. An Internet website is neither a “place”, nor “premises” but rather a collection of “pages” which contain information collected from files on a service computer that communicates with other computers via the Internet (Abraham Tenenbaum “On Metaphors in Computer and Internet Law”, Sha’arei Mishpat 4 (2), 356, 374 (2006)). The analogy between “site” and “place” is fundamentally flawed. Blocking access to knowledge is distinguishable from closing a physical place, inter alia because of the infringement upon freedom of expression. Physical closing does not implicate the rights of the general public. Blocking access to knowledge does. Internet access providers are not enforcement agents of the police. They serve as a channel for providing information to Internet users, and they have an immensely important role in exercising the right to access information.

8.         The Israel Internet Association requests we uphold the Administrative Affairs Court’s decision regarding standing based also on the fact that the consequences of blocking access to a website differ from the consequences of blocking a physical place. Blocking access to websites involves technical challenges that may block access to innocuous sites. Blocking may be ineffective, as well. It may have implications for international obligations, and raise questions about access providers’ liability. Costs are likely to be “rolled” onto users. As a matter of judicial policy, infringements upon freedom of expression and access to information should only done in explicit primary legislation. The Knesset debates around private bills on the matter reflect substantive reservations against conferring the police with the requested powers. Upholding the appeal would turn the police into investigator and prosecutor, judge and executor, while performing interpretive acrobatics and infringing free expression.

Discussion and Ruling

9.         I divide the discussion into three categories, following the path taken by the Administrative Affairs Court:

(a) Standing; (b) Freedom of Expression; (c) Police Authority.

 (a)       Right of Standing

10.       As mentioned, the orders compelled Internet providers to block access to a number of websites used for illegal gambling. The access providers and the website owners chose not to challenge the orders. Prima facie, as claimed by the attorney for the State, the Israel Internet Association is stepping into a dispute in which it has no part. The Administrative Affairs Court deviated from the rule that “the court will generally not grant a public petition where there is a private victim who chose not to turn to the court for relief ” (HCJ 651/03 Citizens Right Bureau in Israel v. Chairman of Central Elections to the Sixteenth Knesset [2] at p. 68).  Recognition of standing rights for the Israeli Internet Association prompted the petitions’ adjudication without presenting the Administrative Court with the required factual infrastructure. The precise contents of the websites subject to the orders were not presented, nor was a full description of the technical ability to block access. No basis was presented for the argument – which the Administrative Court found acceptable – that blocking access to gambling sites could also be expected to block other sites.

11.  The Israeli Internet Association further argued before the Administrative Affairs Court that the Internet providers’ right to hearing had been violated. It further argued that the decision to block certain sites was discriminatory. The problem however is that these are not arguments that can be raised by a public petitioner. These are arguments that only the website owners and the access providers could have raised, had they so wished to do so.

12.       It seems that a priori the petition should have been dismissed in limine in the absence of standing. However, post factum, once the Administrative Affairs Court recognized the Israel Internet Association had standing, and ruled as it did on the merits, it seems inappropriate at this stage to uphold the appeal merely based on his issue, without ruling on the merits of the appeal itself. It is incumbent upon us to rule on the legality of the orders.

Freedom of Expression

13.       The attorneys for the parties spoke loftily and at length about freedom of expression and the right to access information that derives from it. Indeed, we must make every effort to avoid infringing the free dialogue in the new “town square” and the flow of information on the Internet. Freedom of expression is the air we breathe, and the right to access information – our daily bread. All the same, in its decision, the Administrative Affairs Court stated that illegal gambling on the Internet certainly is not a protected right, and that in such circumstances indeed there is no “discourse of rights” (para. 21). However, the gambling sites also feature additional content: expressions, pictures, texts, explanations, lists and other audio-visual information. According to the Administrative Affairs Court all of these are of social value, concededly of “low value”. Nevertheless, “in the prevention of access to gambling websites the Respondents infringed the freedom of expression of users interested in entering the website and in browsing the information and of the site owners who uploaded the content” (para.23).

14.       This infringement upon free expression was scathingly criticized by the Israel Internet Association, but it appears to me that the alleged infringement is not quite what it was made out to be.  Attorneys for the State dispute this, claiming that the aforementioned gambling websites contain gambling content and nothing else, and that in any event, it is not content of a kind to which access cannot be denied based on freedom of expression. As mentioned, the petition was filed by the Israel Internet Association and not by access providers or website operators, with whom the relevant information is stored. This matter again exemplifies the problematic nature of granting standing to a party meddling in a dispute that is not its own, because the factual infrastructure laid before the court was insufficient and a court may follow it blindly.

15.       Regardless, even had the gambling websites under discussion included legitimate content alongside platforms of illegal gambling, there is nothing to prevent website owners from making the information accessible to users by one of two methods: either on an alternative site, or on the same site, together with blocking possible engagement in prohibited gambling there. The infringement of free expression is therefore quite marginal, if at all.

16.       We should not forget that the closure of a physical gambling place violates the right to property, a basic constitutional right, but is nonetheless permitted and frequently done according to the law. Case law, too, has permitted the closure of a physical gambling place, even when it serves for other legitimate activities (per former Justice Grunis in AAA 4436/02 Tishim Kadurim Restaurant, Members’ Club v. Haifa Municipality [3] at p.798 (hereinafter: Tishim Kadurim). As mentioned above, the Israeli Internet Association argues that not all of the content on the gambling sites at issue is illegal and that these sites serve as platforms for chatting and other legitimate uses. This is a factual claim that requires factual substantiation. But assuming it is correct, we again analogize to a physical gambling place, which may undisputedly be legally closed. In addition to serving for illegal gambling, such a place can also serve as a place for social interaction, where conversations, even on matters of highest importance, may be held. But this would not rise to the level of speech protected by the right to free expression that would prevent closing a physical place of gambling. Visitors would be able to continue to meet, to speak, and to exchange opinions in alternative venues.  Similarly, there is nothing to prevent taking the same action regarding a website where illegal gambling takes place.  Access to the latter would be blocked, and to the extent that other legitimate activities took place on the website, there would be no impediment to continuing those, whether on this site or on another site.

17.       Hence, in terms of practical implementation the concern for violating a fundamental principle has been alleviated. The elevated status of freedom of expression is far beyond dispute. It remains intact and its status is securely enshrined, and access to illegal Internet gambling can be restricted without infringing freedom of expression or the right to access information. I make additional comments on guarding against any infringement of free expression below, in my discussion of discretion in exercising police authority.  

(c)  Police Authority

18.       Law enforcement agencies source their actions in two statutory provisions. Section 3 of the Police Ordinance provides that: “The Israel Police shall work toward prevention and detection of offences, apprehension and prosecution of offenders, safe custody of prisoners, and maintenance of public order and the safety of persons and property”. This is a basic and important provision, but because of its generality is of limited value to us. A more important provision for our purposes is the specific provision of section 229(a)(1) of the Penal Law, which addresses “closure of places”, as follows:

 “A district police commander may order the closing of a place for prohibited games or a place for the conduct of lotteries or gambling.”

19.       There are two, similar alternatives. The first: “a place of prohibited games”, and the second, “a place for the conduct of lotteries or gambling”. The Administrative Affairs Court focused on the first alternative, which is defined in section 224 of the Penal Law:

“‘Place of prohibited games’: premises where prohibited games are held regularly, whether open to the public or only to certain persons, regardless of whether those premises are also used for some other purpose.”

Based on dictionary definitions in both Hebrew and English, the Administrative Affairs Court ruled that the statutory definition refers to a physical, delineated place; such as a house, building, field (para. 36 of the Administrative Affairs Court opinion). The court relied on Y. Kedmi’s book, which interprets premises “in the broad and comprehensive sense of the concept... Immovable property as distinct from movable property.” (Yaakov Kedmi, The Criminal Law (Part IV)  2283 (2006).

20.       Can the term “premises” be said to include the world of Internet? In my opinion “virtual premises” are also “premises” but this question can be left for future decisions. Section 229(a)(1) of the Penal Law, as mentioned above, consists of two alternatives. The second alternative, as worded, does not necessitate reference to the definitions section. The question therefore arises as to whether “place” can be broadly interpreted to mean “virtual space”. The Administrative Court answered this question in the negative, with sound, logical and, at first blush, persuasive reason: 

“Moreover, relating to a website as a ‘place’ is inconsistent with its mode of operation. A website, by definition, is an agglomeration of information and applications, installed on a computer, that connects with many other computers over the Internet. When a user ‘enters a website;, their personal computer contacts another computer (‘the website server’) which is found elsewhere, and requests information. The user’s computer has a unique number (IP address) and the website server has a unique number (a different IP address). The website server transmits the information to the personal computer, which uses a browser to arrange the information for reading. When “actions” take place on the website, the personal computer asks for new information from the website server, receives it, and arranges it on the personal computer. Information is transmitted between the personal computer and the server, but there is no “place” here at all. Justice Tenenbaum described this well in his article: ‘The choice of the Hebrew word “site”, intuitively conjures the notion of a geographical site. Perceiving the site as a “place” induces us to say “enter a site”, “exit a site” and the like… all the sites on the Internet are connected to each other and the vulnerability of one also harms the other… the Internet was created, developed and exists by virtue of all the individuals which support it and maintain its integrity. Correct and appropriate public policy must be based on this and facilitate these efforts… a “website” is not a place. In fact, a “site” is nothing more than a computer that holds software that regularly communicates with many other computers’” (para. 37 of the Administrative Affairs Court opinion).

21.       These comments were repeated and reiterated by the attorney for the Israel Internet Society, and I am prepared to endorse them unreservedly. A website, in essence, is not a “place” according to its technological definition. However, even if this is our point of departure, the necessary conclusion does not specifically exclude virtual space from the scope of section 229(a)(1) of the Penal Law, as will be explained. But prior to doing so a few comments must be made about the Internet, progress and the attempts of law and justice to keep up with the times. 

22.       Humanity in its entirety, laymen and experts, almost all of us are still learning, wondering and marveling at the Internet. Its influence is felt all over the world, but it will certainly take a long while before we can assess its full effect and implications: “We are living at the height of a revolution: Technological development in the computer realm, digital information and digital networks are generating a social, economic and political upheaval (Niva Elkin-Koren and Michael Birnhack, Introduction, in Legal Network: Law and Information Technology (with Niva Elkin-Koren, 2011);

The computer – and with it the Internet – are not merely a mutation of previous life forms that we have known, which we have given a home to in the legal system. They are a new life form, and their movement is not the movement of the life forms with whom we are accustomed to live. They move in the manner of the knight (the horse) in a chess game; its movement is not altogether forward, nor altogether backward or altogether to the side. It is not altogether diagonal. Its movement is a tinkling of this and a tinkling of that, and it exists in its own right. But here is how the new life form differs from the knight: we know in advance how the knight will move and we know, more or less, how to protect ourselves when it attacks us. As for these new life forms of the computer and the Internet – we have yet to fully explore them; we have yet to reach the bottom of the pit. One click in Jerusalem, and you are in Tel-Aviv, a second click and you are in Australia, a third click – and the system rebels and everything is erased as if it never was. We have begun to move at the speed of light whereas our bodies are in the carriage, and our stream of thought moves at the speed of the carriage (Mishael Cheshin, “Introduction” The Computer and the Legal Proceeding: Electronic Evidence and Procedure  (2000).

Some view the Internet as a new universe. “In a short time the Internet has created a new universe of inconceivable dimensions. This universe dominates almost every aspect of civilization, replicates it and corresponds to it” (Rubick Rozental, A Few Comments on the Language of Internet, Legal Network: Law and Information Technology, eds Michael Birnhack and Niva Elkin-Koren, 2011, 61).  The Internet has come to our world, entering into its inner domains, but we still have trouble defining it. It exists all over the world and simultaneously in no place at all. More precisely, there is access to Internet and its activity all over the world, but its existence is “nowhere”.     

23.       As is well known, the law follows sluggishly in the footsteps of innovations, and legislation does not keep up with the pace of scientific progress. Offenders against the law adapt to progress more rapidly than its enforcers. This is axiomatic. The former have no restraints; the latter do. Many years passed between the invention of the computer and the enactment of the Computers Law, (1995). Less than a generation or two passed in terms of computers, and the law is already out of date, because the legislature did not foresee, nor could it have foreseen the innovations in technology. But not only is the legal world perplexed. Psychology too has encountered new phenomena of addiction and psychological injuries, and is attempting to develop updated, “on the go” reponses.  The same is true for sociology, and other disciplines in social sciences, natural sciences and the humanities. Not surprisingly, the world of law too is still unequipped. Some have taken an extreme view, claiming that given the virtual nature of the Internet, it cannot be subjected to the laws of space, time and state (see written references for this approach in the article of Yuval Karniel and Chaim Wismonski, Freedom of Expression, Pornography, and Community in the Internet, Bar Ilan Law Studies 23 (1) 259 (2006); Michal Agmon-Gonen, The Internet as a City of Refuge?! Legal Regulation in Light of the Possibilities of the Technological Bypass Technologies and Globalism of the Net, Legal Network: Law and Information Technology, eds. Michael Birnhack and Niva Elkin-Koren, 2011, 207).

24.       This extraterritorial approach is unacceptable. Concededly, an abundance of legislation that would impair the tremendous benefit inherent in the Internet is undesirable, nor is there any point in legislation which is unenforceable given the characteristics of the network. However, for good or bad, virtual space exerts a tangible influence over the concrete world, and our world will neither consent to nor tolerate the virtual realm’s exemption from the law. Act of pedophilia committed online are still pedophilia, drugs sold via the Internet still have the same addictive and destructive affect as drugs sold on city streets, the terrible harms of Internet gambling are no less damaging than danger from gambling in a physical place. Quite the opposite, the Internet opens new horizons for the world of crime. They should be blocked. The approach of excluding law and justice from virtual space must be kept off bounds.

25.       All the same, undeniably, the legal regulation of activity in virtual space is complex and complicated. Normative claims as to what the law ought to be are difficult to make, nor is it easy to apply the existing law. Not by chance, there are those who have concluded that this is an area best suited for legislation; while others feel that case law is the appropriate method for adjusting the law to the Internet era. Both camps are uncertain about the extent to which Internet users should participate in formulating the rules governing virtual space and their application. (For a comprehensive review of the possible models, see: Iris Yaron Unger Uncovering the Identity of an Anonymous Internet wrongdoer – Comparative Review, The Knesset, Legal Department, Legislation and Legal Research, 2012).  A variety of models in case law and legislation have been adopted by states around the world (Miguel Deutch, Computer Legislation in Israel, Tel-Aviv Law Studies 22 (2) 427, 428 (1999)). The issue is weighty and broad and its influence far-reaching, but I will not elaborate on it beyond what is required for discussing the concrete questions of this appeal: the authority of the police to issue an order restricting access to gambling websites on the Internet.

26.       It seems that a comprehensive statutory regulation of this field, in a precise manner adjusted to the virtual era is preferable.  The question is whether, absent updated and comprehensive legislation, the law as currently worded satisfactorily considers the police’s authority to issue the orders in question. The Administrative Affairs Court decided to defer the legislative process, but to void police powers to order closure of virtual gambling places until the statute is expressly amended to confer such authority. This ruling involves difficulties.

27.       The ‘waiting period’ created restricts, and occasionally frustrates, appropriate responses toward law enforcement and justice.  This approach, coupled with the previously described pace of technological progress, can be expected to lead to a situation where many legislative acts will be neither relevant nor applicable. Even after the legislature has amended the legislation, it is entirely possible that within little time that amendment will no longer be useful. Hence waiting for the legislature to act will not necessarily provide a solution. “The judge interprets the law. Without his interpretation of the law, it cannot be applied. The judge may give a new interpretation. This is a dynamic interpretation that attempts to bridge between the law and changing reality without having to change the law itself. The law remains as it was, but its meaning has changed because the judge gave it a new interpretation that is consistent with society’s new needs. The court ... realizes its judicial role in bridging law and life (Aharon Barak, The Judge in a Democratic Society 57 (2004); and see HCJ 8070/98 Citizens Rights Office in Israel v. Ministry of the Interior [4], para. 12 of former Justice Grunis’ opinion; LCA 4447/07 Mor v. Barak I.T.T. [1995] Society for the Bezeq International Services Ltd (hereinafter: Mor) paras. F-I, of Justice Rubinstein’s opinion; CA 9183/09 The Football Association Premier League Limited v. Anon [6] paras. 4-6 of Justice Melcer’s opinion (hereinafter:  Anon)).

28.       On one hand, Internet crime is becoming increasingly sophisticated. On the other, criminal law develops slowly. The chasm between the two must be bridged. The Knesset achieves this through legislation, while the courts through case law. The reality of life does not allow us to wait for the Penal Law to be amended to determine which offences can escape sanction when committed over the Internet and which cannot.  Nor is it legally necessary to wait until the legislature has reviewed all of the criminal law’s provisions and decided which of them are applicable to the Internet. The court must respond to the specific matter brought before it and rule one way or another. This is not a question of ‘judicial legislation’, but rather of ‘judicial creation’. The same criminal offences proscribed many years ago and committed on city streets, are now committed on a larger scale and with greater force via the Internet. Occasionally, the actus reus is identical, the mens rea is identical, the legislative purpose is identical, and the damage, is quite often more extensive and severe in the virtual realm.  

29.       Needless to say, we are still bound by linguistic restraints and cannot deviate from their boundaries to cast our net over whatever we see as a crime or a tort in the “real world” and possibly appears as such in the virtual domain. All the same, the legislative purpose, generally common to all offences, whether committed here or there, requires an interpretative effort to prevent greatly harmful artificial loopholes in enforcement. The tremendous damage that can be wrought by the Internet was descussed by Justice E. Hayut: “The infringement concerned enlists human progress and technological innovations in computing in the service of crime, thus yielding a new and dangerous form of criminality that cannot be taken lightly. This form of criminality does not involve physical-tangible harm that leaves its marks on the victim’s body. It is committed remotely, with the click of a button, but its damage is extensive and carries different levels of implications, including to, as stated, a victim’s personal security and privacy, his property, his business, and his commercial secrets” (Cr.A 1439/06 Zaltovski v. State of Israel [7]). In the same vein, former Justice Grunis wrote: “The Internet is fertile ground for committing different types and categories of criminal activity, and inter alia, activities directed against state security. That the Internet era has made it significantly easier, technically, to commit offences such as a conspiracy to commit an offence cannot be ignored. Hence, in the case before us it is undisputed that “A” and “S” became acquainted by chance… via the Internet. In other words, conceivably, if not for the chance Internet meeting they would not have met and could not have conspired to commit the acts described in the indictment. Hence, the case before us demonstrates a need to impose punishment that deters from the negative and criminal side-effects that accompany technological developments” (CrA. 7430 /10 Anon v. State of Israel [8]). There are numerous other examples, and we take judicial notice of the Internet being exploited for grave and dangerous harm on a broad scale.

30.       Pedophilia is a pernicious scourge on the Internet. Is pedophilic material in virtual space nothing more than a collection of ‘pixels’ – with no substance – that the law is powerless to reach?  In practice, the courts do not stand idly by, and they ideed apply the Penal Law’s provisions to offences committed over the Internet. Naturally, this is not done reflexively, but rather the required physical and mental elements have been examined, under the circumstances of each case, and the principles of criminal law have been applied. (See Assaf Hardoof, Cybercrime, 17 (2010) who sharply criticizes the approach that the Internet’s characteristics undermine the foundations of criminal law. According to his approach, the mental complexities leading to criminal conduct committed in a physical environment also exist on the Internet.)

31.       We will return to the meaning of a “place… of gambling” in section 229(a)(1) of the Penal Law, which the police is permitted to close. If, according to the Administrative Affairs Court’s decision, it refers to a physical and not virtual place, then logic dictates that this would also be the meaning of a “place… of gambling” immediately above in section 228 of the Penal Law. If so, then not only would the police be prevented from issuing orders restricting access to gambling websites, but it is doubtful it would even be possible to convict a person operating, over the Internet, “a place for prohibited games or a place for the conduct of lotteries or gambling” (section 228 of the Criminal Law). On its face, this would conclusively preclude not only restricting access to illegal gambling websites, but also the enforcing the prohibition of possessing or operating illegal gambling websites. This state of affairs would remain until we are saved by a statutory amendment, which may or may not come soon.

32.       Moreover, in Israeli legislation, the term “place” is used for different offences and in numerous contexts. For example, “public place” is defined in section 34(24) of the Penal Law and is mentioned in numerous other sections concerning offences and punishments; Chapter C of the Preliminary Part of the Penal Law, deals with “Applicability of Penal Laws according to Place Where the Offense Was Committed  (emphasis mine – N.S.). A place in which an Internet website is viewed, or is used is a “place” that establishes judicial jurisdiction. Should we exempt the Internet from the Penal Law going forward because it is excluded from the definition of a “place”? Similarly, would we permit discrimination on the Internet just because it is excluded from the definition of a “public place” in section 2 of the Prohibition of Discrimination (Products and Services) in Entrance to Places of Entertainment and Public Places, 5761-2001? (See e.g. the conviction for supporting a terrorist organization on the Internet, where the internet was found to be a “public place” CrimF (Nazareth) 12641-11-10 State of Israel v. Abu-Salim (Deputy President Yung-Gefer) paras. 47-56 (1.4.12)).

33.       The civil law, too, is frequently required to apply the concept of “place” to the Internet. On more than one occasion courts have held that Internet-based conduct fall within the jurisdiction of courts all over the country. For example, in a breach of copyright and intellectual property case, concerning a website for a virtual shop selling household goods and gifts, the court held that “the picture was presented on the Internet, namely – in each and every place within the area of the State of Israel. It is therefore clear that the place of the omission was in the entire state and by extension in each and every district… the territorial jurisdiction extends to the entire area of the State of Israel” (Comments by Judge Tenenbaum in App. (Magistrates – J-Lem) 8033/06 Steinberg v. Levi (10.4.2007). These remarks, made in his role as judge are inconsistent with his decisive remarks in his role as scholar in the article cited above: that “an Internet site ‘is not a place’, which the Administrative Affairs Court relied upon in the decision appealed here (para. 37)). Even more accurately, all the alternatives stipulated in Regulation 3(a) of the Civil Procedure Regulations, 5744-1984 employ the language of “place” (place of residence, place of business, place of creating obligations, place intended for fulfillment of obligations, place of delivery of asset, place of act or omission).  Is it possible to exclude the Internet from territorial jurisdiction because it does not fall into the category of “place”?

34.       Due to space constraints and in the absence of satisfactory arguments it cannot be responsibly councluded that wherever the term “place” appears in primary or secondary legislation it must be applied to the Internet as well. Conceivably, there could be certain, isolated exceptions, but the rule should be that the Internet fits the definition of “place”. The Israeli Internet Association’s claim, which the Administrative Affairs Court accepted, that both in truth and according to its dictionary definition, virtual space is not a “place” is not sufficiently persuasive. The settled, entrenched and well-accepted law is that “the words of the law are not fortresses, to be conquered with the help of dictionaries, but rather the packaging of a living idea which changes according to circumstances of time and place, in order to realize the basic purpose of the law” (comments by then Justice A. Barak (LCrApp 787/79 Mizrahi v. State of Israel [9] at 427). There, the Court held that the “one who escapes from lawful custody” refers not only to an inmate who literally escapes from prison but also to a prisoner who fails to return from furlough: “it may be argued that our concern is with a criminal provision that should be accorded a narrow construction, by attaching only ‘physical’ meaning to the terms ‘custody’ and ‘escape’. I cannot accept this line of thought. A criminal statute, like any other statute should be interpreted neither narrowly nor broadly but instead by attaching to it the logical and natural meaning that realizes the legislative purpose" (ibid).These statements have retained their vitality and are applicable to our case too, and even a fortiori: in that case the issue concerned a criminal offense, whereas our concern here is with an administrative measure.

35.       As stated, the legal world is still not best prepared to handle the Internet, and this is also true of the world of language.  The terms that serve us in virtual space are borrowed from the tangible world. On the Internet we use a “desk top”; the user “cuts”, “copies”, “pastes” and “deletes”; “writes” “notes”; “stores” in “files”; and “sends” to the “recycling bin” and receives “documents” and “junk mail” into a “mail box”. Given this background, the word “place” is by no means exceptional. It would not be a deviation from the ‘principle of legality’, nor from the rules of interpretation were we to determine that “place” also includes virtual space, and that its meaning also encompasses a website. Since we speak of an Internet “site” in our daily conversations, we should remember its dictionary definition and its Talmudic root (b.Zevahim 7a): a “site” is a “place”.

36.       Therefore, in interpreting section 229(a)(1) of the Penal Law, I see no justification for taking a literal and narrow approach, which interprets the word “place” as a physical place only. In the current modern era, a website is also a type of place. The section’s language also tolerates the classification of virtual space – or perhaps better termed as “computerized space” – as a “place”.

37.       From language to purpose: In the case of Tishim Kadurim [3] then Justice A. Grunis explained the purpose for prohibiting certain games as a value-based goal. Man is born to labor rather than easy enrichment based on luck. Addiction to gambling is a serious scourge that harms the individual, their family and society as a whole. Before the Penal Law there was the Criminal Law Amendment (Prohibited Games, Lotteries and Bets), 5724-1964, and before Justice A. Grunis there was Justice Haim Cohn who made the following remarks about the legislative purpose behind the previous statute:

                        The legislative purpose, as reflected clearly in the nature and the language of the law, is to combat, by criminalization, the scourge of gambling and betting – the scourge of winning money or its equivalent other than by work or other reasonable consideration, but rather by the luck of the draw. Mr. Terlo rightly mentioned the well-known fact that mankind has an evil tendency to try his luck in gambling. One need not have a particularly developed commercial instinct to assess the tremendous prospect for profit in the commercial exploitation of this natural human tendency.  Mr. Terlo said, and I agree with him, that such commercial exploitation, in all of its various forms, produces demoralization. I further add that from my perspective, the wrong that the law seeks to prevent is not only the encouragement of desire for lawful easy enrichment without labor, but also – and perhaps primarily – the placing of an obstacle before the blind, where instead of spending his money on his own sustenance and that of his household, he invests in dubious ventures based on luck (HCJ 131/85 Savizky v. Minster of Finance [10] at 376).

38.  As we can see this plague is nothing new to us. The following is a reliable testimony from two hundred years ago about this phenomenon and the harm it causes, relating to the fate of those who wager on dice: “The number of those involved has multiplied, where their foolish preoccupation is such that they spend nights and days gambling, in their homes, on their roofs and on street corners, until they lose everything. Even if they are wealthy, eventually they lose all and must steal and resort to violence, while their family members starve; their children beg for bread, and there is none to give them, for they do not work to bring food to their families. And one sin leads to another, in that they neglect prayer and fulfillment of the commandments, for when temptation seizes them and they engage in gambling, it is extremely difficult for them to forsake it, as difficult as separating one’s fingernail from one’s flesh. They do not take care of themselves and do not tear away from gambling, even to eat at the time for eating and to sleep at the time for sleeping. One who is addicted to gambling will not leave it even when he is old, for only will-power can separate from it.” (Rabbi Eliezer Papo, Pele Yo’etz, Constantinople, 5584 - 1824).[1] […]

39.   In 1975 the legislature added a provision to the Penal Law Amendment (Prohibited Games, Lotteries and Bets), 5724-1964, which granted the District Commander of the Police the authority to issue an order to close “a place for prohibited games or a place for the conduct of lotteries or gambling” (S.H 5735, No. 779, 222). According to the introduction to the Explanatory Note of the bill, the legislature was dissatisfied with the existing criminal sanction, and sought to close places where prohibited games were conducted, as a preventive measure: “The Law imposes a punishment on the possessor or operator of a place for conducting games with cards, dice, game machines, and the like, But there is no law that prevents the actual existence of such place… The proposed law seeks to establish provisions… by enacting legislation directly designed to address the phenomenon of the crime that thrives in such places, and to confer the authority for the advance prevention of the opening of businesses that are liable to harm public safety and generate crime. It also proposes to stiffen the punishments and to adapt them to any given situation (H.H. 5735-1975).” Incidentally, the Explanatory Note refers to the closing of “a certain place”. In light of our conclusions above, it is not inconceivable that “a certain place” encompasses the Internet, it being a place where anonymity is preserved and where we have no knowledge of a website owner’s or users’ identities, nor do we know what that place is, or where is it located, all of these are considered  “anonymous".

40.       The harm wrought by gambling on the Internet is immeasurably greater than that which is caused in physical place. Gambling websites on the Internet are accessible to all sections of the population, from adult to child, the rich and the poor, the honest and the corrupt, the wise and the legally incompetent. With just a click of a button and press of a key any novice can gamble on the Internet. But not only accessibility is concerning, there is also availability – at  any time and any hour.  Identity can be disguised to enable the use of all features of virtual spaces. All of these come together to exacerbate the phenomenon and its range of harms: addiction, vast loss of funds, money laundering, tax evasion, incidental crime, and more. A large physical gambling venue can hold hundreds, perhaps even thousands of clients, but it pales in comparison to the Internet, which is available to millions of people. With these capacities, the number of victims also rises exponentially, as well as the amounts of funds dubiously invested.

41.       When section 229(a)(1) of the Penal Law was enacted, the legislature did not anticipate the Internet and by extension did not consider the illegal gambling that would be conducted there. However, the legislative purpose evidently was to prevent illegal gambling, regardless of location.  The police pursuit of offenders does not end at virtual space; the Internet cannot become a city of refuge. The material factor is not the platform for illegal gambling but rather the phenomenon itself. “Do not look in the canister, but at what is inside (Mishnah, Avot 4.2)” If it is technically possible to close a gambling place, even if the closure is not an enclosure but rather a prevention of access, the legislative purpose should be realized, to the extent possible, through proper interpretation. And again, if we assume that it refers to a physical place, then illegal gambling need not necessarily be conducted in a closed structure, for example, a vast area in which illegal gambling takes place.  The possibility of ordering its closure exists and can be done by preventing access through the gate. The police would be authorized to close the gate and prevent access to a space used for criminal activity. In the same vein, the Internet too is a space: a computerized space (some have used the expression “global public space”. See Jurgenb Habermas, The Structural Transformation of the Public Sphere, Thomas Burger & Frederick Lawrence translations (1989); Tal Samuel-Azran, Global Public Sphere on the Internet: Potential and Limitations, Legal Net:  Law and Information Technology, 433, 434 (Niva Elkin-Koren and Michael Birnhack eds, 2011)). Entrance into computerized space is also through a “gate” embodied by the access provider and the website operator. Concededly, the entrance is not physical, actually consists of communication between computers, but this is immaterial, because the technological definition is inconclusive as to the interpretative question.

42.       Jewish Law can enlighten us. The Torah was given at Mt. Sinai. In the ancient world, modern technology and the Internet era were unimaginable. Nonetheless, the Torah seeks to adapt to present and future reality by way of interpretation, for otherwise it would become a dead letter instead of a living document. Interpretation must adhere to language in order to fulfill the Divine words and to not deviate from them in any way. It was specifically because of this that the Talmudic Sages saw no difficulty in adapting terms such as ox or donkey or camel, used in those times for labor and transport, to the context of vehicles and planes. This is the present need for otherwise Jewish law will no longer be relevant or valuable. Rabbi Aharon Lichtenstein made remarks pertinent for our purposes, and they should guide us: 

                        In the developing technological reality the ability to cause damage, physical or even virtual continually increases, without incurring any liability under the criteria of Nahmanides or of Rabbi Yitzhack.[2] The harm may be more abstract and the process of causing it may be more indirect than the minimal threshold for liability under garma.[3] Nonetheless, the result is quite severe.

                        Accordingly, a learned and sharp-minded thief would be able to plan and execute the perfect burglary, with the assistance of grama tools for breaking in, without consequences, whether due to direct damage or force of garmi.  Should we persist to grant exemptions in this kind of scenario based on the law of grama in torts?...

                        The request is simple, the authority exists and eyes are raised in anticipation. In the event that leading Jewish authorities succeed in enacting an amendment for this matter it would provide a  remedy for a real concern for society, and at the same time, would  elevate the glory of the Torah (Lessons of Rabbi Aharon Lichtenstein, Dina d'Grami, 200 (5760); See also in the comments of Justice N. Hendel, para. 6 Anon.)

43.       Thus far on the laungauge and the purpose. We now proceed to address some of the difficulties the Administrative Affairs Court considered in the decision appealed here, in terms of applying of the law to the virtual sphere. These difficulties also lead the court to conclude that the solution lies with the legislature and not the court, and that it is appropriate to wait for legislative amendment.

44.       A primary difficulty is that the orders restrict access to the Internet through third parties – the access provider. According to the Administrative Affairs Court, based on the Israeli Internet Association’ claim, the law authorizes closing a place, but does not authorizes ordering a third party to prevent access to an Internet site. The claim is a weighty one. Access providers’ legal responsibility poses questions in different legal contexts. For example, in the Mor [5] case the Court held that the provider is not obligated to disclose the identity of anonymous “talkbackers”, and called upon the legislature to regulate the matter. Similarly, in Anon [8] the Court ruled that a supplier cannot be compelled to reveal the particulars of a site owner who breaches copyright in order to file an action for that breach. This decision was also accompanied by a call for legislation of the matter. At the same time, the Court held that if a certain matter did not find a legislative solution, courts would have to provide solutions in case law, and the legal doctrines required to fill in the lacunae were presented. The matter before us is different. Here, it cannot be said that there is no legislative provision that confers authority. There is no need for primary legislation of the issue. The section’s interpretation leads to the conclusion that the section applies to the virtual realm. Legal issues concerning the access provider may be adequately resolved in the context of how the police may exercise its authority to order restricted access to gambling websites. That such difficulties exist should not be a determinative factor in whether the authority exists.

45.       I also believe that the legal challenges involved in restricting access to gambling websites vis-a-vis the access providers were exaggerated. First, using a third party to execute criminal proceeding is not illegitimate. The law recognizes, for example regarding a summons to present evidence for investigation or a trial (section 43 of the Criminal Procedure (Arrest and Search) (New Version) Act, 5729-1969. Second, given the license they receive from the State, access providers have a public duty. They sit at a central intersection – the “Internet points of control” – and under these circumstances using them to execute orders restricting access is justified.  Third, it appears that had it concerned the closure of a physical place by the police, with third party assistance, there would have been no problem.  The attorneys for the State demonstrated this in another context thus: Illegal gambling is being conducted in an isolated villa. A guard is in charge of the path leading to the villa. Would the police not be authorized to order the policeman to prevent gamblers’ access to the path leading to the villa? Fourth, a police order directed at access providers instructing the to restrict access to illegal gambling websites does not require them to conduct any investigation or inquiry and does not unlawfully breach any of their rights, ordering them only to “execute a technical act that does not involve any discretion of the closing of a site with a particular IP address, explicitly specified in the order” (section 41 of the State’s summations). Case law has stressed that imposing legal responsibility on the supplier raises concerns that should be regulated statutorily (see Rachel Alkalai, Civil Liability of Internet Services Suppliers for Transfer of Harmful Information Hamishpat 6, 151, 154 on the Report by the Knesset Sub-Committee for Communications and Information on the Need for a Legislative Arrangement). However the situation in the case before us differs from the one described there. We do not hold that Internet providers are legally responsible to prevent, on their own initiative, access to websites used for illegal gambling.  Moreover, our ruling does not prevent access providers from petitioning a court in appropriate cases in order to subject it to judicial review. This right is stipulated in section 5(1) of the Administrative Affairs Court Act, 5760-2000 (item no. 7 of the First Schedule). Recall that the access providers did not exercise this right and did not challenge the order.

46. The Israeli Internet Association claims that this is an “unprecedented and exceptional measure” (page 1 of the summations). This is not so. The Administrative Affairs Court recognized that restricting access to Internet websites used for gambling is accepted practice around the world: “The desire to minimize the harm from negative uses has led certain authorities, even in liberal democratic countries, to take various measures against websites that support anti-social activities (see: Betting on the net: An analysis of the Government’s role in addressing Internet gambling, 51 Fed. Comm. L. J. (1999)). One of those measures is blocking access to websites that are breading grounds for illegal activity, by various technological means…” (para. 19 of the opinion) (ed. note: translated form the Hebrew opinion’s translation).  In Australia, a law was enacted in 2001, stipulating that “access providers shall block access to illegal gambling sites should they receive an express demand to do so from the authorities” (ed. note: translated from Hebrew opinion’s translation), subject to the conditions set forth in the Interactive Gambling Bill 2001. In 2006, the United States passed a law prohibiting Internet gambling – the Unlawful Internet Gambling Enforcement Act of 2006, which inter alia allows that under certain circumstances, the court may grant orders to compel internet providers to block access to gambling websites (paras. 54- 55 of the Administrative Affairs Court opinion).

47.       Additional restrictions are common around the world. The Council of Europe’s Convention on Cybercrime deals with the adoption of legislation intended to protect society from crimes committed online (http://conventions.coe.int/Treay/en/Treaties/Html/185.htm). It provides inter alia that all parties to the convention will adopt legislative and other measures as may be necessary to criminalize various acts of child pornography, which is disseminated over computer systems (Article 9). In 1998, Sweden passed a law addressing liability for electronic bulletin boards, including various categories of Internet pages (Act (1998:112) on Responsibility for Electronic Boards).  This statute requires service providers who store information (as distinct from Internet access providers) to make illegal content inaccessible or to remove the content. If further refers to a number of provisions in Sweden’s Penal Law, for example, incitement to racism, or child pornography (http://www.nai.uu.se/forum/about-nai-forum-1/SFS-1998_112-Act_E-boards.pdf.).

48.       Australia established an agency known as Australian Communications and Media, which is charged with, inter alia, regulating Internet content. The agency is authorized to investigate potentially prohibited content on the Internet, and to issue access providers “notice of warning and removal” relating to the contents of Internet websites used for illegal gambling. In Italy, since 2006, Internet gambling has been prohibited, unless on authorized websites.  Internet access providers are required to restrict access to unauthorized websites listed in a “black list” kept by an administrative body: Autonomous Administration of State Monopolies, http: www.aams.gov.it/site.php?id=6560).  As it turns out the restriction of access to websites is an accepted measure, occasionally following an order by an administrative body. The a priori involvement of a judicial body is not always necessary, and there is no need for a criminal investigation to precede the administrative directive. States around the world acknowledge the necessity of restricting prohibited activities on the Internet as well. The State of Israel is not a pioneer in this realm.

Police policy is to exercise this authority with caution. The investigations and intelligence branch prepare the infrastructure required for issuing an order.  Legal counsel to the police examines the material, and so does the State Attorney.  Immediately before issuing the order, the access providers and websites operates are given the right to present their arguments. The decision to issue the order is given at the level of the district commander.  A party who could have been aggrieved may file an application for a second review, and following that, as stated, may also petition the courts. After issuing the order, the police examines it periodically, and at least once a month considers whether to extend it, revoke it or amend it. Against this background, if the police orders, consistent with its authority, a third party to assist it in preventing an offence, and if the latter agrees, why should the court prevent it from doing so? If the same access providers wish to object, the doors of the court are open to them in order to hear their claims.

50.       As we have said, the authority is there; the manner of exercising it is subject to discretion and judicial review. Recall, that the access providers filed no petition to any court, and in this sense, the Internet Association is indeed meddling in a dispute to which it is not a party (HCJ 651/03 Citizens Rights Bureau in Israel v. Chairman of the Sixteenth Knesset Central General Elections Committee PD 57(2), 62.) Regardless, in the absence of appropriate factual infrastructure, there is no practical possibility or legal need to elaborate further on this matter.

51. The Administrative Affairs Court stated that restricting access through the orders in question could incidentally block innocent websites. Attorney for the State responded to this argument, claiming that from a technological perspective this fear was negligible because the IP address can be crossed with the website’s URL address in order to prevent restricted access to innocent sites. Personally, I see no need to rule on this point, given that it was not fleshed out in the Administrative Affairs Court.  The state can consider these claims in light of its discretion to exercise the authority. In preparing the order, the police must ensure that execution by access providers does not harm innocent websites, but only restricts access to the targetted website. Where it is impossible to avoid harm to innocent websites, as a side-effect of blocking access to a gambling website, to the extent that the Israeli Internet Association is correct and such situations indeed occur, the police would not be permitted to order restricting access to the site. Presumably, a provider wishing to avoid harm to innocent websites would present such claims under the right to be heard, in a petition for second review by the police, or in a petition to the court.

52.       The Israeli Internet Association also claimed that restriction of access was ineffective. The attorney for State argued in response that the inefficacy claim directly contradicted the Israel Internet Association’s claim concerning the damage such orders would cause: If the orders are ineffective, then naturally no harm would be caused. In any event, the court has no expertise regarding the efficacy of the orders. The position of the Israel Police – the professional body charged with the matter – is that the orders have a substantial effect and that this is another effective tool against illegal Internet gambling.  The Israel Police is aware of the methods used in an attempt to ’bypass’ the orders (for example, changing the URL website address, or its IP address). But this involves costs and not all end users know how to do it, and the police also has the tools for dealing with ‘bypass’ attempts. Actually, enforcement difficulties are not unique to virtual space and are common in all areas of crime: “For by wise counsel thou shalt make thy war” (Mishlei 24:6).

53.       The Administrative Affairs Court had difficulty not only with “place”, but also with “the closure”. According to the court, “closure is one thing, blocking access is another” (para. 41), and “even a broad interpretation of the law cannot confer the police commander authorities not specified in the law”  (ibid). My opinion is different. If the police is authorized to fully close illegal gambling websites on the Internet, then let alone it should be authorized to block or restrict the access to them. This is a less harmful measure. Section 17(b) of the Interpretation Law 5741-1981 provides that “any authorization to act or compel action implies the auxiliary authorities reasonably required therefore.” Authorization to close (and afortiori if closing is not possible) also means granting powers to block access.

54.       The Israeli Internet Association opposed various claims by the State’s representatives regarding the legislative regulation of the issue. This may be so, and it would have been preferable had they spoken in one voice, but we must remember that the issue raises real doubt. There is nothing to prevent changes in views or thought processes, and in making deliberations more productive. The binding position of the State’s representatives, at the end of the day, is that of the Attorney General, and the arguments were made on his behalf. Without derogating from its claims here, the State also submitted the draft bill to clarify the situation, but one cannot know how the legislative process will develop. The same applies to the four previous draft bills presented to the Knesset. Each one of them attempted to explicitly authorize the police to order access suppliers to block access to gambling websites, but none of them materialized into a legislative act. The Knesset members expressed varying opinions but I do not think it is possible to distill a clear conclusion from their comments regarding the subjective intention of the legislature, as concluded by the Administrative Affairs Court: “The fact that the legislator debated the proposal substantively and decided not to enact it, indicates that its subjective intention was not to apply its principles in fact… the subjective and concrete intention of the legislature in this matter, indicates that it sought not to give the District Commander authority to block access to gambling sites pursuant to his own discretion”  (para. 61). In my view, this conclusion is by no means inevitable. According to the record, some of the Knesset Members felt that a legislative amendment was entirely unnecessary, and that the authority already exists. In view of the differing views, additional possibilities exist. Summing up the debate, the committee chairperson pointed out the difficulties that were raised, but the general position was to conduct another hearing. A small part of the legislative proceedings and a few Knesset members who are members of the Constitution, Law and Justice Committee cannot provide a basis for a generalized legislature’s subjective intention.

Final Word

55.  I do not think that there was any justification to cancel the orders issued by the police, with the State Attorney and the Attorney General’s knowledge, to restrict access to gambling websites. First, it is doubtful whether the Israel Internet Association has locus standi in this petition; second, the alleged infringement of free expression is certainly not as serious as was alleged; third, the main point is that section 229(a)(1) of the Penal Law constitutes an authorization for the police to issue the orders. This is consistent with the section’s language, its logic, the legislative history and the legislative purpose.  I therefore propose to my colleagues to strike down the decision of the Administrative Affairs Court and to order the restoration of the orders to restrict access to gambling websites.

Note

56.       After reading the opinion of my colleague, Justice U. Vogelman, my impression is that he was slightly tough on the State regarding the use of a third party – access providers – for purposes of exercising the authority under section 229 of the Law. I addressed this point in paragraphs 44-45 above. I will add just this: My colleague mentioned the well known distinction between delegating authority which also includes the exercise of discretion, and receiving assistance in technical matters related to exercising that authority. My colleague acknowledges that the access providers were not required to exercise discretion, and the police only requested their help in exercising its own authority – in the technical act of blocking a website identified by its IP address as specified in the order. However, according to my colleague, it is still necessary to show that the access providers agree to assist the police, and once the police imposed an obligation upon the access providers, it can no longer be considered assistance.

My view is different. First, let us assume that the police district commander seeks to order the closure of a room used for gambling. To do so he orders a third party, in possession of the keys to that place, to lock the door, without requesting consent. Is there anything wrong with that?  Had the place of gambling not been an Internet site, but rather a room in a hotel, would the police not be authorized to order a reception clerk to assist it in exercising its authority to close that room or to open it? Would this require a legislative amendment?

Second, as mentioned in para. 49 above, prior to issuing the order the access providers were given the right to present their claims; the access providers are entitled to request a second review of the decision to issue an order, and the access providers are also permitted to petition the Administrative Affairs Court. In fact, the access providers took none of these steps. They may have reconciled themselves to the orders as a token of good citizenship; they may have an interest in preventing access to gambling websites, because in doing so they reduce their exposure to law suits (for example: parents suing them for their damages as a result of their children’s Internet gambling). I will not belabor the point speculating because the facts suffice: The access providers did not institute any legal proceedings to express their objection to the orders. My colleague seeks to be meticulous about the access providers’ rights, and requires that their consent be “explicit”, “sincere and genuine willingness”. Under the circumstances, my view is different. In the Haggadah of Pessach, tomorrow night, with respect to the son who does not know how to ask, we say “you shall open your mouth for him”. By way of analogy, this is how we relate to a mute, who is incapable or does not know how to present claims or to ensure their rights are protected. Access providers do not fall into this category and I see no justification for treating them under the criterion of “you shall open your mouth for him”, when the gates of the court were open to them, and they knowingly refused to enter. More precisely, in the future too, whenever the police seek to issue an order, Internet providers will be able to object and to present their case before the order is issued, after it is issued, and also to file an administrative petition. It therefore seems that we may appropriately apply the Talmudic rule that “silence is regarded as consent” (Bavli, 87b), to infer their agreement, and thus remove the obstacle to the exercise of the police authority to restrict access to gambling websites.

 

Justice U. Vogelman

Is the District Police Commander of the Israel Police authorized to order Internet access providers to restrict Israeli users’ access to gambling sites on the Internet, under their authority under section 229(a)(1) of the Penal Law, 5737-1977 (hereinafter: the Penal Law), to close down gambling places? This is the question before us.

General

1.         The appearance of the Internet has radically changed our world.  It enables easy and convenient communication between people. Some use it for interactive entertainment; others use it for electronic trade. Many use it – occasionally on a daily basis – to send electronic mail and for sending instant messages. A countless number of websites enable video and audio, and others enable telephony, files sharing, and the like (Assaf Hardoof, Hapesha Hamekuvan) [CYBERCRIME], 114, 117 (2010)). The web also enables access to immense quantities of information pooled on the Internet – an ever growing collection of documents created by independent authors and stored in servers’ computers. In that sense, the Internet is the most outstanding feature of the “information era” in which we are living, an era in which advanced technological reality enables the immediate transfer of data on a massive scale compared to the world around us (see HCJ 3809/08 Citizens Rights Bureau v. Israel Police [12] para.1 (hereinafter: the “Big Brother” law). In this way the Internet has and continues to contribute to social, economic, scientific and cultural developments around the world. Alongside these numerous advantages, phenomena of lawbreaking are likewise are not absent from the virtual world. The Internet enables activity that is defined as a criminal offence or civil tort, as well as technologies that enable the commission of torts or offences (Michal Agmon-Gonen, The Internet as a City of Refuge?! Legal Regulation in Light of the Possibilities of the Technological Bypass Technologies and Globalism of the Net, in Legal Network: Law and Information Technology, eds. Michael Birnhack and Niva Elkin-Koren, 2011). Illegal gambling enabled by the Internet is part of the content available on the Internet. Gambling websites offer their services from their locations in countries that permit it, and are accessible from different states around the world, including those in which participation in gambling is prohibited or restricted. Over the past few years these websites have become increasingly ubiquitous, given the high financial incentive for establishing them. Online gambling is one of the most profitable branches of trade on the Internet (Chaim Wismonsky, Sentencing Guidelines for Computer Crimes, Bar-Ilan Law Studies 24(1), 81, 88 (2008)).

2.         There is no need to elaborate on the negative social value involved in gambling. My colleague Justice N. Sohlberg also discussed this at length. This phenomenon has seen plenty of opposition, including the claim that a one’s livelihood should be based on work, a vocation or some other legitimate activity rather than easy enrichment based on luck. Whereas participating in gambling is not creative and undermines one’s work-ethic, a person participating in prohibited games may become addicted to this “occupation”, and the addict could cause extensive losses to themselves and their family and ultimately become a burden upon their family and upon society. As known, there are a few legal arrangements that permit gambling games under state auspices, encompassed in the Regulation of Gambling in Sports Act, 5727-1967 and in section 231(a) of the Penal Law. Mifal HaPayis,[4] for example, operates under such a permit. Notwithstanding that state-sponsored permitted gambling enables quick enrichment based on luck and also poses the danger of addiction, it should be distinguished from illegal gambling. Permitted gambling enables fundraising for public causes; they are not usually accompanied by negative elements such as coming under the control of organized crime, and finally, the state can oversee their mangagement and the distribution of funds (see AAA 4436/02 Tishim Kadurim [3] at p. 804,806; Ofer Grusskopf, Paternalism, Public Policy and the Government Monopoly over the Gambling Market, Hamishpat (7) 9, 28 (2002)).  As an aside, it should be noted that in many states gambling is permitted on a wider scale, but needless to say, our decision at this stage is restricted to Israeli Law and the legislatures’ values-based determinations.

3.         Techonolgically, it is now possible to block access to a particular website (compare:  Rachel Alkalai, Civil Liability of Suppliers of Internet Services for Transfer of Damaging Information, Hamishpat  (6) 151, 159 (2001)). This is the background for the orders subject to this proceeding. The events concerning us unfolded as following. At the end of June 2010 Israel Police district commanders sent warning letters to Internet access providers, notifying them of their intention to order blocking Israeli users’ access to various gambling websites (hereinafter: the warning letters). In the warning letters the district commanders specified the URL addresses and IP addresses of these websites. Notably, the Appellants claimed that the website operators also received a similar warning. The Internet access providers received a 48-hour extension to submit their challenges of the orders, and a further extension was granted to providers who so requested. One provider, Respondent 2, exercised its right to object to the orders. In a letter to the district commanders, Respondent 2 claimed that the orders because were unlawful because the district commander is only authorized to order closure of physical places; and also because the Penal Law does not authorize a district commander to use the providers to prevent users in Israel from having access to gambling websites. In August 2010 the police gave notice that it had rejected these claims and the orders forming the subject of the appeal were subsequently issued.

4.         Our decision in this appeal therefore relates to the legality of these orders. My colleague, Justice N. Sohlberg, found that there is a doubt regarding the locus standi of the Israeli Internet Association in this petition; and that there was no justification to declare the orders invalid because they were issued by the district commander without authority, as per the ruling of the District Court. Having read the comprehensive opinion by my colleague, and having considered the matter, I have concluded I cannot concur with the result that he reached. My conclusion precedes the analysis. As detailed below, in my view, section 229(a)(1) is short of authorizing the police to issue the relevant orders. In the first part of my remarks I will discuss the locus standi of the Israeli Internet Association. Next, I discuss the source for the claimed authority – section 229 of the Penal Law, and examine whether it sufficiently authorizes ordering the Internet providers to block access to gambling websites.

Locus Standi of the Public Petitioner

5.         The Israeli Internet Association is a non-profit organization that works to promote the Internet and its integration in Israel. The Association seeks to further the interests of Internet users. It has no self-interest beyond the interests it shares with the general public, or at least with significant parts thereof, and as such its petition is a “public petition”. As a rule, this Court’s jurisprudence has taken a permissive approach to standing rights of public petitioners (HCJ 5188/09 Association of Renovations Contractors for Restoration v. State of Israel  [13] para. 7.) Our firmly settled rule is that a public petition will be recognized where “the matter raised in the petition is of a public nature, which has a direct effect on advancing the rule of law and establishing policies to ensure its existence in practice” (HCJ 1/81 Shiran v. Broadcasting Authority [14] at p. 374; see also HCJ 910/86 Ressler v. Minister of Defense [15], at 462-463). Who can serve as the public petitioner? It could be any one of many people aggrieved by a certain administrative act (HCJ 287/91 Kargal Ltd v. Investments Center Council [16] at p. 862), including any one who is unable to indicate a personal interest in the matter or harm caused to them personally (HCJ 651/03 Citizens Rights Bureau in Israel v. Chairman of Central Elections Committee for Sixteenth Knesset [11] at p.68)). The judicial policy on this issue was and still is influenced by fundamental value-based concepts about the role of judicial review in protecting the rule of law and supervising appropriate functioning of public administration. As such, the court should refrain from refusing the hear a person who claims that an administrative authority has violated the rule of law for the sole reason that they have no personal interest in the matter, given that this would lead to providing the authority with a stamp of approval to continue violating the rule of law (HCJ 962/02 Liran v. Attorney General [17] para. 14 (hereinafter: “Liran”). Yitzchack Zamir Administrative Power Vol.1 120-121 (2^nd ed. 2010) (hereinafter: Zamir)). Along with broadening of the scope of standing rights, the principle that the court will not generally grant a public petition where there is a particular person or body who has a direct interest in the matter should be preserved, unless they themselves have failed to petition the court for relief in the matter concerning them (see Liran [17]). In the words of former Justice M. Cheshin in HCJ 4112/99 Adalah Legal Centre for Arab Minority Rights in Israel v. Tel-Aviv Municipality [18]: “…in a case of this kind we would tell the public petitioner seeking to claim the right of the individual injured: Why are you meddling in a quarrel which does not involve you? If the victim did not complain about the infringement that he suffered, why have you come to provoke dispute?” (ibid., p. 443).  

6.         My colleague Justice N. Sohlberg felt that the Internet Association was “meddling in a quarrel which does not involve it”. I do not share this position. In the case before us, the Internet Association has raised grave claims about the alleged overstepping of authority in issuing orders to Internet access providers. Our concern is with a first attempt to define the scope of the district commanders’ authorities under section 229 of the Penal Law, in terms of blocking access to Internet gambling websites. This is a fundamental question. It is undisputed that the administrative authority’s activity within the boundaries of its authority are central to maintaining the rule of law. This Court has already held that claims of exceeding of authority are categorized as claims that justify broadening standing rights, for “...a court takes a more lenient attitude to the right of standing of persons not directly and substantially harmed where it concerns exceeding authority of a tribunal or agency, or where it concerns an act committed unlawfully, as distinct from other cases” (per Justice Kister in HCJ 80/70 Elizur v. Broadcasting Authority [19] at p.649; compare HCJ 852/86 Aloni v. Minister of Justice  [20], at p.63).

7.         One of the underlying considerations in Justice N. Sohlberg’s position on the Internet Association’s standing was the concern that conducting a proceeding on the part of the Internet Association might mean that the court would not be presented with the required factual foundation.  While I do not deny this concern, it seems that it need not undermine the Association’s standing.  First, we may assume that had the Appellants who participated in the proceedings in the lower court wished to clarify any factual matter or otherwise, they would have done so. For example, consider the Appellant’s complaint that the trial court was not presented with a full description of the technological ability to order blocking access to the websites. Without making an iron clad determination on the question at this stage, it suffices to say that nothing prevented the Appellants themselves from presenting data on this point, to the extent that they disputed the factual infrastructure in the petition. Second, nothing prevents the public petitioner from presenting the necessary factual foundation. In this case, too, I do not find the legal foundation presented to the Court to have hindered judicial review. Consequently, in my view, there is no ground for us to intervene in the District Court’s ruling that the Internet Association has locus standi in this proceeding.

With this in mind we can proceed to the merits of the matter.

The Question of Authority

8. Section 229(a)(1) of the Penal Law, titled “Closure of Places” provides that “A district police commander of the Israel Police may order the closing of... a place for prohibited games or a place for the conduct of lotteries or gambling”. In section 224 of the Law, a “place of prohibited games” is defined as “premises in which prohibited games are habitually conducted, whether open to the public or only to certain persons; regardless of whether those premises are also used for some other purpose”. In order to determine that the orders directed at the access providers requiring them to block access to gambling websites, are within the authority detailed in section 229 of the Law, three interpretative moves are necessary. First, we must determined that a website fits the definition of “place” as defined by the law; second, that blocking access to the website is the equivalent of “closing” as defined in the Law; and third, that the access providers can be used to exercise such authority.

9.         I am prepared to assume, in line with my colleague Justice N. Sohlberg’s holding that a website could constitute a “place” as defined in different contexts in our legislation, and that an online gambling website may be viewed as a “place of prohibited games” as defined in section 229 of the Penal Law. In this regard, I tend to agree that a purposive interpretation of this legislation, in the spirit of the times and technological progress, may indeed lead us to the conclusion my colleague reached that section 229 of the Penal Law could be also applied to “the virtual world” (compare Assaf Hardoof Criminal Law for Internet Users: The Virtual Actus Reus, HaPraklit (forthcoming) (52) 67, 122-124 (2012) (hereinafter - Hardoof)).

10.       Regarding the infringement of free expression. Internet sites indeed serve for voicing opinions and exchanging ideas, but – as is well known – the law does not treat each and every expression similarly. Even had some of the gambling websites included pictures, explanations concerning the rules of different games, information about gambling relations, chat rooms, and others – this is content located at the periphery of the protected value. As such, even if blocking gambling websites may cause blocking access to lawful content, it must be remembered that the value of the “expression”, which we are asked to protect, is not high and that the extent of protection afforded corresponds to the extent of the interest in question (HCJ 606/93 Kiddum Yezumot v. Broadcasting Authority [21] at p. 28). Moreover, to the extent that it concerns the blocking concrete websites, it seems that the primary infringement relates to the website operators’ freedom of occupation. Our precedents have already held that this is an infringement that passes constitutional tests (Tishim Kadurim [3] at pp.814-815). However, despite this and though I am prepared to assume that the extent of the infringement of freedom of expression is limited, I think it important to note that I share the general approach of the District Court, that when dealing with the sensitive topic of blocking Internet websites, we should particularly scrutinize the concern for infringement of freedom of expression. With respect to gambling websites, and only to them, my opinion, as mentioned above, is that the infringement of free expression that resulted from blocking lawful content on the gambling websites, is of a limited degree, On the other hand, it is certainly possible that other cases will reache us in the future, where there may be reason to significantly broaden the scope of protection afforded to expressions displayed on any particular website. Each site has its own characteristics.

11.       Aadditionally, the sensitivity of the matter – blocking websites – has another aspect , given that the trial court also found that blocking illegal gambling websites could also block access to “innocent” sites which the order did not target.  An unintentional block may occur because a number of websites, not linked to each other, may be located on a server with the same address. Regarding this point, the trial court referred to Center for Democracy & Technology v. Pappert [31] 337, F.Supp.2d 606 (E.D Penn. 2004), in which the United States Federal Court struck down a law that enabled censorship of pedophile websites, among others because of the filtering of “innocent” websites. The Appellants, for their part, challenge this holding. They claim that from a technological perspective, the fear of blocking sites that are unconnected to gambling activity is negligible, because the access providers were requested to block websites based on the combination of the IP address and the website address (the URL). This combination of the IP address and the URL address, allegedly, minimizes any possibility of blocking innocent websites. Apparently, this point was not fully clarified because even after examining of the papers filed with the trial court, it is unclear whether it is technologically possible to block only “targeted” gambling websites, as alleged by the Appellant, or perhaps, technologically, it poses difficulties. If indeed, there is danger of blocking “innocent” websites, then this would clearly constitute a grave infringement of free expression and the right to access information – an infringement that would necessitate explicit statutory authorization as well as compliance with the limitations clause.

12.       Had the question of blocking “innocent” websites been the only difficulty arising from this case, it might have been appropriate to remand to the trial court for an in-depth examination of this issue. However, the central obstacle the Appellants face is fundamental and disconnected to the previous question, namely using a third party to execute an authority, without explicit statutory empowerment to do so. In my view, section 229 cannot be sourced to exercise the authority by giving an order directed at a third party – the Internet access providers. My colleague, Justice N. Sohlberg, found that restricting access to gambling websites through a third party does raise concerns, but in his view these difficulties do not negate the authority to do so. My view is different, and I will clarify my reasons.

13.       Our concern is with a district police commander who issued orders to the Internet access providers to block access to gambling sites. These are “personal orders” – in other words, orders directed at a particular person or entity, imposing a prohibition or a duty upon them. This is an individualized rule of conduct. This kind of order, like any administrative decision, requires a written statutory source (Zamir, at 284).  The question therefore is whether the district police commander is authorized to order the providers – a private body that is not accused of any offence – to perform various actions on behalf of the Israel Police, and to actually serve as its long arm. This authority, arguably, is found in section 229 of the Penal Law, which authorizes the district commander to order the “closure” of places used for gambling.  As mentioned, I accept that had law enforcement authorities been able to affect the closure of websites used for gambling criminalized under Israeli Law (for example by disconnecting the website from its connection to the Internet or by shutting down the server’s activity) there would be no question regarding authority.  However, in this case, the relevant websites were not actually “closed”. Instead, the district police commanders ordered third parties – the Internet access providers – to block access to those websites. The issue then becomes whether the powers granted by by section 229 support doing so.

14.       When a governmental authority is conferred with a power, according to settled case law, the authority must exercise this power itself. When the legislature specifies an authorized office holder, it is presumed the legislature wishes that particular office holder, and that alone, exercise it (HCJ 2303/90 Philipovitz v. Registrar of Companies [22] (hereinafter: Philipovitz), at p. 420; see also Daphne Barak-Erez Administrative Power, 178 -170 (hereinafter: Barak-Erez)). These comments are particularly true for criminal enforcement. In the absence of appropriate legislation, law enforcement authority cannot be given to those not part of the enforcement mechanism. Criminal enforcement authority is one of the classic authorities of the state. This authority enables the state to fulfill its responsibility to enforce criminal law through its own execution. It is the state that exercises the Government’s authority over the individual in the criminal proceeding. Therefore, the state – having established the behavioral norms and having been charged with their enforcement – is the entity directly responsible for caution and restraint required for exercising this power. It is the entity that is accountable to the public for the way it executes its powers (HCJ 2605/05 Academic Center for Law and Business v. Minister of Finance [23], para. 28 of former President D. Beinisch’s opinon and para. 14 of Justice A. Procaccia’s opinion.)

15.       By attempting to source the authority in section 229 of the Penal Law, the State maintains it is exercising the authority by itself, and that enlisting Internet access providers to block gambling websites is merely exercising auxiliary powers that administrative agency must employ in order to exercise its authority (section 17 of the Interpretation Law, 5741-1981). I cannot accept this construction. As well known, there is a distinction between delegating authority that includes exercise discretion regarding a particular authority, and receiving assistance in technical matters related to exercising the authority (Philipovitz [22] at p. 424). Whereas the authority is permitted to receive assistance from private bodies about technical aspects of fulfilling their task, there is also a presumption against delegating authority to private entities (AAA 6848/10 Erez v. Giva’ataim [24] para 18; HCJ 5031/10 Amutat Ir Amim v. Israel Nature and Parks Authority [25] para. 18). Here, the access providers were not required to exercise discretion regarding the websites to which access was to be blocked. As such, it could be argued on its face that the authority did not delegate power but only requested assistance in exercising it, and that such assistance is in principle permitted. However, where assistance is concerned, the first and foremost element to demonstrate is that the person or entity whose assistance is required consents to assisting the authority, regardless of whether consent is motivated by commercial and economic motives (compare to Philipovitz [22] at 415), or by voluntary motives. The most important thing is that the authority may receive assistance only from those seeking to offer assistance based on pure and genuine motives and after securing explicit consent. When the authority imposes a duty on a person or entity to perform any act, one can no longer speak of assistance. In our case, the Appellants claim that the expression “closing of a place for prohibited games” mentioned in the relevant section of the Penal Law, also contains the possibility of ordering closure of access routes to that place using auxiliary authority. This is not so. Our concern is with orders that compel a private body – the Internet access providers – to “assist” the authority. Consequently the argument that the providers are an entity that grants its services voluntarily must fail. This is doubly important when the orders themselves warned, in bold print, that failure to comply with the order could constitute an offence of breaching a statutory provision, an offense of assisting the conduct of prohibited games, and an offence of assisting to maintain a place for prohibited games (sections 287, 225, and 228 of the Penal Law, combined with section 31 thereof).

16.       Additionally, I wish to clarify that were there an explicit statutory authorization it could be possible to “impose a duty” and receive assistance from any person for the purpose of realize various legislative goals. Indeed, different pieces of legislation empower an authority to order a third party to assist it, even in the criminal context. For example, section 20 of the Criminal Procedure (Arrest and Search) Ordinance [New Version], 5729-1969 provides that every person must help a police officer to arrest any person whom they are authorized to arrest. In a matter close to our own, a similar arrangement exists: the Criminal Procedure (Powers of Enforcement-Communication Data), 5768-2007 (also known as the “Big Brother Law”) allows Israeli investigatory authorities to be assisted by “holder[s] of a Bezeq license” (as defined there) in order to receive communications data on Bezeq subscribers for various purposes, such as discovering and preventing offences (section 1 and section 3(2) of this law). The various Internet providers are among the companies that may be required to submit communications data (see in the matter of the “Big Brother” law, para.2). This affirmation however also implies the opposite. Imposing a duty, coupled with a sanction, requires legislative bases. Without explicit legislative authority, it is impossible to charge a private entity with performing actions for the authority (compare: Civ.App. 90868/00 (District-T.A.) Netvision Ltd. v. Israel Defense Force- Military Police, para.9 (22.6.2000); Crim.F. 40206/05 (District-T.A.) State of Israel v. Philosof para. 8 b) (5.2.2007)). We are thus left with the need for explicit lawful authorization. In our case however, the language of section 229 of the Penal Law does not contain so much as the slightest hint of an authorization to impose a duty on a third party. And for good reason. Such authorization involves complex matters of law and policy.  In 2008, when the Knesset deliberated over the legislative amendments that would confer authority to block access to gambling websites, representatives of the Minister of Justice (as well as representatives of the police) expressed reservations about conferring authority as stated, for various reasons which will not be addressed here. Today the position of the authorities – with the support from the Attorney General – is different. Of course, the authorities are not bound by their former position, but the only lawful way to confer the district commander with the authority to order a third party service provider, in my view, is an amendment to primary legislation (an amendment which, needless to say, would have to satisfy the limitations clause in Basic Law: Human Dignity and Liberty). Accordingly, the manner in which the orders were issued here deviated from the principle of administrative legality, which is a fundamental norm of administrative law. “This principle teaches that the power of the public authority flows from the powers conferred upon it by law and nothing else. It is the law that grants the license to act, and defines the boundaries of its scope. This is the ABC of administrative law” (Baruch Beracha, Administrative Law, Vol.1 35 (1987); CA 630/97 Local Committee for Planning and Building Nahariya v. Shir Hatzafon Construction Company Ltd [26], at pp. 403-404; HCJ 5394/92 Hoppert v.'Yad Vashem' Holocaust Martyrs and Heroes Memorial Authority[27] at , 362 (1994);  HCJ 7368/06 Luxury Apartments Ltd v. Mayor of Yabneh [28], para. 33; see also HCJ 6824/07 Mana v  Taxation Authority[29]; HCJ 7455/05 Legal Forum for Land of Israel v. Israeli Government [30] at p. 910; Zamir, at 74-890; Barak-Erez at p. 97 and on). This is especially so in context of a mandatory authority, as anchored in the Penal law (see and compare Hardoof at p. 124).

17.       Could future legislation enable imposing the task of blocking gambling websites upon Internet access providers? An arrangement of this kind might take several forms. The legislature might determine that a court must grant such an order; it might grant the district police commanders – or any other authority – the authority to issue these orders, without petitioning a court (compare with “Big Brother” Law, para. 2). We assume that this legislation would also resolve additional concerns stemming from imposing the duty on access providers, while considering the costs likely involved in ensuring effective blocks, including the definition of access providers’ responsibility towards third parties, such as users and website owners whose access to them is blocked, and the like. In any event, it is clear that in our legal system the legislature is branch competent to consider the appropriate way to handle blocking access (Hardoof, ibid). Therefore we shall not jump the gun. We are not required at this point to pronounce on future legislation that has yet to be enacted and the details of remain unknown (and which, as mentioned, will also have to satisfy the limitations clause).

Other Legal Systems

18.       My colleague, Justice N. Sohlberg, found that restricting access to websites used for gambling is acceptable practice all over the world. Before we consider his comparative analysis, we should again note that the treatment of gambling in some countries is more lenient and as such no conclusive analogy can be drawn from the existing law in those countries to our legal system. On the merits of the matter, while certain countries receive assistance from Internet access providers to block gambling websites, as noted by my colleague, these are generally arrangements explicitly mandated by legislation, rather than acts designed to exercise general administrative powers. I will provide some examples.

19.       In the United States, gambling is regulated primarily at the state level rather than the federal level. There are significant differences between the various states in whether and how they view gambling and how they treat it. Federal legislation is therefore designed to assist states in enforcing local gambling laws where gambling activity extends beyond state-lines. Four primary pieces of federal legislation serve the authorities dealing with the gambling phenomenon: The first is the Federal Wire Act, of 1961 (18 U.S.C. §1084), which targets interstate gambling through linear communication. Though this law was enacted years before the Internet came into common use, and long before the online gambling became prevalent, this is legislation that authorities relied upon in the earlier days of the problem (see e.g. United States v. Cohen 260 F. 3d 68 (2d Cir. 2001)). The second act regulating the issue is the Illegal Gambling Business Act of 1970 (18 U.S.C. §1955) that was passed to battle organized crime that used gambling businesses as a main source of income, and it regulates the criminal responsibility of owners of large gambling businesses. The third is the Travel Act of 1961 (18 U.S.C. §1952), which prohibits the use of mail and interstate travel and travel outside the United States for unlawful purposes, including illegal gambling. The forth piece of legislation is the Unlawful Internet Gambling Enforcement Act (31 U.S.C. §5361-67), which prohibits gambling businesses from knowingly receiving payment linked to one’s participation in online gambling. It is interesting to note that law enforcement authorities occasionally found it difficult to rely on old statutes to receive Internet access providers’ assistance in closing gambling websites. Hence, for example, in April 2009 authorities in Minnesota instructed Internet service providers to block state residents’ access to 200 online gambling sites – an instruction given under the Federal Wire Act. However, this was challenged in court based on the argument that this act is inconsistent with the First Amendment’s protections for freedom of expression, and with the Commerce Clause (Edward Morse, Survey of Significant Developments in Internet Gambling, 65 Bus. Law, 309, 315 (2009)). In response, the Minnesota enforcement authorities withdrew the orders issues to the access providers (Lindo J. Shorey, Anthony R. Holtzman, Survey of Significant Developments in Internet Gambling 66 Bus. Law. 252 (2010)  

20.       In Australia, the Australian Communications and Media Authority’s power to order providers to block access to illegal gambling sites is regulated in detail in the “Interactive Gambling Act 2001 (sections 24-31) and in the regulatory code enacted under it (Interactive Gambling Industry Code (December 2001)). In Italy, a state my colleague referred to in his opinion, authorities’ authorization to order access providers to block illegal gambling sites is also set in legislation. Section 50(1) of Law No. 296 of 27 December 2006 (the Budget Law for 2007) established the authority of AAMS (Amministrazione Autonoma dei Monopoli di Stato), an organ of the Italian Ministry of Finance, to instruct, in an order to the communications bodies, to take measures toward removing illegal gambling websites, while setting an administrative fine of €30,000-80,000 for any breach by the communication providers. Under this law, Administrative Order No. 1034/CGV of 2 January 2007 was issued. It details the manner of exercising the power. According to the AAMS data, as of October 2010, 24000 websites were included in the “black list”. Every month hundreds of websites are added.

21.       Therefore we must conclude that even were there countries around the world that recognize the possibility of assistance from Internet access providers in blocking illegal gambling websites – this possibility is authorized there in explicit legislation. Where the subject was not regulated in explicit legislation, questions s about the power of the authorities to do so were raised in various countries, for reasons similar to those given by the District Court.

Afterword

 22.  Before concluding I would like to respond briefly to my colleague Justice N. Sohlberg’s comment regarding my position (para. 56 of his opinion). I wish to clarify that the thrust of my opinion does not turn on the interest of the access providers and the question of their concrete consent to blocking the websites. The conclusion I reached is based on the rule that an authority can only act within the boundaries of the powers the law conferred upon it, and that when exercising police powers the strict application of this rule is especially important. I would point out that I do not accept, as a given, my colleague’s assumption that a third party can be compelled to become “the long arm” of the police without its consent. Take a situation in which the reception clerk of a hotel (an example my colleague provides) fears a confrontation with criminal elements and has no interest in coming into contact with them. Would it also be possible then to compel the clerk to close the room? In my view this question is not free of doubt, but regardless, this we are required to rule on this question. In our case the totality of the circumstances that I presented and the sensitivity of the material discussed, in my view, lead to the conclusion that the existing authorization lacks the power necessary for exercising the alleged authority. 

Epilogue

I have reached the conclusion that section 229 of the Criminal Law does not authorize a district police chief to issue orders directed at Internet access providers, ordering them to block access to gambling websites. In my view, this requires express statutory authorization and the current arrangement is insufficient, because it does not contain authorization to order a third party to assist the enforcement authorities in exercising the power.

            For this reason, were my opinion to be followed, I would dismiss the appeal against the decision of the Administrative Affairs Court and would order the Appellants to pay the Respondents’ attorneys fee, for the sum of NIS 25,000.

 

                                                                                                Justice

 

President A. Grunis

My colleagues, N. Sohlberg and U. Vogelman are in dispute both about the preliminary issue of the locus standi of the Appellant and about the substantive issue of the district police commander’s authority. Regarding the first matter I see no reason to express a position. My colleague, Justice N. Sohlberg who addressed the position that the Appellant had no locus standi in the Administrative Affairs Court, analyzed the substantive issue, and concluded that it would not be proper to allow the appeal based on the preliminary issue without having considered the legality of the orders issued by the district police commanders. Under these circumstances I agree that it is appropriate to address the issue on its merits. Regarding the substantive issue, I concur with Justice U. Vogelman. That is to say, that I agree that the district commanders of the Israel Police do not currently have the authority to issue orders to Internet access providers to block access to gambling websites. The solution lies with the legislature.

 

                                                                                                            The President

 

It was decided by a majority opinion (President A. Grunis and Justice U. Vogelman) against Justice N. Sohlberg’s dissent, to dismiss the appeal, and to order the Appellants to pay the Respondent’s attorneys fees in the sum of NIS 25,000.

 

Handed down today 13th Nissan 5773 (24 March 2013).

 

 

In the Supreme Court

Sitting As a Court of Civil Appeals

CA 5365/11

CA 5489/11

 

Before:			His Honor, Justice E. Rubinstein His Honor, Justice Z. Zylbertal Her Honor, Justice D. Barak-Erez
The Appellant in CA 5365/11 and the Ninth Respondent in CA 5489/11:			ACUM – The Association of Composers
v.
The Appellant in CA 5489/11 and the Ninth Respondent in CA 5365/11:			EMI Music Publishing Ltd
v.
The Respondents:	1. The Director-General of the Antitrust Authority
	2. The Association of Restaurants in Israel
	3. Partner Communications Company
	4. The Association of Function Hall & Garden Owners
	5. Golden Channels
	6. Matav Cable Communication Systems
	7. Tevel Israel International Communications
	8. Anana Ltd
	9. EMI Music Publishing Ltd

 

Appeals against the judgment of the Antitrust Tribunal in Jerusalem on June 2, 2011 in AC 513/04 by Her Honor Judge N. Ben-Or

 

Date of Session:	Nisan 3, 5773 (March 14, 2013)
On behalf of the Appellant in CA 5365/11 and the Ninth Respondent in CA 5489/11:	Adv. Uri Sorek, Adv. Assaf Neuman
On behalf of the Appellant in CA 5489/11 and the Ninth Respondent in CA 5365/11:	Adv. Michelle Keynes

 

 

On behalf of the First Respondent:	Adv. Uri Schwartz, Adv. Yael Sheinin, Adv. Elad Mekdasi
On behalf of the Third Respondent:	Adv. Eyal Sagi, Adv. Amir Vang
On behalf of the Fourth to Seventh Respondents:	Exempt from appearance and representation
On behalf of the Eighth Respondent:	Adv. Ronit Amir-Yaniv, Adv. Ido Hitman

 

JUDGMENT

 

Justice D. Barak-Erez

 

1.         Which principles should guide the activity of ACUM with regard to the management of copyright in musical works in Israel? This question has been presented to us in full force against the background of the finding by the Director-General of the Antitrust Authority that ACUM’s activity creates a cartel, in order to review the conditions prescribed for the approval of the cartel in a way that will balance the rights of authors with the general interest of works being used in public.

 

Background and Previous Proceedings

 

2.         “The Association of Composers, Authors and Publishers,” known as ACUM, is a corporation that operates in order to manage the copyright of its members – lyricists, composers, arrangers, translators, and others – in Israel. ACUM members transfer their rights in their works to it, whilst ACUM acts on their behalf in order to license the use of those works in consideration for royalties that it collects for its members. Ordinarily, the licenses that ACUM grants are sweeping licenses ("blanket licenses") that permit licensees to make use of the whole repertoire of works managed by ACUM (mainly by making them accessible to the public in various ways). In addition, ACUM is bound by agreements with foreign copyright collective management entities (hereinafter "affiliates"), by virtue of which it administers in Israel the rights that are managed by the affiliates abroad.

 

3.         On April 30, 2004 the Director-General of the Antitrust Authority (hereinafter "the Director-General") published a ruling pursuant to section 34(a)(1) of the Antitrust Law, 5748-1988 (hereinafter "the Antitrust Law" or "the Law") according to which ACUM’s activity involves the creation of cartels (both between ACUM members and between ACUM and the affiliates) and a declaration under section 26(a) of the Law that ACUM’s activity as a cartel creates a monopoly in the market of managing copyright in musical works (or more precisely, with regard to management of  broadcasting, public performance, copying, recording, and synchronization rights in those works). The decision was made by the then Director-General, Mr. Dror Strom. However, it also reflects the position of the officers who have succeeded him, Ms. Ronit Kan and currently, Prof. David Gilo, as detailed below. Reference to the position of the Antitrust Authority will henceforth be made without specifically referring to those successors, using the general title – the Director-General.

 

4.         At that stage, ACUM instigated legal proceedings before the Antitrust Tribunal (hereinafter "the Tribunal") – an appeal against the determination of the Director-General that its activity involves cartels (AT 512/04) or, alternatively, an application for the approval of a cartel in accordance with sections 7 and 9 of the Antitrust Law, on the grounds that the cartel's approval is necessary in the public interest (AT 513/04). Both proceedings were heard together. Subsequently, to ACUM’s request, the appeal it filed was withdrawn, leaving only its application for approval of the cartel. The Director-General did not oppose the cartel's approval considering the public importance involved in ACUM's activity, as explained below, but the Tribunal was moved to set conditions to the approval so as to protect not only the public interest but also the individual rights of authors.

 

5.         To make its continued activity possible until completion of the litigation, ACUM filed a request for a provisional permit for operation of the cartel. The Tribunal granted the request and on December 28, 2004 it granted a provisional permit for ACUM’s activity subject to certain conditions (hereinafter "the Provisional Permit"). As detailed below, those conditions regulated, inter alia, situations in which authors could exclude rights in certain works from ACUM’s management so that those authors, rather than ACUM, would themselves deal with granting licenses to exercise those rights (hereinafter "the Exclusion Mechanism"). Over the years the Provisional Permit was extended from time to time based on of the Director-General’s recommendation, various amendments and modifications introduced to its terms. The last of those provisional permits (before the Tribunal's judgment), granted on February 24, 2009, introduced several significant changes, including making the Exclusion Mechanism "tougher," as detailed below.

 

6.         In addition to the position of the Director-General, oppositions to the cartel's approval were filed to the Tribunal by several other entities, including the Association of Function Hall & Garden Owners, Partner Communications Company (hereinafter "Partner"), the Association of Restaurants in Israel, and several cable companies – Golden Channels, Matav and Tevel (hereinafter "the cable companies") (whose activity has since been consolidated).

 

7.         At a later stage, an application to join the proceedings was made by two publishers that represent authors, the publishers themselves being members of ACUM – Anana Ltd (hereinafter "Anana") and EMI Music Publishing (Israel) Ltd (hereinafter "EMI Israel"). Those applications, like the time when they were made, were explained by the changes that had been made to the Provisional Permit’s conditions on February 24, 2009 as regards the Exclusion Mechanism. On December 1, 2009, the Tribunal partially allowed the applicants to join the proceedings in the sense that it permitted each of the two applicants to file a brief document with reference to the conditions that were acceptable to them and to make summations without extending the existing factual basis of the discussion.

 

8.         In its decision of January 25, 2009, the Tribunal stated that by consent of the parties it would rule based on the parties’ summations and supplemental oral arguments, without hearing evidence. The decision further stated that all of the parties agreed to ACUM's approval as a cartel, and took issue merely with regard to the terms of that approval. Consequently, the conditions of the Provisional Permit of February 24, 2009 (hereinafter "the Provisional Conditions") would serve as point of reference for the parties' positions. Accordingly, each of the parties filed its reservations regarding the Provisional Conditions in such manner that enabled the Tribunal to decide which of the conditions would be adopted as is within the permanent conditions, and which would be modified.

 

9.         On June 2, 2011 the Tribunal approved ACUM’s activity as a cartel, subject to a series of conditions (hereinafter "the Permanent Conditions"), which would remain in force for five years from the date of their approval. The Tribunal stated that the basic premise for reviewing the parties' arguments with regard to the conditions was that the anticipated benefit from the cartel substantially exceeded the damage likely to be caused by it, as required by section 10 of the Antitrust Law. In this context, it was explained that ACUM’s activity benefited not only its members – copyright owners (hereinafter "the authors") but also the general public who uses the works it manages (hereinafter "the users"): on the one hand, the sweeping licenses permit the users to make use of the whole repertoire of works that ACUM holds, thereby sparing the public from having to locate the owners of various rights and to negotiate individually with each of them; on the other hand, the sweeping licenses also benefit the authors since they streamline (and, to a great extent, enable) collection of royalties and enforcement of their rights.

 

10.       Since all parties agreed on principle to the approval of the cartel, the Tribunal hearing focused on the nature of the conditions to which the approval should be subject in order to dispel concern as to its abuse with regard to authors or users. The point of departure for the hearing was, as aforesaid, the Provisional Conditions, some of which were agreed upon by all parties, whilst others were in dispute. The disputes on which the appeal before us focuses pertain to the conditions prescribing the extent of the duty owed by ACUM to appoint external directors and the extent of ACUM members’ ability to exclude their rights from its management, as detailed below.

 

11.       Other controversies, including those concerning the definition of acts that would be construed as an abuse of ACUM's position and the way in which ACUM should act in taking legal action against users, were ultimately not considered by us since only few of the arguments concerning them were raised within the written appeal, while the arguments before us did not in fact concentrate on them.

 

12.       The appointment of external directors – the position of the Director-General was that a condition should be added to the Permanent Conditions to the effect that ACUM should appoint external directors in a proportion of no less than one third of the total members of its board and those directors would be responsible for the internal plan to enforce antitrust law that ACUM is obliged to implement (in accordance with section 10 of the Provisional Conditions). ACUM objected to this requirement, on the grounds, inter alia, that it is not a public company where the appointment of external directors is necessary in order to protect minority rights, and in any event ACUM's articles of association ensure due representation for each category of its members, and even guarantee numerical balance between the categories.

 

13.       The Tribunal accepted the Director-General's position on this matter, noting that a corporation for the collective management of copyright naturally raises concern as to the abuse of power against the authors themselves. Appointing a substantial number of external directors and entrusting them with the internal enforcement plan, it was held, would help deal with that concern, especially considering the fact that the corporation's members are dispersed and lack management expertise. The Tribunal also attributed importance to the fact that from ACUM's position in the proceedings it appeared that ACUM itself acknowledged the need to appoint external directors and was willing to do so even before the Tribunal’s judgment in order to reinforce the "managerial, professional, economic character of ACUM's board of directors".

 

14.       The extent of ACUM members’ ability to exclude rights from ACUM’s management – the Provisional Permit that ACUM had originally obtained (in 2004) included, in section 2.3 of the Provisional Conditions, a mechanism permitting a member to give notice "at any time, of his desire to assume all or any of the copyright with regard to any of his works, with regard to all users or specific categories of users," such that the works included in the notice would cease to be part of ACUM's repertoire, and copyright ownership would revert to the notifying member (hereinafter "the broad exclusion mechanism"). Underlying this mechanism was the concept that a “liberal” option to exclude any right in a work, even specifically, would intensify competition and increase the authors' power against ACUM. Later on, based on the experience accrued from the implementation of this arrangement, the Antitrust Authority reached the conclusion that the broad exclusion mechanism was not yielding the anticipated results with regard to enhancing market competition, and in contrast was aggravating the concern for abuse of the exclusion ability. For example, it turned out, according to the Director-General, that the broad exclusion mechanism that enabled interested authors, inter alia, to exclude from ACUM's management merely the use of "new media" (such as mobile phones and the Internet) and to leave it with the power to grant sweeping licenses for broadcasting rights only in "traditional media" (like television and radio), might undermine the justification for ACUM's existence as a corporation whose purpose is to reduce the substantial transaction costs involved in individually contracting with each of the authors. Accordingly, in 2009 the exclusion mechanism in section 2.3 of the Provisional Conditions was limited in two ways: first, the Provisional Conditions provided that an exclusion notice could only be given with the consent of all joint authors in a collective work whose exclusion was sought (for example, the lyricist, the composer of the music, and the arranger); second, it was provided that partial exclusion, namely exclusion of some of the uses of the work, could only be done in accordance with four "exclusion baskets" concerning different categories of use (hereinafter "the narrow exclusion mechanism"): presentation of the work in an audio format (for example radio broadcasting); its presentation in an audio-visual format (for example in a television program); copying the work; and recording it. The narrow exclusion mechanism therefore did not permit the author to exclude the work in various formats at his discretion, as specifically chosen by him (for example, excluding the work's use only with regard to mobile phones).

 

15.       The Director-General's position, joined by ACUM, Partner, and the cable companies on this issue, was that the narrow exclusion mechanism should be included in the Permanent Conditions. In contrast, EMI Israel and Anana believed that the broad exclusion mechanism should be adopted with regard to both aspects that distinguish it from the narrow exclusion mechanism and they challenged both the requirement for unanimous consent of all authors of a joint work and the restriction of exclusion according to "exclusion baskets."

 

16.       EMI Israel pleaded that the narrow exclusion mechanism improperly infringed on the constitutional property rights of the authors it represented, both because the predefined "exclusion baskets" limit the prerogative of the right’s owner to permit or prohibit certain uses of his work, and because the vast majority of musical works managed by ACUM are jointly owned by several authors. Under these circumstances, it was argued, making the exclusion conditional upon the consent of the other owners in fact negates the ability of a given author to permit or prohibit the use of his work. EMI Israel further asserted that adopting the narrow exclusion mechanism would compromise the competition among ACUM's members in the sense that only large corporations would be able to afford managing rights outside of ACUM, while individual authors would not be able to bear the financial and logistical burden it involves.

 

17.       Anana pleaded that adopting the narrow exclusion mechanism would lead to infringement on its reliance interest, given the fact that, relying upon the wording of the broad exclusion mechanism, it had already excluded works it managed from ACUM's repertoire with regard to the use of "new media" that it would now have to restore. In addition, it made a series of arguments concerning the restrictions set forth in the narrow exclusion mechanism – a lack of distinction between authors whose contribution to a joint work was significant and authors whose contribution was negligible (who nevertheless obtain a de facto veto right to exclude the work); impairing the ability of authors to maximize their profits; as well as infringing on the moral aspect of the author’s right (in the sense that an author who wishes to preclude the use of his work for religious, image-related, or moral reasons would find it difficult to do so under the narrow exclusion regime). Anana further contended that making the exclusion conditional upon the consent of all joint authors effectively makes it a dead letter since joint authors would frustrate any attempt to reach the necessary agreements.

 

18.       The Tribunal held that the approval should be made conditional upon a narrow exclusion mechanism and in that respect it adopted the position of ACUM and the Director-General (joined by Partner and the cable companies). The Tribunal explained that such exclusion mechanism provided an appropriate answer to the necessary balance between enhancing market competition and protecting the individual author's proprietary right. The Tribunal went on to state that a corporation for the collective management of copyright is in any event not intended to enable its members to realize their rights in full. On the contrary, such arrangement is based upon a waiver of complete and total freedom with regard to the works in consideration for reducing the cost of managing and enforcing copyrights. EMI Israel and Anana, the Tribunal held, were in fact seeking to enjoy the benefits of belonging to a cartel without bearing the costs. The Tribunal further explained that copyright grants an author a monopoly that may harm the general public, a concern which is intensified when authors are incorporated in a cartel. Therefore, there is no reason to avoid subjecting the cartel's approval to conditions that restrict the individual author's proprietary right in his work.

 

19.       As aforesaid, the Tribunal ultimately approved ACUM's activity as a cartel, subject to a series of conditions, including those mentioned above. The two appeals before us – the appeal by ACUM and the appeal by EMI Israel – were filed against its said judgment – as detailed below.

 

The Appeals

                       

20.       ACUM's appeal (CA 5365/11) concerns, as aforesaid, only one aspect of the Tribunal's judgment – the condition regarding the duty to appoint external directors. Its arguments in this respect are directed both against the basic obligation to appoint external directors and against their number.

 

21.       EMI Israel’s appeal (CA 5489/11) originally revolved around several of the other conditions to which the Tribunal made the permanent permit subject, but at the hearing before us EMI Israel concentrated its arguments on the details of the condition regulating the rights exclusion mechanism. It should be noted that Anana, which did not appeal the Tribunal’s judgment, appeared at the hearing as a respondent and in that capacity it presented arguments in support of EMI Israel's basic position.

 

22.       Generally, EMI Israel believes that the narrow exclusion mechanism impairs the protection of the authors' rights and reinforces ACUM's monopoly. More specifically, EMI Israel pleads that implementing the narrow exclusion mechanism would lead to infringement on authors' proprietary rights and would impair the possibility of creating a competitive copyright market. According to EMI Israel, the protection of copyright necessitates both recognition of the power of each author to implement the exclusion mechanism with regard to a work he helped create, even without obtaining the other authors’ consent, as well as authors’ right to exclude their works outside of the "exclusion baskets" that necessitate "crude" and imprecise choices that do not express important distinctions, primarily the distinction between "old" media (like radio and television) and "new" media (such as mobile phones).

 

23.       On the other hand, the Director-General believes that both appeals should be dismissed. He supports the Tribunal’s judgment and emphasizes that the conditions it approved are required in order to protect authors and users against the monopolistic power of ACUM and in order to protect the public interest involved in the use of the works.

 

Our Ruling

 

24.       Having reviewed the parties' arguments we have reached the conclusion that both appeals should be dismissed. We are convinced that, at the moment, the Permanent Conditions, including the conditions against which the appeals have been addressed, are all necessary in order to dispel the concerns raised inherently by a cartel related to the collective management of copyright. These conditions are necessary in order to ensure that the cartel’s benefit to the public will exceed the perceived damage from it. Indeed, as detailed below, reviewing the parties' arguments has made it clear that the distinction between "new" and "old" media within the exclusion mechanism is an evolving issue, the regulation of which should be monitored. However, as noted, the approval and its conditions have been set for a period of five years, of which two have already passed (as the conditions relating to the narrow exclusion mechanism were approved by the Tribunal in June 2011). At the end of that period, it will be possible to revisit the conditions and the way they are being implemented in order to make decisions towards the future. In that sense, our ruling reflects the facts presented in the proceedings, including the experience accumulated in the Israeli market and its existing uses of copyright.

 

The Normative Framework: Between Copyright Law and Antitrust Law

 

25.       Two normative frameworks frame our discussion: copyright law – as a framework that seeks, inter alia, to balance the author's rights in his work and the public interest to enjoy the fruit of the work for the benefit of all, in order to promote culture and knowledge; and antitrust law – which recognizes, inter alia, the possibility of approving a cartel, subject to conditions aimed at protecting the public from the abuse of monopolistic power. Copyright law is currently governed by a relatively new statute – the Copyright Law, 5768-2007 (hereinafter "the Copyright Law"), which replaced the relevant British Mandate statute, while the issues concerning the activity of cartels are regulated by the Antitrust Law.

 

26.       The activity of ACUM should be evaluated and examined according to these two perspectives. As mentioned in the introduction to our judgment, ACUM was established for the collective management of copyright in musical works. From the perspective of copyright, that management should be for the benefit of authors and in the name of protecting their rights, but without neglecting the public's ability to enjoy the works; from the perspective of antitrust law, that management, which constitutes a cartel and monopoly, should be for the benefit of the public and should ensure that public access to the works is not unreasonably denied. More specifically, in order to comply with the provisions of sections 9 and 10 of the Antitrust Law with regard to the approval of a cartel, it has to be ensured that the benefit to the public from such collective management substantially exceeds the damages that it might cause to all or some of the public.

 

27.       In many ways, the controversies that have arisen before us pinpoint once again the dilemmas that underlie copyright law. Recognition of copyright is aimed at encouraging the creation and dissemination of expression but also at balancing this benefit against the costs of limiting access to protected works (cf: Guy Pesach, The Theoretical Basis for the Recognition of Copyright, 31 Mishpatim 359, 410 (2001)). In the words of Vice President (retired) S. Levin:

 

            "In Anglo-American law the basic justification for these laws is perceived as the desire to provide an incentive to the author in order to achieve maximum access to the work by the public at large. This is the heritage of Israeli copyright law" (CA 326/00 Holon Municipality v. NMC Music Ltd, PD 47(3) 658, 671 (2003)).

 

Copyright Management Corporations: ACUM as a Test Case

 

28.       The case before us should be examined not only in light of the general principles of copyright law, on the one hand, and antitrust law, on the other hand, but also in light of the experience accumulated from copyright management through corporations established for such purpose. ACUM is a local corporation that was established back in pre-state Israel (see: Michael Birnhack, Colonial Copyright: Intellectual Property in Mandate Palestine 185-186 (2012)). Nevertheless, more broadly speaking it is merely one of many examples of corporations known as "copyright collection societies" or collective management organizations" (hereinafter "collective management corporations"). Such corporations operate in many countries and thereby provide an answer to a genuine need of authors who cannot routinely manage the grant of licenses to use their works, collect royalties, and enforce copyright law on those who infringe their rights. These corporations manage the rights of many authors collectively and thereby contribute to reducing the costs of negotiating with users and reducing enforcement costs. At the same time, the mechanism of collective management also benefits the public who uses the works because it allows bringing these works to the public on a regular basis. The collective management corporation typically offers users "a blanket license" in relation to the corporation's whole repertoire, thereby saving them the need to negotiate individually with each of the authors of works included in the repertoire. Such users are for the most part broadcasting stations owners, producers, hall owners, and others, through whom the works are made accessible to the public at large (see: Ariel Katz, Monopoly and Competition in the Collective Management of Public Performing Rights, 2 Din Ve'Devarim 551 (2006); Guy Pesach, Associations for the Collective Management of Rights – Another Look at Effectiveness and Fairness, 2 Din Ve'Devarim 621 (2006) (hereinafter "Pesach"); Walter Arthur Copinger, Copinger on Copyright, pp 1790-1794 (16th ed., 2011) (hereinafter "Copinger")).

 

29.       Alongside recognizing the fact that collective management corporations are a well-known and widespread phenomenon, the concern that accompanies their activity is also acknowledged. Collective management of copyright involves a significant challenge from the perspective of antitrust law, considering the fact that it has centralized characteristics and therefore raises the concerns involved in the creation of a cartel, including the concern of acquiring and abusing monopolistic market power, either by demanding high royalties or in other ways. Against those disadvantages, we usually weigh the necessity of such activity for effectively managing copyright and it is therefore common to regard collective management corporations as "natural monopolies" (and, to a certain extent, something of a necessary evil) and to allow them to operate subject to supervisory mechanisms and regulation (see: Ariel Katz, The Potential Demise of Another Natural Monopoly: Rethinking the Collective Administration of Performing Rights, 1 J. Comp. L. & Econ. 541, 544-548, 551-553 (2005) (hereinafter "Katz"); Copinger, pp 1798-1800). It is along these lines that the activity of the two major collective management corporations in the U.S. – the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc (BMI) – is regulated by special judicial orders ("consent decrees") as part of antitrust law. These orders, whose conditions are revised from time to time, place collective management corporations under a host of constraints in order to ensure their compliance with the competition criteria set forth in antitrust law (for a discussion of the supervisory mechanisms of collective management corporations in the U.S., see: Stanley M. Besen, An Economic Analysis of Copyright Collectives, 78 Va. L. Rev. 383 (1992).) Similarly, collective management corporations that operate in Europe are under supervision, subject to the antitrust law of the European Union (see: Lucie Gaibault & Stef Van Gompe, Collective Management in the European Union, in Collective Management of Copyright and Related Rights 135 (2nd edition, Daniel Gervias ed. 2010); Copinger, pp 1801-1808).

 

The Conditions in Dispute: Public Directors and the Exclusion Mechanism

 

30.       As already mentioned, the controversy before us does not concern the basic authority for ACUM’s operation as a cartel but rather the conditions that have been prescribed for its activity, or, more precisely, two of these conditions. In that sense, the discussion is based on the accepted notion, explained above, which views collective management corporations as something of a "natural monopoly," the existence of which is essential but their activity necessitates supervision and restraint in order to protect the public from the potential negative effects of substantial market power being accumulated by a single entity. The conditions for ACUM’s operation should therefore express the balance between the proprietary right of authors and the public interest in a market free of monopolistic influences, which acquires a unique aspect with regard to the market of creative works that naturally need to be accessible to the public (albeit for a fee).

 

31.       Ultimately, the hearing in this case revolved around two matters: the requirement to appoint directors, and the scope of the rights exclusion mechanism. Both of these need to be examined from the unique point of view that combines the purposes of copyright law with those of antitrust law, paying attention to the balance that both those sets of laws seek to achieve between individual proprietary rights and economic interests, on the one hand, and the public interest, on the other hand.

 

The Appointment of Public Directors: Between the Public Interest and the Interest of the Rights Owners

 

32.       The first condition that was prescribed for the approval of the cartel was to appoint public directors who will constitute a third of the total number of board members (which in practice means appointing four such directors). As aforesaid, ACUM has objected to this condition both in principle and in practice.

 

33.       In principle, ACUM asserted that it is not a public company and therefore there is no justification to enforce on it a supervisory mechanism appropriate to public companies. In this context, it was further asserted that its board of directors includes a delicate balance between all the sectors ACUM represents, which in itself ensures protection of the public interest (article 30.2 of ACUM's current articles of association provides that the company's board of directors shall consist of nine members that include two lyricists, a writer, two easy listening composers, one composer of concert music, one publisher, and two external directors). ACUM also noted that its corporate governance is dispersed and therefore does not raise an "agency problem" of the type with which the mechanism of external directors is designed to deal. ACUM also asserted that in any event it has in place adequate mechanisms to resolve potential disputes and conflicts of interest, including an internal arbitration mechanism as well as the Permanent Conditions that prohibit ACUM from discriminating between its members. According to ACUM, the appointment of public directors would "dilute" the authors' control over their property rights. In practice, ACUM further noted the costs involved in the appointment of the requisite number of public directors, which lead ACUM to be willing to appoint no more than two public directors.

 

34.       According to the Director-General, the need to appoint public directors stems from two factors: first, it will help ensure that ACUM serves the interests of all its member authors, taking into account the interests of individual authors rather than only the group interests of certain categories of authors. Second, the appointments will ensure that at least some of the directors have professional skills in the area of corporate management.

 

35.       With regard to the proportion of public directors on the board, the Director-General's position is that the requirement that no less than a third of the board would be comprised of external directors is justified, since the need for external directors is specifically greater under ACUM’s circumstances, where the corporate structure is dispersed and lacks a distinct controlling shareholder. In this respect the Director-General went on to explain that, in his opinion, ACUM's members need even more protection than "ordinary" shareholders, considering the fact that their livelihood depends on the corporation and they cannot sell their shares to "realize their profits."

 

36.       Having reviewed all this, we have reached the overall conclusion that ACUM's case in this respect should be dismissed.

 

37.       The appointment of public directors – that is, directors who are not employees or shareholders of the company – is one mechanism which allows supervising the behavior of the company, its managers, and its controlling shareholders and helps dispel the various agency problems involved in its activity (see: Irit Haviv-Segal, Company Law, 429, 438 (2007) (hereinafter "Haviv-Segal")). It can be said that the essential contribution of the public director lies in the "external dimension" that he brings to the board's work – as someone who reviews matters referred to the board from a broad, objective, and balanced perspective that also takes into account the public implications of its activity. The provisions of section 240(a1)(1) of the Companies Law, 5759-1999 (hereinafter "the Companies Law"), according to which a public director shall have professional skills or accounting and financial expertise, ensure that his appointment will add a professional dimension to the company that will contribute to its satisfactory management (see: Joseph Gross, The New Companies Law, 386-387 (Fourth Edition, 2007) (hereinafter "Gross")).

 

38.       The mechanism of appointing public directors is typically operated in the context of the activity of public companies – section 239 of the Companies Law requires a public company to appoint at least two public directors, whilst sections 114 and 115(a) of that Law require a public company's board of directors to appoint an audit committee from amongst its members, on which all the public directors shall serve. In addition, there are laws that impose a duty to appoint public directors to serve on the board of certain corporations whose shares are not held by the public, but whose activity has other public importance. Thus, for example, a mutual fund must appoint at least five directors to serve on its board and the proportion of public directors is the same as required of a public company (see: section 16(a) of the Joint Investments Trust Law, 5754-1994); while an insurance company, as defined in the Control of Financial Services (Insurance) Law, 5741-1981, must appoint public directors who will constitute a third of the total members of its board (see: section 2(1) of the Control of Financial Services (Insurance) (Board of Directors and Its Committees) Regulations, 5767-2007). In addition, the board of directors of a company that manages provident funds is required to appoint an investment committee for each fund it manages, the majority of committee members being qualified to serve as public directors (see: section 11(a) of the Control of Financial Services (Provident Funds) Law, 5765-2005).

 

39.       Having reviewed the case, we are satisfied that the condition concerning the appointment of public directors to serve on ACUM's board is consistent with the purpose underlying the approval of the cartel. Although ACUM is not a public company, it does essentially manage a resource that has clear public aspects. From the point of view of the authors, ACUM provides an essential service, without which it would be difficult for them to produce financial benefit from their works. In many ways, that is also the case from the point of view of the public at large: the protected works belong to the authors (and to whoever has acquired rights in them) but it is important that they are used in such a way that will also benefit the general public. Indeed, these public aspects of ACUM's activity underlie its approval as a cartel. At the same time, ACUM's monopolistic characteristics and its status as a cartel in the domain of musical copyright grant it a public dimension in and of themselves. The requirement to appoint external directors to provide a further layer of supervision over ACUM's activity is therefore called for and inherent to the rationale of the cartel's approval in order to protect both authors and users. It should be noted that making the approval of a cartel conditional upon the appointment of external directors, even when the corporation in question is not a public corporation in the ordinary sense, is not unprecedented. Thus, for example, the approval as a cartel of the recycling corporation that was established as a joint venture of manufacturers and importers of soft drinks in Israel was made subject to a similar condition (see section 4 of the Conditions for the Operation of the Recycling Corporation, as approved in AT (J'lem) 4445/01 Shufersal Ltd v. The Director-General of the Antitrust Authority (November 5, 2001)). The same applies to the approval as cartels of two other collective management corporations: the Israeli Federation of Independent Record Producers Ltd. (hereinafter "PIL") (see section 11.3 of the Conditions for the Operation of the Israeli Federation of Independent Record Producers Ltd., as approved in AT (J'lem) 3574/00 The Israeli Federation of Independent Record Producers Ltd. v. The Director-General of the Antitrust Authority (April 29, 2004)), and the Israeli Federation for Records and Cassettes (hereinafter "IFPI") (see: section 13.3 of the Conditions for the Operation of the Israeli Federation for Records and Cassettes Ltd, as approved in AC (J'lem) 705/07 The Israeli Federation for Records and Cassettes Ltd. v. The Director-General of the Antitrust Authority (February 3, 2011).

 

40.       With regard to authors' protection, there appears to be grounds to the argument concerning the importance of protecting the common interests of ACUM's members, regardless of the “category” to which they belong. Public directors can express "cross-category" interests that concern the benefit of authors generally in their relationship with ACUM, as opposed to the benefit of particular categories of authors. Moreover, without laying out hard and fast rules, it can be said that there is prima facie grounds to the assertion that the importance of the public director institution is in fact greater in a corporation characterized by dispersed ownership, in the absence of controlling shareholders, as is the case with ACUM. The agency problem in companies of this type is characterized by interest gaps between management and shareholders (as opposed to interest gaps between the controlling shareholder and minority shareholders, which are typical of companies that have controlling shareholders). Some view the appointment of public directors as a central mechanism for dealing with such gaps (see Haviv-Segal, pp 438-439). Clear expression of this distinction can be found in the First Schedule to the Companies Law, which contains suggested provisions for the corporate governance of public companies. Paragraph 1 of the Schedule prescribes the recommended percentage of independent directors, distinguishing between companies that do and do not have controlling shareholders. With regard to the latter, the Schedule provides that a majority of the directors should be independent, whilst in the former it provides that it is sufficient for a third of the directors to be independent.

 

41.       Furthermore, even assuming that the present structure of ACUM's board of directors faithfully represents its member authors, that structure does not prima facie guarantee that the protection of authors will also take into account the public interest more broadly. Indeed, a public director's fiduciary duty to the company is no different than that of an ordinary director, in the sense that he too must act for the benefit of the company (see: Gross, p. 406; cf: CA 610/94 Buchbinder v. The Official Receiver, para. 43 (May 11, 2003)). However, the public director will presumably represent a broader, more objective point of view, cognizant of the public implications of the corporation's activity.

 

42.       Moreover, as already explained, the appointment of public directors also has great importance as regards guaranteeing a minimum number of directors with professional managerial skills. In fact, ACUM itself acknowledged the professional advantages of appointing public directors even before the Tribunal's judgment was handed off and the revised version of ACUM's articles of association now require the appointment of two such directors. The fundamental aspect of this controversy has thus somewhat eroded and it has become a matter of extent and degree. We believe that the proportion of directors set forth in the Permanent Conditions – a third of the board members – is not excessive or unreasonable, considering ACUM’s character as a corporation whose ownership is dispersed and especially given the lingering concern of abusing monopolistic power.

 

43.       This discussion, which is "internal" and concentrates on corporate and antitrust law, can be supplemented by an "external" discussion, based on the significance that entities with public aspects have from the perspective of public law. According to this Court's case law, a private corporation whose activity has clear public aspects might be regarded as a "hybrid" entity, which places it under additional duties over and above those it is subject to in accordance with private law. Care must be taken not to overextend the category of hybrid entities in order to avoid eroding the significance of acknowledging a public status and blurring the lines between the public and private spheres. Moreover, under the current circumstances, there is no need to rule on whether ACUM should be regarded as a hybrid entity and a complete discussion of the criteria for the recognition of an entity as hybrid is unnecessary. However, it should be noted that ACUM's activity does entail many of the criteria mentioned in previous case law as characterizing a hybrid entity. Thus, for example, in HCJ 731/86 Micro Daf v. Israel Electric Corporation Ltd PD 41(2) 449 (1987) (hereinafter "Micro Daf"), where the question of hybrid entities was discussed for the first time – in the context of the Electric Corporation's activity – the factors taken into account were the monopolistic aspect of the corporation's activity, the nature of the resource it manages, and the fact that statutory powers have been entrusted to it. These factors were not considered an "exhaustive list" and since then entities which lacked those characteristics, at least to the same extent, have also been recognized as hybrid (see: CA 294/91 Jerusalem Community Hevra Kadisha Burial Society v. Kastenbaum PD 46(2) 464 (1992)). For further discussion, see: Daphne Barak-Erez, Administrative Law vol. 3 - Economic Administrative Law 463-492 (2013)). With regard to ACUM, the monopolistic aspect of its activity is beyond dispute. In Israel, although there are other collective management corporations, including the abovementioned PIL and IFPI, the product they supply – licenses for the broadcasting and public playing of sound recordings – does not substitute the product ACUM supplies. As the Director-General stated in his declaration, ACUM has no direct competitors in its relevant market and although formally nothing stops authors from managing their works themselves, few of them find such course of action practical or worthwhile, so that in fact the vast majority of works for which royalties are paid in Israel are under the management of ACUM. The same applies to the implications that the resource managed by ACUM has on the general public. Although the licenses that ACUM offers are acquired by a relatively small category of users, those licenses feature the right to play the works in public (or make them otherwise available to the public). Hence, they have a very significant effect on public access to the works. In other words, the public aspect of ACUM's activity also derives from the fact that the product it supplies is not in fact the musical works themselves but rather the collective management mechanism, which facilitates (and to a great extent enables) playing those works in public and therefore constitutes a product of clear public importance. Finally, although ACUM does not exercise statutory powers, its approval as a cartel entrusts it with power that derives from a statutory decision established in the Antitrust Law. These characteristics, even if they are insufficient to define ACUM as a hybrid entity in the ordinary sense of the term (and, as aforesaid, we have no need to rule on this issue), do support the basic justification for the Director-General's requirement under the current circumstances. Indeed, the appointment of public directors is ordinarily not imposed on a hybrid entity. However, the fact that ACUM constitutes an entity that owes important duties to the public can serve as a factor in the Director-General's decision to subject a cartel to conditions.

 

The Rights Exclusion Mechanism

 

44.       The other condition at the center of the litigation before us concerns, as aforesaid, the rights exclusion mechanism. Underlying the controversy were two questions: first, is the requirement for the consent of all joint authors of a work in order to exclude it from ACUM's repertoire justified or should that power be held by each of the authors individually? Second, how delicate and precise should the "segmentation" mechanism be with regard to the exclusion ability, as regards the distinction between different types of uses? We shall clarify those questions below.

 

The Rights Exclusion Mechanism: the Consent of All Authors or a Personal Right?

 

45.       The requirement that the exclusion of the work should be conditional upon the agreement of all its authors prima facie imposes a constraint on the right of each of the authors to control the rewards of his work. For that reason it has been criticized by EMI Israel and Anana. In contrast, the position of the Director-General and ACUM is that making the exclusion conditional upon the consent of the other authors is essential to protect both users and authors. The main argument regarding the protection of users relates to the concern that a "liberal" exclusion mechanism that would give an independent exclusion right to each author would impair ACUM's ability to offer sweeping licenses and thereby undermine the basic justification for its existence from the perspective of public interest. With regard to the protection of authors, it is asserted that the ability to exclude rights without the agreement of the other authors would encourage abuse of that power by "powerful" authors at the expense of the other authors of the work. ACUM explained that if each author of a joint work could exclude his rights from ACUM’s repertoire without the agreement of the other authors, it would grant veto power to that author to prevent works from being used by those to whom other authors wish to grant permission. ACUM also emphasized that where the rights in a work are vested in several authors veto power will forever be involved and the remaining question is only which veto power is least damaging: that of an author wishing to prevent the work's exclusion and leave it with ACUM's repertoire, or that of the excluding author to prevent any use of a work contrary to the position of the other authors. According to ACUM, the former is infinitely preferable. Having reviewed the case, we have reached the overall conclusion that we accept the position of the Director-General and ACUM in this respect.

 

46.       We accept as a starting point for our discussion the (reasonable) assumption that the rights in the type of works that ACUM manages are often shared by several authors. This can be illustrated by the typical case of a song. According to copyright law, every song is made up of several independent works, the rights in each of which are vested in different authors – the words of the song are a literary work owned by the lyricist; the music is a musical work owned by the composer. Moreover, there are also cases in which several composers or lyricists collaborate in the process of creating a work and in such cases the circle of rights owners expands even further. Considering this situation, it is easy to understand EMI Israel and Anana's grievances: making the exclusion power conditional upon the agreement of all authors undoubtedly burdens the individual author who seeks to exclude his work. However, this does not suffice. The question before us is whether this burden is justified, considering the purpose of the permanent permit – and our answer to that question is in the affirmative.

 

47.       In order to discuss this question it is necessary to return to the original reasons that led to managing rights through a corporation like ACUM. The most important tool available to ACUM for the collective management of rights is the grant of a sweeping license known as a "blanket license," the advantages of which in terms of transaction costs constitute the basic reason that legitimates ACUM's activity, despite difficulties in terms of antitrust law. Extending the ability to exclude rights from ACUM's management will naturally impair its ability to offer blanket licenses and thereby reduce the public benefit from its operation as a cartel. Over-extending that possibility will impair the public benefit from ACUM’s activity to such extent that it will no longer be the case necessarily that the benefit substantially exceeds the potential damages to the public interest from the cartel's operation. Having considered matters, we are satisfied that the grant of a personal "exclusion right" to each author would amount to such over-extension. Considering the typical ownership structure of musical works, an exclusion mechanism that is not conditional upon the agreement of the other authors effectively means granting authority to a single author, regardless of his part in the work, to exclude the work as a whole from ACUM's blanket license regime. Thus, a user who wishes to make lawful use of the work would have to negotiate with the excluding author in addition to acquiring the sweeping license from ACUM. Such a state of affairs would greatly limit the benefit of the cartel for users to the point of raising doubts as to whether the cartel is indeed "in the public interest," as required by section 9 of the Antitrust Law whenever a cartel is approved.

 

48.       Furthermore – accepting the position whereby the consent of all the authors of a joint work is unnecessary to exclude it would also raise difficulties for the relationship between the authors themselves as it may enable some of the authors – usually the more "powerful" ones – to exploit their exclusion power at the expense of the other authors. This may occur in situations where the user has already acquired most of the rights to use the work by means of a blanket license and merely needs to "supplement" the excluded right. This may give rise to phenomena of "extortion" and "free-riding," so that the remaining owner of the right will demand exceptionally high license fees for his share. We have already discussed the problem of such a state of affairs from the user's point of view. However, in truth, the problem also exists from the perspective of the excluding author making excess profit at the expense of the other authors. This difficulty is intensified in light of the fact that the ability to exclude rights from ACUM's management – given the complexity involved in negotiating with users individually – would essentially be of benefit to powerful rights owners, like large publishers, as opposed to individual, independent authors.

 

49.       It should be noted that we have so far used the expression "joint authorship" in order to describe all the cases in which the rights in a particular song are shared by several authors, although in fact it is prima facie possible to distinguish between two models of joint authorship. One model, of "joint authorship in indefinite shares," relates to two or more authors who collaborated in such way that it is impossible to distinguish the share of each of them in the finished work. In such a case, the work is considered a "joint work" according to section 1 of the Copyright Law. The other model, of "joint authorship in definite shares," involves a finished product, like a song, which is made up of several units, each of which was created by a different author and is a protected work in itself (for example the words of the song, which were written by one author, constitute a literary work; while the music, which was composed by another author, constitutes a musical work). The authors in such a case are not regarded as joint authors according to the Copyright Law, despite the fact that their relationship is substantively founded upon sharing. It is interesting to note that the American copyright law does distinguish between works where the shares of the various authors are inseparable and works where the shares of the various authors are interdependent. Nevertheless, both situations are considered "joint work" (see: Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 6.4 (2002) (hereinafter "Nimmer"). In any event, for the purpose of the present discussion concerning the ability of authors to exclude rights from ACUM’s management we need not consider this distinction. In both cases, splitting the licensing authority would place practical obstacles for using the joint work.

 

50.       In fact, the controversy before us derives not only from the different interests that the various parties represent but also from the fact that the Copyright Law does not expressly regulate the issues to which joint authorship gives rise (see: Michael Birnhack, A Cultural Reading: the Law and the Creative Field, Authoring Rights: Readings in Copyright Law 83, 105-106 (Michael Birnhack & Guy Pesach, Editors, 2009) (hereinafter "Birnhack"); Gilad Wexelman, Corporate Creation and Cooperative Creation, Authoring Rights: Readings in Copyright Law, 167, 177-178 (2009) (hereinafter "Wexelman"). Cf  Margaret Chon, New Wine Bursting from Old Bottles, Collaborative Internet Art, Joint Works and Entrepreneurship, 75 Or. L. Rev. 257 (1996)). In fact, the only arrangement the Law establishes with regard to joint works (as defined in section 1) relates to the period of protection of the work, which is measured according to the age of the surviving joint author, plus 70 years (section 39 of the Copyright Law).

 

51.       Additionally, reference to comparative law does not yield an unequivocal answer, considering the numerous potential approaches to this issue. Thus, for example, subject to certain restrictions, the law in the U.S. vests each of the joint authors with an independent right to permit use of their work even without the consent of the other authors, provided that they are paid their proportional share of the profit produced from the work (see: Nimmer § 6.10; Russ VerSteeg, Intent, Originality, Creativity and Joint Authorship 68 Brooklyn L. Rev. 123, 149-150 (2002)). In contrast, according to the approach prevailing in English law, the agreement of all authors is necessary in order to permit use (see: Copyright, Design and Patents Act 1988, section 173(2). See also: Copinger, p 334.) For the purpose of the ruling before us, we must be cognizant of the fact that the variety of existing approaches regarding copyright management of joint works attests not only to the great complexity of the matter but also to the fact that recognizing authors' proprietary rights does not inherently dictate a particular result.

 

52.       Since there is no specific regulation of the issue of jointly owned copyright within the Copyright Law, we may turn to legislation in other contexts concerning the joint ownership of property rights. Detailed regulation of this sort exists regarding the joint ownership of land in sections 27 to 36 of the Land Law, 5729-1969 (hereinafter "the Land Law"). According to section 9(e) of the Movable Property Law, 5731-1971 (hereinafter "the Movable Property Law"), arrangements concerning joint ownership of land essentially apply to movable property too, "save as may be otherwise provided in a co-ownership agreement." By virtue of section 13(a) of the Movable Property Law, such arrangements also apply to joint ownership of "rights." Nevertheless, reference to the Land Law with regard to the legal regime governing joint authorship should be made with care. As Prof. Michael Birnhack has noted:

 

            "Even if a model of joint authorship is prescribed, the socio-legal institution can be designed in various ways, ranging from management based on the decisions of all owners, through consent-based management, to each author having freedom of use. Selecting the appropriate point on this range should be influenced by an understanding of the law concerning the creative process and the reciprocal relationship between joint authors, between each of them and the work, or anywhere else where the work and its significance are formed" (Birnhack, p 106).

 

Similarly, Dr. Gilad Wexelman has also written:

 

            "A joint work raises problems of a different type, when compared with the joint ownership of tangible resources and applying the doctrines that exist regarding joint ownership of tangible resources to joint authorship is therefore improper and inappropriate. These doctrines do not provide the necessary solutions for joint authorship. The inference deriving from this is that it is appropriate to adopt a broader, different conception of the joint authorship process, rather than a conception influenced by the private property model" (Wexelman, p 178).

 

53.       One way or the other, before we seek to draw an analogy based on the arrangements relating to joint ownership of land, it is important to emphasize that we need not consider the legal regime that governs the relationship between joint authors as an independent issue. The question of joint authorship should be analyzed in the case before us merely in the particular context of a joint work's management by a collective management corporation like ACUM – which naturally goes beyond the default rules that apply to joint authorship. In any case, under the circumstances,  reference to the existing legal arrangements regarding the management of joint rights should serve merely as a framework and a starting point for the discussion.

 

54.       The arrangement prescribed in the Land Law concerning joint ownership is based on a concept of management by majority decisions, except for matters that go beyond ordinary management and use, in which unanimous agreement is required. In this respect, section 30 of the Land Law provides:

 

            (a)       The owner of a majority of the shares in any joint property may determine all matters relating to the ordinary management and use of the property.

 

            (b)       A joint owner who considers himself aggrieved by a determination under subsection (a) may apply to the Court for directions and the Court shall decide as seems just and expedient under the circumstances of the case.

 

            (c)       Any matter outside the scope of ordinary management and use requires the consent of all the joint owners.

 

55.       The joint owners of a land can agree upon a different method for the management of their rights but, as provided in section 29 of the Land Law, this is the arrangement that applies "unless otherwise provided in a joint ownership agreement" (subsection (c)) (see also: CA 810/82 Zol Bo Ltd. v. Zeida PD 37(4) 737 (1983); CA 663/87 Nathan v. Greener PD 45(1) 104 (1990)).

 

56.       At the same time, section 31(a)(1) of the Land Law provides that each joint owner may, without the consent of the other joint owners, make reasonable use of the joint property, provided that he does not prevent another joint owner from conducting such use. In other words, none of the joint owners of land may stop his fellow owners from using the property, so long as it applies to reasonable use.

 

57.       What can be learned from these arrangements for the case in question? Applying the arrangement prescribed in section 30, mutatis mutandis, leads to the conclusion that the requirement of a "unanimous" decision is appropriate insofar as management or use out of the ordinary is involved. It can therefore be argued that the management of copyright through an entity like ACUM is the ordinary, accepted method worldwide for the management of individual authors' rights, and departing from that arrangement therefore constitutes an "extraordinary" decision outside the ordinary realm of rights management. It should therefore be made unanimously, exactly as provided by the conditions that have been approved.

 

58.       Indeed, as stated above, the considerations relevant to joint ownership of land are not necessarily apt with respect to joint authorship. Thus, for example, the arrangement contained in the Land Law can be seen as "hostile" to a state of joint ownership, recognizing that joint ownership of land may burden its efficient management. Section 37 of the Land Law therefore provides that "each joint owner of immovable property is entitled at any time to demand the dissolution of the joint ownership." Yet, joint authorship is not a "pathological" condition. On the contrary, the process of authorship frequently involves collaboration – either direct or indirect – between several authors and dissolving the joint authorship should not be regarded as socially desirable. It is also likely to be more difficult to appraise the value of the work for the purchase of one of the joint authors' shares than severing the joint ownership of land. Consequently, as already mentioned, the analogy from the Land Law should be drawn with all due care. However, even taking into account the difference between joint ownership of land and joint authorship, it does appear that the requirement of unanimous consent for the exclusion mechanism is proper. Particularly because joint authorship is a "natural" condition and typical of many works, it is appropriate to be apprehensive about an exclusion mechanism that is based on each of the authors having an individual right of action, reinforcing the status of strong authors and burdening public access to the works, as explained below.

 

59.       Examining the rule with regard to the reasonable use of jointly owned land also leads, prima facie, to a similar conclusion. By drawing an analogy based on section 31(a)(1) of the Land Law it can be inferred that leaving the work under the management of ACUM constitutes reasonable use, considering the fact that it is the typical, widespread method for the collection of royalties. According to this logic, there appears no justification for adopting an exclusion mechanism that enables a joint author, who so desires, to prevent his fellow author from making reasonable use of the work, by excluding it from the collectively managed repertoire.

 

60.       It should be noted that this Court has previously considered the question of collaboration between joint authors, in CA 1567/99 Sivan v. Sheffer PD 57(2) 913 (2003) (hereinafter "Sivan"). Under the circumstances of that case, we recognized the right of each of the joint authors to terminate a contract that had been made in connection with the use of the rights when the contract was breached. Can it therefore be inferred that it would be proper in the current case to permit each of the joint authors to individually decide on exclusion? Despite the apparent similarity between the situations, in fact they are quite different and the conclusion should therefore be different too. In Sivan the issue was the rescission of a contract due to its breach and ipso facto it was possible to rely on the principle that whosever right has been infringed on is not required to forgive the infringement. This result is supported by considerations deriving from the law of obligations and in particular from the issue of multiple creditors. In contrast, in the case at hand, the question is posed for the purpose of delineating the ordinary rules of management, in the absence of any alleged breach. The relevant considerations are thus different, and so is the result that they dictate. Indeed, in Sivan the Court has made a clear distinction between these two questions. In fact, it noted that it was not ruling on the question of unilateral exercise of copyright in a joint work, which is more similar to the present case, and it went on to state that section 31(a)(1) of the Land Law prima facie makes it possible to adopt a flexible approach in such cases (Sivan p 942).

 

61.       Taking a broader view, it appears that the position presented to us by EMI Israel and Anana does not give proper weight to the effect of high transaction costs and free-riding in the management of multiple ownership resources, a phenomenon referred to as "the tragedy of the anti-commons" alongside the better-known term "the tragedy of the common property" or "the tragedy of the commons" (see generally: Michael Heller, The Tragedy of the Anticommons: Property in the Transition from Marx to Markets, 111 Harv L. Rev 621 (1998); James Buchanan & Yong J. Yoon, Symmetric Tragedies: Commons and Anticommons, 43 J. L. & Econ. 1 (2000)). Indeed, the narrow exclusion mechanism that the Tribunal approved appears more suitable for dealing with these phenomena. In connection with joint authorship, “the tragedy of the anti-commons” is manifested in sub-optimal use of the work as a result of uncoordinated behavior by its owners. In a legal regime where a license to use a particular work necessitates the agreement of all its owners, each of the owners might act to maximize his own profits by claiming a high fee for agreeing to its use, without considering the negative externality that such behavior for the other owners. Ultimately many users will find it difficult to meet the overall price required of them and the work will be used to a lesser extent, thus harming both the joint authors and the public, whose access to the work has been limited. It is common to believe that the solution to this problem is one of the major advantages embodied in the activity of collective management corporations (see: Katz, p 561; Francesco Parisi & Ben Depoorter, The Market for Intellectual Property: the Case of Complementary Oligopoly in The Economics of Copyright 162, 168-169, Wendy J. Gordon & Richard Watt eds. 2003 (hereinafter "Parisi & Depoorter")). Since dealing with the market failings associated with joint authorship is one advantage that justifies the monopolistic activity of corporations like ACUM, great importance is attributed to the design of an exclusion mechanism that will not frustrate that advantage by vesting veto power in each joint author who wishes to preclude use of a joint work.

 

62.       Ultimately, even under the narrow exclusion regime joint authors can agree in advance, contractually, on the scope of their understandings with regard to the work's exclusion from collective management. In fact, the narrow exclusion regime merely provides the default with regard to the inclusion of a joint work in the repertoire managed by ACUM. Insofar as the authors wish to agree on a different decision-making mechanism with respect to the management of joint works, they are at liberty to do so. Presumably such an arrangement, made before any of the parties is in a position for extortion or "free-riding," will help limit the coordination difficulties asserted by EMI Israel and Anana with regard to obtaining the consents necessary for the exclusion of a joint work. In view of the aforesaid, the default mechanism prescribed – according to which in the absence of an agreement between the joint authors to the contrary, the consent of all authors is necessary to exclude the work from management by ACUM – is appropriate.

 

The Rights Exclusion Mechanism: the Degree of Segmentation and the Distinction between New and Old Media

 

63.       As mentioned above, the arguments by EMI Israel and Anana also revolved around the fact that the "exclusion packages" defined in the Permanent Conditions do not distinguish between uses for the purpose of "old media" and uses for the purpose of "new media." In this respect Anana reiterated the case that it made before the Tribunal concerning the impairment of authors' ability to exhaust the full financial potential embodied in their works by excluding the works from management by ACUM solely with regard to "new media," and concerning the damage caused to Anana itself, having prima facie relied upon the previous exclusion mechanism in excluding rights that it will now have to restore to ACUM’s management.

 

64.       In contrast, the Director-General and ACUM argued before us that categorizing the necessary permissions according to types of media will allow ACUM members to abuse their power against users by forcing them to purchase specific uses (for example using the work on a cellular platform) in addition to the general fee for the license awarded through ACUM. In addition, ACUM mentioned that the adoption of a "liberal" exclusion regime enabling a precise "segmentation" of the excluded uses of any work would involve a significant logistic and financial burden on its ability to manage copyright of its repertoire.

 

65.       Deciding between the conflicting positions in this respect has proven to be more complex than the parties' arguments revealed. In truth, as we explain below, both positions are extreme and fail to fully address the difficulties they entail. Consequently, at present, we believe that the exclusion mechanism approved by the Tribunal should be upheld, provided that the question of excluding "new media" – subject to conditions and constraints – will be comprehensively reviewed towards the renewal of the cartel’s approval. We shall explain our said position.

 

66.       The present exclusion mechanism, as expressed in section 2.3 of the Permanent Conditions, enables an author to exclude his rights completely, in respect of all their potential uses. Moreover, the mechanism allows excluding the rights in respect of some of the uses, yet solely in accordance with one of four alternatives – "the exclusion packages" that stand at the center of the discussion. Because of their importance, we shall lay them out in full below:           

 

            "2.3.1  Excluding the rights for audiovisual broadcasting, including synchronization and recording for the purposes of such broadcasting, and including the provision of interactive and/or on demand services and any similar service, including by television, Internet, telephony or mobile phone.

 

            2.3.2   Excluding the broadcasting rights by means of audio, including recording for the purposes of such broadcasting, and including the provision of interactive and/or on demand services and any similar service, including by television, Internet, telephony or mobile phone.

 

2.3.3   Excluding the right of copying. For the avoidance of doubt, it is clarified that excluding the right of copying does not include the right of copying for broadcasting purposes.

 

2.3.4   Excluding the right of imprinting and/or recording. For the avoidance of doubt, it is clarified that excluding the right of imprinting and/or recording does not include the right of imprinting and/or recording for broadcasting purposes".

 

67.       The alternatives at the center of the present controversy are the first and the second (and to a limited extent also the fourth, insofar as the exercise of the right of copying is aimed at integrating a musical work in the soundtrack of an audiovisual work). These alternatives deal with uses that make the work available to the general public – its broadcasting on television or radio, making it accessible by means of "streaming" technology, which enables viewing or listening to content through the Internet without copying it to the user's computer, and the like. The main distinction that the exclusion mechanism makes in this context is between presenting the work by audiovisual means and presenting it by audio only. Thus, for example, given the present situation, an author can be represented by ACUM for the purpose of playing songs on the radio but not for using them in the format of television content.

 

68.       Presumably, maximum protection of the author's rights and his financial interests should have enabled every author to make specific exclusion decisions as much as possible – even with reference to a specific work in a particular use. Along these lines, ACUM's present exclusion mechanism permits, as aforesaid, limited "segmentation" by types of use. However, it has been argued before us that this does not suffice. The dispute revolved around the degree of precision required by segmentation. While the present segmentation mechanism essentially distinguishes between audio and audiovisual uses, EMI Israel (supported by Anana) also wishes to distinguish between "old media" – like television and radio – and "new media" – such as the Internet and cellular phone services. This position was presented to us as warranted by technological progress and the launching of new channels to use works, as well as the protection of the author's prerogative to manage the works he owns. However, as we explain below, this position raises fundamental and practical difficulties and thus cannot be adopted in the format in which it was presented.

 

69.       It should be stated that the question of excluding "new media" should first be considered in light of the two perspectives that fashion the discussion as a whole – that of copyright law and that of antitrust law. However, in this context, it is important to bear in mind another point of view which relates to the interface between law and technology and focuses on the adaptation of the legal framework to technological developments as well as its implications to future technological development, for better or worse (see and compare: Dotan Oliar, The Copyright-Innovation Trade-Off: Property Rules, Liability Rules and Intentional Infliction of Harm, 64 Stan. L. Rev. 951 (2012)).

 

70.       At the outset, we should consider the fact that the ability to exclude "new media" that EMI Israel seeks to adopt relies primarily on a technological distinction between "old" and "new" communication platforms. This distinction is replete with difficulties. The world of communications is characterized by constant, rapid technological development. More importantly, the technological aspect of this area is characterized by a phenomenon sometimes called "technology collapse": with the development of technology the walls that separate various media platforms gradually collapse and different types of technology "collapse" into each other, creating new interfaces. Thus, for example, a movie that is distributed through the Internet is also available for viewing on a smartphone, while traditional radio stations also broadcast songs and programs by streaming technology over the Internet. Given this technological reality, the distinction between "old media" and "new media" is not dichotomous, nor is it permanent or stable. In fact, EMI Israel and Anana did not even explain how these categories should be defined in their view, and settled for giving clear-cut examples (such as using a song as a ringtone), which were insufficient to delineate the boundaries of the distinction. Their case therefore left many practical questions unanswered. For example, no explanation was given as to whether the transmission of television broadcasts through the Internet to be viewed on smartphones would, according to the proposed approach, require a license for "new media" or "old media" or in any event how would this example be classified to one category or the other. The rapid, constant development of new communication technology guarantees that questions of this type will not remain theoretical. In this context, we should note the interesting case of the American company MobiTV, which at the beginning of the 21st century developed technology that enabled receiving satellite or cable broadcasts and viewing them on mobile phones. A dispute (which gave rise to several legal proceedings) arose between MobiTV and ASCAP, one of the two largest collective management corporations in the U.S. The dispute concerned the purchase of a blanket license necessary to legitimate the transmissions, as a result, among other things, of MobiTV's objection to being charged a "new media" rate even though the content it offered its customers was the same as broadcast by traditional means (although ultimately the judgment did not rule on this question directly. See: United States v. ASCAP, 712 F. Supp. 2d 206 (SDNY 2010)). With regard to the controversy relating to the classification of MobiTV's services as "new media," see also its preliminary response in the legal proceeding it initiated (Applicant Mobitv, Inc's Pre-Trial Memorandum at 25, United States v. ASCAP, 712 F. Supp. 2d 206 (SDNY 2010)).

 

71.       Insofar as the distinction between "new media" and "old media" is intended to extend to situations in which the content of radio and television programs is transmitted through the Internet to computer screens or by cellular phone services to mobile phone screens, adopting this distinction is likely to have a "chilling effect" on the use of the works in "old media" too. This is because users would presumably refrain in advance from integrating excluded works in productions intended for "old media," if only given their concern of future marketing constraints in "new media." Thus, for example, when a television program is produced, certain songs might not be included in it – as a cautionary measure – so as not to impair the possibility of broadcasting the program over the Internet too. Such indirect implications are not always clear "in real time" to an author who wishes to exclude his work, but recognizing them might also be weighed against the distinction proposed by EMI Israel and Anana.

 

72.       Another aspect to be considered is the likely implications of the exclusion mechanism on cyberspace users. In their arguments before us EMI Israel and Anana concentrated on institutional and corporate users, such as large communications companies, thereby presenting only a partial perspective on the matter in dispute. However, the exclusion mechanism they sought to adopt is not intended to apply only to such users. In fact, a sweeping exclusion of "new media" uses is likely to lead, without distinction, to difficulties for small website operators, including, for example, Internet radio operators, for which the ability to contract with collective management corporations constitutes a lawful, practical way for making regular use of a wide variety of works (and indeed some believe that the activity of collective management corporations is of especial importance for authorized use of musical works over the Internet. See, for example: Daniel Gervais, The Landscape of Collective Management Schemes 34 COLUM. J. L. & ARTS 591, 601 (2011) (hereinafter "Gervais, Landscape"). For a discussion of the importance of collectively managing works in a digital environment, see also: Recommendation 2005/737/EC on collective cross-border management of copyright and related right for legitimate online music services [2005] OJ L276/54 (hereinafter "the 2005 EC recommendation"); Proposal for a Directive of the European Parliament and of the Council on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market (July 11, 2012) (hereinafter "the 2012 proposed directive"). See also Copinger, pp 1816-1826).

 

73.       The effects of the requirement to distinguish the use of new technologies on making works accessible to the public should also be considered in view of past experience in similar contexts. Thus, for example, in New York Times Co. v. Tasini 533 US 483 (2001) (hereinafter "Tasini"), the US Supreme Court considered whether a newspaper (the New York Times) could upload articles by freelance writes to a computer database. After lengthy litigation, the US Supreme Court accepted the position of the writers who argued that the license previously given to the newspaper was merely for the purpose of printed publication, as opposed to electronic media. Following the judgment the newspaper had to acquire permission from the writers to publish their articles in the database. Yet, since the newspaper believed that taking such action would not be financially viable, the result in practice was the removal of the articles from the database, thereby denying public access to them. We do not need to go into the merits of the judicial ruling in Tasini insofar as it relates to the understandings between the newspaper and its writers at the relevant times. In fact, the ruling in Tasini is not directly relevant to the technological aspects of the publication format and is instead focused on whether uploading the articles to a general computerized database (of numerous articles from various newspapers and journals) could be construed as a newspaper publication (indeed, in another case of similar circumstances the Supreme Court of Canada held that a newspaper could copy articles published in its printed edition to digital CDs containing articles of that newspaper alone. See: Robertson v. Thomson Corp. 2006 SCC 43 (2006)). Nevertheless, the results of this case embody an important lesson. Taking the broader view it teaches us that an arrangement that does not take into account the dynamic nature of uses might prove to burden and damage the public interest. Taking a forward-looking view, it appears that experience teaches us that it is difficult to base licenses for use on a distinction between technologies as this might subsequently frustrate broad access to cultural assets (see also: Francesco Parisi & Catherine Sevcenko, Lessons from the Anticommons: The Economics of New York Times Co. v. Tasini, 90 Ky. L. J. 295 (2001-2002)).

 

74.       What is the experience of other legal systems regarding the exclusion of "new media"? On the face of it, this is an important question, considering the fact that the challenges of technology in the area of copyright are by no means unique to Israel. However, for the reasons detailed below, the benefit of a comparative study has proven limited at the present stage of developments in the area.

 

75.       Truth be told, reference to legal developments in Europe and the U.S. shows that the exclusion of "new media" is often recognized as possible. Presumably, this reinforces the position of EMI Israel and Anana. However, studying matters in depth indicates that this experience has limited application to the case before us, because, among other reasons, the issue under consideration here is still in the early stages of formulation, trial, and controversy in other systems too.

 

76.       The two major collective management corporations in the U.S. – BMI and ASCAP – recently permitted two of their members (including global EMI) to exclude the rights owned by them from collective management for the purpose of certain aspects of the works' use in "new media" (as detailed on their websites – http://www.bmi.com and http://www.ascap.com). Yet, it is important to note that the ability to do so is embodied in the decisions of the corporations themselves rather than the result of external regulation. Moreover, the American rights management corporations operate in a different way than ACUM in the sense that they manage only one type of rights – public performance rights, which concern the permission to perform the work in public, to broadcast it, or to make it available to the public (but not the permission to copy the works or integrate them in audiovisual productions). That is, the starting point for the exclusion is a market of rights that is more "split" than the market in which users and authors operate in Israel. This background is likely to influence the factors relating to the desirable exclusion mechanism. Subsequently, it should be noted that reference to the exclusion of "new media" from administration by collective management corporations in the U.S. is not made in "all or nothing" terms, and in fact includes certain restrictions. For example, BMI's most up to date announcement on the matter (as published on its website) has clarified that the ability to exclude "new media" is aimed at cases where the work's use necessitates more than one type of license, while ASCAP has emphasized in addition that exclusion is possible with regard to making works accessible to the public exclusively through "new media," and does not apply to users that are broadcasters. Finally, and this is a major point, it cannot be ignored that some of the decisions on these matters are very recent (for example, BMI's announcement, of February 11, 2013, was published long after the litigation between the parties before the Tribunal had ended). It is therefore difficult to draw inferences from other legal systems' sustainable experience in this area. In fact, it can be said that at this stage the secondary effects of the "shock waves" that the new reforms have created for users have not yet been fully clarified, although the existence of such "shock waves" is already apparent. For example, we may point to a new development – lawsuits brought by users against management corporations to reduce the fee charged for a "blanket license," since "the blanket" no longer covers "new media" too (for instance, the claim brought against ASCAP by a large Internet radio company called Pandora at the end of 2012, which is still pending. For reports in the media about the case, see, for example: Don Jeffrey, Pandora Media Sues ASCAP Seeking Lower Songwriter Fees (November 6, 2012, available at http://www.bloomberg.com/news/2012-11-05/pandora-media-sues-ascap-seekin... Ed Christman, Pandora Files Motion to Keep Low Publishing Rates (June 20, 2013) available at http://www.billboard.com/ biz/articles/news/digital-and-mobile/1567890/pandora-files-motion-to-keep-low-publi-shing-rates).

 

77.       In principle, European law permits a rights owner to join a collective management corporation even when he seeks to reserve the use of the rights on the Internet or through CDs (see: Commission Decision of August 6, 2002 in case COMP/C2/37.219 Banghalter/Homem Christo (Daft Punk) v. SACEM. See also: section 5(3) of the 2005 Commission recommendation and the 2012 proposed directive, mentioned above). Nevertheless, it is important to bear in mind that this arrangement is also the result of factors irrelevant to Israeli reality, primarily the desire to reach a standard, coordinated pan-European regulation where there are multiple collective management corporations.

 

78.       Another factor that should be mentioned parenthetically involves the broader context in which the exclusion mechanism is embodied, with regard to the acceptance of the Conditions towards authors' freedom of action and freedom of choice. In this context, for example, it is significant that the Permanent Conditions ensure the right of each of ACUM’s members to contract with users individually and to offer them individual licenses to use certain works alongside the management of those works by ACUM, without excluding them from its repertoire (section 2.4 of the Permanent Conditions). This is similar to the U.S. practice and different from the norm in Europe, where most collective management corporations require exclusivity from their members in respect of all rights in their work (see: Gervais, Landscape, p 598). Indeed, it is possible that this course of action will not be frequently used and it is likely to be significant mainly from the perspective of users who do not require blanket licenses but rather individual licenses for certain works. However, from a more general perspective, this mechanism creates something of a balancing effect on ACUM's coercive power (see also and compare: Parisi & Deporter, pp 170-172).

 

79.       More generally, it can be said that EMI Israel and Anana’s requirement to allow a sweeping exclusion of "new media" uses was based on the assumption that they are entitled to enjoy the fruits of the cartel while realizing the financial potential embodied in the works they manage to its fullest. That is a mistake. Indeed, once ACUM's activity was recognized as a cartel, which raises concern of abuse of monopolistic power against the public, it can no longer be said that ACUM members are entitled to fully exercise their proprietary rights while enjoying the benefits of the cartel. Although the cartel has been approved, its approval was made subject to conditions. Those conditions bear a price that ACUM and its member authors must pay in order to balance the excess benefits such membership confers and to ensure that the public is protected against the concerns involved in the cartel's activity. In fact, what we have previously stated regarding the exclusion of a work without the consent of all joint authors is also appropriate with regard to the issue of segmentation – the adoption of a segmentation mechanism that enables the exclusion of works based on a technological distinction between new and old media, without reservation, might reduce the benefit that ACUM’s activity yields for the public to such extent that may undermine the justification of its approval as a cartel.

 

80.       We can therefore sum up and say that even if the ability to exclude "new media" uses should not be outright dismissed, EMI Israel and Anana have at present failed to lay a substantial foundation for the considerations and details of the exclusion mechanism they wish to adopt, regarding, inter alia, the ability of such a mechanism to provide an answer to the concerns indicated above. For that reason, we cannot accept their position. We should parenthetically emphasize that we have not ignored the possibility that the ability of an author to manage his works independently in the realm of "new media" might prove to be significant for some authors, including "small" or independent ones. The Internet is a flexible technological platform that is far more accessible to private agents than traditional media. It allows direct, convenient, and relatively easy communication between the rights owner and the individual user and thereby yields more direct patterns of consumption, sometimes dramatically reducing transaction costs and thus enabling "small" authors to profit from their works without the assistance of collective management mechanisms (see: Casey Rae-Hunter, Better Mousetraps: Licensing, Access and Innovation in the New Music Marketplace, Journal of Business & Technology Law 7(1) 35, 39 (2012)). However, this is merely one of many considerations and it has not been argued before us. Thus, for example, in contrast, the ability to exclude "new media" might actually be damaging to small authors in particular given the "dilution" it would generate in the value of blanket licenses. Consequently, as a general rule and as already mentioned, the question of "new media" should be revisited comprehensively as part of the cartel's re-approval at the end of the five-year period allotted to it. This is based on the understanding that one cannot rule out in advance the possibility that a delineated and limited format of "new media" exclusion (insofar as such a format is proposed in the future) might enable interested authors greater independence in the management of their works, without impairing the interests of the public at large, to an extent that will undermine the reasons underlying the cartel's approval.

 

81.       In other words, the precise definition of the "exclusion category" sought in respect of "new media" is likely to have a decisive impact on whether the overall exclusion mechanism yields a balanced result. An important, albeit not the only, aspect of this definition relates to the phenomena of "technology collapse" and "content leakage" that we have already considered. As previously mentioned, a sweeping, generalized definition of "new media" regarding the exclusion ability would yield uncertainty in respect of the scope of the excluded uses, might lead to many users being charged double fees (not only by ACUM but also by authors themselves), and would create a "chilling effect" from the users’ perspective, as they might refrain from including an excluded work in productions intended for "old media" based on their concern that new media marketing will be limited in future. In contrast, a narrower definition of excludable uses, particularly a definition that focuses on uses designated for new media (for example the production of a ringtone based on an existing tune) would help reduce the awkwardness that numerous exclusion possibilities yield, moderate the negative effects of "content leakage" between different technological platforms from the users’ perspective, and reduce the damage caused to their financial interests. In this context, we may add that part of the negative experience accumulated from the operation of the broad exclusion mechanism (in the scope of the Provisional Conditions for ACUM’s activity before their 2009 amendment) resulted from the fact that it granted complete flexibility with regard to the exclusion format and did not consider the significance of the term "new media" nor did it regulate the boundaries of the exclusion options related to it.

 

82.       To complete the picture it should be noted that the issue of excluding rights in "new media" from collective management as part of a cartel's approval in Israel has not arisen for the first time in ACUM’s case. As already mentioned, the Tribunal had authorized in the past the activity of two other collective management corporations that were also considered a cartel – PIL and IFPI. In both cases the conditions for the approval regulate the corporation members’ ability to exclude rights from collective management in accordance with a predetermined "exclusion basket," and include several categories concerning various Internet and mobile phone uses (see: section 3.3 of the conditions for the operation of IFPI and section 2.2 of the conditions for the operation of PIL). Recognition of this is prima facie relevant to the discussion. However, we should consider the fact that both those entities deal with the management of producers rights (the owners of sound recordings), an area which is not identical to the area in which ACUM operates (management of composers, songwriters, and arrangers rights). We expected the parties before us to refer to this comparison – one way or the other – but they failed to do so. Each of them clung to the position of "all or nothing" and sided, respectively, either with a complete exclusion of "new media" or an absolute negation of the ability to exclude new media uses. Thus, the option of excluding "new media" and the conditions for it were not fully addressed.

 

83.       What emerges from all the aforementioned is this: reviewing the implications of excluding "new media" shows that it is not necessarily justified to completely negate the option to exclude works for the purposes of "new media." Nevertheless, there are clear indications that this applies only to a limited exclusion mechanism, which concentrates on certain types of "new media" uses and strives to minimize the harm caused to users. Such an exclusion mechanism cannot be based merely on a technological distinction between "old media" and "new media" which allows a sweeping exclusion of all uses of the latter type – as proposed by EMI Israel and Anana. In any event, examining the possibility of another exclusion category concerning "new media" and fashioning the boundaries of that category should be done with care after studying the positions of all interested parties and all the relevant facts. As aforesaid, this matter is for the Tribunal to consider when the extension of the cartel's approval arises. Our position is also supported by the temporary nature of the approval – for only five years. At the end of that period (two years of which have already passed), the Tribunal will revisit the approval of the cartel, at which time it can also reconsider the scope of the exclusion mechanism's "segmentation," on the basis of five years’ experience with the operation of a "narrow" exclusion mechanism. That experience will join with lessons already learned from the operation of an unlimited exclusion mechanism (as part of the Provisional Conditions) and will help the Tribunal evaluate the possibility of adopting a balanced, intermediate alternative that will permit the exclusion of limited uses for the purposes of "new media," without undermining ACUM’s purpose as a collective management corporation. Presumably, by the time the Tribunal considers the extension of the cartel's approval, international experience on this issue will also be established which will enrich the set of facts before the Tribunal.

 

84.       To sum up, our opinion is that the conditions for the permanent approval should be left as they are for the time being, including the issue of excluding works for the purposes of "new media," based on the assumption that the Tribunal will be able to revisit this issue when the current conditions expire. It should be emphasized that this does not express any substantive holding regarding the result to which the Tribunal should reach on this or any other issue, beyond the general statement that the possibility of permitting a limited, well-defined exclusion of "new media" uses should not be ruled out. On the basis of the up-to-date facts laid out before it, the Tribunal will presumably reach a correct decision regarding the proper and most effective way to do so, insofar as it deems fit to follow such path.

 

Conclusion

 

85.       The appeals before us revolved around ACUM’s activity, yet they necessitated a broad discussion with regard to the collective management of copyright, considering not only the complexity of jointly owned works that derive from the talents of several authors but also the complexity of the variety of uses in a constantly changing technological world. At the present time we have reached the overall view that according to the facts before us we should not intervene in the conditions attached to the cartel's approval – from the perspective of balancing the proprietary rights of all authors against the public interest of accessibility to works that are part of the general cultural repertoire and it is therefore important to avoid placing substantial barriers to their use. We have not ruled out the possibility that in future the proper balance between authors’ rights and the public interest might dictate a different result with respect to integrating the distinction between different types of "new media" and "old media" in the rights exclusion mechanism. To a great extent, this issue represents the challenge of collectively managing rights in the modern era with its changing technological and business environment, where the practice of collective management is more essential than ever but also raises more serious difficulties and complexities than ever. The answer to these challenges (both with regard to "the segmentation mechanism" and with regard to other matters discussed before us) lies in a delicate, changing balance between the relevant interests. As we have mentioned, this balance might be affected by changes in technological platforms and business practices, by studying new information, and by lessons derived from ACUM’s activity in Israel and the operation of collective management corporations worldwide.

 

86.       In conclusion, I would suggest to my fellow justices to dismiss both appeals. ACUM would bear the Director-General's costs in the amount of NIS 20,000. EMI Israel would bear the Director-General's costs in the amount of NIS 40,000 and Partner's costs in the amount of NIS 10,000.

Justice Z. Zylbertal

 

I concur.

 

Justice E. Rubinstein

 

A.        I concur with the comprehensive opinion of my colleague, Justice Barak-Erez.

 

B.        Without wishing to gild the lily, I would like to add brief remarks. We are dealing with ACUM, a special entity established in 1936, during the British Mandate, to protect the rights of authors and artists in their intellectual property and it is as though it has always been a fundamental Israeli institution. Indeed, perhaps if we could start over today it would have been possible to think of other ways of organization for this purpose, not necessarily a private company, but such is the situation we are facing, in which we are called upon to have our say. However, even given the current situation, the challenges of dealing with the rights of those in need of ACUM’s services are ever-changing, especially with the dynamic technology, and it is not without reason that my colleague qualified the second part of her opinion with regard to the exclusion mechanism, by looking to the future.

 

C.        With regard to public directors, the Tribunal was indeed right in its decision. In my opinion, the more the better, provided that these directors do their work faithfully as agents of the public and it is to be hoped that this is the norm, in which case the financial expense involved is justified. Regarding their duties, see Prof. J. Gross, Directors and Officers in the Era of Corporate Governance (Second Edition, 2011) Chapter I, p 1 et seq and the references there; and see also Amendment No. 8 to the Companies Law (2008) with regard to the possibility of appointing independent directors; I. Bahat, Companies, 12th edition, 5771-2011, 386. My colleague described in detail the circumstances of this case but also added notes drawn from general public law, namely when a particular entity appears to be hybrid, and as derived from this analysis – the fact that ACUM is similar to that model in view of its duties to the public, without deeming it necessary to rule that it is indeed a hybrid entity. I myself would tend to say that we are indeed dealing with a hybrid entity, whether we take a relatively narrow view of it, through the eyes of its direct beneficiaries, or a broader view of the general population of users; see also my comments in ALAA 1106/04 Haifa Local Planning and Building Committee v. The Electric Corporation (2006), paras. C and D.

 

D.        The author A. Harel in his work Hybrid Entities – Private Entities in Administrative Law (5768) enumerates (pp 118-125) criteria for analyzing the hybrid nature of an entity, including a vital public function, providing a service to the public, not-for-profit activity, a monopoly, the concentration of great power that might be abused, and functional public funding. When dealing with a monopoly, as in the case before us, although ACUM is incorporated as a private company, it is painted in bold colors of hybridity, in particular considering the narrow choice given to individuals (ibid, 115). Indeed, in a rapidly changing world of varied technological possibilities for using works, the interest of authors and artists, as well as the general public, is one of fairness towards everyone; see also D. Barak-Erez, Citizen, Subject, Consumer and Government in a Changing Country (2012), 119, 121, who characterizes an entity as hybrid, when, inter alia, it serves as an actual substitute for government involvement. In the case before us, as implied above, the matter could have presumably been dealt with through a regulatory framework and this component justifies, in my view, a thorough discussion of the issue of public representatives. Indeed, before us is a private company, yet this is merely its framework and shell while its content is significantly broader; even the name attests to its belonging to the public realm – the Association of Composers, Authors and Publishers. ACUM's articles of association (as last approved on July 21, 2013 according to its website) include external directors and the controversy consists merely of their number. According to its website, ACUM presently has approximately 7,500 author members; don’t they deserve extensive protection against a potential clash of interests between various groups within the company?

 

E.         Now a few words on the role of external directors, which is the current legal term, or public directors; as we know, the Companies Law, 5759-1999 refers to an external director (article five, sections 239 et seq) but the literature uses this expression interchangeably with public director, as it was termed in the Companies Ordinance (section 96(b)(c)). Indeed, according to the learned author J. Gross (Directors and Officers in the Era of Corporate Governance (2011) 92), the external director "does not represent the regulator or the general public. He owes a fiduciary duty to the company and to it alone and he only has to bear the interest of the company in mind"; and see also Dr. O. Haviv-Segal, Company Law (2007) 438. However, even if this narrow definition is correct in principle, without going into a comprehensive discussion, the current case involves a special instance of a "private-non-private" company, which does not strive to maximize its profits. In this context, see by analogy the statement by Haviv-Segal, ibid, about the external director’s function in restraining "opportunistic behavior" by a controlling shareholder or management: "in this respect the external director can be regarded as the representative of the public shareholders on the company's board of directors." We should also mention (Gross, p 93) that the external director "brings with him knowledge, experience, and objective judgment and might balance the various views within the company, especially when the board of directors is made up of several cohesive groups"; he is "removed from the shareholders' personal interests… can express objective opinions in cases where differences have arisen between various groups in the company and balance the different interests in the company…". By analogy, this statement is presumably consistent with the present case, despite ACUM's "private" corporate framework. Therefore, the external directors have a particularly important role from the broad, overall perspective of the interests of ACUM's members generally as well as the public at large; see also Hadara Bar-Mor, Corporate Law III (5769-2009) 307-309. Thus, we should not intervene in the ruling of the Tribunal on this matter.

 

Regarding my colleague's remarks concerning the rights exclusion mechanism and old and new media, what can be inferred from them is a lesson in complexity and arbiter humility. We are dealing with money and maximizing authors’ benefit but the question is whether the baby won’t be thrown out with the bathwater. My colleague pointed out the difficulties and her conclusion is that more experience and study is necessary in order to reach a proper balance (see para. 82). My sense is that this appears difficult and challenging; the technological means are constantly changing before our very eyes, along with their implications to the issue before us, and hence solutions are likely to be short-lived. The regulator, the Director-General of the Antitrust Authority, has an extremely important role in this respect since the Tribunal has only what its eyes can see, while the Director-General is equipped with available monitoring tools. Finally, this summer I have had the opportunity to serve as a "secondary partner" in three intellectual property decisions. Their common denominator is the complexity caused by time, complexity of different types, technological and economic. Studying the fascinating collection Copyright – Readings in Copyright Law (M. Birnhack & G. Pesach, 5769-2009) reveals a variety of insights that will concern us a great deal in the future. Apart from the need to plough through the specific material, the constant changes, perhaps more than in any other area of civil law, also place the courts, and equally so – the regulatory entities, under weighty responsibility. The tension between property and competition, and between the long, short and medium term, poses real challenges. The professionalism of the regulators – be it the Patent Office or, as aforesaid, the Director-General of the Antitrust Authority – helps courts in making their rulings but does not relieve them of their responsibility. In these matters comparative law may also be useful. The bottom line is that this judgment ought to be a starting point for lessons to be learned; over, but not done.

 

Held as per the opinion of Justice D. Barak-Erez

 

September 3, 2013 (Elul 28, 5773)

In the Supreme Court

Sitting As a Court of Civil Appeals

CA 1697/11

 

Before:	His Honor, Justice S. Joubran His Honor, Justice U. Vogelman His Honor, Justice N. Sohlberg
The Appellants:	1.  A. Gottesman Architecture Ltd 2.  Asaf Gottesman
v.
The Respondent:	Arie Vardi

 

Appeal against the judgment of the District Court of Tel Aviv-Jaffa (Her Honor Judge A. Baron) of January 17, 2011 in CF 1222/09

 

On behalf of the Appellants:	Adv. Hillel Ish-Shalom, Adv. Roy Kubovsky, Adv. Guy Lotem
On behalf of the Respondent:	Adv. Eran Presenti

JUDGMENT

Justice U. Vogelman

 

            An architect designed a unique house for a client and asked to photograph it in order to show it on his firm's website. The client refused. The architect published computer simulations of the client's house on the website, without giving details identifying the owner of the house. Does this case give rise to an infringement of privacy? That is the question that faces us.

 

The Main Facts and Proceedings

 

1.         The Second Appellant (hereinafter referred to as "Gottesman") is an architect who heads a firm of architects. At the beginning of the year 2000 the Respondent (hereinafter referred to as "Vardi") commissioned Gottesman's services for the latter to design his residence for him. The parties do not dispute the fact that the project was one of a kind and a house was ultimately built that was exceptional as regards its size, the type of materials used in its construction and its unique design. Despite the extensive scale of the project, no written agreement was ever made between Vardi and Gottesman, either with regard to the commissioning of the architectural work or concerning the possibility of documenting and photographing the building for Gottesman's purposes.

 

2.         Even before the construction was completed, Gottesman asked Vardi to photograph his house, as was his firm's practice. Vardi, for his part, made the photographs conditional upon Gottesman and the intended photographer signing a letter of commitment in respect of the photographs' use. According to the wording proposed by Vardi, Gottesman and the photographer would be obliged to apply to him in writing whenever they wanted to make use of the pictures and obtain his express consent. The two were also required to undertake to pay Vardi agreed damages without proof of loss for any breach of that undertaking: Gottesman - $500,000 and the photographer - $50,000 (hereinafter referred to as "the letter of commitment"). Gottesman asserted that the letter of commitment that Vardi proposed was a new requirement that was contrary to a previous understanding between the parties in respect of photographing the house. Vardi, on the other hand, expressed anger at the fact that Gottesman categorically denied the importance of protecting his privacy. No agreement was ultimately made between the parties and in the absence of any understanding, professional photographs of Vardi's house were not taken.

 

To complete the picture, it should be noted that at the relevant time photographs of Vardi's house were published in two places: firstly, pictures of the house exterior were published in a book that was printed in hundreds of copies, published by Apex Ltd (hereinafter referred to as "Apex"), which had installed windows and shutters in Vardi's house; secondly, pictures were published on the website of the carpenter who had done carpentry work in Vardi's house. Both Apex and the carpenter had signed a letter of commitment in favour of Vardi with regard to using pictures of his house in terms similar to those that Gottesman had been asked to sign.

 

3.         Since Gottesman had not been permitted to photograph Vardi's house he commissioned the services of a studio that specialised in the creation of computer simulations in order to create an artificial simulation of the architectural work in Vardi's house. Those simulations, which look very similar to actual photographs, were published on the website of Gottesman's firm (hereinafter referred to as "the website"). There were no details identifying the owner of the house or its address alongside the pictures. After Vardi discovered that the computer simulations had found their way onto the website, he filed a lawsuit in the Tel Aviv Magistrates Court against Gottesman and his firm, in which he applied for a permanent injunction restraining them from making any use of photographs or simulations showing his house. At the same time as bringing the action, a motion was also filed for the provisional relief of removing the simulations from the website. An order prohibiting publication of the existence of the legal proceedings, including any identifying detail in respect of any of the parties to the action, was also sought. On November 11, 2008, during a Magistrates Court hearing of the motion for provisional relief, the parties reached an understanding with regard to publicising Vardi's house on the website until the motion for provisional relief is heard on its merit. In that understanding it was provided that the simulations would be removed from the website and other pictures of the house, which had already been published in the Apex book with Vardi's consent, would be published instead (hereinafter referred to as "the procedural arrangement"). On September 24, 2008 the Court (Her Honour Judge Z. Agi) allowed the application for the award of an interim gag order. Nevertheless, the Court ordered the trial to be remitted to the Tel Aviv District Court because it was found that the relief sought in the action was within its residual jurisdiction since it was an application for a permanent mandatory order incapable of financial quantification. Both the procedural arrangement and the gag order remained in force during the trial of the action.

 

The Judgement of the Lower Court

 

4.         The District Court (Her Honour Judge A. Baron), to which the trial was remitted, allowed Vardi's claim and held that his privacy had been infringed as a result of the exposure of his home on the Internet. It was held that although the simulations did not include personal belongings or intimate items, they did make it possible to obtain an impression of the lifestyle in the house, the habits of its occupants and their financial position. On the other hand, the Court dismissed the plea that removing the simulations would infringe the freedom of occupation and intellectual property rights of Gottesman and his firm. Consequently, against the infringement of Vardi's privacy, the Court weighed the harm to the economic interest that Gottesman and his firm would sustain, if they could not use the simulations in order to attract potential clients. In balancing them, the Court held that Vardi's right of privacy outweighed Gottesman's economic interest. Alongside that, the Court held that Vardi had not expressly or impliedly agreed to publication of the pictures or simulations. It was found that even if there had been talk between the parties about publishing pictures of the house in some or other framework, no express agreement had been reached to take and publish photographs. It was also held that there was no implied agreement to publishing the pictures. Amongst other things, the Court declined to treat the working relationship between Gottesman and Vardi or the fact that Gottesman had designed and planned the house as implied consent to the use of the simulations. It was further held that Vardi's agreeing to allow Apex and the carpenter to make certain use of photographs did not constitute implied agreement to similar use by Gottesman. Finally, the Court stated that even had Vardi's agreement been obtained, the agreement was unenforceable by virtue of section 3 of the Contracts (Remedies for Breach of Contract) Law, 5731-1970. A permanent injunction was therefore awarded restraining Gottesman and his firm from making any use of photographs or simulations showing Vardi's house, and the procedural arrangement that the parties had reached was annulled/rescinded. The sweeping gag order in the case was also removed and replaced by a mere prohibition of publishing the evidence.

 

The Parties' Arguments on Appeal

 

5.         In the appeal herein Gottesman and his firm reiterated their assertion that they should be permitted to publish the simulations on the website. At the outset, the Appellants dispute the lower court's finding that showing the computer simulations infringes "the privacy of a person's intimate life", within the meaning of the definition in section 2(11) of the Protection of Privacy Law, 5741-1981 (hereinafter referred to as "the Protection of Privacy Law" or "the Law"). Firstly, it was pleaded that showing the computer simulations of a house without specifying details identifying the owner cannot be construed as an infringement of privacy as defined in the Protection of Privacy Law. According to the Appellants, in order to prove an infringement of privacy as a result of the information published, it has to be shown that a link can be made between the information and a specific "person". In the instant case, it was argued, the computer simulations were shown in a "sterile" state, based on the planning position before the occupants entered the house and while making certain modifications. Alongside that, it was asserted that in any event there was no infringement of "the privacy of a person's intimate life" because the section relates to highly intimate information, such as a person's sexual proclivity or state of health. The same goes all the more so, according to the Appellants, in respect of the simulations that show the outside of the house and the spaces designated for hospitality. In the alternative, the Appellants plead that even if an infringement of privacy was caused, it did not give rise to a cause of action since it is a minor infringement "of no real significance", as defined in section 6 of the Protection of Privacy Law, because the simulations were published anonymously, without specifying personal details.

 

6.         Even if there was an infringement of Vardi's privacy, the Appellants plead that the defence of good faith applies in the circumstances prescribed in the Protection of Privacy Law. In particular, it was pleaded that the Appellants did not imagine that the publication would infringe Vardi's privacy and they are therefore entitled to the defence prescribed in section 18(2)(a) of the Law ("he did not know and need not have known that an infringement of privacy might occur"). It was further pleaded that the publication was intended to serve Gottesman's moral right to obtain fitting credit for his work, which he has by virtue of an architect's copyright in his work (section 4 of the Copyright Law, 5768-2007 (hereinafter referred to as "the Copyright Law")). According to the Appellants, this entitles them to the defence under section 18(2)(c) of the Protection of Privacy Law ("the infringement was committed in defence of a legitimate personal interest of the infringer") because, according to them, the moral right should enable the architect to publish computer simulations of his work.

 

7.         The Appellants further argue that it was inappropriate for the lower court to find that the element of "absence of consent" necessary to establish an infringement of privacy had been fulfilled. The Appellants first protest the finding that Vardi's consent was necessary in this context. Such consent, according to them, would only be necessary if Gottesman had sought to enter Vardi's house and photograph it in the private domain. However, they assert, it is unnecessary to obtain consent when involved is the use of the architectural plans and simulations created on the basis of them. Secondly, they argue, Vardi had originally agreed to the house being photographed and in any event his implied agreement to publishing the simulations could be inferred from the agreement that he had given to publish pictures of the house in the Apex book and on the carpenter's website, and also from the principle agreement to the procedural arrangement. Therefore, the Appellants maintained, Vardi's attempts to procure Gottesman's signature to the letter of commitment should be construed as an attempt contrary to a previous understanding between the parties. Such being the case, it should be held that Gottesman's refusal to sign the said document is irrelevant. Finally, the Appellants argue that it should be presumed that had Vardi wished to limit the use of the work, he would have done so from the outset in an express agreement.

 

8.         Vardi, for his part, endorses the lower court's ruling. According to him, publishing the simulations on the website constitutes an infringement of his and his family's privacy. According to Vardi, the fact that simulations, rather than actual pictures, were published on the website was aimed at circumventing the Protection of Privacy Law because the simulations show the house almost exactly as it really is and it is easy to link them with it. In view of that, Vardi seeks to adopt the District Court's finding that publishing the simulations on the website should be treated as publication of a matter relating to a person's "intimate life", as provided in section 2(11) of the Protection of Privacy Law and it therefore involves an infringement of privacy. According to Vardi, the Appellants cannot benefit from the defences prescribed in the Law: as regards the defence under section 18(2)(a) of the Law, which deals with the absence of knowledge of an infringement of privacy, it is asserted that Vardi emphasised to Gottesman that he jealously guards his privacy, and his attorney also demanded that the Appellants remove the pictures from the website immediately; as regards the defence under section 18(2)(c) of the Law, it was pleaded that the Appellants were not protecting a "legitimate personal interest" by publishing the simulations but merely sought to produce an economic gain. In any event, Vardi argued, the essential requirement of good faith to establish the said defences was not fulfilled in the present case because the Appellants had failed to remove the pictures at his request.

 

9.         Furthermore, according to Vardi, the case herein does not give rise to a clash between copyright law and protection of privacy law. An architect, according to Vardi, has no copyright in a house that was built but at most in the two-dimensional plans of the house and even those, it is argued, cannot be published by the architect without the client's consent. Consequently photographing the house and circulating the photographs, including by way of simulations, is not an inherent right of the architect. Even were copyright involved, Vardi asserts, it is an economic right which does not supersede the right to privacy. In this context, Vardi emphasizes that the lower court was not moved to award relief that would preclude the Appellants from showing the project to customers and in professional circles; instead an injunction restraining publication at large, on the Internet, or in a book or magazine, was sought. Such being the case, according to Vardi, the Appellants' freedom of occupation or copyright was not infringed. Finally, Vardi maintains that the plea of copyright infringement was merely made by Gottesman incidentally and in an unspecified manner at the trial in the lower court and it is therefore a prohibited "amendment of pleadings" on appeal.

 

10.       The parties also took issue with regard to the formation of consent to publish the simulations. Vardi asserts that his agreement to the publication of the simulations was not obtained. According to him, during the years of the relationship between the parties, his confidence in Gottesman had lessened and he had therefore chosen to ask for any understanding in respect of photographing his house and using the pictures to be put in writing. A written undertaking along those lines did not come about and, such being the case, according to Vardi, no agreement was consummated between the parties in respect of publication. In that connection Vardi rejects the Appellants' argument that agreement to publication could be inferred from the procedural arrangement that the parties reached or from the agreement that was given to the carpenter and Apex for publication. According to him, a person is entitled to control his privacy so that consent to waive privacy should be made knowingly and expressly.

 

The Procedural Progression

 

11.       On April 2, 2012 we had an appeal hearing in the presence of the parties before a bench headed by the (now retired) Deputy President, Justice E. Rivlin. At the hearing we believed that it would be best for the dispute between the parties to be resolved in mediation. The parties accepted our proposal and agreed to go to mediation. Unfortunately, the mediation did not prove successful and the parties notified us on July 27, 2012 that they had not reached an overall understanding. Prior thereto, in May 2012, the Deputy President retired and he was replaced by my colleague, Justice N. Solberg (as decided by the President, A. Grunis on August 13, 2012). In view of the change to the bench since the hearing, the parties were permitted to supplement summations in writing. The time for a ruling has now been reached.

 

Discussion and Ruling

 

The Right to Privacy

 

12.       The right to privacy is one of the most important human rights in Israel. It is one of the freedoms that mould the character of the regime in Israel as a democratic one (HCJ 6650/04 Jane Doe v. The Netanya Regional Rabbinical Court, para 8 (May 14, 2006) (hereinafter referred to as "Jane Doe")). Since the Basic Law: Human Dignity and Liberty was passed, it is even vested with constitutional status (section 7 of the Basic Law). Privacy enables a person to develop his selfhood and to determine the degree of society's involvement in his personal behaviour and acts. It is his "proprietary, personal and psychological castle" (Crim. App. 5026/97 Gilam v. State of Israel, para 9 (June 13, 1999) (hereinafter referred to as "Gilam")). The right to privacy therefore extends the line between the private and the public, between self and society. It draws a domain in which the individual is left to himself, to develop his "self", without the involvement of others (HCJ 2481/93 Dayan v. The Jerusalem District Commander, PD 45(2) 456, 471 (1994) (hereinafter referred to as "Dayan"). It "embodies the individual's interest not to be bothered by others in his intimate life" (CA 8825/03 Clalit Health Services v. The Ministry of Defence, para 21 (April 11, 2007)).

 

Infringement of Privacy – Section 2(11) of the Protection of Privacy Law

 

13.       The prohibition of infringing privacy is currently embodied in the Protection of Privacy Law. Section 1 of the Law provides that "no person shall infringe the privacy of another without his consent". As has already been held, the definition of "privacy" is not simple (HCJ 6824/07 Manna v. The Tax Authority, para 34 (December 20, 2010); CA 4963/07 Yediot Aharonot Ltd v. John Doe, para 9 (February 27, 2008) (hereinafter referred to as "Yediot Aharonot")). Section 2 of the Protection of Privacy Law prescribes what an infringement of privacy is. In his claim, Vardi referred to section 2(11) of the Law, which concerns "publishing any matter relating to a person's intimate life, including his sexual history, state of health or conduct in the private domain". Of the three alternatives mentioned in the section, the most relevant herein is "publishing any matter relating to a person's intimate life" and also, to some extent, "publishing any matter relating to [a person's] conduct in the private domain". In order to delineate the expression "any matter relating to a person's intimate life", two matters should be clarified: firstly, what is a matter relating to a person's "intimate life"; and secondly, whether the information published indeed makes it possible to identify a "person".

 

(a)       A Person's Intimate Life

 

14.       Firstly, as regards the expression "a person's intimate life": what can fall within that definition? "Intimate life" is also a vague expression, the boundaries of which are unclear (Eli Halm, Protection of Privacy Law, 148 (2003) (hereinafter referred to as "Halm")). It is therefore clear that the answer to the question as to what will be regarded as a matter relating to "a person's intimate life" is not plain and simple and that "like many expressions that we encounter in the law books and ordinary life, their interpretation depends on the context and the purpose for which the interpretation is needed (see and compare the opinion of Justice T. Strasburg-Cohen in CA 439/88, The Registrar of Databases v. Ventura, PD 48(3) 808, 835 (1994) (hereinafter referred to as "Ventura"); also compare the opinion of Justice G. Bach in the same case, p 821). In this respect I would mention that I do not accept the interpretation that a high threshold of intimacy needs to be crossed – for example matters relating to a person's sexual history – in order to establish infringement of "a person's intimate life". That interpretation, which Gottesman propounded, relies on the fact that section 2(11) provides that infringement of privacy is "publishing any matter relating to a person's intimate life, including his sexual history" (emphasis added – UV). However, studying the legislative history of the Protection of Privacy Law indicates that the ending, after the word "including", was added to the section merely to clarify that "a person's sexual history" is also a matter relating to his "intimate life" (see the Explanatory Notes on the Draft Protection of Privacy (Amendment No. 8) (Prohibition of Publishing a Matter of Sexual History) Law, 5766-2005). In that sense the addendum is merely to clarify and elucidate (see ALA 2985/96 Medalsi v. Goni PD 50(2) 81, 86 (1996). See also: Aharon  Barak, Legal Interpretation, Volume II, Legislative Interpretation 137-138 (1993)).

 

15.       Having said all that, the first issue to clarify is whether the phrase "a person's intimate life" also embraces publications concerning a person's home. A person's home is not one of those concrete matters that are mentioned in section 2(11) of the Protection of Privacy Law – "a person's state of health" and "his conduct in the private domain". Nevertheless, information relating to a person's home might certainly fall within the scope of "a person's intimate life". Indeed, a person's home gains a place of honour in the case law relating to privacy. Thus, for example, in Dayan, His Honour the Deputy President (as he then was) A. Barak held that:

 

            "The constitutional right to privacy extends, inter alia […] to a person's right to conduct the lifestyle that he wants in his own home, without interference from outside […] The right to privacy is therefore intended to ensure that a person will not be a prisoner in his own home and will not be forced to expose himself in his own home to interference that he does not want" (ibid, p 470; see also Jane Doe, para 10; Gilam, para 9).

 

Nevertheless, as I see it, these statements are not to be understood literally as relating merely to the physical aspect of the home. As President A. Grunis noted in respect of the statement cited above from Dayan, "it should be understood more broadly, metaphorically, along the lines of the expression coined by Warren & Brandeis, 'the right to be let alone'" (HCJ 8070/98 The Association for Civil Rights in Israel v. Ministry of the Interior PD 58(4) 842, 856 (2004); see also Yediot Aharonot, para 9). It should therefore be said that information relating to a person's home will not necessarily always be included in the scope of the matters concerning a "person's intimate life". For the publication of information relating to a person's home to be construed as an infringement of privacy, as defined in the Law, it is necessary to see whether it is such as to cross that threshold of intimacy, beyond which it may be said that "a person's intimate life" was infringed. In the instant case, reviewing all the circumstances leads to the conclusion that publishing the simulations of Vardi's house interior does indeed involve infringement of "a person's intimate life". The interior of a person's home is his castle and he is entitled to be let alone in it. Inside a person's home he exercises his right to privacy in the clearest form. A person therefore has a reasonable expectation that pictures of the interior of his home will not be published at large without his consent. In the instant case, studying the simulations of Vardi's home as published on the website shows that, despite the fact that they are computer simulations, the impression gained from them is very tangible. In this respect I accept the findings of the trial instance that "since the simulations show Vardi's house as it really is, it matters not whether they are the result of computer work or a camera" (p 13 of the lower court's judgement). And note, although the simulations do show the house in a "sterile" condition, namely without Vardi's personal belongings appearing in them, the items of furniture in them are very similar indeed to the existing furniture; they expose "personal" spaces in the house, like the bedroom and bathroom; and they are such as to attest to Vardi's lifestyle and also demonstrate, in the words of the section, "his conduct in the private domain".

 

16.       The simulations of the house exterior should be treated differently. Ordinarily, the front of a house is exposed to passers-by. It is in the "public eye". Consequently, insofar as the front of a house is visible from the street, it is clear that showing its picture or simulation will not give rise to any infringement of privacy (see also CF (J'lem District) 7236/05 Levin v. Ravid Stones, para 14 (May 15, 2006)). The right of privacy does not extend to information that is already in the possession of the public. Therefore, when certain information is in any event in the public domain, the view that the right of privacy is not howsoever infringed is appropriate. (For similar statements in American law, see Jackson v. Playboy Enterprises, Inc., 547 F. Supp. 10, 13 (S.D. Ohio 1983); Fry v. Ionia Sentinel-Standard, 101 Mich. App. 725, 731 300 N.W. 2d 687 (Mich. Ct. App. 1980); Reece v. Grissom, 154 Ga. App. 194, 196, 267 S.E.2d 839 (Ga. Ct. App. 1980).  See also David A. Elder, Privacy Torts 3-45, 3-44 (2002) (hereinafter referred to as "Elder"); James A. Henderson, Richard N. Pearson and John A. Siliciano, The Torts Process 930-31 (4th ed. 1994).)

 

17.       According to Vardi, a distinction should be made between the situation described above, in which the front of the house as visible from the street is shown, and the simulations published by Gottesman on the website. Vardi asserts that the simulations of the house exterior that Gottesman posted on the website of his firm show the house from an angle that necessitates access to the grounds of the house, from which passers-by cannot obtain an impression of it. In that sense, Vardi pleads, a photograph from "the public domain" is not involved. Even if Vardi is right in that plea, there is no question that portraying the front of a person's house in public does not give rise to an infringement similar in extent to that caused by displaying the interior of his house. Whilst the interior of a person's house is visible only to his invited guests, the front of his house is less "private". The front of a person's house does not have the same "intimacy" that is characteristic of the intimate rooms of his home. In that sense, the simulations of the house exterior are not "information" that is sufficiently close to the nucleus of the interest protected by section 2(11) of the Law. Hence, whilst the simulations that portray the internal spaces of the house might infringe "a person's intimate life", publishing simulations of the house exterior does not give rise to such an infringement.

 

(b)       "A Person's" – the Requirement of Identification

 

18.       The wording of section 2(11) of the Protection of Privacy Law shows us that in order for the publication of a matter to constitute an infringement of privacy, it has to be established that the information published makes it possible to identify a person. When can it be said that information published does indeed make it possible to identify a person so that an infringement of privacy does arise?  Essentially, it appears that the answer is that an infringement of privacy will not arise where the requirement of "identification" is not fulfilled, namely insofar as a reasonable person would be unable to connect the information published with a specific person. On this point I would immediately clarify, ex abundanti cautela, that we might in future come across cases in which it will be possible to consider making that requirement more flexible. Those will be the exceptions in which particularly sensitive information is published to the point that even if it cannot be connected with someone, the very publication will create in the one to whom the information relates a serious sense of his privacy's violation, so that its protection will be justified. We shall leave discussion of such matters for when they arise since that is not the case herein.

 

19.       In order to comprehend the nature of the identification requirement, recourse may be had, by way of analogy, to defamation law that we can use as an aid to interpretation and source of inspiration (see CA 723/74 Haaretz Newspaper Ltd v. The Israel Electric Corporation Ltd, PD 31(2) 281, 293 (1977); Dan Hay, The Protection of Privacy in Israel, 91-97 (2006) (hereinafter referred to as "Hay") and the references there). This is because in many senses an infringement of privacy is similar to the damage caused to reputation as a result of publishing defamatory information. Even before the enactment of the Defamation Law, 5725-1965 (hereinafter referred to as "The Defamation Law"), this Court insisted that in a claim on a cause of defamation it has to be established that the focus of the publication is a specific person. It was therefore held that the plaintiff on such a cause will be obstructed by the fact that he cannot be identified in the picture that was published (CA 68/56 Rabinowitz v. Mirlin PD 11 1224, 1226 (1957)). This requirement was intensified after the Defamation Law was enacted. Indeed, a question similar to that facing us was considered at length in the context of defamation law in CA 8345/08. Ben Nathan v Bachri (July 27, 2011) (hereinafter referred to as "Jenin Jenin "). In that case the Court considered the criteria whereby it could be held that defamation addressed at a group defames its members (ibid, para 18). The Court held in that case that "[…] For cause to arise to take proceedings in respect of the publication of defamation it has to be shown that it relates to an individual or certain individuals and when the proceedings are taken by the injured party, he must show that the statement relates to him" (ibid, para 32. Emphasis added – UV). What is important with respect to the instant case is that the inference was drawn, inter alia, from the fact that the section of the relevant statute (section 1 the Defamation Law) provides – as in the case herein – that the subject of the statement must be a "person" (ibid).

 

20.       By way of comparison, in American law a similar criterion is also accepted in respect of the infringement of privacy. According to the case law there, the requirement of identification has been recognised as an essential one that confronts anyone seeking to assert the infringement of his privacy. Such being the case, where the plaintiff's image or name was not used, the courts in the USA have held that in practice no infringement of privacy arises (see: Branson v Fawcett Publications, 124 F. Supp. 429, 431-32 (E.D. III 1954); Rawls v. Conde Nast Publications, Inc. 446 F. 2d 313, 318 (5th Cir. 1971) (hereinafter referred to as "Rawls"). See also: Elder, pp 3-40). Consequently, as regards publications such as a photo of a person's house, car, dog or more, that are made without mention of some or other person's name, it has been held that they do not constitute an infringement of privacy, even if subjectively a person feels that his privacy has been infringed (Rawls, ibid; Samuel H. Hofstadter and George Horowitz, The Right of Privacy, 44 (1964)).

 

21.       From the aforegoing it prima facie appears that it suffices for the information published to be shown anonymously in order to avoid the possibility of infringing privacy. However, in this respect it should be taken into account that even information that is shown anonymously might establish a connection with a specific person. In other words, even if the name of the person is not expressly mentioned alongside the information, it has to be ensured that he cannot be identified by other means, for example: if in the publication numerous identifying details are given from which it might be possible to deduce with whom the publication is dealing (see: Hay, p 115). If we treat the prohibition as merely the specification of a person's name, "it would make a mockery of the Law because it is enough to mention numerous identifying details in order to make it clear in many cases who is involved" (Zeev Segal, The Right of Privacy against the Right to Know, Iyunei Mishpat  IX 175, 190 (1983) (hereinafter referred to as "Segal)). As held in Jenin Jenin, "the requirement of identification is substantive, rather than technical. The question is not whether the name of a person is expressly mentioned in the statement published […] The requirement of identification will be fulfilled in those cases where what is published is attributable to the individual who asserts damage implied from the publication or as a result of extrinsic circumstances or a combination of the publication and the extrinsic circumstances" (ibid, para 34).

 

22.       In order to analyse whether it is possible to connect a person with particular information, a criterion of "de-anonymising" has been proposed in the literature. According to the criterion, if anyone has a key that will make reverse engineering possible, namely to attribute the information published to a particular person, then it can be said from the outset that the information is identifying (Michael Birnhack, Private Space – Privacy, Law & Technology, 191-193 (2010)). As aforesaid, it is therefore not necessary for a person's name or picture to appear alongside the publication; it suffices for it to be possible by some means to connect the information with a specific person by "reverse engineering". Clearly, such "reverse engineering" is mainly likely to occur when the information published includes clear and unique characteristics (cf: Motschenbacher v RJ Reynolds Tobacco Co., 498 F.2d 821, 827 (9th Cir. 1974)).

 

23.       In the instant case, is the requirement that the publication deal with a "person" fulfilled? To that end it is necessary to substantiate the conclusion that despite the anonymous publication of the simulations on the Gottesman website, they can be linked with Vardi. In the case herein we have reached the conclusion that although Vardi's name is not mentioned in the publication, the simulations' publication is likely to make it possible to identify him by other means in view of those unique characteristics relating to Vardi's house. As the lower court held, Vardi's house is a "project of a unique type". In this connection the lower court described Vardi's house as "spectacular and extraordinary as regards its size, the type of materials used in its construction, its unique design and also as regards the investment in each one of the architectural details that make it up". Gottesman himself attested to the project as a "one-off project" and in his appeal he described the house as "a spectacular, extravagant and extraordinary residence […] one of the largest houses in Israel and the largest designed by the Appellants". On the Gottesman website the unique design of the house is described as including the use of special materials like blue glass, unique metal, illuminated gardens and more. All these constitute distinctive construction characteristics that distinguish Vardi's house from others. These indicate that Vardi's house is unlike any other; it is an extraordinary, unique work of architecture. In view of that, it appears that recourse may be had to the simulations published on the Gottesman website for the purpose of that "reverse engineering" that will make it possible to deduce that the simulations shown on the website in fact simulate Vardi's house.

 

Section 6 of the Protection of Privacy Law –Infringement of No Real Significance

 

24.       Even if the information published does indeed relate to "a person's intimate life", the Protection of Privacy Law requires it to be established that the infringement was not of "no real significance" (section 6 of the Protection of Privacy Law). In this connection, it has to be shown that the infringement of privacy was not done as a "trivial act" because such an infringement vests no right to relief (The Association for Civil Rights, p 863). The intention of the section is to do away with vexatious lawsuits, in respect of which no reasonable person would take the trouble of going to court (cf section 4 of the Civil Wrongs Ordnance [New Version]; see also CF (TA Magistrates) 199509/02 Tzadik v. Haaretz Newspaper Publishing Ltd, para 10 (January 22, 2014); Hay, p 124).

 

25. In the instant case, the publication of the simulations is not "a trivial act". The simulations that appeared on the Gottesman website tangibly show the interior of Vardi's home and in that way enable the public at large to gain an impression of the home owner's lifestyle and manners. There is no doubt that when any clear image of a person's home is made visible, and especially his intimate rooms – the bedroom, bathroom etc. – the publication is likely to give him an intense feeling of discomfort. The nature of those rooms is that they are concealed from the eye, and usually from the eyes of invited guests as well. That is where a person expects more than anything that he will be secluded from the public eye. Such being the case, bringing the lawsuit herein seems to be in good faith on the face of it and it is certainly not a frivolous or vexatious claim. It is such as to express the deep sense of discomfort caused to Vardi by the publication – which to my mind also has objective foundation in the circumstances. However, that is not the case with regard to the publication of the simulations of the front of the house. As I mentioned above, in that connection I tend to believe that even if publication of the simulations of the house exterior might cause some infringement, it is minor and trivial, in respect of which there is no cause for the grant of relief.

 

Defences to a Plea of Privacy Infringement (Section 18 of the Law)

 

26.       Another element necessary for the award of relief on a cause of infringement of privacy is negation of the existence of the circumstances of one of the defences prescribed in section 18 of the Law. Those defences demonstrate that the Protection of Privacy Law does not make the right of privacy an "absolute" one (CA 1928/93 The Securities Authority v. Gibor Sabrina Textile Enterprises Ltd, PD 49(3) 177, 193 (1995)). The defences prescribed in the Law might therefore bar a civil claim or criminal proceedings in respect of the infringement of privacy. Nevertheless, a party seeking to shelter behind those defences must show that he acted in good faith. Good faith is "like a gate and only if it is traversed will the circumstances in which the specific infringement of privacy was committed be examined" (Gilam, para 8). It should be noted that the case law has interpreted this as a requirement of subjective good faith. It is therefore necessary to prove that the person committing the infringement acted in the belief that the infringement was in the scope of the defences prescribed by the Law (Jane Doe, para 24). In order to prove good faith, the defendant or accused can have recourse to the presumption mentioned in section 20(a) of the Protection of Privacy Law, according to which:

 

            "20.     (a)       Where the accused or defendant proves that he committed the infringement of privacy under any of the circumstances referred to in section 18(2) and that it did not exceed the limits reasonable under those circumstances, he shall be presumed to have committed it in good faith."

 

In this connection the court will review "the form, substance and extent of the publication in order to see whether the publisher has fulfilled his duty, for which the defence extends to him, or went beyond that and exceeded the 'limits reasonable' in connection with which the legislative norm was framed" (Segal, p 199).

 

Against that presumption that is available to the defendant or accused, the plaintiff or prosecutor can have recourse to the presumption mentioned in section 20(b) of the Law:

 

            "20.     (b)       The accused or defendant shall be presumed not to have committed the infringement of privacy in good faith if in committing it he knowingly went further than was reasonably necessary for the purposes of the matters protected by the section."

 

In this respect, proving that the publisher knew that he had exceeded the reasonable is equivalent to establishing the absence of the publisher's subjective good faith because it will demonstrate "his indifference to the consequence involving infringement more than  necessary to protect the value recognised by the Law" (Segal, ibid).

 

27.       In his appeal Gottesman relied on two defences – those prescribed in sections 18(2)(a) and (c), which provide as follows:

 

 

            "18.     In any criminal or civil proceedings for infringement of privacy, it shall be a good defence if one of the following is the case:

 

                        […]

 

                        (2)       the defendant or accused committed the infringement in good faith in any of the following circumstances:

 

                                    (a)       he did not know and need not have known that an infringement of privacy might occur;

 

                                    […]

 

                                    (c)       the infringement was committed in defence of a legitimate personal interest of the infringer;

 

                                    […]"

 

28.       We shall therefore review whether the infringing act was committed in one of the circumstances mentioned in section 18(2) – and in our case, the circumstances prescribed in section 18(2)(a) or 18(2)(c)            of the Law. As regards the defence prescribed in section 18(2)(a) of the Law, as the lower court held, before publication Vardi repeatedly emphasised to Gottesman that he jealously guarded his privacy and he was resolute in his refusal to publicise the house or parts of it. Consequently, from such time as Vardi made it perfectly clear to Gottesman that he strongly objected to publication without the latter signing the letter of commitment, it is difficult to conceive that the infringement was committed without Gottesman "knowing […] that an infringement of privacy might occur", as the section requires. Clearly, therefore, the plea with regard to the defence under that section cannot be upheld.

 

29.       We should now examine whether Gottesman has available the defence under section 18(2)(b), which concerns an infringement committed in order to protect a "legitimate personal interest" of the infringer. The section necessitates a balance to be made between the right of privacy and other conflicting values, and the expression "legitimate personal interest" should be construed "by making a balance between the desire to protect the interest of the injured party and safeguard his privacy, on the one hand and the contrary interests of the infringer, on the other hand" (Crim App 1132/96 Hatuha v. State of Israel, para 8 (January 20, 1998)). In the instant case, Gottesman and his firm have a twofold interest in publishing the simulations: both a creative interest and a business interest. It cannot be disputed that Gottesman has the moral right in his architectural work. Such being the case, he is entitled to the work being credited to him, namely to his work being identified with his name. This expresses recognition of the author's personality and the attempt to respect the personal connection between the author and his work (sections 45 and 46 of the Copyright Law; see also: Tony Greenman, The Moral Right – From Droit Moral to Moral Rights, Authoring Rights – Readings on the Copyright Law 439, 439-440 (Michael Birnhack & Guy Pesach, Editors, 2009)). The desire to safeguard the freedom of creative expression means that the transfer of an architect's economic rights in his work will not preclude his expressing himself in the same artistic style and motifs in other works (cf Sara Presenti, Copyright Law, vol. II (3rd edition, 2008)), and in the instant case, that the work can be exposed to other circles. Consequently, on the artistic-creative level, one can understand Gottesman's desire to expose to the public Vardi's house, a work that is unquestionably of unique quality and size. In addition, there is nothing wrong in Gottesman's desire to publicise his work for economic reasons as well because displaying the work might certainly enable its author to establish a reputation and attract clients. Nevertheless, as we have mentioned, in the scope of the defence under section 18(2)(c) a balance needs to be made between the infringement of Vardi's privacy and the legitimate personal interest of Gottesman. As mentioned above, as I see it, showing the interior of Vardi's home gives rise to a considerable infringement of his privacy. On the other hand, the harm to Gottesman's legitimate personal interest is limited. This is because Vardi's request was limited to precluding publication of the simulations on the website and, such being the case, there is nothing to stop Gottesman from making use of simulations for his business purposes, exposing them on a more limited scale, for example by showing them to clients in his office or to professional circles, a matter to which Vardi has himself agreed in writing (paragraph 23 of his summations). In this connection, certain weight should also be given to the fact that Gottesman could have given full expression to his interest in publishing the simulations by making an express agreement in such respect with Vardi in real time. To this should be added the fact – as explained above – that Gottesman can also show the simulations of the house exterior on the website. In the overall balance between the competing rights and interests, the outcome is therefore that it is inappropriate to apply the defence of section 18(2)(c) to publishing simulations of the interior of Vardi's house. Having found that publication of the simulations does not fall within one of the circumstances mentioned in section 18(2) of the Law, we have no need to consider the question of good faith or the application of the presumptions prescribed in section 20 of the Law.

 

Absence of Consent to Infringement of Privacy

 

30.       Having reached the conclusion that that there is an infringement, of real significance, of Vardi's privacy, in respect of which it cannot be said that it is covered by one of the defences prescribed in the Law, we must rule whether Vardi's consent was given to the publication discussed herein. The Protection of Privacy Law provides that an infringement of privacy will not occur where there is consent to the infringement (section 1). Such consent can be expressed or implied (section 3 of the Protection of Privacy Law; Jane Doe, para 20). The reason for that requirement is that "the right of privacy is to protect the individual, and as a rule society cannot protect an adult against his will" (Crim App 4463/93 Birav v. State of Israel, PD 49(5) 447, 458 (1996)). And note, consent is not cause to justify an infringement of the rights of privacy. Consent itself is an inherent part of the right so that if it is given, a right of action does not arise (Halm, p 41). Although consent for the purpose of infringement of privacy can be inferred from a series of cases and modes of behaviour (Hay, p 122), it is best to exercise extreme care in determining that consent to publication has been obtained. "Care should be taken not to apply the justifying force of consent to cases in which it is clear that there is no real consent and the use of the consent is therefore constructive and fictitious" (Ruth Gavison, Prohibiting Publication That Infringes Privacy, Human Rights in Israel – Collection of Articles in Honour of Haim H. Cohn, 177, 199 (1982)). It has been held along these lines that from the fact that an individual agreed to disclose certain particulars to one person or several persons, it cannot be inferred that he is precluded from objecting to the publication of those particulars to the public at large (Ventura, p 822); and that even the existence of a close relationship such as marriage does not per se indicate implied consent to one partner's infringement of the other's privacy (Jane Doe, para 20).

 

31.       From the general to the particular – in the instant case it appears that such consent was not obtained. I would mention at the outset that I do not accept Gottesman's claim that Vardi's consent to the publication was not necessary because all that was published were the simulations based on the architectural plans. Insofar as that publication causes an infringement of privacy, then it is subject to the principle that "no person shall infringe the privacy of another without his consent" (section 1 of the Protection of Privacy Law). In the instant case, it would appear that such consent was not consummated. As the lower court held, the relationship between Vardi and Gottesman was conducted on the basis of oral understandings, without the issue of consent to publication reaching exhaustive discussion between the parties. Vardi's requirement that photographs of his home could only be taken subject to signing the letter of commitment that he proposed therefore did not constitute a departure from a previous understanding between the parties but an unsuccessful attempt to reach an understanding. Since that agreement was not signed, express consent to publication was not obtained. Indeed, as aforesaid, the existence of consent can also be inferred. However, we have not found substance to the plea that Vardi's agreeing to the publication of other pictures of the house infers that implied consent was also given to Gottesman. Actually, the fact that other publications were specifically made subject to signing the said letter of commitment is such as to demonstrate the absence of consent in the instant case. Our conclusion is therefore that consent to the infringement of privacy was not obtained.

 

Conclusion

 

32.       In conclusion, we have found that publishing the simulations showing the front of Vardi's house does not give rise to an infringement of privacy and in any event not an infringement of real significance, as defined in section 6 of the Law. On the other hand, we have reached the conclusion that the simulations showing the interior of Vardi's house do infringe "his intimate life" and that despite their anonymous publication, it is possible to connect them with Vardi. It has also been found that it is not an infringement "of no real significance" and that the defences prescribed in section 18(2) of the Protection of Privacy Law are inapplicable. Because the infringement of Vardi's privacy was made without his consent to the publication, there is no alternative but to find that publication of the simulations of the interior of his home on the website cannot be permitted.

 

I therefore suggest to my colleagues to allow the appeal in part to the effect that the injunction remains in force in respect of publishing the simulations of the house interior on the website. The meaning of this is that there is no bar to simulations of the house exterior being published on the site. In view of that result, I suggest to my colleagues to set aside the liability for costs at first instance and make no order for costs in the current instance.

 

 

 

Justice S. Joubran

 

I concur.

 

 

 

Justice N. Sohlberg

 

I concur with the judgement of my colleague Justice U. Vogelman. The distinction that he made between the front of the house and the house interior, has deep roots in Jewish law. The Torah forbids a creditor to enter his fellow's home in order to collect his debt: "When you make a loan of any kind to your neighbor, do not go into his house to get what he is offering as a pledge.  Stay outside and let the man to whom you are making the loan bring the pledge out to you" (Deuteronomy 24:10-11). Although a lender and borrower, rather than strangers, are involved, the respect of privacy requires that the house not be entered; the homeowner brings the pledge outside. Despite the fact that the borrower has a debt to the lender and the lender's prima facie moral right to enter the borrower's house in order to take steps to secure repayment of the debt, the Torah prohibits entry to the borrower's house. The Torah did not make do with a moral provision but prescribed a legal right for the protection of privacy (see: N. Rakover, The Protection of Privacy (5766-2006) 265).

 

Jewish law protects a person's privacy not only by precluding admittance to the private domain but also by precluding "damage by sight" [hezek reiyah] from outside. As we know, Bilam sought to curse the Children of Israel when he saw them dwelling in the desert according to their tribes but he found himself blessing, instead of cursing, them and he said "How goodly are your tents, O Jacob, your dwelling places, O Israel" (Deuteronomy 24:5). This is interpreted by the Talmud as follows: "What did Bilam see? He saw that the openings of their tents did not exactly face each other, whereupon he exclaimed, worthy are these that the divine presence should rest upon them". That is to say that when Bilam saw that the tents of the Israelites were positioned so that their openings did not face each other and were directed in such a way as to ensure the privacy of everyone, he was filled with admiration and said: "How goodly are your tents, O Jacob, your dwelling places, O Israel!" (N. Rakover, ibid, pp 269-272). The Code of Jewish Law [The Shulchan Aruch] (Choshen Mishpat, 154:3) lays down the rule: "A person shall not open a window onto his neighbour's courtyard. And even one of the people who share the courtyard and has sought to open a window in his house onto the courtyard shall be restrained by his partner because he can see him from it. And if he has opened one, it shall be blocked. And if the people who share the courtyard with him have given him permission to open a window or door, he may, but he shall not open a door opposite a door or a window opposite a window and shall distance them from each other. And if it is to another courtyard, onto which he has been given permission to open a door or window, he should distance it from his neighbour's door or window until he cannot see in it at all". This is not the place for details of the Jewish law (see at length, Rakover, ibid) but merely for the principle of respecting a person's privacy. That is how God [HaKadosh Baruch Hu] acted when he called to Adam from the entrance to the Garden of Eden, from which we shall learn: "A person should never suddenly enter his neighbour's house. And every person shall learn the appropriate mode of behaviour [derech eretz] from God, who stood at the entrance to the Garden of Eden and called upon Adam, as it is said: "But the Lord God called to the man and said 'where are you'?" (Genesis 3:9; Derech Eretz Raba, Chapter 5).

 

We can therefore see the distinction between the interior and exterior back from ancient times. A few years ago I heard the lawsuit of a man and his wife who had built a rounded wall of unique design, made of basalt manufactured by Ravid Stones Ltd, at the front of their house. In order to promote its sales, the company published a photograph of the front of the house in the press, on the Internet and in a catalogue. The plaintiffs asserted infringement of their privacy, amongst other things. I stated there that the list of acts in section 2 of the Protection of Privacy Law, 5741-1981, that involve an infringement of privacy, does not contain "a prohibition against publishing the front of a person's home; and not without reason. A person's home – on the inside – is his castle. The front of it that faces outward is naturally exposed to the whole world. Any person passing by may savour the outer beauty of the house. A photograph of the front of the house from the public domain does not involve an infringement of privacy" (CF (J'lem) 7263/05 Levin v. Ravid Stones, para 14 (May 15, 2006)).

 

I therefore concur with my colleague's judgement, on the basis of its reasoning.

 

 

 

Held as stated in the opinion of Justice U. Vogelman.

 

January 23, 2013