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Safecom, Ltd. v. Raviv.pdf

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In the Supreme Court	CA 7996/11
Sitting as a Court of Civil Appeals

Before:	Justice E. Rubinstein Justice Y. Danziger Justice Z. Zylbertal


The Appellants:	1. Safecom Ltd 2. David Zilberberg

v.

The Respondent:	Ofer Raviv

	Appeal against the Haifa District Court's judgment of August 28, 2011 in CF 542-04-09, given by His Honor Judge Dr. A. Zarnakin

Date of session:	Cheshvan 6, 5774 (October 10, 2013)

On behalf of the Appellants:	Adv. Nahum Gabrieli

On behalf of the Respondent:	Adv. Tamir Afori

JUDGMENT

Justice Y. Danziger

This is an appeal of the judgment of the Haifa District Court (His Honor Judge Dr. A. Zarnakin) of August 28, 2011 in CF 542-09-09, dismissing the Appellants' claim against the Respondent for the infringement of copyright in their technical drawings.

Factual Background

1. Appellant 1, Safecom Ltd (hereinafter: "Safecom"), develops and markets products for the electrical backup of cable TV broadcasting systems, and the Appellant 2, David Zilberberg (hereinafter: "Zilberberg") is its manager and one of its shareholders. Zilberberg became acquainted with the Respondent when the latter sought to market Safecom's products to a company for which he worked, and he also connected Zilberberg to an American company, Innovative Solutions 21, Inc. (hereinafter: "the American company"), which led to the marketing of Safecom products in the USA. On June 18, 2002, an agreement was made between Safecom and the American company according to which the American company would be the exclusive distributor of Safecom products (hereinafter: "the Agreement"). The Agreement provided that ownership of all copyright, patents and other intellectual property rights connected with the products, including graphics, sketches and models, that were developed by Safecom would be retained by it. The Respondent had no formal status in the American company, but he was involved in the technical matters associated with marketing Safecom's products in the USA, and, in that context, he also took part in the preparation of technical drawings of Safecom products. In May 2005, the Agreement was terminated by Safecom, and in 2008, it learned of the filing of a patent application in the USA by the Respondent together with the American company's president, which concerned a voltage backup system for cable systems. In view of Safecom's complaint that the drawings underlying the patent application infringed its copyright in the drawings of its products, it filed suit in the District Court. By consent of the Respondent, the court awarded a provisional injunction. An objection filed against the registration of the American patent registration was dismissed.

2. Safecom asserted that the Respondent had copied 14 original drawings that Zilberberg had prepared as part of a presentation for the Safecom products, which was furnished to the Respondent in 2003, when the agreement was still in force. According to it, the drawings that Zilberberg prepared were protected by copyright and owned by it, while the Respondent's drawings were absolutely identical and had been copied "one to one" and, as such, constituted an infringement of its right of reproduction. In order to emphasize the copying, Safecom pleaded that its drawings contained a mistake in the presentation of the switch box, and that mistake had been copied by the Respondent.

3. The Respondent, for his part, asserted that the claim was governed by American law because the alleged infringement had been committed in the USA, and since that law had not been proven, the claim should be dismissed. According to him, under American law the claim would be dismissed because of the applicable American rules of fair use. In regards the very infringement, the Respondent pleaded that since the act was governed by the Copyright Act, 1911 (hereinafter: "the Old Law") it was first necessary to prove that the alleged infringement also constituted an infringement under the Copyright Law, 5768-2007 (hereinafter: "the New Law"). According to him, under section 21 of the New Law, the copying of a work that is deposited for public inspection constitutes permitted use and no infringement is therefore involved. As regards the alleged copying, the Respondent pleaded that there was no relevant similarity between the Safecom drawings and his drawings, either visual or substantial. According to him, there are approximately 32 elements in the patent application drawings, while in the presentation there are only 19. This is because of the difference between the technology used in order to manufacture Safecom's products and that presented in the patent application. The Respondent further pleaded that the similarity between the drawings lay in their common functionality in a manner that does not afford protection. The Respondent also pleaded that he was party to making the drawings and therefore had a right of ownership in the Safecom drawings, and that the Agreement did not apply to him because he was not an employee of the American company. The Respondent also filed a counterclaim, but since no appeal has been brought in respect of it, we need not refer to it here.

The District Court's Judgment

4. The District Court first dismissed the Respondent's claim that the matter is governed by American law. The court held that the Respondent had received the presentation in Israel. It was therefore reasonable to assume that the act of copying had also been performed in Israel, and it had not been proven otherwise. In any event, the court held that the Respondent did not dispute the court's jurisdiction to try the matter in accordance with domestic law when the provisional injunction application had been considered, and he was therefore estopped from pleading the same. As regards Israeli law, the court held that the Safecom drawings do indeed amount to a protected work, according to both the Old Law and the New Law. The court dismissed the Respondent's claim that the use he had made was permitted use under section 21 of the New Law since the section treats of the use of works that have already been deposited for public inspection and not use which itself constitutes deposit for public inspection.

5. As regards the alleged copying, the District Court first held that the Respondent was not a joint owner of the rights in Safecom's drawings, because, even if he was not one of the American company's formal officers, he did substantially function as such and the agreement should therefore be applied to him. The court nevertheless dismissed Safecom's claim that the Respondent had admitted copying the drawings. The court emphasized that the Respondent's claim with respect to the difference in the number of elements between Safecom's drawings and the drawings in the patent application had not been rebutted, and a visual similarity had therefore not been established. The court dismissed Safecom's claim with respect to copying the mistake in its drawings because, according to it, no mistake was in fact involved. Finally, the court held that because of the great functionality of the Safecom drawings, some similarity was obliged between drawings that sought to present a similar product, and Safecom's drawings, or a substantial part of them, had therefore not been copied.

Hence, the appeal.

The Grounds of Appeal in Brief

6. The Appellants – through their attorney, Adv. Nahum Gabrieli – argue that the District Court erred when it held that there had been no copying in the instant case. According to them, they did not have to adduce direct evidence of copying the drawings because the law makes it possible to suffice with circumstantial evidence to prove copying. The Appellants assert that the access that the Respondent had to the drawings, which is not in dispute, together with the substantial similarity between their drawings and his, leads to the sole conclusion that there was copying. The Appellants emphasize the identical elements between their drawings and those of the Respondent that do not derive from the functional presentation of the products, like the same twists and turns in the lines that are shown on them. According to them, the Respondent himself admitted that there are many ways to draw the products concerned, and he even showed example drawings of similar systems that were different from the drawings in the instant case. Moreover, in principle it cannot be held that when functional technical drawings are involved, copying cannot necessarily be inferred. The Appellants add that the finding that the similarity between the drawings was not the result of copying is inconsistent with the relationship between the parties, as described above. Finally, the Appellants aver that the court was mistaken when it reviewed the substantial similarity on the basis of the number of elements appearing in each of the drawings, rather than a general impression of the substance of the part copied, which according to them, obliged the conclusion that there had been prohibited copying.

The Respondent's Reply in Brief

7. The Respondent – through his attorney, Adv. Tamir Afori – argues that the District Court rightly distinguished between proving a visual similarity and establishing a substantial similarity. According to him, in the instant case there has not been copying, as a matter of fact, because even if it were established that he had access to Safecom's drawings, the court found, as a matter of fact, that there was no visual similarity between the works. According to him, in order to establish such a similarity, the Appellants should have produced an expert opinion insofar as the matter concerns a technical drawing. In any event, the Respondent asserts that there had been no copying of a substantial part that was original to the Appellants, and that the copying of parts of the work that are not original in any event does not amount to copying and to an infringement of any right of the work's owner. According to him, in the instant case works are involved, only parts of which are original, and it is necessary to carefully analyze whether the original parts that were copied constitute a substantial part of the Plaintiff's work. Since, in the instant case, functional works are involved, the respondent argues that only the identical copying of original parts should be regarded as an infringement of copyright. The Respondent emphasizes that after filtering out all the non-original parts of Safecom's drawings, what remains is at most a "copy" of curved lines that do not constitute a substantial part of the work.

8. The Respondent adds that it was inappropriate to deny his rights in Safecom's drawings since he was a joint author of them because of the Agreement between Safecom and the American company to which he was not party, and it should therefore be held that he is a joint owner and joint author of the Safecom drawings. Furthermore, the Respondent asserts that it was inappropriate to hold that the law governing the infringement is Israeli law since the Appellants had not established that the infringement asserted by them was committed in Israel, and that burden rested with them. According to him, his agreeing to the award of a provisional injunction does not attest to his agreeing to conduct the principal case in accordance with Israeli law. Finally, the Respondent argues that even if he is not the owner of the Safecom drawings, he is still their joint author, and the use that he made of them is therefore a permitted use under section 27 of the New Law, which permits the author of an artistic work to make works that constitute a partial copying or derivative of it, even if he is not the owner of the right. Moreover, according to him, the use that he made of the drawings is also protected by virtue of section 20 of the New Law because it was done in legal administrative proceedings or, in the alternative, it was fair use under section 19 of the New Law.

9. In the hearing before us an attempt was made to bring the parties to an overall understanding that would make the need for our ruling unnecessary, but that attempt was unsuccessful.

Discussion and Ruling

10. This appeal raises questions at the very heart of copyright law, and that, essentially, address the foundations upon which the protection of works is based, and in particular, the matter of the author's originality; the distinction between idea and expression; and infringement of the right to copy the work. These questions are highlighted with regard to the protection of functional works, and they require elucidation and clarification. Having read the parties' summations and listened to their oral arguments in the hearing before us, I have reached the overall conclusion that the appeal should be allowed and the case should be remanded to the District Court in regard to the matter of relief. I shall also recommend that my colleagues do the same.

The Basis of the Protection of Works – Originality

11. The requirement of originality has been recognized by this Court as a threshold for the existence of copyright in a work [for more on the originality requirement, see: Michael Birnhack, “The Requirement of Originality in Copyright Law and Cultural Control,” 2 Alei Mishpat 347, 352-355 (2002) (Hebrew) (hereinafter: "Birnhack")]. The development of the requirement in Israeli case law has been based on the provisions of the Old Law, despite the fact that the Hebrew version did not mention "originality", whereas the binding English version provides, in section 1, that copyright will be granted in respect of:

"every original literary, dramatic, musical and artistic work…" [emphasis added – YD].

The requirement of originality was anchored in the New Law in section 4(a), which provides:

"Copyright shall subsist in the following works:

(1) original works that are literary works, artistic works, dramatic works or musical works, fixed in any form" [emphasis added – YD].

12. This Court reviewed the case law relating to the elements underlying the requirement of originality at length in CA 8485/08 FA Premier League Ltd v. Israel Sports Betting Regulation Council (March 14, 2010) (hereinafter: the Premier League case) [http://versa.cardozo.yu.edu/opinions/fa-premier-league-v-israel-sports-b.... It was held that the requirement of originality is analyzed on the basis of two main criteria – investment and creativity.

In the scope of the investment criterion, the author must have invested certain labor in the work in order to gain the right to its rewards, similar to the theoretical basis for recognizing the right to "corporeal" property [see: the Premier League case, para. 26; CA 513/89 Interlego A/S v. Exin-Lines Bros SA, IsrSC 48(4) 133, 164 (1994) (hereinafter referred to as the Interlego case)]. This criterion is based on the labor approach and the theory of natural rights based on the teachings of the philosopher John Locke as theoretical justification for the grant of property rights generally and copyright in particular [for a broader discussion, see: Birnhack, pp. 373-375; Guy Pesach, “The Theoretical Basis for the Recognition of Copyright,” 31 Mishpatim 359, 386-391 (2001) (Hebrew) (hereinafter: "Pesach"); Justin Hughes, “The Philosophy of Intellectual Property,” 77 GEORGETOWN L.J. 287, 297-98, 302-10 (1988); Wendy J. Gordon, “A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property,” 102 YALE L.J. 1533 (1992)].

In the context of the creativity criterion, which is based on the rationale according to which the purpose of copyright law is to enrich the creative world and the range of expressions available to the public, the nature of the investment, independently of its quantity, must be considered in order to show that it contributes to that purpose [see: Premier League, para. 27; Interlego, pp. 164-165]. This approach is based on a more social concept of copyright but, nevertheless, also on a utilitarian-economic approach, according to which a balance should be made between the cost – the incentive to be given to the author in the form of the monopoly granted to him in respect of the use and control of his work -- and the benefit of safeguarding the public domain for future work [see: Pesach, pp. 361-374; William M. Landes & Richard A. Posner, “An Economic Analysis of Copyright Law,” 18 J. LEGAL STUD. 325 (1989)].

I would add that, in my opinion, in the scope of the originality requirement three subordinate elements should be identified, and in addition to the investment criterion and the creativity criterion, the origin criterion should be analyzed. By this I mean a requirement that the work should originate in the author and that it should not be based on another work – or in the words of my colleague Justice E. Rubinstein "original, meaning independent" [see: CA 3422/03 Krone AG v. Inbar Reinforced Plastic, IsrSC59(4) 365, 378 (2005); CA 360/83 Strosky Ltd. v. Whitman Ice Cream Ltd., IsrSC 40(3) 340, 346 (1985) (hereinafter: the Strosky case). For further on originality as origin, see Birnhack, p. 355-372].

13. This Court has also considered the question of the nature and quantity of the originality requirement's elements that suffice to realize it. In respect of the investment criterion, it has been held that all that needs to be proven is a minimal investment of some human resource [see: Interlego, p. 173; Premier League, para. 34]. On the other hand, a quantitative definition of the requisite creativity is somewhat more complex and it appears that this Court has not yet fashioned a single formula for its realization. Nevertheless, the definition of the requisite creativity for the protection of a work has been delineated in case law by a process of elimination. Thus, it has been held that the creativity criterion does not impose a particularly high threshold for the author, and that slight and even worthless creativity might sometimes suffice [see: Interlego, p. 173; CA 23/81 Hirschco v. Orbach, IsrSC 42(3) 749, 759 (1988) (hereinafter: the Hirschco case); CA 2687/92 Geva v. Walt Disney Co., IsrSC 48(1) 251, 257 (1993) (hereinafter: the Geva case)]. It has also been held that the work need not be novel in comparison with existing works in the same sphere [see Strosky, p. 257; Geva, p. 257].

14. Because of the lack of any cohesive definition of the creativity requirement, and because of the absence of any controversy with regard to the definition of the investment necessary for the protection of a work, the possibility has been raised that a substantial investment in a work can compensate for a lack of creativity in such a way as will meet the requirement of originality and establish protection for the work. However, that approach was rejected by this Court long ago in Interlego, in which the approach of American law was adopted, as expressed in the American Supreme Court's judgement in Feist Publications, Inc. v. Rural Telephone Service Company, Inc., 499 US 340 (1991) (hereinafter: the Feist case), according to which mere investment is not sufficient for the copyright protection of a work [see: Interlego, p. 165, 169; Premier League, paras. 36-38].

15. To sum up the foregoing, the case law laid down by this Court is that for the grant of copyright protection in respect of a work, it must be established that an original work is involved, three subsidiary elements being analyzed – the origin criterion, the investment criterion and the creativity criterion – the existence of only one element being insufficient for the purpose of establishing originality.

The Protected Part of the Work – The Idea/Expression Dichotomy

16. Before I move on to discuss the originality required for the protection of functional works, I wish to consider another basic rule concerning the copyright protection of works – the distinction between idea and expression. A basic principle of copyright law is that the idea that underlies a work will not be protected by the right, and that the protection is afforded only to the way in which it is expressed. This rule is embodied in section 7B of the Copyright Ordinance, which governs the instant case, and was subsequently anchored in section 5 of the New Law, which provides:

"Copyright in a work as provided in section 4 shall not extend to any of the following, but copyright shall apply to the way in which they are expressed:

(1) an idea …"

17. This Court has consistently emphasized the said distinction in its case law [see, for example: CA 10242/08 Mutzafi v. Kabali, (October 10, 2012), para. 24 (hereinafter: the Mutzafi case); CA 2173/94 Tele Event Ltd. v. Golden Channels & Co., IsrSC 55(5) 529, 544 (2001) (hereinafter: as the Tele Event case); Strosky, p. 346; CA 139/89 Harpaz v. Achituv IsrSC 44(4) 16, 19 (1990)]. This distinction is based on the concept that the grant of protection to mere ideas would frustrate one of the major purposes of copyright law – the encouragement of creation and leaving sufficient "raw material" in the public domain [see: Tony Greenman, Copyright, vol. I, 75 (second ed., 2008) (hereinafter: "Greenman")]. The distinction between idea and expression, in the context of textbooks for example, has sometimes led to the conclusion that the author's right has been infringed because of the fact that the expression of the method of study created by him (which constitutes a mere idea) has been copied [see, for example: Hirschco], but also sometimes to the opposite conclusion that all that has been "copied" is the actual idea that underlies the work [see, for example: Mutzafi].

18. The rule that an idea is not protected and only the way in which it is expressed is protected overlaps the rule that facts per se are not protected. This rule finds expression when compilation works are involved, and it has been held that such works will only be protected insofar as the choice and arrangement of the raw materials – which constitute unprotected facts – meet the requirement of originality (see: Interlego; CA 2790/93 Eisenman v. Kimron, IsrSC 54(3) 817 (2000); Tele Event]. This requirement is expressed in section 4(b) of the New Law, which provides:

"… originality of a compilation means the originality of the selection and arrangement of the works or of the data embodied therein".

However, in view of the rising status of the creativity requirement and the determination that investment does not suffice to prove originality, it has been held that, in certain cases, a "compilation work" will not be sufficiently original and will therefore not gain protection [see: Premier League, paras. 51-54]

19. We can see that the distinction between idea and expression is of major importance in copyright law, and that, in certain senses, it also overlaps the requirement of originality that underlies the copyright protection of works. The overlap between these two basic principles of copyright law is particularly relevant when functional works are involved, as will be explained below.

The Merger Doctrine and Functional Works

20. Having regard to the distinction between idea and expression, the concept has developed whereby, insofar as a particular idea can be expressed in only a single way, then protection will not be given to a work that constitutes that expression. This concept has been called the "merger doctrine". The merger doctrine has received little reference in the case law of this Court [see: Geva, p. 262; CA 2682/11 Petach Tikva Municipality v. Zissu (May 20, 2013), para. 49]. The doctrine originates in American law, and its application in modern case law is based on the judgement in Baker v. Selden, 101 US 99 (1880) (hereinafter: the Baker case). In the Baker case, consideration was given to whether a book that presents a new method of bookkeeping and also includes blank forms that make it possible to implement the method, grants its author an exclusive right to use the actual method. The American Supreme Court laid down a rule in that case for use in analyzing works, the only or main use of which is utilitarian. The Court in that case held that:

"… where the art it teaches cannot be used without employing the methods and diagrams used to illustrate the book, or such as are similar to them, such methods and diagrams are to be considered as necessary incidents to the art and given therewith to the public" [ibid., p. 103].

The federal courts in the USA have relied on this statement in order to develop the merger doctrine. The best-known judgment, which most broadens that doctrine, is Morrisey v. Procter & Gamble Co., 379 F.2d 675 (1st Cir. Mass. 1967) (hereinafter: the Morrisey case). In that case, it was held that when a single idea has a very narrow range of possible expressions, a work that constitutes one of the expressions is not to be granted copyright protection (ibid., pp. 678-679)]. Numerous federal courts have supported the rule in Morrisey, but dissenting opinions have also been aired [see: Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 2.18[C] (2002) (hereinafter: Nimmer)].

21. Baker and its development in case law have been strongly criticized [see: Nimmer, § 2.18[C]. Firstly, it has been argued that in Baker itself, the American Supreme Court restricted the rule cited above solely to the right to use the method or idea given expression in the work, and that the use of the expression in order to present the method will constitute an infringement of the copyright, or in the words of the American Supreme Court:

" The use by another of the same methods of statement, whether in works or illustrations, in a book published for teaching the art, would undoubtedly be an infringement of copyright" [ibid., p. 103].

Secondly, it has been argued that the distinction between copying the expression for the purpose of using the method (or idea), compared with copying the expression for the purpose of showing the method (or idea) is artificial. It has therefore been proposed to determine that copying for the purpose of using the idea will also constitute copyright infringement, and that all that should be permitted is the use of the method or idea for functional needs [see: Nimmer, § 2.18[C]-[D]]. This proposal is based on the understanding that copyright does not preclude reliance upon a work that constitutes a certain expression of an idea and presents a particular method in order to turn the method into a product. Such protection is only granted by patent law. For the purpose of demonstration, let us assume that a company manufactures a particular electrical product that is not per se protected by copyright. For the purpose of manufacture, the company produces drawings that constitute a protected work (as detailed at length below). In view of the proposition presented above, a competing company will not be able to copy the drawings, but assuming that the product itself is not protected by a patent or design, the competing company will be able to manufacture the product on the basis of the drawings without infringing copyright. I would immediately say that I accept this latter distinction, and in my opinion, it should be adopted.

22. Despite the criticism that has been presented, it does appear that when there is a complete merger between the idea and its expression, and when there is only one way to express the idea, a consensus does exist that the work that gives expression to that idea will not gain copyright protection [see: Greenman, p. 83; Nimmer § 2.18[C][2]; Paul Goldstein, Copyright § 2.3.2 1 (1989)]. However, opinions are divided on the question when there are just a few possibilities of expressing the idea. According to one approach, as held in Morrisey, in such a case, copyright protection should also not be granted, but according to another approach, the work will be granted copyright, but it will only be infringed when there is absolute or almost absolute similarity between the works [see: Greenman, p. 83; Geva, p. 262]. This controversy is relevant, because, in the instant case, it is asserted by the Respondent that Safecom should have proven exact copying because its drawings constitute an idea that can only be expressed in limited ways (para. 12 of the Respondent's summations). In order to decide this controversy, in my opinion, reference may be made to the fundamental rule of copyright law presented above – the requirement of originality.

23. Issues concerning the merger doctrine arise in many cases in respect of certain types of work. Thus, in the modern era, the question arises in respect of computer programs [see: Greenman, p. 81]. In addition, it has been asserted that the courts in the USA are expanding the application of the doctrine to visual works [for more on this, see: Michael D. Murray, “Copyright, Originality and the End of the Scenes a Faire and Merger Doctrines for Visual Works,” 58 BAYLOR L. REV. 779 (2006)]. Another area in which the work, by its nature, raises issues concerning the merger doctrine is that of functional works. The instant case involves a functional work that is also a visual work. In fact, the merger doctrine can be well understood not only on the basis of the distinction between idea and expression, or to be more accurate, the merger between them, but also on the basis of the originality requirement, in particular insofar as it concerns functional works.

24. In Interlego, President M. Shamgar considered at length the difficulties that the requirement of originality raises as regards functional works. One of President Shamgar's most important findings in this respect was that, in principle, a work is not to be denied copyright protection merely because it is functional [ibid., p. 160]. Nevertheless, President Shamgar held that in respect of these works the Old Law applies a filter in addition to the requirement of originality, which he called "the artistry criterion" [ibid., p. 173]. I would immediately explain that President Shamgar based the reference to that criterion on section 35(1) of the Old Law, which defines artistic work as works of painting, drawing, sculpture and artistic craftsmanship, and architectural works of art, and engravings and photographs [emphasis added – YD]. In the instant case, Safecom's drawings meet the exact definition of a "drawing" as an artistic work in accordance with section 35(1) of the Old Law, and on the face of it, the artistry criterion therefore does not apply to them directly. However, in my opinion, inspiration may be drawn from that criterion in order to interpret the application of the merger doctrine to Safecom's drawings, and to analyze their originality as a functional work.

25. In Interlego, the difficulty that functional works pose for the requirement of originality was described in a way that very much brings to mind the principles of the merger doctrine. In President Shamgar's words:

"When the form is dictated by the function, namely when the function limits the possible forms in which the product can be designed, then there is no justification for granting copyright to the form that is a product of functional-artistic judgement, since the protection that is given protects the function, not the author's original choice of the specific form. This is a circumstance in which the product's form is determined because of its functional task" (ibid., p. 177) (emphasis original – YD).

In fact, the words "function" and "form" can be substituted for the words "idea" and "expression". In order to resolve this problem, President Shamgar proposed six possible criteria for identifying the "artistry" of a work: the choice criterion; the author's intention criterion; the public acceptance criterion; the public's willingness to pay criterion; the minimal aesthetic standard criterion; and the art for art's sake criterion (ibid., p. 179). After a detailed discussion, President Shamgar proposed the "choice criterion" as the test appropriate to the examination of whether or not a work's expression derives solely from its functionality. He defined the criterion as follows:

"The choice criterion: one of the characteristics of art is that it reflects the ability to express an idea in a variety of ways. As far as we are concerned here, this is a very broad criterion since it will be fulfilled whenever the creator of the functional product has the ability to choose between several options (ibid., p. 179).

And following:

"It appears that in view of the purposes of copyright as indicated, and in light of the principles for the solution as formulated, the choice criterion should be regarded as a proper one in the context of examining the final product. That is to say, as long as the form obtained is one of several alternatives. The alternatives should be effective. An effective alternative is one that not only performs the functional task of the product but also meets the limited options of form existing in respect of future works deriving from the connection between function and form. There should be alternatives which, in addition to the functional task, meet the restriction of form that derives from the product's functional task or in other words, there should be several alternatives that all meet the restrictions of form that derive from the functional task" (ibid., p. 181).

26. Applying the choice criterion can be of help in determining the proper protection of work regarding which it is asserted that its great functionality limits the ways for expressing the idea it represents. According to the choice criterion, the function or purpose for which the work is intended should be sought and an examination made as to whether the form of presenting that purpose – the expression – is accompanied by the author's choice from among several options that could achieve the same purpose. The application of this criterion might certainly lead to different conclusions with regard to different elements of the work. One can think of a functional work, some of the elements of which constitute essential expression of the purpose for which it has been created and therefore do not require the author to choose from alternatives when creating them, while at the same time, other elements are not dictated by its purpose, and it is clear that the author had a large range of possible choices with respect to the mode of expression. In view of this, one can again enquire into the controversy existing with regard to the relevance of the merger doctrine. As aforesaid, in my opinion when there is a solitary option for the expression of a particular idea, it is inappropriate to grant protection to that solitary mode of expression. However, when there are several possible expressions of a particular idea, even if they are very few, then in my opinion, having regard to the choice criterion, the author does have a choice among those possible expressions, and it is therefore inappropriate to deny copyright protection to the expression chosen. Nevertheless, I am willing to accept the approach that in such cases, when the number of options is very limited, then in order to prove copyright infringement, it will be necessary to apply the copying criteria strictly, and require that the work that is alleged to be an "infringing work" be almost absolutely the same as the protected work [see: Geva, p. 262; Strosky, p. 357; Greenman, p. 83].

Copying a Functional Work

27. The question of the criteria for copying in copyright law is an elusive one. Nevertheless, in the early 1970s, this Court laid down standards for the test in CA 559/69 Almagor v. Godik, IsrSC 24(1) 825 (1970) (hereinafter: the Almagor case). The standards that were laid down in Almagor are still in use and were recently summed up by Justice Y. Amit in Mutzafi as follows:

"(–) It has to be proven that the defendant copied real and substantial parts of the plaintiff's work, the quality rather than the quantity being decisive.

(–) Copying can be inferred when the defendant had access to the plaintiff's work and the similarity between the works is of such an extent that it is unreasonable to suppose that it is the hand of chance.

(–) The accumulation of points of similarity is of importance. The more there are, the greater the concern that copying is involved.

(–) The question whether the similarity between the two works is sufficient to determine that copying of a real and substantial part is involved is one of fact and degree. The answer to the question should be given not on the basis of a mechanical comparison of a number of words or lines that are similar in the particular works, but in accordance with the judge's impression of the works as a whole" (ibid., para. 26).

28. Do these standards change when the protected work is a functional one? In my opinion, that question should be answered in the negative. As I have described above, functional works raise various difficulties at the stage of analyzing the requisite originality for the purpose of recognizing them as copyrighted works. However, once a functional work has passed the originality requirement stage and the choice criterion, it is a protected work in all respects, and substantial parts of it may not be copied. In this respect, even if only some of the elements that make up the functional work have passed the "choice filter", that does not affect their being work protected against copying.

The only consequence of a work being functional concerns the standard for the analysis of copying when the protected elements constitute an idea that can only be expressed in a limited number of ways.. In such a case, a higher threshold will be necessary to establish copying, and almost absolute similarity between the protected elements and the allegedly copied elements will be required in order to establish that substantial similarity.

Were Safecom's Drawings Copied?

29. Having considered the elements necessary to establish the protection of a work and prove its protection when the emphasis is on functional works, I shall now analyze whether, in the instant circumstances, Safecom's drawings amount to protected works, and whether the use that the Respondent made of them amounted to copying in infringement of the copyright.

30. Firstly, it should be noted that drawings do generally meet the definition of an artistic work under section 35(1) of the Old Law, and, in any event, the Respondent does not assert that Safecom's drawings do not fall within the scope of the works to which protection is granted. Consequently, an analysis has to be made of whether the drawings meet the requirement of originality and, in such event, because they are functional works, whether they also meet the choice criterion. It is not without reason that it is said that a picture is worth a thousand words, and I shall therefore first present one of the parties' drawings as they appear in the comparative table that the Appellants filed (Exhibit 1 of their exhibits).

* On the left – the Safecom drawing; on the right – the respondent's drawing

The Safecom drawings portray an electrical product whose purpose is to provide electrical backup when there is a malfunction. The drawings show an illustration/photograph of the product with boxes at its sides in which there is text that expresses some electrical function, each of the drawings showing – on the product and between it and the boxes – lines and arrows that describe the electrical function that the drawing seeks to describe by visual expression. I would first state that I accept the Respondent's argument that the boxes, per se, like the text within them, do not amount to protected works. I also accept his argument that his drawings show a photograph of a product that is different from Safecom's, and that it is therefore not a copy. Nevertheless, that does not suffice as regards the question of the drawings' originality and the question of copying.

31. It should first be noted that even if each of the elements of the Safecom drawings does not, per se, amount to an original work, that does not negate the possibility that the combination of the elements into a single visual work does amount to a compilation that affords protection to the way in which the elements are arranged, as opposed to the protection of each element individually [see: Greenman, pp. 119-124]. Nevertheless, even without finding that the Safecom drawings amount to an original compilation, in my opinion it can be found that they do constitute a sufficiently original artistic work.

32. From looking at Safecom's drawings there appears to be no doubt that their purpose is to demonstrate the electrical process and the functions performed by the product that it manufactures. For the purpose of that demonstration, there is no doubt that it is necessary to use predefined expressions, such as the text that describes common electrical functions and such as showing the actual product to which the text relates. Together with that, Safecom's drawings also include lines and arrows that demonstrate the flow process described in the drawing. From looking at the drawings, it appears that this demonstration, which has a functional task, can be expressed in a large number of ways that can achieve the purpose, while Safecom chose a particular means of expression according to which the lines and arrows would be of a certain length and certain thickness, taking a winding course appropriate to the way in which it chose to position the product and the text boxes on the drawing. It is my opinion that Safecom's said choice affords it copyright protection in respect to the particular visual element that seeks to "correspond" with those elements that do not amount to a protected work.

33. Having found that some of the elements of Safecom's drawings do amount to copyrightable artistic work, it remains to determine whether the Respondent's drawings constitute a reproduction of its drawings. I stated above that when a functional work is involved, insofar as there is a limited number of ways in which to express the underlying idea, it will be necessary to show that the work that is allegedly an infringement is almost completely the same as the protected elements in the functional work. I am prepared to assume, for the purpose of the discussion, that whether Safecom's drawings in whole constitute a protected compilation, or whether some of the elements are protected separately as an artistic work, the number of ways to give expression to a demonstration of the product's electrical process is limited. Nevertheless, even working on that assumption, from a comparison between Safecom's drawings and the respondent's drawings it appears that as regards the drawings marked Fig. 2 to Fig. 13, and Fig. 15 and Fig. 16 (Exhibit 1 of the Appellants' exhibits), the Respondent did make an identical (or at least almost identical) copy of the protected elements of the Safecom drawings in the form of the lines that describe the flow process.

34. The Respondent asserts in this regard that filtering out the photograph of the product that was not copied and the elements that are not protected in the form of the boxes and the text on them, "at most what are left are… certain curved lines that describe the connections between the parts of the system. Curved lines in a drawing are not a 'substantial part' of the work. Real de minimus is involved" (para. 14 of the Respondent's summations). I cannot accept that argument. The fact that certain elements of the work are not copyrighted, whether because they are unprotected works, mere ideas or a complete merger between idea and expression, leaves those elements in the public domain and thereby permits their free use by anyone so desirous. However, when other elements of the work are copyrighted, it cannot be said that the fact that other elements of the work are not protected makes copying them insubstantial. Such a finding would negate the very protection of those elements, and that cannot be accepted. In my opinion, specifically when substantial elements of the work do not gain copyright protection and remain in the public domain, then copying all those protected elements will attest to the copying of a substantial part of the work, a fortiori when there is absolute, or almost absolute, similarity [on the substantiveness of the reproduction having regard to the amount of the copying, see Mutzafi, para. 91). This is especially so since there is no dispute that the Respondent did have full access to Safecom's drawings. It should be borne in mind that the Respondent could have made use of those unprotected elements of Safecom's drawings and added different visual descriptions to them that demonstrate the functionality of the drawings, and he could also have arranged the elements of the drawing differently, which would have achieved the functional purpose as well. Since the Respondent made exact use of Safecom's protected visual resources, he infringed its copyright in those elements. Justice's Netanyahu's statement in Strosky is apt in this regard:

"A general inverse relationship equation may be appropriate inasmuch as the less originality and intellectual effort in the work, the more exact the copying that is needed for its copyright infringement. According to this equation, it can be said that the originality and effort in the sign are modest, while the copy is almost exact. That suffices for infringement" (ibid., p. 357).

Permitted Uses

35. Having found that the Respondent did infringe Safecom's copyright in its drawings, it remains to discuss the Respondent's arguments that his actions and the drawings that he made constitute permitted use according to the New Law and therefore do not amount to infringement. The Respondent bases his arguments on section 78(c) of the New Law, according to which an act that does not constitute an infringement of copyright in accordance with that Law will not constitute an infringement of copyright under the Old Law, despite its application in the circumstances. In view of that argument, it should first be determined whether the use of the work, in accordance with the uses that are defined in chapter four of the New Law as "permitted uses", constitutes copyright infringement. In my opinion, the answer to that is in the negative. In CA 5097/11 Telran Communications (1986) Ltd v. Charlton Ltd. (September 2, 2013) (hereinafter referred to as "Telran"), my colleague Justice Z. Zylbertal expressed the opinion that use in accordance with the uses defined in chapter four of the New Law cannot amount to a contravention of that law (ibid., paras. 28-30). That opinion is based both on the wording of the Law and on the perception that there are certain uses that, according to the purposes underlying copyright, amount to a right of the user and not merely a defense against contravention of the Law [for further, see Niva Elkin-Koren, “Users' Rights,” in Michael Birnhack & Guy Pesach, eds., Copyright (2009) 327 (Hebrew)]. I accept this position both as regards the finding that permitted use, as defined in chapter four of the New Law, does not constitute a contravention of the law, and as regards the finding that permitted use in fact constitutes a right that is granted to the user to make certain types of use of a work. I am conscious of the fact that this position is contrary to the holding of Deputy President E. Rivlin in CA 9183/09 Football Association Premier League Ltd. v. Anonymous (May 13, 2012) (hereinafter: the Anonymous case), para. 18 of his opinion, and in view of the existing disagreement, the time may have come for an extended bench to address this issue.

36. Having found that permitted use does not amount to a contravention of the New Law, consideration should be given to the types of permitted use that are asserted by the Respondent in the instant case.

Firstly, the argument Respondent raises avers that his use of Safecom's drawings is permitted use under section 20 of the New Law, which permits the use of a work in legal administrative proceedings to the extent justified having regard to the purpose of the use. I cannot accept that argument. I am prepared to assume for the purpose of the discussion that using the work for the purpose of presenting it to the registrar of patents in a particular country does constitute use in legal administrative proceedings, despite the fact that such a finding is not free of difficulties. However, the main element of this permitted use is the extent of the use, having regard to its purpose. In the instant case, the purpose of using Safecom's drawings and presenting them to the American Registrar of Patents in the patent registration application was the registration of a patent in respect of a product that competes with the one that Safecom markets. My opinion is that such use by a direct competitor, using the copyrighted work for the purpose of direct competition with the owner of the work, cannot amount to permitted use under section 20 of the New Law.

37. Secondly, the respondent raises an argument that the use that he made of Safecom's drawings amounts to fair use, as defined in section 19 of the New Law. Section 19(a) of the New Law comprises an open list of types of use of protected works that will be permitted and fair. Section 19 (b) of the New Law enumerates four non-exclusive factors that are to be considered in order to determine whether a particular use amounts to fair use, including:

"(1) the purpose and nature of the use;

(2) the nature of the work of which use is made;

(3) the extent of the use, qualitatively and quantitatively, in relation to the work as a whole;

(4) the effect of the use on the value of the work and its potential market".

This Court has held that "these are not essential or cumulative factors but a non-exhaustive list of parameters that might indicate the fairness of a particular use that is made of a protected work" [Anonymous, para. 19 of the opinion of Deputy President Rivlin].

The four subordinate criteria listed in section 19(b) of the New Law are based on the subordinate criteria that have been laid down in the American Copyright Act [see: 17 USC § 107]. Empirical research that has been conducted attests that although the fourth subordinate criterion – the effect on the potential market – is most often mentioned as the decisive factor regarding the fairness of use, the first subordinate criterion – the purpose and nature of the use – does in fact have the most marked effect on the decision, the most influential factors being the commerciality and transformativeness of the use [see: Barton Beebe, “An Empirical Study of US Copyright Fair Use Opinions,” 1978-2005, 156 U. PENN L. REV., 549 (2008); Neil Weinstock Netanel, “Making Sense of Fair Use,” 15 LEWIS & CLARK L. REV. 715 (2011)]. It appears that these factors were also the most influential in this Court's ruling in Anonymous [ibid., para. 20].

In the instant case, it appears that the use that the Respondent made of Safecom's drawings did not meet the standard of fair use. Thus, in the scope of the first subordinate criterion, it is clear that the Respondent's use was commercial because its whole purpose was to bring about the registration of a patent in respect of his product that competes with Safecom's product. Moreover, on analyzing the question of transformative use, it does not appear that the Respondent's use of the Safecom drawings led to the creation of a new expression, different from the original expression embodied in them. As regards the third subordinate criterion – the extent of the use – I have already found above that the Respondent made an exact, or almost exact, copy of Safecom's drawings, and the extent of the use is therefore full. Finally, having regard to the fourth subordinate criterion, it is clear that since the product marketed by the respondent directly competes with Safecom's product, there is no doubt that the use affects the potential market for Safecom's drawings.

Incidentally, I would mention that I cannot accept the Respondent's argument that the American Patent Office has expressed its opinion that the use of a protected work for the purpose of a patent application amounts to fair use. From studying the opinion (which was annexed as Appendix J to the Respondent's volume of supporting documents), it appears that the American Patent Office means that the use of protected works that the Office itself makes in its relationship with those filing patent applications amounts to fair use [see: United States Patent and Trademark Office, USPTO Position on Fair Use of Copies of NPL Made in Patient Examination (January 19, 2012)].

38. Thirdly, the Respondent contends that the use that he made of Safecom's drawings is permitted in accordance with section 27 of the New Law. Section 27 of the New Law provides:

"Making a new artistic work which comprises a partial copying of an earlier work, or a derivative work from an earlier work, as well as any use of the said new work, are permitted to the author of the said earlier artistic work even where said author is not the owner of the copyright in the earlier artistic work, provided the new work does not repeat the essence of the earlier work or constitute an imitation thereof".

In order to fall within the scope of the section, the Respondent must show that he was at least a joint author of the Safecom drawings. The District Court found that the Respondent had waived his rights in the drawings in favor of Safecom in the scope of the Agreement. The Respondent argues in this connection that even if he had waived his rights in the drawings, as regards the New Law he is still the first joint author of them. In my opinion, there is no need to rule on this issue because even if the respondent is a joint author of Safecom's drawings, section 27 of the New Law does not work in his favor in this case because the use that he made of Safecom's drawings amounts to an absolute, or almost absolute, copy of them. It cannot, therefore, be said that "partial copying" of Safecom's drawings, or a work deriving from them, is involved, and it can easily be found that the Respondent's drawings "repeat the essence of the earlier work or constitute an imitation thereof".

39. Before concluding, I shall briefly consider the Respondent's argument concerning the law governing this case. According to the Respondent, copyright law is naturally territorial, as is the application of the Old Law. Since Safecom's drawings were copied in the USA, the Respondent asserts that the law governing the case is American law, which was not proven by the Appellants, and the appeal should therefore be dismissed. The District Court considered the Respondent's said argument and held that the drawings were not only copied in the context of filing the patent, but that the Respondent had received the presentation containing Safecom's drawings in Israel and copied them on the computer at his home in Israel. Consequently, the District Court held that Israeli law could be applied to the case. Those findings of the District Court are findings of fact, in which I have not found it appropriate to intervene at the stage of appeal. I would merely state that even were it appropriate to find that this case is governed by American law, that would not necessarily lead to the dismissal of the appeal in the absence of proof of the foreign law. This is particularly so when a sphere is involved that is regulated by numerous international conventions, which lead to relatively great conformity among the different state laws [see, for example: CA 169/94 Werner v. Amorim, IsrSC 50(3) 119, 124 (1996); CA 1227/97 Red Rock Quarry and Stone Works Ltd. v. Ibrahim IsrSC 53(3) 247, 259 (1999); CA 7687/04 Sasson v. Sasson (February 16, 2005), para. 10].

40. In conclusion, I would recommend to my colleagues that we find that certain elements of Safecom's drawings amount to protected work, that 13 of the Respondent's drawings amount to an absolute, or almost absolute, copy of Safecom's drawings, and that the use that the Respondent made of the drawings does not amount to permitted use. I would also recommend to my colleagues that we remand the case to the District Court for ruling on the appropriate relief in respect of those infringements, and that the Respondent pay the Appellants' costs in the amount of NIS 40,000.

Justice Z. Zylbertal

I concur.

Justice E. Rubinstein

A. I concur in the illuminating opinion of my colleague, Justice Danziger.

B. My colleague gave thorough consideration to a broad picture of copyright law, with regard to originality as a condition for the protection of a work, the protection of the way in which an idea is expressed, as opposed to the idea itself, and the criteria concerning works of a functional character, which is a complex matter in itself.

C. I would like to add another criterion to all these – the common sense criterion, which might sound too broad because it can be said that common sense should guide us in every case, and on the other hand it is not necessarily the same for everyone in individual matters. However, by saying "common sense" in the instant case, I mean the accumulation of all the overall facts before the court. When a work is involved, appearance or the sight of the eyes ("better is the sight of the eyes than the wandering of the desire", Ecclesiastes 6:9) is also acknowledged to be a significant parameter in intellectual property law (and see: CA 3422/03 Krone v. Inbar, IsrSC 59(4) 365, in respect of drawings as well. See also, inter alia, CA 7125/98 Mipromal v. Kalil, IsrSC 57(3) 702, 710 et seq.). Incidentally, the expression "the criterion of common sense" (in a slightly different sense) can be found in case law. See the statement by then Justice Grunis in ALA 5454/02 Taam Teva v. Ambrosia, IsrSC 57(2) 438, 453 (2005) citing this criterion per the learned commentator Seligson (Trademarks and Similar Law, (5733), 80-81 (Hebrew)) as regards the comparison of a conceptual message. And in the instant case, in preparing the file, when we – the bench – inspected the drawings involved, in our eyes there was a great similarity that was immediately conspicuous. Consequently, as I see it, the result that we have reached was required not only by common sense but also by the sight of our own eyes.

D. Intellectual property law does, indeed, in many cases involve subtle nuances in respect of which it is frequently difficult to separate the wheat from the chaff, and much has been written about the difficulties of litigation in this sphere (see: D. Freiman, Patents (second printing, 2008) 7); but in my opinion, the case before us is not one of the difficult ones and anyone looking at the drawings that my colleague presented in his opinion (para. 30) needs no arcane language and can take them at face value, almost like the well-known definition by US Supreme Court Justice Potter Stewart concerning pornography, who said that it is perhaps difficult to define but "I know it when I see it".

E. As aforesaid, I concur with my colleague's review, together with his cataloguing and arrangement of the matter.

F. Before concluding, I would mention that Jewish law, especially in its modern embodiment, but even long ago, has considered the matter of intellectual property rights; see my opinion in CA 9191/03 V&S Spirt Aktiebolag v. Absolute Shoes, IsrSC 58(6) 869, 888-892, which also discusses (at p. 890, para. 18(3)) the Jewish law foundations of enforcement in intellectual property matters, and I would here emphasize the approaches of Jewish law that concern a another’s craftsmanship, trespass and theft, and more; in Krone, supra (at p. 379), I also considered the matter of a graphic pattern (or drawings) as a cause of action in Jewish law, and also see my opinion in ALA 7774/09 Weinberg v. Weisshof (2012) paras. 9 to 12 and the authorities cited there.

Decided as stated in the opinion of Justice Y. Danziger.

Given this 15th day of Kislev 5774 (November 18, 2013)

Justice

Full opinion:

Link to original Hebrew text of decision on official ISC website:

http://elyon1.court.gov.il/files/11/960/079/w08/11079960.w08.pdf

Rosenbaum v. Zeger

Case/docket number:

C.A. 248/53

Date Decided:

Monday, April 4, 1955

Decision Type:

Appellate

Topics:

Jewish Law

Contract law

Abstract:

In September 1950, the appellant lent to the respondents for a period of two years the sum of I.L. 800.- secured by a mortgage on land and a building registered in the Land Registry. To ensure the return of a sum equivalent to the amount lent, and having regard to a possible fall in the value of the Israel pound, it was provided by clause 9 of the mortgage deed that, if at the time of payment the value of the land and building had risen, the lender should receive on repayment an addition to the sum of I.L. 800.- representing the change in value.

When the time for repayment of the loan arrived the value of the property had risen owing to a fall in the value of the Israel pound and the respondents offered to repay the sum of I.L. 800.- but refused to pay the additional sum provided for. They sought a declaration in the District Court that they were entitled to redeem the mortgage and have the registration money removed from the Land Registry upon payment of I.L. 800.- and expenses. The respondents contended (a) that clause 9 of the mortgage deed was illegal, being contrary to Ottoman legislation regarding a maximum rate of interest that might lawfully be charged and (b) that clause 9 was unenforceable as being contrary to public policy, in that it encouraged inflation. On the basis of these two contentions the court made a declaration in favour of the respondents and the appellant appealed.

Held, allowing the appeal, that clause 9 of the mortgage deed was not contrary to the Ottoman legislation. A clause in a mortgage deed calling upon the mortgagor to pay in Israel pounds a higher sum than that lent, if at the time of redemption the value of the land and building, subject to the mortgage, had risen because of a fall in the value of the Israel pound, is not contrary to the Ottoman legislation regarding interest and there is nothing contrary to public policy in such a clause.

Voting Justices:

Silberg, Moshe

Primary Author

majority opinion

Berinson, Zvi

majority opinion

Goitein, David

majority opinion

Full text of the opinion:

C. A. 248/53

ELSIE ROSENBAUM

ASHER AND HAYA ZEGER

In the Supreme Court sitting as a Court of Civil Appeal

[April 4, 1955]

Before Silberg J., Goitein J., and Berinson J.

Contract - Loan -Mortgage deed - "Value clause" - Condition for repayment of additional sum as pledge against inflation - Not against public policy - Ottoman Law - Additional sum payable not excessive interest - Jewish Law - English and American Law.

Palestine case referred to:

(l) C.A. 475/44 - Estate of the late Habib E. Salem represented by the Executors, Jamil Salem and Others v. Hanna Asfour and Adeeb Jeadeh, Trustees in Bankruptcy of Eugenic Hallasso; (1945), 12 P.L.R. 339.

English cases referred to:

(2) Feist v. Société Intercommunalé Belge d'Electricité: (1934) A.C. 161.

(3) Lomax (H. M.Inspector of Taxes) v. Peter Dixon & Co., Ltd.; (1943) 2 All E.R. 255.

American cases referred to:

(4) Bates v. United States; (1939). 108 F. 2d 407.

(5) Norman v. Baltimore & Ohio Railway Co.; (1934), 55 S. Ct. Rep. 407.

(6) Die Deutsche Bank Filiale Nürnberg Humphrey; (1926), 47 S. Ct. Rep. 166.

Gale v. Grannis; (1857), 9 Ind. 140, American Digest, Vol. 47, 2124.
Garvin v. Linton; (1896), 62 Ark. 370, American Digest, Vol. 47, 2111.

(9) Beckwith v. Windsor Manufacturing Co., (1842), 14 Conn. 594, American Digest, Vol. 47, 2112.

(10) Bade v. Kierst; (1887), 10 N.Y. St. Rep. 705, American Digest, Vol. 47, p. 2113.

(11) Hamilton v. Moore; (1846), 26 Tenn. 35, American Digest, Vol. 47, 2113.

(12) In Re Mansfield Steel Corp.; (1929), 30 2d Fed. Rep. 832.

Orgler for the appellant.

Barak for the respondents.

SILBERG J. The appeal before us concerns a matter of money, that is to say, a question of money as money. We have been called upon to define the nature of depreciated currency and to determine the significance of a "value clause" contained in the terms of a loan - whether or not it is contrary to the law concerning interest.

2. The facts of the case, which are clear and not in dispute (the action concerning their legal significance only), are as follows:

A. At the end of September, 1950, when the respondents needed money to complete the construction of a house on their plot in Ramat Izhak, the appellant lent them I.L. 800.- for two years, and to secure the repayment of the loan, a mortgage was registered in her favour on the plot and on the building under construction.

B. Clause 7 of the mortgage deed provided that the loan was to bear interest at the rate of 9 per cent per annum, of which a part was payable in advance and the remainder in equal quarterly installments, which were subsequently paid. However, the parties added one more condition, which is the pivot round which the present appeal revolves. This condition is set out in clause 9 of the deed, which reads as follows:

"If the value of the mortgaged property is at the time of repayment higher than its value at the time of registration of the mortgage, the lender (the appellant) shall be entitled to demand that the borrowers (the respondents) pay to her in addition to the amount of the loan, such part of the excess value as corresponds to the proportion between the amount of the mortgage and the present value of the mortgaged property. For the purpose of this clause, the parties agree that the present value of the mortgaged property (i.e. of the land, the building and the trees), if it were free from tenants and the building wholly completed in accordance with the approved plan, would be I.L. 4,500.- ... Nothing contained in this clause or in any other provision of the mortgage deed shall give the borrowers the right to pay off the debt by paying an amount of less than I.L. 800.- plus interest and the other amounts due to the lender."

This clause, a "value clause" in technical language, was inserted in the terms of the mortgage in order to protect the lender against such depreciation of the Israel pound as might occur during the validity of the mortgage. It is not in dispute that the increase in the value of the property referred to in clause 9, means "an increase brought about by a decrease", that is to say, such an increase in the value of the property as would of necessity result from a decrease in the value of the currency. The representative of the appellant has declared before us, too, that his client is not trying to benefit by any increase in the price of the property, other than such an increase as is the expression and exact counterpart of a decrease in the value of the currency.

C. When the date of maturity of the mortgage arrived, the appellant was invited by the respondents to appear at the Land Registry Office for its redemption. They offered to pay the appellant the nominal amount of the mortgage, i.e. I.L. 800.-, saying they were not bound to add anything whatsoever, even if the value of the mortgaged property had increased as a result of a depreciation of the Israel pound. The appellant refused, in reliance on clause 9 of the mortgage and contended that the value of the mortgaged property had indeed increased.

D. The respondents thereupon applied to the District Court of Tel Aviv for a judgment declaring that they owed the appellant the amount of I.L. 800.- only. Their contention was, and is, that the condition laid down in clause 9 is of no legal validity, a) because it requires the borrowers to pay interest in excess of the permitted rate (that is, a plea of 'excessive interest'), and b) because a condition of this kind is contrary to public order being a serious inflationary factor prejudicial to the country's economy. The learned judge accepted both parts of the submission and granted the respondents the declaration prayed. It is against that judgment that the appellant appeals to us.

3. I will say at once that the second part of the above submission does not commend itself to me at all. Matters of public order are, as is well known, limited to a well known list of matters, and any addition to those is scarcely considered possible in these days (see Halsbury, Hailsham edition, Vol. VII, p. 154; 12 English and Empire Digest. 242 paragraph 19791): "Judges are more to be trusted as interpreters of the law than as expounders of what is called public policy"). Moreover, experts have not yet decided that the linking of loans to value clauses constitutes an inflationary factor harmful to the State, and even if the experts of other nations had so decided, I would still not be sure that such a general rule applies also to the peculiar economic conditions prevailing in the State of Israel. If, for instance, it should appear that the authorisation of such transactions is likely to attract foreign investors to this country, I should not hesitate to say that it is actually beneficial to the State.

4. It thus remains for us to deal with one remaining question: whether having regard to the interest (9 per cent per annum) payable under clause 7 of the deed, the stipulation in clause 9 is or is not one for excessive interest.

This is a legal question, and we have to consider and decide it with reference to the legal provisions as to interest in force in this country.

5. The following are the three Laws dealing with the permitted rate of interest:

a) the Ottoman Code of Civil Procedure of 1879 (Article 112);

b) the Ottoman Law Concerning Interest of 1887 (Articles 1 and 3);

c) the Usurious Loans Ordinance, 1934 (sections 2 and 3).

Article 112 of the Ottoman Code of Civil Procedure provides:

''If the contract be for the payment of a sum of money, and there be delay in making such payment, damages may be awarded at the rate of 1 per cent per month on the principal amount, and the creditor shall not be required to prove that he has suffered any loss."

Some eight years later, the Ottoman legislator reduced the permitted rate of interest, fixing it at 9 per cent per annum, and this has been the "legal" rate of interest to this day. The relevant provisions of the Ottoman Law Concerning Interest are:

''1. With effect from the date of promulgation of this law. the maximum rate of interest for all ordinary and commercial credits shall be 9 per cent per annum.

3.If it be proved that a creditor and debtor have in a deed of contract agreed to a rate of interest higher than the legal rate, whether this be explicit in the deed or whether the excess be included in the principal amount, the rate shall be reduced to 9 per cent per annum."

Sections 2 and 3 of the Usurious Loans Ordinance, 1934, grant the courts power to re-examine the transaction between the borrower and the lender in order to find out whether it does not involve any obligation to pay interest in excess of the legal rate.

We thus see that a maximum rate of interest - 9 per cent per annum - is in force in this country, but this does not bring us any nearer to the solution of our problem. For the question of interest to us in this appeal is whether an increase in the quantity of pounds intended to compensate for their qualitative decline, constitutes an "additional payment" within the meaning of our law of interest.

It is regrettable and somewhat surprising that the two learned counsel who have very ably presented their arguments before us should not have succeeded in discovering a single judgment, either in Israel or abroad, that deals directly with this question, i.e., which examines the validity of the condition in question or of a similar condition (such as a "gold clause", a "dollar clause" etc.) from the point of view of the payment of excessive interest which it might involve. I do not rely for authority or support on the famous judgment of the House of Lords in Feist v. Société Intercommunale Belge ďElectricité (2), or on the case of Estate Salem v. Trustees of Halllaso (1), which follows the same lines in coming to a decision. In both cases, the validity of the gold (or dollar) clause was not attacked because of the interest transaction involved - not in the Feist case, for there has been no maximum legal rate of interest in England for a hundred years, and not in Salem's case, for the representatives of the parties did not raise the problem of interest at all. The principle known as the "Feist construction" merely imports that a gold (or dollar) clause does not lay down the "how", but the "how much", not a "mode of payment", but a "measure of liability", and the clause therefore was held to be neither invalid nor unlawful by reason of a departure from the gold standard or a contravention of the law forbidding the trade in foreign currency. Even this was not really an innovation, for the International Court at the Hague, in the case of the Serbian Loans, had already decided:

"The treatment of the gold clause as indicating a mere modality of payment, without reference to a gold standard of value, would be not to construe but to destroy it."

(Case of Serbian Loans, Permanent Court of International Justice, Series A, Collection of Judgments, 1928-1929; Judgment No. 14, p. 32, cited in Feist's case, ibid.pp. 173-174).

In the case before us, however, the question is whether the larger amount payable as a result of the increase of the value of the mortgaged property constitutes a prohibited addition of interest, and on this question the two judgments I have referred to do not help.

This question is by no means an easy one. The difficulty lies in the changes that have occured, in the course of history, in the attitude of peoples and nations in the matter of interest and usury, both from a purely ethical and from an economic and practical point of view. To avoid terminological confusion, I shall use the word "usury" (in Hebrew: neshekh) in the sense of prohibited or excessive interest. (For the Talmudical definition of the term see Baba Metzia in the chapter on usury, 60 b, Mishna u-G'mara ibid.; and comp. Maimonides, fourth chapter of the Rules Concerning Borrower and Lender, rule 1). A Swiss scholar has pointed out: -

"The ethical nature of the concept of usury renders it impossible to formulate permanent and definite criteria of what constitutes a usurious transaction. As long as freedom of contract remains the cornerstone of economic organization, it is not the economist but the legislator who must decide at what point a voluntary economic transaction constitutes an abuse of economic freedom and thus an act of usury. Transactions which were condemned in the Middle Ages as usurious became recognized in subsequent centuries as normal economic practices, while usages which were outlawed and punished in one country were at the same time freely permitted in another. Moreover in certain periods the moral views of the legislative bodies were identical with those of the majority of the people, while at other times there was a wide divergence in this respect, so that usages which were officially outlawed were nevertheless sanctioned in economic life. Thus while concepts such as price, wage, interest, are economic categories transcending time, usury is a historical category" understood only in the light of the moral and legal norms prevailing in a particular period."

(Edgar Salin, Usury, Encyclopaedia of Social Sciences, Vol. 15, p. 194).

Unfortunately, however, purely ethical considerations do not give us a key to the solution of the specific question to be considered by us, and, as stated, we have not found a clear legal norm either in the Israel statute-book nor in the local jurisprudence. We shall therefore have to rely on analogy or on the accumulated experience of other legal systems, making due allowance - where necessary - for differences of time and place.

6. Nearer to the case before us are judgments given, in Enlgand and in the United States of America, in matters relating to the payment of income-tax. I begin with the well-known judgment of the English Court of Appeal in Lomax v. Dixon & Co. Ltd. (3).

The facts of that case were as follows:

A Finnish company owed an English company amounts arising out of various loans, which added up in the course of time to a total debt of £ 319,600. These amounts were payable on demand. As the Finnish company was unable to pay the whole of the debt at once, an arrangement was made between the two companies, as a result of which the Finnish company gave the English company 680 bills for £ 500 each, or £ 340,000 in toto, i.e. for £ 20,400 more than the original amount of the debt. That is to say, the bills were issued as the usual expression is, at a 6 per cent discount. It was stipulated that the bills should bear interest at the rate of 1 per cent above the lowest rate of discount of the Bank of Finland for that year, but in any case not more than 10 per cent per annum. It was also stipulated that if in any year the net income of the Finnish company should reach a certain amount, each bill due for payment should be redeemed at a 20 per cent "premium". The maturities of the 680 bills were fixed as follows: the first 100 were to be paid several days after the date of the arrangement. and the remainder. in equal instalments, in the course of twenty years. It was proved that in laying down the above terms of payment, the English company had in mind "the element of risk which might arise through trouble between Finland and Russia", on which the learned judge remarks in his judgment (p. 258) that -

"In view of the manner in which that apprehension has justified itself, (meaning the Russo-Finnish War which broke out seven years later) it can scarcely be suggested that .. .the appellants were taking excessive precautions by insisting on the notes being issued at a discount and redeemable at a premium."

The question facing the court in that case was whether that ''discount" of the bills - i.e. the difference between the original amount of the debt and the principal of the bills - and the "premium" to be paid in the event indicated were "income" chargeable with tax under the income-tax laws in force in England.

The court decided that the discount and premium were not subject to income-tax, the reason - put shortly - being that the said arrangement was not an interest transaction but a capital transaction, designed to insure the company against the risk it was taking in agreeing that payment, instead of being immediate, be spread over a period of twenty years. This is what was said by Lord Greene, Master of the Rolls:

"...there can be no general rule that any sum which a lender receives over and above the amount which he lends ought to be treated as income. Each case must, in my opinion, depend on its own facts and evidence dehors the contract must always be admissible in order to explain what the contract itself usually disregards, namely, the quality which ought to be attributed to the sum in question." (ibid., p. 260)

Further on, the learned judge says:

''I can find no ground for distinguishing the present case from that of an ordinary issue of debentures by a trading company. If at the date of the agreement the appellants had lent to the Finnish company £ 319,600 to be secured by an issue of notes at 94 repayable over 20 years at 120 and bearing interest at a rate fixed by reference to bank rate in the usual way, the revenue authorities would not have claimed tax on the discount or the premium. The element of capital risk was quite obviously a serious one and the parties were entitled to express it in the form of capital rather than in the form of interest if they bona fide so chose. It is said, however, that there is a difference between the case of a security issued for a present loan and that of a security issued to cover an existing loan. This argument found favour with MacNaghten J., but, with all respect to him, I cannot follow it. The parties to the transaction, faced with an existing debt which the Finnish company was obviously not in a position to repay there and then, did what in effect amounted to writing down the capital value of the debt which by the terms of the agreement was now to be repaid over a long period of years bearing interest in the meantime at a normal commercial rate. I can see no difference between writing down the capital value of an existing debt and writing down the capital value of a new debt, which is what is done where a company makes an ordinary issue of debentures at a discount or repayable at a premium. Moreover, it is quite common for a company to issue debentures as security for an existing loan..." (ibid., p. 261).

At the end of the judgment, the learned judge sums up the principles resulting from his analysis of the problem, as follows:

"It may be convenient to sum up my conclusions in a few propositions. (i) Where a loan is made at or above such a reasonable commercial rate of interest as is applicable to a reasonably sound security, there is no presumption that a 'discount' at which the loan is made or a premium at which it is payable is in the nature of interest. (ii) The true nature of the 'discount' or the premium (as the case may be) is to be ascertained from all the circumstances of the case... (iii) In deciding the true nature of the 'discount' or premium, in so far as it is not conclusively determined by the contract, the following matters together with any other relevant circumstances are important to be considered, viz., the term of the loan, the rate of interest expressly stipulated for, the nature of the capital risk, the extent to which, if at all, the parties expressly took or may reasonably be supposed to have taken the capital risk into account in fixing the terms of the contract." (Ibid p. 262 and 263).

With reference to these principles, the Court of Appeal decided that the "discount" and premium were not interest and thus not income, and were therefore exempt from income tax, as the Income Tax Commissioners had already decided previously.

This is the rule established in the Lomax case (3), and we cannot ignore it in considering and deciding the question before us. Nor did the learned judge of the District Court overlook this English judgment, but, with all respect, he did not interpret it correctly. It may be noted in his favour that he was misled by the headnote to the case. The moral to be drawn is, if I may amend the well-known warning of Ecclesiastes : "And more than of these, my son, beware of the headings and summaries of the law reporters". In the passage quoted literally by the learned judge, the editor says:

"Interest on a loan is properly speaking payable for the use of the money or as a recompense to the lender for being kept out of his money. A payment or recompense made to the lender because there is a risk that the money lent or some part of it may never be repaid is a consideration of a different kind and is, in fact, a provision for capital depreciation. It seems to be clear that interest properly so called is taxable, whereas a provision against capital depreciation is not taxable."

Thereafter the learned judge of the lower court quotes a message from the judgment itself, which says:

"A good example of the difficulty is to be found in the contracts of loan which used to be made on a gold basis when the currency had left or was expected to leave the gold standard. In such contracts the amount to be repaid was fixed by reference to the price of gold ruling at the repayment date and, if the currency depreciated in terms of gold. there was a corresponding increase in the7 amount of sterling to be repaid at the maturity of the loan. It could scarcely be suggested that this excess ought to be treated as income when the whole object of the contract was to ensure that the lender should not suffer a capital loss due to the depreciation of the currency."

The learned judge combines these two passages into a stick with which to beat the ratio decidendi of the Lomax judgment (3). In his opinion, the English judges erred by confusing "depreciation" and "devaluation":

"While the former term denotes the loss in purchasing power, either on the money market or on the commodity market or on both, 'devaluation' is a legislative act designed to alter the relation between the currency and the monetary cover and to create a new, stable position until it is again altered by the legislator...

"Obviously there can be no question with us of devaluation. True, the relation between the Israel pound and foreign currency has been changed several times. We have fixed all kinds of rates for the purchase and sale of currency by the Treasury from or to local residents in connection with foreign trade transactions. But our currency is not linked to any monetary cover. It depends on the economic strength of the Israeli population and of Diaspora Jewry...

"It therefore seems to me that I cannot be guided by the Lomax judgment in considering whether the benefit in question comes, or does not come, under the heading "interest" ..." (p. 5 of the judgment of the District Court).

I dissociate myself, with respect, from the conclusion at which the learned judge arrived in the last paragraph of the above passage. The differentiation between devaluation and depreciation is quite correct, and no one will quarrel with it (see Nussbaum, Money in the Law, 1950, p. 172); but I do not agree with the conclusion drawn by the learned judge. For what is the relevance of this difference, and in what way does it reveal an error into which the English judges have allegedly fallen? The decision given in the Lomax case (3) is not essentially concerned with either devaluation or depreciation; it is built Entirely upon one idea, namely that the object of the lenders was not to earn profits, but to safeguard the principal; they merely wished to forestall the danger that hung over their heads in view of the likelihood of a Russo-Finnish war breaking out - as in fact it did - during the long period that had to be allowed for the redemption of the bills. I am not defending the headnote to the case. That is indeed wrong and misleading. But there is neither a misconception nor a slip of the pen in the judgment itself. The example given by Lord Greene, namely the insertion of a gold clause in loan contracts made after, or immediately before, the abandonment of the standard, merely illustrates and puts in concrete form the difficulty we sometimes encounter when trying to discover the true meaning of a contract. This is shown by the opening words of the passage I have quoted. Nor is this the only example given by the noble lord, as anyone who reads the text of the judgment, from the last paragraph on p. 258 to the last paragraph but one on the following page, will clearly see.

In short: the Lomax decision does not depend at all on the correctness of the distinction between the concepts "devaluation" and "depreciation", and the learned judge, therefore, was not right in refusing for this reason, and for this reason alone, to apply that decision to the case under consideration.

7. The Lomax case deals with a question relating to income-tax, and the rule established by it directly is that a payment intended to compensate for or avert a loss of principal is not interest chargeable with income-tax. If it is correct - as I think it is - that the concept of interest referred to in income-tax laws is identical with the concept of interest dealt with by our interest laws, than the Lomax decision would also appear to solve the question before us.

8. Another judgment on tax matters that is relevant to our case was given in 1939 by the Federal Circuit Court in Bates v. United States (4). In one respect, the Bates case is nearer to our case than the Lomax case, for in it, too, the issue hinges on the law concerning the increase and decrease of the value of the currency; but otherwise it is much farther removed, since it has nothing whatever to do with the question of interest.

The matter occurred in 1935, about a year after the American dollar had been officially devalued by 40 per cent by a proclamation of President Roosevelt. dated January 31, 1934. In that year, Bates sold for 175,482 dollars securities which he had bought in the years 1931-1933 for 134,464 dollars, thus realizing a nominal profit of approximately 40,000 dollars. The officials in charge of income-tax or, more exactly, the officials in charge of the tax levied in America on capital profits of this kind, demanded from him tax on that profit, and the matter came before the District Court. Bates' contention was - in a nutshell - as follows: To determine the amount of the profit obtained, one had to compare the selling price of the securities with their purchase price; and as the present, devalued dollar was no longer the "full" dollar that had existed before 1934, there was no common basis for the drawing of the comparison, other than the real, gold value of the two currencies. If that was so, he had made no profit at all on the transaction, for taken at their gold value, the 175,000 dollars which he had received for the securities in 1935 were certainly not worth more than the 135,000 dollars which he had paid for them in the years 1931-1933.

The Circuit Court rejected this contention relying upon the judgments given by the Supreme Court of the United States in Norman v. Baltimore and Ohio Railway Co. (5), and in Die Deutsche Bank Filiale Nürnberg v. Humphrey (6).

After analysing these judgments, and after concluding from them the "equivalence, dollar for dollar, of cost and selling price money" - this is one aspect of what is known in technical literature as "the nominalistic principle" - the District Court refutes Bates' contention saying that since gold coins had ceased to be legal tender, and one was not permitted to possess them but had to surrender them to the Treasury and to receive for them dollar bills, the value of which corresponded to the gold value of the devalued dollar, it followed that the law regarded the dollars invested by Bates in the purchase of the securities as actually equivalent, dollar for dollar, to the dollars he had received at the time of their sale; and that being so, there was a common basis for drawing a comparison between the purchase price and the sales price, and the calculation of profit was to be made, quite simply, by deducting the number of dollars paid in the past to the seller of the securities from the number of dollars now received from the purchaser.

After further pursuing this line of reasoning, the court concludes as follows:

"The following hypothetical situation suggested by defendant illustrates the difficulty of plaintiff's position If the taxpayer (i.e. Bates) had borrowed the dollars ($ 134,464.01) necessary to buy the securities in question in 1933 and prior years and had not discharged his obligation until after he had sold the securities in 1935 the taxpayer could have used $ 134,464.01 to discharge his obligation and would have had the excess of $ 41,018.85. And it is clear, as a matter of law, that his creditor who received the taxpayer's promise to pay at a time prior to the changing of the gold content of the dollar would have been required to accept in discharge of the obligation $ 134,464.01 of the so-called "new money", although the obligation represented what the plaintiff calls "cost money".(Ibid., p. 410.)

These are most trenchant remarks, which require no comment. The question arises whether this example does not by itself invalidate the arguments advanced here by the appellant. We only have to substitute "the appellant" for "Bates", "I.L. 800.-" for "134,464.01 dollars" and to add the further hypothetical assumption that the value of the Israel pound decreased between the years 1950 and 1952 by fifty per cent and that the value of the mortgaged property thus increased in the same proportion, in order to arrive at the conclusion that the appellant, who - according to our hypothetical example - borrowed the I.L. 800.- in 1950 from somebody else, has made a "net" profit of I.L. 400.- And if, for the purposes of the capital profits tax laws in force in America, Bates' 40,000 dollars were regarded as profits chargeable with tax, why should not the appellant's I.L. 400.- be regarded as "interest" within the meaning of our interest laws?

This question was put by us, during the proceedings, to counsel for the appellant, and his reply was: It should not. If the appellant had borrowed the amount of the loan from somebody else and had not yet repaid it, the amount in dispute would quite possibly be regarded as interest. But as it was, she did not borrow money from anyone, but expended the amount out of her own pocket. which means that no profit has accrued to her from the "increase" of the amount of the mortgage.

This answer is not satisfactory at all. It is impossible to make the decision dependent on whether the mortgagee lent his own money or money he had previously borrowed from another person. Supposing a man who on the day the loan was given had both money of his own and money he had borrowed that day from another person - will the court in such a case start investigating whether the money given on loan was of the first or of the second "kind", and will the outcome of the case depend on this ? Certainly not.

However, there is another answer to the above question, an answer which counsel for the appellant has himself touched upon, in a different context, while presenting his arguments before us. That answer is : interest is not the same thing as profit, and the fact that a certain sum is regarded as profit for purposes of tax, does not force us to invest it with the character of interest (the reverse is true: where there is no profit, there is no interest). When the State imposes taxes on the profit or income of its citizens, it cannot ignore, or more exactly, it cannot completely ignore, the nominalistic concept of currency, that is to say : it cannot disregard the concept (which is artificial, of course, from a factual point of view) that a dollar is always a dollar and a pound always a pound, in spite of the fall they have undergone on the international money market or on the domestic commodity market. For if it did, the entire tax system of the State would collapse, and the government budget with it - see Nussbaum loc cit., end of the first paragraph - and in time of inflation, for instance, there would be hardly any taxable profits, for the bulk of the profits would be ascribed to the depreciation of the national currency. Depreciation of the currency is a national calamity, through which everybody suffers, including, of course, the taxpayer who, for instance, in this country, pays land betterment tax on the nominal increase of the value of the property.

However, the line of thought will be a different one, and the test will be quite another, if we examine profit from the point of view of the interest character attributable to it. Here we have to ask ourselves what the lender intended: to obtain something in addition to what he had or merely to preserve what he had. As to this question - the question what it is that the lender had - we do not necessarily have to use the artificial standard of the nominalistic principle, but may also take into account the diminution which has occurred in the actual, real value of the currency. The real value of I.L. 800.- which the appellant lent the respondents was at that time 800: 4500 (eight hundred four-thousand-five-hundredths) of the value of the mortgaged property. And the only purpose of clause 9 was to keep the value of her money at the same ratio. She could have achieved this also in a different manner: by investing the amount of the loan in the purchase of a part of the property in question or some other property, from the respondents themselves or from somebody else, and if she adopted the course she did, this does not testify to a desire on her part to enrich herself by usurious prohibited interest.

9. That the matter of usury depends on the intention of the parties is a principle expressly accepted by American jurisprudence, as appears from the following judgments quoted in the American Digest:

"Usury is mainly a question of intent." (Gale v. Grannis (7).)

"A usurious agreement cannot be implied against theintent of the parties, as there must be a corrupt intent to take more than lawful interest to constitute usury.” (Bade v. Kierst (10).)

"Usury is a question of intention, to be made out by proof of facts, and not an inference of law, to be drawn from the inequality of the currency loaned and that stipulated to be repaid for it." (Hamilton v. Moore (11).)

There are it is true certain judgments which somewhat minimize the importance of intention, but the overwhelming majority strictly adhere to the intention theory. Additional support for it may be found in a much more recent American judgment, the well known judgment given in 1929 in In Re Mansfield Steel Corp. (12).

I am not insisting that we, too, in this country, should go mainly by the intention, but the idea expressed in this matter in American jurisprudence may itself give us a certain orientation in groping our way through the dark maze of interest and usury. Let us not forget that the States of the U.S.A. make up an overwhelming majority of the states in the world which have a legal rate of interest - in the whole of Europe, if I am not mistaken, there are only two or three such states - and that they may be presumed to have knowledge, experience and understanding of life's necessities in this legal field. Now if intention is the main consideration, or even only one of the main considerations, the matter is not so simple, and the general character of the transaction must be very carefully considered.

10. The richest experience in matters relating to interest can be found in the sources of Jewish law. This is one of the most interesting and most developed branches in the whole of Jewish law. On the one hand, there is a strict and fundamental prohibition of anything that smacks of interest, a deep detestation - the heritage of generations - of the type and trade of the moneylender (moneylenders are men who "deny the fundamentals" of Judaism, they "make a mockery of the Law and a fool of Moses", and they are mentioned in the same breath as pig-breeders-Palestinian Talmud, Baba Metzia, end of the chapter concerning usury; Berakhot 55a, and elsewhere). On the other hand, people felt the necessity of taking into account the demands of everyday life, the need for a certain amount of relaxation, since the economic necessity of credit cannot be altogether dispensed with. And lastly, or as a result of these two, the need to lay down legal concepts, patterns and forms, so as to determine exactly the borderline between the lawful and the unlawful. If we add to this the fact that during and after the Middle Ages the lending of money was a special trade which, as is generally known, several historical factors compelled the Jew (and particularly the Jew) to engage in, then we shall not be at all surprised at the thorough work done in this legal field by scholars of earlier and later ages. Interesting problems arose, interesting ideas and rules came to the fore, and although Jewish law does not bind our courts in these matters, a study of this law may broaden our outlook and help us to see matters in their true perspective.

11. Interest was defined with admirable conciseness and accuracy by Rav Nahman, a Babylonian scholar who lived at the end of the Third and beginning of the Fourth Century of the Common Era: -

"The principle of interest is that a payment in consideration of waiting is prohibited." (Baba Metzia, 63b)

Interest is a "payment for waiting", that is to say: the sum paid to the lender for waiting for the repayment of the money which is temporarily in the possession of the borrower. Any payment due to the lender for anything else, for any other service, and any monetary transaction not constituting repayment of the money lent is not interest within the meaning of the above definition. Hence some monetary transactions were permitted, their lawfulness being based on the idea that the profit receivable by the person providing the money is, as to its legal form, a profit on a sale, or the enjoyment of the proceeds of something disposed of which had belonged to that person, or the like (see the passage concerning the sale of a field, Baba Metzia, 65b-66b; Tosefoth, Baba Metzia, 64b, the passage beginning with the word "v'lo"; Maimonides, 6th Chapter of the Rules Concerning Borrower and Lender, Rule 6; ibid., Rule 8, etc.). A "payment for waiting" is forbidden only if it goes direct from the borrower to the lender, but not if it is given to the lender by a third person. The lender is therefore permitted to accept from the borrower, at a discount, bills which the borrower has received from another. From the strictly legal point of view this is considered as a purchase of bills, and not a loan of money, although when looked at from the economic point of view there is no difference here between them: -

"There are things which are like interest, but which are permitted. A person may buy the bills of another person without scruples, and a person may give another person a denarius in order that he may lend somebody a hundred denarii, for the Torah forbids only such interest as goes from the borrower to the lender."

(Maimonides, fifth chapter of the Rules Concerning Borrower and Lender, rule 14. Source: Baba Metzia, 69b, Palestinian Talmud, Baba Metzia, the chapter concerning usury, and Tosefta, Baba Metzia, chapter 4; but compare Maggid Mishne le-ha-Rambam, ibid., and Tur Shulhan Aruh, Yore Dea, 160(7), which makes several reservations with regard to the above rules).

These and similar rules helped to keep the Biblical prohibition of interest within reasonable bounds and to prevent it from becoming a curse rather than a blessing, a disturbing rather than a regulating factor, in the progressing economic life of successive generations.

12. But this was not enough to overcome one great difficulty attending precisely the ordinary loan - the actual monetary loan. I refer to the fluctuations in the value of the currency, such as were experienced even in those early days. We know this because the prohibition of interest in Jewish law applies not only to interest fixed in advance (ribbit ketzutza) but also to the interests not so fixed (avak ribbit), which latter is forbidden not by the Bible, but by the Rabbinical authorities (Baba Metzia, 61b). In fact, any profit actually and directly accruing to the lender from the borrower, in connection with and in consideration of the loan, is interest and forbidden even if at the time the loan was given it was not yet certain that this profit would accrue.

The question was raised whether it was permissible to borrow "a denarius for a denarius" or whether it was to be feared that the denarii might have increased in value by the date of repayment, so that the lender would receive more than he had lent, which would be interest. And if the denarii in fact increased in value between the date of a loan and the date of repayment, was the lender entitled to claim the whole of the number of denarii he had lent, or did he have to deduct the number of coins proportionate to the increase in value?

The answer given by the Talmudical authorities is most original and worthy of note: everything depends on the nature of the denarius concerned. There is a denarius which is mere coin ("tab'a"), that is to say, a legal, official means of payment with which all commodities can be bought and which is not susceptible of an increase (or decrease) in value, because its apparent rise in value is spurious, a mere reflex of a fall in the price of commodities ("perot") brought about by other causes; it follows that the prohibition of interest does not apply to it when it is given on loan on a denarius-for-denarius basis. But there is a denarius which is not mere coin which buys, but a commodity which is bought or bartered, and if its value increases or is likely to increase, then this is an actual increase in value, which must be taken into account in the matter of the prohibition of interest. It was decided that a silver denarius was mere coin - being generally current more than any other coin - and that, therefore, it was permitted to lend it even on a denarius-for-denarius basis, and it is not apprehended that any interest might be involved. But a gold denarius is, according to most of the authorities, a commodity, and therefore it is prohibited to lend it for fear that its value might subsequently increase and the lender thus receive interest: for the lending of commodities on a measure-for-measure basis is forbidden in principle in Jewish law as "interest not fixed in advance" (Baba Metzia, first item on the chapter concerning gold, 44b-45a).

"For a silver denarius is coin in every respect, and not susceptible to an increase or decrease in value .. .therefore one cannot say that a silver denarius has anything at all to do with interest, and so it is permitted. As for the gold denarius, however, since it is, in contrast to silver, like commodities and movables, it is subject to a rise or fall in value. Thus, a gold denarius may be worth ten silver denarii at the date of the loan, and ten and a half denarii at the date of repayment. There is thus an element of interest in it" (Nimmukei Yosef Commentary to Rif Izhak Alfasi, ibid.).

"It is forbidden to borrow on a 'measure-for-measure' basis, and a corresponding prohibition applies to everything else except coin... a gold denarius is to be treated as a commodity, it being forbidden to borrow a gold denarius for a gold denarius, for fear that one that is worth twenty-four silver denarii at the date of the loan may be worth twenty-five at the time of repayment; but it is permitted to borrow a silver denarius for a silver denarius, and so to borrow all other coins, that is, if they are current coin..." (Tur Shulhan Aruh, Yore Dea, 162(1). For the interpretation of the words "all other coin" see Beit Yosef, ibid., and the Responsa of R. Yom Tov Tzahalon, 33.)

Concerning the intrinsic, qualitative difference between coin and commodities - we find in one of the early authors: -

"For in each of the different kinds of things in the world you find differences in value arising from the nature of the things themselves - their taste or smell or appearance - .. .except in the case of coin, the usefulness of which lies entirely in its monetary function, its purchasing power, and if so, what does its rise or fall, its thickness or thinness, matter?" (R. Avraham Ben David, quoted in "Shitta Mekubbetzet", Baba Metzia, at the beginning of the chapter concerning usury.)

These remarks, written in the thirteenth century, surprise by the modernity of the conception reflected in them; they contain, in a single sentence, the theory of "money as a medium of exchange", which was to gain wide currency in the technical literature of the twentieth century (see Nussbaum, ibid., p. 11, notes 43 and 44). Their meaning is as follows: currency is a means of purchase, the value of which is imparted to it from without, by the laws of the State to fix its value or purchasing power, while commodities carry their value within themselves, as a result of the enjoyment derived from their natural use.

The distinction between coin and commodities runs like a golden thread through the whole of rabbinical literature concerned with the lending of money, and is a main consideration in deciding the various questions connected with the law of interest. The idea remained unchanged, or almost unchanged, but its practical application underwent considerable changes, due to the shifting of the boundary-line between "mere coin" and commodities, as we shall see later. Every change in the value of the currency by order of a ruler, and every reduction of its content or weight for purposes of taxation or as a result of war, rebellion and the like, immediately brought with it a spate of inquiries to leading scholars as to how to deal with the debt when occasion arose, and according to which value, the old or the new, it was to be paid on maturity. There was in these cases not only a clash of interests between the lender and the borrower, but also an inner conflict in the lender himself if he was an honest man. For interest is forbidden by Jewish law both to the borrower and to the lender (Baba Metzia 75b, 6la and all the authorities). It is forbidden not only to take interest, but also to give it. The borrower thus found himself between Scylla and Charybdis, and his choice was a very delicate one: if he gave more than what was due, he infringed the prohibition of interest, and if he gave less, he brought himself under the prohibition of larceny. ("Let the teacher of righteousness teach him what the mode of payment should be, so that it may not involve either interest or larceny", Responsa Darhei Noam, Yore Dea, 24). This, too, is one of the reasons for the large number of questions asked with regard to this legal issue.

An apt description of the situation, both as regards the law and the factual background, is contained in one of the responsa of the Rivash, who taught in Spain and Algiers at the end of the fourteenth and the beginning of the fifteenth century.

"Reuven owes Levi seven thousand - secured by a mortgage on certain lands - on two promissory notes made out in the old currency, when King Don Enrique introduced a new currency, which was not worth one quarter of the earlier currency. He did so because otherwise he would not have been able to pay his troops. He ordered that this currency be accepted throughout his kingdom like the earlier currency. But years later when his rule had become established and he saw that this currency (i.e. the new one) had caused great damage and loss throughout his kingdom and that commodities had become much dearer owing to this currency, he declared it invalid."

The story goes on to tell how Reuven, who "had access to the king's court and perceived the king's desire and intention to declare that currency invalid", deposited with a trustee of the (rabbinical) court six thousand in the bad currency "in order that it might be given to Levi if he surrendered the notes". The sages of Seville decided that this payment was a good payment. Levi disputed this decision, and the matter was brought before the Rivash for final determination. Here is his decision: -

"Decision: A valid award of the Court of the Holy Community of Seville (may the Lord preserve it) is final, and far be it from me to doubt and question its rulings ...because 'the law of the State binds Jews living in it.' The king ordered expressly that every person must accept the new, debased currency at the rate of the previous one, and that debts could be paid in it; we have here an instance of the principle that the law of the State is the law binding on Jews living in it. It is not a case of extortion on the part of the king, because the matter of the currency is one of royal prerogative. The king has the right by virtue of his being king, to deal with the currency at his pleasure and to fix a specific value for it. He may raise and lower its value at his pleasure. And if sometimes, as need arises - just as he imposes taxes in order to lodge and pay his army - he greatly depreciates the currency, who can call him to account for it? ..." (Responsa of the Rivash, 197.)

Of course, in the decision of the Rivash the question of interest did not arise, because the lender in question, Levi, received new, debased currency instead of the old, good currency which he had lent Reuven. The question there was whether Reuven was not robbing his creditor by depositing the debased currency, and the answer was no, on the ground that "the law of the State binds Jews living in it" - i.e. the law of King Enrique, which recognised what is known today as the "nominalistic principle" in matters of currency, was the law which bound the parties to the transaction. But what would have been the law if the injured party had not been the lender Levi, but the borrower Reuven? Let us picture the following: the same Reuven borrowed the seven thousand from Levi in the period of the debased currency, and before the time of payment came - and for exactly the same economic reasons as were indicated by the Rivash - i.e. because "commodities had become much dearer owing to that currency" - the same King Enrique invalidated that currency and replaced it by a new currency, worth more than the old, and decreed that all borrowers in the State must pay in the new, good currency. Would, in this case, the rule of the State, which is the "nominalistic principle", have overridden the prohibition of interest, just as in the case of the Rivash it superseded the prohibition of larceny? The rule known to us that coin may be borrowed for coin (except gold coin and the like) would not have provided a simple solution to the problem, for here, ex hypothesi, we have to do, not with an imaginary or "reflected" increase of the value of an existing currency, but with the replacement of an existing currency by a new one, for the definite purpose of "bringing down the prices of commodities", as aforesaid, and this new currency, of course, involved an actual addition of value in comparison with the previous currency.

The above question was thus not before the Rivash but, as we know, the words of the Torah are sparing in one place and plentiful in another, and so we find an answer in the decision of other authorities. A great many responsa have been written concerning the relation between an increase in the value of the currency and interest; the very names of the coins mentioned in them - doros, cordanos, mejidis, venetsianus, perahim, groshosh, hatikhot, levanim, reichsthaler, zehuvim, zolotash and the like - testify to the width of the field covered, both in space and time, and it is easy to understand that no uniformity of language and content can be expected in all the authors concerned. Nevertheless, in spite of the great variety of the opinions expressed, when reviewing the decisions given on this question - namely whether an increase in the value of the currency (otherwise than through an increase in weight) prevents the lender, by reason of the prohibition of interest, from receiving from the borrower the whole of the quantity of coins he lent him - three main groups emerge before us.

13. The first group holds that a law of the State, which in this instance is the "nominalistic principle", is binding and when it puts an end to the inequality between the different values of all kinds of coin, it automatically clears that transaction of the stigma of interest. Thus and only thus - I think - must the use of that rule be here conceived, for otherwise it will not be understandable (and this objection has in fact been raised in the sources) how the law of the State can permit what is otherwise prohibited.

"...and all the more: how are debts to be paid where

it is a question of the law of the State? It is clear that the law of the State is the law that binds and that there is no question of interest in this case" (Responsa Sh'vut Yaakov,II, Choshen Mishpat 175).

"...If the king decrees that every lender be repaid in the other coin, then some say that the principle of the law of the State is the binding law, then the transaction is clearly permitted ...and that there is neither larceny nor interest involved..." (Beit Yosef, to Tur there Dea, 165,in the name of the authorities).

"As for your question concerning the change of the currency in our country, in relation to the payment of debts, I am surprised at that question, for it is agreed that the law of the State is the law that binds" (Responsa Chatam Sofer, part "Choshen Mishpat", 58).

Another group likewise permits the acceptance of coin increased in value, though not with reference to the law of the State, but for specific talmudic reasons derived from the law of interest itself, or for no special reason at all, from a desire to make things easier, in deference to common practice, or the like

"...If it has been expressly stipulated that the same coin as has been lent shall be repaid, then the same coin must be repaid even if it has increased in value by more than one fifth and even if commodities have become cheaper in consequence, and this will not involve the payment of interest." (Sh'vut Yaakov, loc. cit., in another part of the responsum.)

"In our opinion, all coins forever have a fixed value, and it is therefore permitted to borrow all of them on a Iike-for-like basis (gold for gold and copper for copper); although a change may have taken place and the value may have risen or fallen, one will pay back the same coin as one has borrowed; and as no interest is involved, one has to pay back the same coin." (Chazon Ish, Choshen Mishpat, 16(9).)

There are many more decisions permitting the borrowing of a coin for a coin not only in the case of the silver denarius - which is an actual coin - and permitting the lender to get back all the coins he has lent even if their value has increased between the date of the loan and the date of repayment. A long list of such decisions will be found in the Responsa Chikrei Lev, part "Choshen Mishpat", 154.

On the other hand, there is another group, representing a minority opinion, which prohibits the lending of a coin for a coin and the receipt of coin increased in value (i.e. of the same quantity of it), because "the Gemara does not permit a coin for a coin unless no profit at all accrues to the lender."

14. For the sake of accuracy and completeness, I would mention here the well-known fact that at the beginning of the seventeenth century and later a number of dispensations (haskamot) were granted by Jewish communities with a view to reaching, in the event of an increase or decrease in the value of the currency, a compromise between the lender and the borrower by splitting the difference or "loss" between them in equal shares; but the object of these dispensations was to divide in an equitable manner the loss caused by law to one of the parties, and not to alter or abrogate the prohibition of interest. The concern was to avoid the "larceny", not the interest, for the frequent changes in the value of weight of the coin brought disorder into the economic life of the masses and also endangered the internal peace of the community.

In 1691, the Governor of Egypt "declared invalid the clipped and debased mejidis and introduced new mejidis, which were good both as to the silver and the weight", and an immediate consequence of this measure was utter confusion among Egyptian Jewry .. .Such were the dangers that threatened the life of the communities. It was to obviate them that in several countries (but apparently not in Egypt) the above-mentioned dispensation and permits were issued. They did not change the law of interest itself; the half-of-the-difference paid to the lender in the case of an increase in the value of the currency was permitted by law and did not give rise to scruples with regard to interest, for the reasons set out above.

15. We have come to the end of our survey of Jewish law. Let us now see to what conclusion it leads with regard to the question before us. It seems to me that an exact analysis of the principles disclosed will show that clause 9 of the mortgage deed, the value clause, would not in Jewish law have been regarded as a stipulation for interest. To make this clear, we have to translate the case into Jewish legal language. What did the appellant do? She wished to insure herself against depreciation of the Israel currency, a process which would entail a proportionate rise in the prices of all commodities in the State. This means: she ensured to herself the right to receive, at the time of repayment, the same quantity of commodities as she would have been able to buy with her money at the time the loan was given. Her actual wealth - in commodities - would not thereby increase; what would increase was only the number of coins she was to receive, and such an increase, despite the "law-of-the-State" rule of the "nominalistic principle", is not in Jewish law regarded as interest, although, but for that stipulation, the debt due to her could have been redeemed with a lesser number of coins. We have seen that the law-of-the-State rule, with the nominalistic principle arising from it, may level out, in legal respect, the difference between the two values and thereby -- in the case of an increase in value - neutralize the prohibition of interest. But it is not realistic at all - and we have not found any hint to this effect in the sources - that by reason of this principle the depreciated currency should be regarded as actually equivalent to the previous currency, and that because of this fiction any purely quantitative addition to the number of coins originally given to the borrower should be regarded as prohibited interest. We have seen that principle at work as a "neutralizer" of interest, but we have not found it in the role of a "catalyst" of interest. In all the talmudical and rabbinical discussions concerning the rise and fall of the value of the currency, a great deal of attention is given to the question whether this rise and fall of the value is inherent in the currency, so that the latter, when increasing in value, produces the cheapening and multiplication of the commodities, or whether the increase and decrease is inherent in the commodities, that is to say, is due to some economic cause extraneous to the imaginary increase of the value of the currency, so that no benefit accrues to the lender by a mere increase of that value. It follows that the correct test of interest in Jewish law is whether or not the lender is actually enriched - in commodities - by the added quantity of coins. There may be actual enrichment without the transaction being forbidden as involving interest - for various legal reasons peculiar to the law concerning interest - but there cannot be the opposite, namely that the transaction is forbidden as involving interest without the lender being enriched.

Conclusive proof of this may be found, on careful study, in the aforementioned dispensations granted by the said communities. Under these dispensations, the difference in value was to be divided between the lender and the borrower, both in the event of a rise of the value of the coin lent and in the event of decrease thereof. If the groshosh, e.g., at the time of the grant of the loan stood at 120 levanim, and at the time of repayment had dropped to 100, the borrower had to pay the lender 110 levanim, i.e. one depreciated grush plus 10 levanim. These dispensations were accepted and followed even by those authorities who recognised in principle the "principle of the law-of-the State is binding", according to which the borrower may by right repay the debt in depreciated currency without adding anything. This shows clearly that the half-of-the-difference paid to the lender by virtue of the permit, i.e. the 10 additional levanim which the lender receives besides the grush repaid to him, is not prohibited interest according to Jewish law. For those dispensations, as I have already observed, were designed merely for an equitable distribution of the loss and were not intended to change - nor, perhaps, capable of changing - the law of interest itself. Now what is the reason for permitting the addition? Here - in contrast to the opposite case of the increase in value of the currency - the reason is that the addition does not enrich the lender in comparison with his position at the time the loan was granted. And this is the law with regard to the case before us.

16. To sum up, we have seen that English jurisprudence does not regard as interest the additional amount paid in respect of a risk to the principal of the loan; we have seen from American jurisprudence that the intention of the parties is the main thing and that, to constitute usury (prohibited interest), there must be a corrupt intent to get more than the legal interest (it may be assumed that in the transaction entered into by the present appellant there was no "corrupt intent"); lastly. we have seen that even Jewish law, which is very strict with regard to interest and which deals with the problem of interest more strictly than any legal system at any time and in any country, finds no fault with the stipulation of a value clause. In view of all this, it is unlikely that the Ottoman legislator would have wished to go farther than all the others, and I therefore think that the condition laid down in clause 9 of the mortgage deed does not constitute a stipulation for interest prohibited by the laws of this country.

17. One brief concluding remark. We have not been asked here to express our opinion as to the economic aspect of the problem: whether or not the linking of loans to value clauses is economically desirable. Let others decide this. But at the same time, we should not blind ourselves to reality. The linking of loans - especially long-term ones - to value clauses is of everyday occurrence, both in the private and in the cooperative sector, and nobody seems to object. This is one of those cases where people should be allowed to make their economic arrangements without interference; certainly this matter does not come under the heading of prohibited interest.

In my opinion the appeal should be allowed and the declaration issued by the District Court set aside.

GOITEIN J. I concur.

BERINSON J. I concur.

Appeal allowed.

Judgment given on April 4, 1955.

1 ) See In re Mirams (1891) 1 Q.B. 595.

Full opinion:

Rosenbaum v. Zeger.pdf

New Zealand Insurance Company v. Yuval

Case/docket number:

C.A. 118/51

Date Decided:

Thursday, June 4, 1953

Decision Type:

Appellate

Topics:

Relevance of foreign law in judicial decisions

Insurance

International Law

Abstract:

The plaintiff, a Haifa merchant, insured with the defendant, a company having its head office apparently in New Zealand and a branch in London, a consignment of 100 watches despatched to him from Paris. The policy, made in Haifa and mentioning the London branch, was in English and contained a "lost-or-not-lost" clause. In fact the watches had been sent from Paris twenty days before the issue of the policy, but this fact was not disclosed to the underwriters. The consignment was stolen while in transit in France, and only seven watches were recovered. It was impossible to determine whether the theft had been committed before or after the date of the policy. The District Court gave judgment against the defendants for the value of 93 watches, holding that the information relating to the prior despatch of the watches had not been withheld by fraud on the plaintiff's part, and that there was no duty on him to volunteer it.

Held, allowing an appeal and remitting the case to the District Court for further consideration:

1. The question what was the law applicable to the contract, being one of conflict of laws to which no local law extended or applied, must be determined in accordance with the English common law by virtue of Article 46 of the Palestine Order in Council, 1922.1)

2. Quaere, whether the English law rule is that in the absence of an agreement to the contrary a contract of marine insurance is governed by the law of the place where the underwriter carries on his business.

Spurrier v. G.F. La Cloche 1902 A.C. 446 and

Greer v. Poole (1879) 5 Q.B.D. 272 considered.

3. There was no evidence before the court to prove either what was the country in which the underwriter carried on business or, assuming it to be England, what the provisions of the English law were. As distinct from a case in which English common law is applicable under Article 46, it is necessary to prove such law by expert evidence when it is to be applied as a foreign law.

4. In the absence of evidence, it must be presumed that the law of the defendant's place of business is identical with the local law.

5. A question of marine insurance is comprehensively answered by the Ottoman Maritime Code, 1863, and there is no occasion to turn to English law under Article 46. On the contrary, the Code must be interpreted in the light of the French law from which it was derived.

6. By Article 193 of the Ottoman Mercantile Code 1) a contract of insurance will be cancelled in the event of the non-disclosure of a fact which, had it been known to him, would have prevented any ordinary, reasonable underwriter from consenting to the conditions included in the policy.

Accordingly:

(a) The question does not depend upon whether the assured knew or did not know of the loss of the watches, or whether he acted fraudulently or not.

(b) The "lost-or-not-lost" clause proved that the mere fact that the watches had already been despatched at the date of policy could not have affected the underwriters' estimate of the risk insured.

(c) The question whether the non-disclosure of the fact that the watches were already in transit for twenty days at the time when the insurance was applied for affected the validity of the contract depended upon whether that period was so long in reference to the circumstances that an ordinary, reasonable underwriter would regard it as increasing the risk he had underwritten. That question should be answered by the District Court.

Case remitted accordingly.

Voting Justices:

Silberg, Moshe

Primary Author

majority opinion

Assaf, SImha

majority opinion

Landau, Moshe

majority opinion

Full text of the opinion:

C.A. 118/51

NEW ZEALAND INSURANCE CO. LTD. AND ANOTHER

IZHAK YOUVAL (SALZMAN)

In the Supreme Court sitting as a Court of Civil Appeal.

[June 4, 1953]

Before: Silberg J., Assaf J., and Landau J.

Conflict of Laws - Palestine Order in Council, 1922, Article 46 - English law to be applied - English law, when applied as foreign law and not by virtue of Article 46, to be proved by experts - Principle of identity of laws - Contract of marine insurance - Ottoman Maritime Code, 1863, s. 193.

Held, allowing an appeal and remitting the case to the District Court for further consideration:

Spurrier v. G.F. La Cloche 1902 A.C. 446 and

Greer v. Poole (1879) 5 Q.B.D. 272 considered.

4. In the absence of evidence, it must be presumed that the law of the defendant's place of business is identical with the local law.

Accordingly:

(a) The question does not depend upon whether the assured knew or did not know of the loss of the watches, or whether he acted fraudulently or not.

(b) The "lost-or-not-lost" clause proved that the mere fact that the watches had already been despatched at the date of policy could not have affected the underwriters' estimate of the risk insured.

Case remitted accordingly.

Palestine cases referred to :

(1) C.A. 123/41 - Gustav Weil v. Barclays Bank (D.C. & O.), Haifa Branch; (1941) 2 S.C.J. 354.

(2) C.A. 259/41 - Leopold Baef v. The Palestine Building Syndicate, Ltd.; (1942) 1 S.C.J. 82.

(3) C.A. 73/43 - L. v. L; (1943) 1 A.L.C. 245.

Israel cases referred to:

(4) C.A. 37/48 - Bank Hapoalim Ltd. v. Ya'acov Kravtsov; (1948/9) 1 P. 44.

(5) C.A. 130/50 - Amal Ltd. v. Yehoshua Shindler; (1952) 6 P.D. 710.

(6) C.A. 37/49 - Gila Cohen Rapoport v. Sara Paldwrowski; (1950) 4 P.D. 645.

(7) C.A. 51/49 - Yosef Yazdi and Others v. Rivka Yazdi; (1950) 4 P.D. 762.

(8) C.A. 167/47 - Binyamin Minkowitz v Zalnan Fishtsner & Others; (1948/49) 1 P. 49.

(9) C.A. 65/49 - Moshe Freisler v Fritz Weiss; (1951) 5 P.D. 878.

English cases referred to :

(10) Spurrier and Another v. G.F. La Cloche; (1902) A.C. 446.

(11) Greer v. Poole and Others; (1880) 5 Q.B.D. 272.

Solomon for the appellant.

Meridor for the respondent.

SILBERG J. This appeal concerns marine insurance and the question that has been raised before us is :what is the position in law of an assured who keeps silent and does not disclose to the insurance company that the goods have already been sent from the place of despatch, that they have been lost en route, and that it is not known whether such loss occurred before the contract was made or thereafter. The difficulties of this case are increased by the fact that the policy contained the well known "lost-or-not-lost" clause and that it did not restrict the insurance to future risks only.

2. The material facts are set out below, and particular importance must be attached to the relevant dates :

(a) In 1947 the plaintiff Mr. Izhak Youval (Salzman), began business as an importer of watches. His method of operation was to send gold ingots to Prance for the purpose of being worked and mounted, and filled by the Lanco Company into watches which be later re-imported into Palestine as finished goods. One of these orders was carried out in the middle of March, 1947. It concerned some 250-300 watches which were to be sent from France to Haifa in small batches. At the same time the plaintiff informed the Lanco Company that he had opened a bankers' credit in its favour in connection with this order. Several months passed and after a great deal of correspondence the company at last telegraphed to the plaintiff on June 20, 1947, that it was about to send him 100 watches and requested him to have them insured. And indeed after seven days - that is on June 27th, 1947 - the watches were despatched from a Post Office in Paris. The company then wrote to the plaintiff to that effect in a letter which had left Paris on July 5th and which reached the plaintiff between the 10th and 12th but not later than the 15th of the same month. On receipt of the letter the plaintiff transferred by telegram to the Lanco Company the cost-price of the watches in accordance with the bill which was attached to the letter. On the 16th of July, Mr. Israel Salzman - the son of the plaintiff and the manager of his business - went to the office of Hamisrad Hameouhad Leahrayout Ltd., the agents of the appellant, the New Zealand Insurance Co. Ltd. There he spoke to Mr. Frankel, the clerk in charge and requested him to insure 100 gold watches against loss and damage for up to 800 Palestine Pounds from the Post Office in Paris to Rehov Herzl, Haifa. Frankel agreed, Salzman paid the premium and the next day, that is on July 17, 1947, an insurance policy on behalf of the New Zealand Insurance Company was issued as requested and delivered to the plaintiff. At the time when Salzman requested the insurance to be effected he did not inform Frankel that the watches had already been sent from Paris; on the other hand he was not asked by Frankel whether the watches had already been sent or not. I shall deal with this point further in the course of this judgment.

(b) Several months passed but the goods failed to reach their destination. The plaintiff inquired as to the meaning of this. The company tried to put him at his ease and investigations were made in France until finally - in February 1948 - it appeared that the watches had been stolen on the way and had disappeared, and that only seven of them had been recovered in Marseilles. From a letter which the plaintiff received towards the end of 1949 from the French Railways we learn that the person who stole the watches was found and arrested on or about July 26, 1947 but - as the Company adds regretfully - "the thief did not indicate the exact date on which the theft was committed."

(c) The plaintiff applied to the agents of the Insurance Company and asked to be indemnified in respect of the damage (which according to the policy was payable in Haifa). The agents refused, their only ground being :

"There is no evidence that the goods which were insured were still in existence when you requested the insurance to be made. It is obvious that a contract of insurance can be made only in respect of existing goods and not on goods that are non-existent. Consequently we have to reject the claim."

Because of this refusal the plaintiff lodged a claim before the District Court, Haifa, against the New Zealand Insurance Co. Ltd. and (alternatively) against the Hamisrad Hameouhad Leahrayout Ltd., and asked for judgment against them in respect of the damage in the sum of L.P. 8.- for each of the 93 watches that had been stolen and not recovered or the sum of L.P. 744.-in all, together with interest and costs. In paragraph 5 of the statement of claim the plaintiff writes :

"5. The loss of the said 93 watches took place subsequent to July 17, 1947. Alternatively, the plaintiff claims that even if it should appear that the said watches were lost between June 27, 1947, and July 17, 1947, the first defendant is liable for the damage."

The defendants' main defence, as set out in paragraphs 5 and 6 of their statement of defence, was as follows:-

"5. The date of validity of the said policy was from July 17, 1947, in respect of the said goods provided that the said goods were at that time in transit through the post from France to 44, Rehov Herzl, Haifa.

6. According to the plaintiff, the goods were sent by post from France on June 27, 1947. The defendant was not liable for any loss to the goods during the period between June 27, 1947 and July 17, 1947. lf the goods were lost then their loss took place before the date of the policy and no liability lay on the defendant in respect of goods that were not in transit in the post before the policy came into force."

In addition to the above, the defendants added a vague and laconic plea in their statement of defence. Paragraph 7 reads as follows:

"7. The insurance policy does not cover the case in question.''

No explanation was given as to why or wherefore. To the simple reader this sentence is nothing but a mere abstract and a more concentrated resume of the pleadings set out in paragraphs 5 and 6 of the statement of defence which I have set out.

(d) From the letter of Hamisrad Hameouhad Leahrayout Ltd. rejecting the claim and from the statement of defence of the defendants, it is clear that, at the begining, the dispute centred on one small point. It was confined to the question whether the insurance company was or was not liable for loss which had taken place before the insurance policy was issued. But during the trial in the District Court and as a result of the evidence produced by each side, the area of dispute was widened considerably - with the consent it would seem of both parties - and the defence of the defendants began to be concentrated on another point. Put very shortly it was this : that because young Salzman, when effecting the insurance, was silent about the goods having already been sent from the place of despatch and did not disclose this fact to the insurers, the Company was not liable to pay for the damage even if the goods were lost after the issue of the policy. From the point of view of the trial this change of front was legitimate and I am not prepared to consider it per se as being fatal to the defence. (Compare Bank Hapoalim Ltd. v Ya'acov Kraftsov (4), Amal Ltd. v. Yehoshua Shindler (5), and there is no difference in this connection between a cause of action and a ground of defence). But the lateness of the plea is an indication of the fact that the defendants themselves did not attach much importance to Mr. Salzman's failure to disclose the date of despatch of the watches. And the learned judge would do well, when the case is remitted to him, in the light of the directions at the end of this judgment, to give this point due consideration and the necessary weight, taking into account all the other factors.

(e) The learned judge did not accept the pleas of the defendants and gave judgment against the New Zealand Insurance Co. for the amount claimed. He struck out the claim against the second defendants (Hamisrad Hameouhad Leahrayout) as it was entered alternatively - "only in the event of it appearing that the second defendant was authorised to act in the name of the first defendant in the said matter", (see paragraph 6 of the Statement of Claim) - and it appeared that the Company was in fact entitled to act in the name of the first defendant. The question which the learned judge put to himself in the fact instance was - did Mr. Salzman know on July 16, 1947, or did he not know that the goods were lost ? And he held that Mr. Salzman did not know of the loss of the goods. Salzman had not been asked by Frankel if the goods had been dispatched from Paris or not, and - in the opinion of the learned judge - Salzman was under no obligation on his own initiative to mention the date of despatch of the goods. The policy contained the clause 'lost or not lost' and the company was also liable for loss which had occurred before the contract was signed. It followed from these findings - and the learned judge gave judgment to that effect - that the company could not escape the liability it had undertaken towards the plaintiff. And it is against this judgment that the appellants are now appealing. Both parties are agreed that the insurance in question is marine insurance and has to be interpreted according to the general rules that apply to this particular branch of insurance.

3. Before I deal with the legal liability of the insurance company arising out of the policy I should like to mention a preliminary point which I regret to say was not sufficiently considered during the hearing. The question is : which law applies in order to discover where legal liability lies? The choice here is between the Ottoman Commercial Code - which was introduced locally by statute and which was based on the French Commercial Code - and the marine insurance rules of the English common law, or even perhaps - as we shall see further on - between these laws and both the common law and the statutory law of the foreign country to which the insurance company belongs. We listened to many ingenious arguments from counsel for the appellants, Mr. Solomon, but almost all of them were based on the well known rules of the English common law and only incidentally and en passant did he touch on some sections of the Ottoman Code. Mr. Meridor, on the other hand, was more cautious and more comprehensive but he too founded interesting arguments on the principles of the common law applicable in the English law of marine insurance. It seems to me with all respect, that both learned counsel have failed somewhat to give sufficient importance to the basic problem. They dealt with it - I would almost say - with reticence and this is a pity for without doubt they could easily have made a valuable contribution to the solution of this important question. In any case and whatever may be the result of this "reticence" of theirs, we are most grateful to both counsel for the wide range of their arguments, for they have thereby shown us interesting points of similarity and enabled us to examine and consider the differences - if any - of the various systems of law in their approach to the problem before us.

4. The question therefore is which law governs marine insurance in this case? And this question has two aspects.

(a) In view of the fact that there are clear provisions in the local Ottoman mercantile law - that is to say, the Commercial Code, on this very subject, may we apply the English common law rules respecting insurance?

(b) Considering that the contract in question is an insurance contract written in a foreign language, made with a foreign company whose place of domicile is in a foreign country (New Zealand or England) are we not bound in this case to apply the "national" law of the company, that is to say, the law in force in its "place of business"?

5. We shall first deal with the second question which is the more difficult of the two. For the answer to it can help us in solving the first problem. This is the question relating to private international law, and for its solution we must turn to the English Common Law. That is because on this subject there is no local law - apart from some rules in connection with personal status - and here Article 46 of the Palestine Order in Council automatically applies. Under this Article we are obliged in the absence of a local law, to apply the principles recognised by the English common law.

But when we come to examine the English legal literature which deals with this branch of the subject we come across a special - almost peculiar - rule regarding the law that applies to such policies of insurance. The most forceful expression of the rule is found in the well known book on Private International Law by Wolff, second edition, p. 486, where it is said :-

"Insurance contracts, except for contracts for re-insurance between companies, will in case of doubt be governed by the law of the insurer's place of business. The same is probably true of most other kinds of contracts that are concluded under typical conditions set up by great industrial, commercial, or railway companies, contracts 'where one will predominates, dictating its law not to single individuals but to an undetermined collectivity and leaving to those who want to enter into an engagement nothing more than unreservedly to accept the terms of the contract, to adhere to them' ...Such mass contracts, concluded under identical conditions ...can maintain their uniformity only if they are all governed by the same law, and there is a strong inference that this is the law of the place of the enterprise."

A statement of much wisdom and weight ! But I am very doubtful if it truly and correctly sets out the position as it is in English law. The quotation in the above statement is taken from the French book of Saleilles, "De la declaration de la Volonte", and it certainly cannot be considered as an authority binding on our courts.

Of greater weight is another authority which is cited by Wolff - that is the case of Spurrier v. G.F. La Cloche (10). But on examining the judgment itself we see that Wolff's opinion as it was expressed by him was not adopted by the English judges but that they made it subject to several qualifications which blunt its edge and deprive it of its potential sting.

For what were the facts in that case? A resident of Jersey (one of the Channel Islands belonging to Britain) insured his stamp collection against loss and fire with an English company. The policy was in English and not French which is the language of this English island - and it was signed in Jersey by the agents of the company. The policy contained a condition to the effect that all disputes between the company and the assured regarding liability to pay for any damage or the amount or extent involved had to be submitted to arbitration in accordance with the Arbitration Act 1889, or any other amending act and that a decision of the arbitrators was a condition precedent to any claim for damages being made against the company unless the company admitted liability to pay the amount claimed. This condition precedent is illegal according to the laws of Jersey - because it restricted the jurisdiction of the courts - but valid according to English law. The question arose whether this was an "English contract" which had to be interpreted according to English law or a "Jersey contract" which had to be interpreted according to Jersey law ? The answer was that the contract was English. And this is what Lord Lindley said in his speech in that case :-

"Their lordships are of opinion that, although this policy was made in Jersey, and any money payable under it would have to be paid to the assured in Jersey, the nature of the transaction, the language in which the policy is expressed, and the terms of the agreement and of the conditions, all show that the contract between the parties is an English contract and that wherever sued upon its interpretation and effect ought, as a matter of law, to be governed by English and not by Jersey law. The intention of the parties is too plain to be mistaken; the contract to pay out of the funds of the company is of itself very significant; and the reference to the English Arbitration Acts shews that the arbitration proceedings were to be conducted according to English law and no other." (Ibid., p. 450).

And the plaintiff's claim was dismissed in consequence.

We see here something which very often happens in English judgments because of the well known reluctance of English judges to create "dangerous" precedents. The decision was based not on one but on many facts, so that the ratio decidendi of the judgment is in effect the result of all the facts taken together. We do not know what their lordships would have decided if the policy had been drawn up in the language commonly used in Jersey nor if the policy had not mentioned the English statutes although the language of the policy was English. As an authority, therefore, this judgment is meagre indeed and it cannot support the aside and sweeping generalisation as expressed above by Wolff in his book. It should also be noticed that the question in that case concerned the validity of a condition specified expressly in the body of the policy whereas Wolff's opinion, if correct, would mean that in connection with the whole problem of liability ensuing from the contract, one would be obliged as a matter of course to apply the "national" law of the policy - and for this proposition this English case is certainly no authority.

6. A similar rule to that propounded by Wolff is found in Dicey's book where Wolff is quoted (in one of the notes) as authority for it and an English judgment given in 1880 is cited in further support. I refer to Dicey's Conflict of Laws, sixth edition, p. 674 :

"Rule 149 - A marine insurance policy issued by an underwriter carrying on business in England is governed by English law, except in so far as the policy stipulates that it be construed or applied in whole or in part according to the law of a foreign country."

As a comment on this rule it is said :

"This Rule is an application of the general principle that in the absence of an agreement to the contrary, a contract of marine insurance in governed by the law of the country in which the underwriter carries on his business."

Immediately after this it is added:

"This will, as a rule, also be the lex loci contractus and the lex loci solutionis."

It is said here "as a rule", that is to say, not always. This means that in the opinion of Dicey the rule will also apply in the case where the lex loci contractus is different from the law of the country where the underwriter carries on his business. But what is the authority for this? We do not have to search long for it because the author himself tells us whence it comes. He directs as to a judgment given in Greer v Poole (11), and (in comment 1) says, citing the words of Lush L.J. :

"It is no doubt competent to an underwriter on an English policy to stipulate, if he thinks fit, that such policy shall be construed and applied in whole or in part according to the law of any foreign state, as if it had been made in and by a subject of the foreign state, ...but, except when it is so stipulated, the policy must be construed according to our law, and without regard to the nationality of the vessel." (ibid. p. 674).

Again we are bound to be not a little disappointed when we examine the original judgment and inquire into the facts as they appear from the pleadings and the judgment itself. An English merchant insured with an English firm of underwriters certain goods which were on a French ship proceeding from Lagos to Marseilles. The ship whilst on the high seas was involved in a collision which caused it, but not its cargo, damage and was towed to Gibraltar for examination and repairs. The owner of the ship, for lack of funds mortgaged both ship and cargo with a certain money lender to obtain the money necessary. The ship was repaired and proceeded to Marseilles. The money lender claimed back the loan and the owner of the cargo - the English merchant above mentioned - had to pay from his own pocket some money to release the goods from the money lender. The question arose whether the English underwriters were liable to pay these costs. The problem was this - was the loss a 'loss by perils of the seas' and therefore also included in the insurance covered by the policy, or was it not such a loss and therefore not covered by that policy? This is a question of law which is dealt with by both French and English law - only the French answer is positive and the English - negative. The question therefore is which law applies in this case? And the answer of the English court was that English law applied - because as appears in our citation 'the policy must be construed according to our law without regard to the nationality of the vessel', and the underwriters were consequently not liable to pay for this damage.

Does this judgment support the sweeping statement that all English marine insurance policies even if effected abroad are to be interpreted according to English law? This does not seem to me to be the case. In all the facts mentioned in that case both by counsel for the parties and by the judge, there was not even the slightest hint that the insurance contract in question was made outside England. Had this been the case there would have been no doubt that counsel for the merchant-plaintiff would have pointed it out. Further the words which Lush J. used in parenthesis - "as if it had been made in a foreign state" - indicate that the policy was not effected in a foreign country. We are entitled therefore to presume that all the "factors" in that case were English: the merchant who was insured, the underwriters who effected the insurance, their place of business and the place where the contract was made - all except the ship, which had French nationality. The choice in that case therefore was not between the law of the place of business of the underwriters on the one hand, and the law of the place where the contract was made on the other, but between the law of the place where both the underwriters had their business and the contract was made, on the one hand, and the law of the country to which only the ship carrying the cargo belonged, on the other. Placed with this uneven choice there was no room for hesitation, and so the court ruled in favour of English law. In any case, one cannot take this judgment as authority - and perhaps Dicey himself did not mean - that an English policy will always be interpreted according to English law even if the contract of insurance was effected outside England.

6. But - and this is the last point which is decisive here - even if we were to adopt the method of Wolff and Dicey in solving this problem and be ready to accept all the consequences involved in it, we would still not be able to answer the question before us. This is simply because we do not know two facts - I repeat, two facts: (a) Where is the place of business of this company - is it in London or New Zealand? (b) What is the national law of the place of business of this company? Even if we were to suppose - and this would be highly arbitrary on our part - that as far as the assured in Palestine was concerned ''the place of the company's business" was its London branch, the name of which appeared at the bottom of the policy, we still do not know as a matter of law what is the law on marine insurance which is in force in England as well as what legislation on the subject has been enacted there at least since the year 1906. We have to be careful not to be confused by, and to avoid the mistake of relying purely on, outward similarities. If by following the rule proposed by .Wolff and Dicey, we have to ascertain the law which is in force in England on the subject, this will not be the English common law which, through article 46 of the Order in Council, has become our "own" local law, but the English law as a foreign law consisting of both common law as well as statutes. This law we have to apply by reason of the principles of Private International Law because of the "foreign quality" of the company in the same way as we would have had to apply American law, for example, had "the place of business" of the company been in New York. This English law as a "foreign law" and especially the statutory part of it, cannot be considered as "a notorious fact that requires no proof." Even though it is "English" it has to be proved like all foreign law by evidence of experts and not by reference to text books. For the content of a foreign law is a question of fact and not a question of law (See Weil v. Barclays Bank (1); Baer v. The Palestine Building Syndicate, (2); L. v. L., (3); and no judge may decide what the foreign law is from personal knowledge except on the most simple points where proof by experts is manifestly unnecessary (See Dicey, ibid. p. 868). The problem here is certainly not one that can be considered as simple as this. Possibly, as regards English law, the position was different on this point when Palestine was a British Mandated territory. But now that Israel is an independent State there is no justification for this difference. We therefore cannot apply in this case foreign marine insurance law unless this law has been proved before the court below and this has not been done. And because this law has not been proved and as a matter of law we do not know what it is - indeed we do not even know where to look for it, whether in New Zealand or England - we will have to fill the void by adopting the well known fiction of Private International Law which is known as the principle of "identity of laws". As is well known, according to this principle the court must presume - generally speaking - that the foreign law which has not been proved is identical with the local law respecting the matter in question. (Dicey, ibid. Rule 194 pp. 866-867; Rapaport v. Paldwrowski (6); Yazdi v. Yazdi (7). We thus in effect return by a round about way to the local law which must apply, although formally we do so by introducing it in the garb of "foreign law".

7. Consequently whether the view of Wolff and Dicey is correct or not, in the appeal in this case at any rate, we must apply the local law because the "national law" of the policy, which is different from it, has not been properly proved.

8. We therefore come back to the first question : what is in first this local law? Is it local law in the narrow sense, that is to say, the Ottoman Law of Marine Insurance, or does it also include the recognised principles of the English common law which have become part of the "local law" in its widest sense through the directive of Article 46 of the Palestine Order in Council, as it has been interpreted? It seems to me that as far as this question is concerned there is no doubt whatsoever. Following precedents from the days of the Mandate, this court has ruled that the courts of this country are not required to apply the English common law "in respect of any legal problem requiring solution if the question can find some kind of answer in parallel provisions of the law of Palestine even though it is incomplete and faulty", Minkowitz v. Fishtner (8). And how much more so is this the case when the legal problem, as the one before us, has been provided for in the local law by a statute which is neither incomplete nor faulty? The main question to be answered in this appeal is what is the effect and consequence of silence on the part of the assured concerning the first that the goods had already been despatched? And this question of silence on the part of the assured is answered fully and exhaustively in a special section of a local statute - that is to say, section 193 of the Ottoman Maritime Code, 1863, which is in force in this country by virtue of the first part of Article 46 of the Palestine Order in Council. As is well known, this Ottoman Law adopted most of the principles of the corresponding French law (Second Book, Chapters 1-14 of the French Maritime Law 1807), and most of its sections were copied word for word. On this subject therefore French law is one of the sources of our own law and we can refer to it - without resorting to the evidence of experts - in order to clarify terms common to both. On the other hand, because of the very close similarity between the two laws, it is particularly important to notice those few instances where the text of the Ottoman law differs from that of the French law. (Compare the judgment of Agranat J. in Freisler v. Weiss (9).)

9. When we come to compare article 198 of the Ottoman Maritime Code with Article 848 of the French Commercial Code from which it was copied we notice at once just such a difference. This article of the Ottoman Code is different in that it has a further provision and contains half of a long paragraph which does not appear in Article 848 of the French Code.

The relative articles of these two laws read as follows:

Article 848 du Code de Commerce (in French):

"Toute réticence, toute fausse déclaration de la part de l'assuré, toute différence entre le contrat d'assurance et le connaissement qui diminueraient l'opinion de risque ou en changeraient le sujet, annullent l'assurance..."

Article 193 du Code de Commerce Maritime (Ottoman) :

"Rend le contrat nul pour l'assureur, toute reticence, toute fausse déclaration de la part de l'assuré, toute différence entre le contrat d'assurance et le connaissement, qui diminueraient l'opinion du risque, ou en changeraient le sujet, et qui serait de nature à empêcher le contrat ou en modifier les conditions, si l'assureur eut été avert du véritable état des choses..."

In translation the articles read as follows:-

Article 848 of the French Commercial Code:

"Any silence, false declaration on the part of the assured (or) any difference between the policy of insurance and the bill of lading that is likely to diminish the assessment of the risk or to change the subject matter, cancels the insurance..."

Article 193 of the Ottoman Maritime Code:

"The contract will be cancelled as far as the assured is concerned by reason of any silence, false declaration on the part of the assured, (or) any difference between the policy of insurance and the bill of lading that is likely to diminish the assessment of risk or to change the subject matter and which by its nature would have prevented the agreement being concluded of would have called for different conditions if the undertwriter had been informed of the true state of the facts..."

This translation needs amplification because it lacks something - as happens in all translations - that something which is lost when the text of a passage is transmitted from one language to another. It is not necessary that the reticence, the declaration etc. should actually diminish the assessment of the risk. It is sufficient for them to appear as being "likely" to. This is in my opinion the nearest word that conveys in translation the meaning of the original language used by the authors of these two laws.

Let us now compare the language of these articles. The words at the end of Article 193 of the Ottoman Code, which I have quoted in italics, do not appear at all in Article 848 of the French Code, as we have already noticed. And it is not for nothing that these words were added. It means - and one cannot escape from this conclusion - that the Turkish legislator was unwilling to invalidate an insurance policy by reason of silence, for example, except where not only would the silence, that is to say the non-disclosure of a fact, be likely to diminish the assessment of the risk, but where also the opposite, that is to say where the disclosure of the fact would "by its very nature" have prevented the conclusion of the agreement or changed its terms.

10. And one may well ask what is the meaning and significance of this additional condition? Logically speaking it is not certain that it would follow automatically from the very change in the assessment of the risk. For if the silence of the assured as regards the real facts have the effect on the underwriter of diminishing in his view the amount of the risk, then surely the opposite, that is disclosure of the real facts, must have the effect of increasing in his view the amount of the risk and his reaction would no doubt be either to refuse to insure because it would not pay him to do so or to change the terms in his favour by asking for a higher premium etc. The underwriter knows the terms of his policy well and presumably would not neglect his interests. And if so, how has the Ottoman legislator helped in this by amending Article 348 and what further provision has he added to the previous single condition it contained? On the other hand we cannot possibly ignore the clause that has been added and certainly this was not done just to make it look more attractive. We must, therefore, do our utmost to give the language some sort of practical significance and the only question is what and how?

11. It seems to me that our dilemma can be solved only in one way, that is by putting special emphasis on the words "which by its nature would" which appear in the clause that was added by the Ottoman legislator - either to introduce something new or to increase the emphasis, so as to remove doubts and avoid mistakes. What emerges is that the criterion must be objective and general and not individual and personal (that is to say taking into consideration the special mentality of a particular under-writer). The fact which the assured did not disclose should be of such a nature that had it been disclosed it would have prevented any reasonable underwriter from consenting to the conditions which had been agreed upon. This is the objective quality which if present makes a policy null and void even if the assured had no intention of deceiving. For "dolus" is not necessary to render a policy void on the ground of silence on the part of the assured, as a contract can be avoided on this ground even if the assured acted in good faith. According to the well known commentators Ripert, Lyon-Caén and Dalloz (Ripert, Précis de Droit Maritime, 6-ème éd. paragraph 594); Lyon-Caèn, Traité de Droit Commercial, 5-ème éd. paragraph 1447; Dalloz, Code de Commerce, Article 348) this is the position in French law. And on this point, at least, the French opinion is sufficient legal authority as to the way the term, as used in the Ottoman Law, should be interpreted because the whole conception of silence was copied by the Ottoman legislator from French law.

The importance of the innovation or the emphasis in Article 193 becomes much clearer when this objective quality is absent. That is to say where even though the knowledge of the fact, which the assured had not disclosed, was most likely to increase the measure of the risk in the view of this particular under-writer, and so naturally either prevent the conclusion of the contract or cause a change in its terms, yet it was not a fact which by its very nature, generally and objectively speaking, was likely to have any influence on an ordinary reasonable under-writer. In such a case - this is the effect of Article 193 - the silence per se would not be a ground for cancelling the contract of insurance and only when other factors are added, such as, for example, an intention to deceive, will it become void or voidable in accordance with the accepted rules of the general law of contract. This is the only interpretation - so it seems to me - which it is possible to give to what has been added to Article 193 by the Ottoman legislator. Without it it is impossible to find any justification for the addition of this second qualification.

12 Having investigated the legal background of the problem, let as now consider the grounds of the appeal in the light of the above principles. We need deal, in my view, only with the following three points raised by the appellant.

(a) That the learned judge was wrong in making the verdict depend on whether Salzman knew or did not know of the loss of the watches at the time when he applied for the insurance policy;

(b) that the bare fact that the watches had already been despatched from Paris at the time when the insurance policy was applied for was important in itself as it was likely to have an influence on the assessment of the risk and that it was the duty of Mr. Salzman to inform Mr. Frankel of it even assuming that he (Salzman) did not know or even suspect that the goods had been lost;

(c) the appellant's third point, pleaded in the alternative, was that even if the watches had not been lost before the 16th of July, the day when the policy was applied for, they had already been on the way for some 20 days and that therefore Mr. Salzman was in duty bound to disclose this fact to Mr. Frankel because this long delay alone would have increased the amount of the risk in the view of Frankel and would certainly have caused him to refuse to issue the policy as he expressly testified before the court.

13. With regard to the first point, I am of the opinion that counsel for the appellant is correct. As I have already pointed out under the conditions specified in Article 193, the cancellation of the contract because of the silence of the assured does not depend on the intention of the assured to defraud. The contract is cancelled as a matter of course even if the assured did not know or did not suspect that the goods had been lost. The learned judge was wrong therefore in his approach when he held that the deciding factor was whether the assured knew or did not know of the loss of the said goods.

14. On the other band I am not prepared to accept the second contention of counsel for the appellants. As Mr. Meridor rightly points out, the answer to this contention is contained in one of the terms of the policy itself. For as will be remembered the policy includes the "lost or not lost" clause. "lost or not lost" in this case means on the way from Paris to Haifa - for the basic purpose of the insurance was to cover the loss that might occur during the transit of the watches from the post in Paris to Haifa. The defendants too in their defence (paragraph 5) speak of the validity of the policy in connection with the transit of the watches from France to Haifa. Hence the language of the defence clearly indicates the possibility that the goods had already left Paris and that even so the underwriter agreed to take the risk on himself. Consequently, therefore, he cannot complain and say that the non-disclosure of this fact increased his estimate of the risk. In the circumstances the underwriter should have been more cautious in his assessment of the whole risk which he was taking on himself. A hint, and also authority for this, can be found by comparing the language of Articles 210 and 212 (second paragraph) of the Ottoman law to which Mr. Meridor has drawn our attention. It is very possible that the position in English law is different as counsel for the appellants claims, and it is also possible that it is exactly the same as counsel for the respondents maintains. In any case, for the reasons given above, English law does not apply here.

15. As regards the third point, whether it is correct or not depends on the answer to another question which the learned judge, because of his approach to the problem, did not find necessary to give - although he had enough evidence before him to enable him to decide one way or the other.

In paragraph 11 of this judgment I explained the criterion that is given in Article 193 for annulling a contract of marine insurance on the ground of the silence of the assured. This criterion is objective and the question which the court has to put to itself is shortly this : Was knowledge of the fact which the assured had not disclosed likely to increase the assessment of the risk in the view of any reasonable underwriter and so naturally to prevent him from consenting to the conditions which had been agreed upon, or not ? In the context of the facts of this case, the question would be this: Was knowledge of the despatch of the watches from Paris some 19-20 days previously likely to increase the assessment of the risk in the view of a reasonable underwriter - and not just Mr. Frankel - when this ordinary underwriter was prepared to issue a "lost or not lost" policy and to accept responsibility also for past losses? The answer to this obviously depends on the answer to the question, what is the period of time which such a consignment usually takes to arrive at Haifa from Paris, and whether a delay of some 20 days on the way was likely or not to arouse suspicion in the mind of an ordinary underwriter that it had been lost. The learned judge could have decided that point as he had before him evidence from both parties. But he did not consider it necessary to do so as he had held the defendants liable by reason of the criterion he had chosen, as explained above. This is, in my opinion, the only question which is still left open and on the answer to it would depend the fate of the claim. As we cannot decide this point in this court the case will have to be remitted to the District Court for a decision to be given there in the light of the evidence it had brought before it.

I am of the opinion therefore that the appeal must be allowed, that the judgment of the District Court be set aside and the case remitted to it for completion, subject to the following directions.

That the learned judge who heard the case should decide on the evidence which he had before him - without receiving further evidence - whether the delay of 19-20 days in the months June-July 1947, whilst these watches were on the way from Paris to Haifa, was unusual or not. Should the learned judge, after hearing the parties, hold on the evidence before him, that the defendants had succeeded in proving that this delay was unusual he should give judgment in their favour. Should he hold otherwise - he should give judgment in favour of the plaintiff.

ASSAF, J.: I concur.

LANDAU, J.: I concur.

Appeal allowed, judgment of the District Court set aside, and case remitted.

Judgment given on June 4, 1953.

Full opinion:

New Zealand Insurance Co. v. Youval.pdf

Amir v. The Great Rabbinical Court in Jerusalem

Case/docket number:

HCJ 8638/03

Date Decided:

Thursday, April 6, 2006

Decision Type:

Original

Topics:

Arbitration

Basic Law: Administration of Justice

Breach of statutory duty

Abstract:

[This abstract is not part of the Court's opinion and is provided for the reader's convenience. It has been translated from a Hebrew version prepared by Nevo Press Ltd. and is used with its kind permission.]

This petition puts to the test the question of the Rabbinical Court's authority to adjudicate a property dispute between a couple after the divorce proceeding between them has been completed, and it focuses on an alleged breach of the divorce agreement by one member of the couple. Is the matter within the jurisdiction of the Rabbinical Court or is it within the power of the civil judicial instance; and if the Rabbinical Court does indeed have authority to adjudicate the matter, what is the source of the authority and from where does this authority derive? Is it from the law; is it from the parties' agreement in arbitration or otherwise? And what is the nature of this authority?

The Supreme Court, sitting as the High Court of Justice, granted the petition and held (per Her Honor Justice A. Procaccia, with the concurrence of His Honor Vice President (Ret.) M. Cheshin and His Honor S. Joubran) that –

The High Court of Justice's intervention in religious court decisions is limited to extreme cases of ultra vires, infringement of the principles of natural justice, departure from the provisions of law aimed at the religious court or when equitable relief is necessary where the matter is not within the jurisdiction of another court or tribunal. The subject matter of the petition justifies this Court's entertaining the matter on grounds of the Rabbinical Court's exceeding the jurisdiction vested in it.

The Rabbinical Court is a state judicial instance, which was established by virtue of the Rabbinical Courts Jurisdiction (Marriage and Divorce) Law, 5713-1953 (hereinafter: "the Rabbinical Courts Jurisdiction Law"), and it derives its power and jurisdiction therefrom, and it has only those jurisdictional powers that the state law has given it.

The original powers of the Rabbinical Court were set in the Rabbinical Courts Jurisdiction Law and they are built of exclusive powers by virtue of the law and powers that are parallel to the civil court and the Rabbinical Court that are vested by virtue of the parties' agreement. The case law has recognized the existence of the judicial instance's inherent ancillary power that derives from the original power of the Rabbinical Court by virtue of the law, and in special circumstances grants it jurisdiction to again hear a matter upon which it has ruled in the past.

Is the Rabbinical Court vested with jurisdiction to decide a dispute by virtue of the parties' agreement, where such jurisdiction is not in the scope of the statute that empowers the Rabbinical Court or within the ancillary powers that are vested in it? The parties' agreement to vest jurisdiction in the Rabbinical Court might take on two guises: one, simple agreement, irrespective of the provisions the Rabbinical Courts Jurisdiction Law; the other, agreement intended to empower the Court to deliberate and decide on a dispute as an arbitrator. A court's jurisdiction is vested by law and it has no power to derive it from the parties' agreement except were the law itself has seen fit to recognize such agreement in certain circumstances as the source of jurisdiction. A similar approach is also taken with regard to the judicial instance's power to adjudicate by way of arbitration. Since the state judicial instance merely has the subject matter jurisdiction conferred to it by statute, it is not vested with power to deliberate and adjudicate a matter as an arbitrator by virtue of the parties' agreement, unless it has been expressly given that power by statute. The Rabbinical Court does not have power to hear and decide a matter that is not one of those that is within its exclusive jurisdiction in accordance with the statute or within its parallel jurisdiction, even if the parties have given their agreement to its jurisdiction. According to the same way of thinking, the Rabbinical Court has no power to decide a dispute as an arbitrator by virtue of an arbitration agreement between the parties in a matter which by its nature is not within its legal jurisdiction.

Is the respondent's answer against the petitioner within the bounds of the Rabbinical Court's subject matter jurisdiction? The respondent's cause of action is the enforcement of a contractual indemnity provision concerning property in the divorce agreement that obtained the force of a judgement of the Rabbinical Court, further to which the parties' divorce was completed. The source of the Rabbinical Court's exclusive jurisdiction in matters of marriage and divorce in accordance with the Rabbinical Courts Jurisdiction Law does not apply because the subject of the claim is a property matter after the dissolution of the parties' marriage and a matter of "marriage and divorce" is not involved. Nor is it a matter "connected with a divorce suit". The respondent's cause of action is a new one, the subject of which is the enforcement of a divorce agreement or an application for the enforcement of a divorce award, based on a divorce agreement. The Rabbinical Court does not have jurisdiction either by virtue of the parties' agreement pursuant to section 9 of the Law, which deals with the Rabbinical Court's parallel jurisdiction that is vested by virtue of the parties' agreement in matters of personal status according to article 51 of the Palestine Orders in Council or the Succession Ordinance. Subject matter jurisdiction under section 9 is limited solely to the matters mentioned in it – matters of "personal status" as defined in the Palestine Orders in Council or the Succession Ordinance. In a dispute that does not relate to those matters, even the parties' agreement cannot vest jurisdiction in the Rabbinical Court. The Rabbinical Court therefore has no original jurisdiction to hear the respondent's claim.

The Rabbinical Court does not have "ancillary" inherent jurisdiction to try the respondent's claim. In the instant case, the Rabbinical Court's ancillary jurisdiction, insofar as it relates to setting aside a divorce award by reason of a defect in making the divorce agreement, that might have given the Rabbinical Court ancillary jurisdiction to try its revocation, is of no relevance. Similarly, the Rabbinical Court has not acquired ancillary jurisdiction by virtue of a material change in circumstances after making the divorce award that justifies setting aside the divorce agreement and the divorce award since the respondent's claim is for the specific performance and enforcement of the divorce agreement. Again, the Rabbinical Court's ancillary jurisdiction to retain jurisdiction in a matter pending before it until the proceedings conducted before it are concluded will not vest it with jurisdiction. The second respondent finally and unconditionally adjudicated herein and awarded the force of judgement to the divorce agreement. A property dispute that has arisen between the parties after the award of judgement gives rise to a new cause of action and necessitates the institution of new proceedings in accordance with the jurisdictional framework prescribed by law.

Nor does the Rabbinical Court have jurisdiction to hear the matter by virtue of the doctrine of "continuing jurisdiction". Continuing jurisdiction is vested where an instance has tried a particular matter in the past and in special circumstances need has arisen to set aside or modify an earlier decision due to a material change that has occurred in the circumstances upon which the original decision was based. The claim seeks to enforce the agreement and has no place in the continuing jurisdiction vested in the Rabbinical Court.

The Rabbinical Court does not have ancillary jurisdiction to try the new cause arising further to the divorce agreement in order to interpret the agreement. Having completed and exhausted its power to rule on the matter of divorce, it no longer has ancillary power to interpret the divorce agreement or the divorce award. Moreover, in the instant case no question of interpreting the divorce agreement has arisen and a claim for its enforcement has been brought instead.

A rabbinical court cannot be empowered to decide a dispute between litigants in arbitration, in a matter that is not within its subject matter jurisdiction according to the statute. In the instant case, it also appears from the divorce agreement that its contents cannot be construed as an arbitration clause, equal to "an arbitration agreement" between the parties. The power of an arbitrator to decide a dispute between parties derives from an arbitration agreement. The condition precedent for arbitration is the existence of an agreement to refer a dispute to arbitration. If parties have agreed to refer disputes between them to the decision of some entity but it is not clear that a decision in arbitration is involved, then there is no arbitration agreement.

By deciding the respondent's lawsuit against the petitioner for the enforcement of a contractual indemnification provision in the divorce agreement, the Rabbinical Courts exceeded the power vested in them by law. Consequently, the decisions of the first and second respondents are void.

Voting Justices:

Procaccia, Ayala

Primary Author

majority opinion

Cheshin, Mishael

majority opinion

Joubran, Salim

majority opinion

Full text of the opinion:

In the Supreme Court

Sitting As the High Court of Justice HCJ 8638/03

Before:	His Honor, Vice President (Ret.) M. Cheshin Her Honor, Justice A. Procaccia His Honor, Justice S. Joubran



The Petitioner:	Sima Amir

v.

The Respondents:	1. The Great Rabbinical Court in Jerusalem
The Respondents:	2. The Regional Rabbinical Court in Jerusalem
	3. Yoseph Amir


On Behalf of the Petitioner:	Adv. Michael Korinaldi

On Behalf of the Third Respondent:	Adv. Nechama Segal

On Behalf Of the Rabbinical Courts System:	Adv. S. Jacoby

JUDGEMENT

Justice A. Procaccia

1. This petition puts to the test the question of the Rabbinical Court's authority to adjudicate a property dispute between a couple after the divorce proceeding between them has been completed, and it focuses on an alleged breach of the divorce agreement by one member of the couple. Is the matter within the jurisdiction of the Rabbinical Court or is it within the power of the civil judicial instance; and if the Rabbinical Court does indeed have authority to adjudicate the matter, what is the source of the authority and from where does this authority derive? Is it from the law; is it from the parties' agreement in arbitration or otherwise? And what is the nature of this authority?

2. The petition concerns the petitioner's motion to vacate the decisions of the Great Rabbinical Court in Jerusalem – the first respondent – of May 4 and June 9, 2003, which dismissed the petitioner's appeal against the judgment of the Regional Rabbinical Court of Jerusalem – the second respondent – of May 27, 2002, and its decisions of March 5, 2001 and June 18, 2002.

Background and Proceedings

3. The petitioner and the third respondent (hereinafter: “the respondent") were married in 1980 and have three children. Their relationship became unstable and they motioned the Regional Rabbinical Court of Jerusalem in 1992 in order to arrange for divorce proceedings. As part of that proceeding, the couple requested the Regional Rabbinical Court to approve a divorce agreement that they had made. In the agreement, the couple agreed on the act of divorce, the custody and support of the children, and various financial and property arrangements, as follows: the three children would be in the custody of the wife until reaching the age of 18 (clause 3); the husband would pay child support in the sum of NIS 1,000 per month for all three of the children until they reach the age of 18; the sum of the child support as set in the agreement would not be increased, and in exchange, the husband would transfer his share of the couple’s apartment to the wife, including his share of the apartment’s contents and the gold objects, ownership of which would all be transferred to the wife (clauses 4(a) and (b)); the husband also undertook to discharge the balance of the mortgage loan each month (clause 6(c)). The agreement also included a condition whereby the wife undertook not to sue the husband in any court for an increase in child support, either directly or indirectly, and if the husband were sued, the wife would compensate him in such a way that he would receive half of the apartment, half of its contents and half of the gold (clauses 4 and 5 the agreement). Taking out a stay of exit order inhibiting the husband's departure from the country would also be deemed a breach of the agreement and lead to the same result (clause 13). In order to secure the wife's obligation in accordance with the agreement, a cautionary note would be registered against the apartment, pursuant whereto one half of the apartment would be transferred into the husband's name if he were sued to increase child support. The relevant provisions of the agreement are as follows:

"4. Child Support

(e) For the avoidance of doubt and without prejudice to the generality of the aforegoing, child support under the agreement shall unequivocally cover all the children's needs without exception… until the children reach the age of 18.

The mother undertakes not to sue the father in any legal instance for an increase in child support or for the satisfaction of any of the children's needs without exception beyond what the father has undertaken in this agreement, either directly (herself) or indirectly (through any institution, entity, authority, person and/or in the name of the minor and/or anyone who now and/or in future has an interest), and if the husband is sued, the wife shall compensate him and he shall receive one half of the apartment, one half of its contents and one half of the gold. The obligation is in perpetuity.

…

5. Indemnification

(a) The mother undertakes and takes it upon herself not to sue the father in any legal instance whatsoever for an increase in child support or for the satisfaction of any of the children's needs without exception beyond what the father has undertaken in this agreement, either directly (herself) or indirectly (through any institution, entity, authority, person and/or in the name of the minor and/or anyone who now and/or in future has an interest).

(b) If, contrary to the abovementioned, the father is sued for an increase in child support and/or satisfaction of any of the children's needs, whether the lawsuit is brought by the mother and/or the mother in the name of the children or by an entity, authority, institution and/or anyone who now and/or in future has an interest, beyond what the father has undertaken in this agreement, then the mother undertakes to transfer one half of the apartment into the father's name and one half of its contents and one half of the gold. The obligation is in perpetuity.

(c) To secure the wife's obligations in this agreement, a cautionary note shall be registered, pursuant whereto one half of the apartment shall be transferred into the husband's name if the husband is sued to increase child support…"

The agreement also includes a provision with regard to the exclusivity of the Rabbinical Court's jurisdiction in the event of a dispute between them after the divorce, in the following terms:

"9. Cancellation of Mutual Claims And/or Complaints

…

10. …

11. If after the divorce, differences arise between the couple, they undertake to file the lawsuit solely in the Rabbinical Courts.

12. …

13. The wife undertakes not to take out a stay of exit order preventing the husband's departure from the country, and taking out such an order shall constitute a breach of this agreement, and the husband shall be entitled to obtain one half of the value of the apartment, of the contents and of the gold.

…"

The divorce agreement was given the effect of judgement by the Rabbinical Court, and on May 26, 1992 the couple was divorced.

4. About five years later, in June 1997, the couple's children (through the petitioner) filed a child support motion against the respondent in the Jerusalem Family Court (FC 10330/97). The motion was mainly intended to increase the child support upon which the couple had agreed in the Rabbinical Court to NIS 6,700. This was, inter alia, due to the petitioner's claim that the respondent was not paying the mortgage payments as undertaken by him in the divorce agreement. In the answer of defense, the respondent defended the claim on its merits. According to him, he was living off a general disability pension of NIS 1,200 per month, from which he was paying child support. The Family Court (per Judge N. Mimon) held in its judgement that the children's monthly support should be increased to a total of NIS 2,000 for both minor children together, and the sum of NIS 500 for the other child until his enlistment to the IDF; with respect to the minors, it was further held that from the time they reached the age of 18 until they completed their service in the IDF, the child support for them would be reduced by NIS 700, and upon completion of their military service the liability for their support will be terminated; if they do not enlist, the liability for them would be terminated when they reach the age of 18. With regard to the other child, upon his enlistment to the IDF and until his discharge, support of NIS 300 would be payable for him.

On September 20, 1997, about three months after the motion to increase child support was filed in the civil court, the respondent filed a motion in the Regional Rabbinical Court of Jerusalem "for a declaratory judgement and specific performance" of the divorce agreement. In the motion, he pleaded that the petitioner had breached the divorce agreement several times and in several different aspects, as follows:

"8 (a) The defendant (the petitioner – AP) filed a motion to increase child support in the name of the minors before this Honorable Court on February 28, 1993 – a motion that was dismissed by the Court

(b) The defendant filed another motion on November 6, 1994 and at the end of that motion the wife again applied for an increase in child support.

9. (a) The defendant went further, and when she saw that her motions were being dismissed by the Honorable Rabbinical Court, she filed a motion to increase the child support in the name of the minors in FC 10330/97 in the Jerusalem Family Court.…

(b) As part of the motion in Family Court, the wife applied for a stay of exit order that the Court approved.

(c) Moreover, at about the time she filed the motion, the defendant filed a motion for a stay of exit order on July 22, 1997, after the previous order inhibiting departure from the country had been set aside, and the Chief Execution Officer approved it".

He pleaded that the wife had therefore breached clauses 5 and 13 of the divorce agreement. On the basis thereof, the respondent sued the wife for one half of the apartment and its contents and one half of the gold.

5. After filing his motion to the Regional Rabbinical Court, the respondent traveled abroad for more than two years and abandoned his motion. After returning to Israel, he renewed the motion in the Rabbinical Court. The petitioner pleaded in her defense, that the subject of the motion was " breach of a divorce agreement" and according to the law laid down in HCJ 6103/93 Sima Levy v. The Great Rabbinical Court in Jerusalem, PD 48(4) 591 (hereinafter: "Sima Levy Case") the Rabbinical Court did not have jurisdiction to adjudicate the motion. As for the merits of the motion, the petitioner argued that the respondent had come to court with unclean hands because he had breached the divorce agreement by not paying the mortgage payments as he had undertaken in the divorce agreement. The Regional Rabbinical Court, in its decision of February 25, 2001, referred the issue of jurisdiction raised by the petitioner to the Rabbinical Courts' then legal counsel on rabbinical jurisdiction, Adv. E. Roth, for his opinion.

During the same month (February 2001) the petitioner filed a lawsuit in the Jerusalem Family Court against the respondent for "declaratory judgement as to the revocation of the indemnity provision in the divorce agreement" (FC 10331/97). This was based, inter alia, on the argument that the respondent breached the divorce agreement by not paying the mortgage payments as he had undertaken in the divorce agreement. The petitioner further requested that the Court declare the revocation of clauses 11 and 13 of the divorce agreement, pleading that they were "contrary to public policy and the law". The respondent argued in his defense that the claim should be summarily dismissed due to the proceedings conducted on the same issues in the Rabbinical Court.

On March 4, 2001, and before the Family Court had awarded its decision on the respondent's motion for the summary dismissal of the petitioner's claim, the opinion of the legal counsel on rabbinical jurisdiction, Adv. Roth, was filed in the Rabbinical Court. In his opinion, with reference to clause 5(b) of the divorce agreement, the Rabbinical Court did not have jurisdiction to adjudicate the respondent's motion after the divorce. Nevertheless, he believed that clause 11 of the divorce agreement could be treated as an arbitration clause in accordance with the Arbitration Law, 5728-1968 (hereinafter: "the Arbitration Law"). By virtue of the rules of arbitration, the Rabbinical Court is empowered to adjudicate the suit as an arbitrator in accordance with the rules and restraints governing an arbitrator. He further added that, in his opinion, it was unnecessary for the couple to sign an arbitration deed, since clause 11 of the divorce agreement constituted an arbitration deed in all respects.

Following the opinion of the legal counsel, Adv. Roth, the Regional Rabbinical Court decided on March 5, 2001 that it was vested with jurisdiction to adjudicate the respondent's suit "since in the Court's opinion clause 11 constitutes an arbitration deed".

On May 14, 2002, and before the Regional Rabbinical Court's judgement had been awarded in the respondent's suit, the Family Court awarded its decision in the respondent's motion for the summary dismissal of the petitioner's suit. It reviewed the question of the Rabbinical Court's jurisdiction to try the respondent's claim, whether as a court empowered by virtue of statute or as an arbitrator, but it decided to stay the award of its decision on jurisdiction on the ground that:

"Mutual respect of legal instances requires that after a decision has been awarded by the Rabbinical Court holding that it has jurisdiction to adjudicate the suit that has been filed with it as an arbitrator, the award of a decision on jurisdiction should be stayed until the proceedings in respect of jurisdiction have been exhausted by the plaintiff, who will perhaps wish to act by applying on appeal to the Great Rabbinical Court or by applying to the High Court of Justice to clarify whether her position with regard to jurisdiction will be allowed, or even by motioning to vacate an arbitral judgment as provided in section 24 of the Arbitration Law…"

On May 27, 2002, the Regional Rabbinical Court awarded its judgement in the respondent's motion. The court was divided in its opinion between the three judges, and the decision was made, in the words of the judgement, in accordance with –

"the third opinion, which was the decisive one of the three, since there are several doubts regarding the interpretation of the agreement, and there is a doubt as to whether it constitutes a breach according to Halachic authorities and the circumstances. Therefore, the case should be decided according to the law, and if the apartment has already been transferred into the wife's name, it is not possible to take away her ownership of the apartment because of a doubt, and of course the wife is liable to comply with all of the obligations in the divorce agreement.... If the apartment has not yet been transferred, it is not possible to order the plaintiff ... to transfer his share of the apartment into the wife's name ....

If the plaintiff has already signed a power of attorney and delivered it to the wife, it would appear that the wife cannot be precluded from exercising the power of attorney in order to transfer the plaintiff's share of the apartment into the wife's name…. On the other hand, if the husband still needs to sign transfer documents and the like, he should not be made to help transfer the dwelling into the wife's name in any way whatsoever….

With regards to the gold objects that the wife has received, it would also appear that she cannot be made to return them to the husband because they are in her possession and in this way her possession is valid…"

As mentioned above, according to the Rabbinical Court's decision of March 5, 2001 it decided the respondent's suit as an arbitrator, but on June 18, 2002 it awarded another decision that was headed "Clarification", according to which:

"The Rabbinical Court makes it clear that it was the Rabbinical Court that approved the agreement and that there was an undertaking that all matters involved in the agreement would be tried solely by the Rabbinical Court. Therefore, since both parties undertook in the agreement, and the Rabbinical Court also approved the agreement, the Rabbinical Court consequently has jurisdiction to hear and adjudicate the matter, and the Rabbinical Court awarded the judgement by virtue of its jurisdiction, and there was no need for the Rabbinical Court to adjudicate the same as arbitrator, and although the Rabbinical Court could also adjudicate the matter as an arbitrator, the Rabbinical Court also had jurisdiction to try the matter as an adjudicating court in accordance with the aforegoing".

6. The petitioner appealed to the Great Rabbinical Court against the Regional Rabbinical Court's judgement of May 27, 2002. Her main plea in the appeal was that the Regional Rabbinical Court did not have jurisdiction to adjudicate the respondent's suit, either as a competent court by virtue of the law or as an arbitrator, and its judgement is therefore void. As to the actual merits, she argued that the Regional Rabbinical Court had made an error "of judgement" and "disregarded facts" by not giving proper weight to the fact that it was the respondent who was in breach of the divorce agreement by not making the mortgage payments as he had undertaken in the divorce agreement. Consequently, on that ground too, on the merits of the case, the Regional Rabbinical Court's judgement should be vacated. The respondent also appealed to the Great Rabbinical Court against the said judgement.

The Great Rabbinical Court, in its decision of May 4, 2003, dismissed the petitioner's appeal with respect to jurisdiction and held that the interpretation of the divorce agreement indicated that it concerned the couple's agreement for "property in consideration for child support". That interpretation affects the substance of the complaint that the respondent filed to the Rabbinical Court, and it demonstrates that it is a suit to revoke the divorce agreement as opposed to a motion for the enforcement of an indemnity provision. That being the case, the Rabbinical Court had jurisdiction to adjudicate the respondent's motion by virtue of its original (primary) authority because "indemnification was not involved, but property and child support and the connection between them, and those matters of property division and child support are certainly matters of personal status that are governed by section 9 of the Rabbinical Courts Jurisdiction Law". The Rabbinical Court was also vested with original (primary) jurisdiction to adjudicate the suit in view of clause 11 of the divorce agreement, which provides that if differences arise between the petitioner and the respondent after the divorce, the two undertake to file the motion solely to the Rabbinical Courts. The Rabbinical Court mentions that at the hearing, the respondent also pleaded avoidance of the Get and the divorce because according to him the Get had been given by mistake. Consequently, on that ground too, the Rabbinical Court had original (primary) jurisdiction to adjudicate the claim. According to the Rabbinical Court, it also had jurisdiction by virtue of its "continuing" jurisdiction, because the respondent was "applying expressly for the revocation of the property arrangement as a result of a change in circumstances concerning child support". Finally, the Great Rabbinical Court held that the jurisdiction to adjudicate the respondent's suit was vested in the Regional Rabbinical Court, when "the jurisdiction is the essential jurisdiction vested in the Rabbinical Court, rather than jurisdiction by virtue of the Arbitration Law". The Great Rabbinical Court adjourned the deliberation on the appeal itself to a later date.

On June 9, 2003 the Great Rabbinical Court awarded another decision, this time with regard to the respondent's appeal against the Regional Rabbinical Court's judgement. In its decision, the Great Rabbinical Court ordered the matter to be remitted to the Regional Rabbinical Court for it to try the argument, which had not been tried in the Regional Rabbinical Court, that the petitioner had breached the divorce agreement by suing for increased child support in the Regional Rabbinical Court in 1993.

The Petition

7. In her petition before us, the petitioner seeks to set aside the decisions of the Great Rabbinical Court and the Regional Rabbinical Court, according to which the Rabbinical Court had jurisdiction to adjudicate the respondent's motion, both as original (primary) jurisdiction and by virtue of an arbitration clause.

This Court issued an order nisi in the petition.

The Parties' Arguments

8. The petitioner's essential argument in her petition herein is that the Rabbinical Court lacks jurisdiction to adjudicate the property dispute that has arisen between her and the respondent in respect of the divorce agreement that was made between them. According to her, the Rabbinical Courts are not vested with original (primary) jurisdiction to adjudicate the suit. Moreover, they do not have continuing jurisdiction to hear the respondent's suit. The respondent's motion to obtain one half of the property, which was transferred to the wife, is based on the cause of enforcing an indemnity provision in the divorce agreement. This cause is based on a plea of breach, if one occurred, after the divorce agreement was made and the judgement of the Rabbinical Court giving it force and effect was awarded, and after the couple had been duly divorced. A subsequent breach of the divorce agreement in respect of property after the parties' divorce cannot be bound in retrospect with the divorce agreement and the judgment that materialized in the past. From the divorce and onwards, motions that relate to the breach of the divorce agreement are not a part of matters of personal status. The Rabbinical Court therefore lacks jurisdiction to adjudicate them, and jurisdiction in respect of them is vested in the civil court. Moreover, it was argued that the respondent himself breached the divorce agreement by not paying the mortgage payments as he had undertaken to do in the divorce agreement. His breach of the agreement has civil-financial character, which also demonstrates that his suit after the divorce is subject to the jurisdiction of the civil, rather than religious, court. The petitioner further pleads that clause 11 of the divorce agreement does not amount to an arbitration clause and does not purport to establish an agreement for arbitration. Instead, its wording and contents merely demonstrate its determination, by agreement of the parties, to which court the couple's motions after the divorce should be filed. This agreement, per se, does not vest jurisdiction in the Rabbinical Court. In view of all of this, and based on other grounds too, upon which we shall not focus, the Rabbinical Courts' decisions on jurisdiction are void.

9. The respondent's position in his petition is that the Rabbinical Court is vested with jurisdiction to adjudicate the suit he filed to it. In this respect, he relies on the provision of the divorce agreement, according to which the parties expressly agreed to vest the Rabbinical Court with jurisdiction to try any future dispute between them concerning the agreement. He pleads that, according to case law, a matter that can be bound from the outset with the divorce suit, such as property matters, and it was agreed in the divorce arrangement to vest jurisdiction in the Rabbinical Court in respect to them, is also within its jurisdiction after the divorce. He further asserted that the meaning of the cause of the action that he filed was the revocation of a conditional undertaking given under the agreement, as opposed to the enforcement of a contractual indemnification arrangement. That is to say that the respondent entered into a conditional undertaking to transfer property to the petitioner in consideration for the child support being set in a binding amount and not being increased, and for motions not to be brought in this matter. Since that condition had not been fulfilled, the property undertaking that he had given is void. A contractual indemnification provision is not to be treated in the same way as a conditional property undertaking, with regard to which the Rabbinical Court has continuing jurisdiction even after the divorce. Alternatively, it is argued, the Rabbinical Court has jurisdiction to entertain the respondent's suit according to the law of arbitration, by virtue of clause 11 of the divorce agreement, which constitutes an arbitration agreement, even if the word "arbitration" is not mentioned in it.

Judgment

10. This Court's intervention in the decisions of religious courts is limited to extreme cases of ultra vires, infringement of the principles of natural justice, departure from the provisions of law aimed at the religious court or when equitable relief is necessary where the matter is not within the jurisdiction of another court or tribunal (sections 15(c) and (d)(4) of the Basic Law: the Judiciary; HCJ 323/81 Vilozni v. The Great Rabbinical Court, PD 36(2) 733; HCJ 1689/90 E'asi v. The Sharia Court, PD 45(5) 148, 154-155; HCJ 1842/92 Blaugrund v. The Great Rabbinical Court PD 46(3) 423, 438; HCJ 5182/93 Levy v. The Rehovot Regional Court PD 48(3) 1, 6-8).

The subject matter of the petition herein justifies this Court's entertaining the matter on grounds of the Rabbinical Court's exceeding the jurisdiction vested in it for the reasons explained below.

The Question

11. The couple signed a divorce agreement containing property and child support arrangements. In the scope of the property arrangements, they agreed to limit and not increase child support. They added a condition according to which if motions to increase child support were filed by the wife, directly or indirectly, or if she took out stay of exit orders, these actions would have certain property consequences. The parties further agreed that if differences arose between the couple after the divorce, they undertook to conduct the claims solely in the Rabbinical Courts. Indeed, after the divorce, disputes did arise between the parties following motions to increase child support that were brought against the husband, and stay of exit orders were taken out. Further thereto, the husband filed a suit in the Rabbinical Court claiming a breach of the divorce agreement by the wife and requesting to receive one half of the property because of that breach. In those circumstances, after the couple's divorce, is the Rabbinical Court vested with jurisdiction to adjudicate the husband's property suit, which is based on an alleged breach of the divorce agreement by the wife? Or is the exclusive jurisdiction to deliberate and adjudicate that claim vested in the civil court?

The subsidiary questions that are to be decided can be divided into two:

First is whether the Rabbinical Court has jurisdiction by virtue of the law to adjudicate a property claim based on a breach of the divorce agreement after the divorce has been completed, by virtue of one of the following:

(a) Original-primary jurisdiction by virtue of statute to hear and adjudicate issues pertaining to the divorce;

(b) the Court's "ancillary" jurisdiction to adjudicate matters connected with the divorce after its completion, as interpreted and expanded by case law.

The Second is whether the Rabbinical Court has jurisdiction to decide a property claim based on the breach of a divorce agreement by virtue of the parties' agreement, and what legal significance is to be given to this agreement.

We shall consider these questions.

The Starting Point

12. The starting point underlying the analysis of the Rabbinical Court's scope of jurisdiction is based on several fundamental assumptions:

First, the Rabbinical Court is a state judicial instance, which was established by virtue of the Rabbinical Courts Jurisdiction (Marriage and Divorce) Law, 5713-1953 (hereinafter: "the Rabbinical Courts Jurisdiction Law"), and it derives its power and jurisdiction therefrom. As such a state judicial instance, the bounds of the Rabbinical Court's powers are defined and fashioned in accordance with the state law.

Second, every state judicial instance, including the religious court, has merely those jurisdictions that the state law has granted it; it is the statute that established it, and it is the one that defined its powers and assigned them to it. In doing so, the statute assumed, as part of the basic concept of democratic government, that in the granting of judicial powers also lay judicial limitations. Anything that has not been granted to the judicial instance is outside and beyond its power, and it must not surpass its acknowledged boundaries and into areas that have not been entrusted to it and go beyond its responsibility. That is the principle of legality that characterises the structure of democratic government, upon which rests the perception of the status of the government authorities, including the courts. It is on the basis of this principle that the realm of jurisdiction that is vested in the state judicial instances, of which the Rabbinical Courts form part, extends.

Third, the definition of the judicial powers of the various different courts, including the Rabbinical Courts, derives from statute, and statute is subject to interpretation by case law. The case law's interpretation of the extent of the powers vested in the judicial instance is intertwined with the provisions of the statute as the primary source of the power vested in the judicial instance, and it is intended to serve its purpose. In reviewing the boundaries of the religious court's power we shall therefore assume that the religious court is vested with the powers that have been granted to it by the statute, as they have been interpreted by case law, and it has only what the law has given it. As the Court stated (per Justice Landau) in HCJ 26/51 Menashe v. The Chairman and Members of the Rabbinical Court in Jerusalem, PD 5 714, 719:

"The Rabbinical Courts of our country exist in accordance with the general law, which determines their place in the state courts system, and the questions relating to the spheres of their jurisdiction should generally be resolved in accordance with the same principles as govern other courts".

This is what distinguishes Rabbinical Courts from arbitrators, internal tribunals and voluntary tribunals, which are not established by virtue of statute but mainly by virtue of contract or regulations, and the scope of their jurisdiction is determined pursuant thereto. These entities are essentially governed by the principles of the private law that creates them and they are not part of the country's state judicial system.

As Justice Zamir stated in HCJ 3269/95 Yosef Katz v. The Jerusalem Regional Rabbinical Court, PD 50(4) 590, 602:

"The Rabbinical Court is established by virtue of statute and its jurisdiction derives from the statute. Its budget comes from the State Treasury and its judges receive salaries like state employees; it sits in judgement beneath the symbol of the State and it writes its judgements on State paper; the orders that it issues speak in the name of the State and are enforced by the State. The Rabbinical Court is not a private entity but a state institution. It is therefore subject to public law and review by the High Court of Justice. Amongst other things, the Rabbinical Court is obliged to respect and observe the fundamental principle that governs every government agency, namely the principle of legality. According to that principle, the Rabbinical Court has nothing other than the power granted to it in accordance with the statute" (emphasis added).

In this respect Justice Cheshin stated in the Sima Levy Case (ibid, p. 616):

"The legal system takes a grave view of a judicial entity acting beyond the bounds set for it by the law; hence, the case law holds that a lack of subject matter jurisdiction plea stands out and the court will consider it at any stage of the litigation, even where a party first raises it on appeal".

(See also HCJ 816/98 Eminoff v. Eltalaff, PD 52(2) 769, 796-7; HCJ 512/81 The Hebrew University Archaeology Institute v. The Minister of Education, PD 35(4) 533, 543-4; HCJ 30/76, MF 150/76 Siho v. The Karaite Jewish Community Religious Court, PD 31(1) 15, 17-18.)

The state judicial system, and its various different courts, both civil and religious, is built on common norms that govern all its agencies. Thus, for example, it has been held in the past that the fundamental principles that govern civil judges also apply to rabbinical judges. The rabbinical judge, like the civil judge, is part of the judicial authority and in his position he is subject to the same basic rules as obligate any judicial officer:

"He is not an arbitrator between parties who voluntarily apply to him. He operates by virtue of state law and his authority extends over the whole public with all its diversity, opinions and views. Like a civil judge, a rabbinical judge enjoys independence in matters of judgement. The laws concerning conditions of service, immunity, appointment, discipline and the like that govern the rabbinical judge are very similar to those that govern a civil judge. Like the civil judge, so too the rabbinical judge must, by his action, ensure the public's trust in his judgement. The public is not only the religious public. The rabbinical judge deals with the whole people and he must by his conduct ensure the trust of the whole people, both secular and religious". (Per Justice Barak in HCJ 732/84 MK Tzaban v. The Minister of Religious Affairs, PD 40(4) 141, para. 16.)

In this context, case law has also drawn a clear distinction between a person's fitness as a rabbinical judge of the Israeli Rabbinical Court and his fitness as a community rabbi. On enactment of the Dayanim (rabbinical judges) Law a clear separation was created between judicial and rabbinic functions, and a mix between the two in judicial work is no longer consistent with the concept of state law. In the words of the Minister of Religious Affairs Warhaftig, when he presented the Dayanim Law draft on first reading in the Knesset, as cited in the Tzaban Case:

"With the establishment of the State of Israel we adopted this course. We distinguished between those functions and separated between rabbis and rabbinical judges" (Knesset Proceedings Session 5457, 1954, p. 2182).

As Justice Goldberg added on this subject in the Tzaban Case:

"The main power of the Rabbinate rests in its traditional authority over those who come 'to seek God', whilst the rabbinical judges' authority when sitting in judgement does not depend on the wishes of the litigants but is enforced in the context of the judicial system prescribed for it by the legislature. In this sphere, the rabbinical judges perform the function of 'judging the people', with its varied opinions and views".

The religious function of the rabbinical judge as rabbi is not intertwined with the judicial function that he performs as a rabbinical judge and is separate from it. The Rabbinical Court cannot therefore rely on its religious power in order to assume jurisdiction in a matter that exceeds its powers and authorities in accordance with state law (Schiffman, Family Law in Israel, 5755, Vol. I, p. 42).

Against this background there is difficulty with the argument that is sometimes made that the Rabbinical Court might perform a dual function: on the one hand, a state judicial function imposed upon it by virtue of state law, and on the other hand, a religious court in monetary matters by virtue of the parties' agreement. Like any public entity that performs a function in accordance with the law, so the Rabbinical Courts, which operate by virtue of statute must also discharge the responsibility owed by them by virtue of statute and decide the matters entrusted to them. As part of the state judicial system, they possess only the jurisdiction that the statute has placed in their hands. That is the essence of the principle of legality that underlies public administration and the judicial system (Katz Case, ibid, p. 607); hence, even if Jewish law and tradition permit a Rabbinical Court to adjudicate and decide disputes in a certain manner, that does not suffice to authorize it to do so because "the Rabbinical Court, as a state institution, must act within the authority vested in it by state law" (Katz Case, ibid, p. 607). To the same extent, a civil court, which is part of the judicial authority, may not assume an authority or function that does not derive from state law (Tzaban Case, ibid, p. 152).

It is against this background that we shall examine the question of the Rabbinical Court's jurisdiction to decide the respondent's property suit against the petitioner based on a breach of the divorce agreement, and the relief deriving therefrom. A comprehensive analysis of the issue of jurisdiction in a similar context can be found in the judgement of Justice Cheshin in the Sima Levy Case and it will guide and direct us.

The Rabbinical Court's Original – Primary Jurisdiction

13. The original primary powers of the Rabbinical Court were set in the Rabbinical Courts Jurisdiction Law and they are built on two tiers: exclusive powers by virtue of the statute; and parallel powers of the civil court and the Rabbinical Court that are vested by virtue of the parties' agreement. The exclusive powers comprise matters of marriage and divorce, as well as matters that are duly bound up in the motion for divorce, including wife and child support. Parallel jurisdiction that is vested by agreement relates to matters of personal status in accordance with article 51 of the Palestine Orders in Council and the Succession Ordinance. The relevant provisions are as follows:

"1. Jurisdiction in matters of marriage and divorce

Matters of marriage and divorce of Jews in Israel, nationals or residents of the State, shall be under the exclusive jurisdiction of rabbinical courts.

…

3. Jurisdiction in matters incidental to divorce

Where a suit for divorce between Jews has been filed in a rabbinical court, whether by the wife or by the husband, a rabbinical court shall have exclusive jurisdiction in any matter connected with such suit, including support for the wife and for the children of the couple.

…

9. Jurisdiction by consent

In matters of personal status of Jews, as specified in article 51 of the Palestine Orders in Council, 1922 to 1947, or in the Succession Ordinance, in which a rabbinical court does not have exclusive jurisdiction under this Law, a rabbinical court shall have jurisdiction after all parties concerned have expressed their consent thereto."

The Rabbinical Court's powers – both the exclusive ones (marriage, divorce and matters bound with divorce) and the jurisdiction in accordance with the parties' agreement in matters of personal status – are original-primary powers by virtue of the statute to hear and rule on the matters that fall within the scope of those powers.

Power Ancillary to Original Jurisdiction

14. The Case law has recognized the existence of a judicial instance's inherent ancillary power that derives from the original power of the Rabbinical Court by virtue of the statute and in special circumstances grants it jurisdiction to again hear a matter upon which it has ruled in the past. Such is, for example, the jurisdiction of the civil and religious courts to vacate a judgement awarded by them that is based on an agreement between the parties, in the making of which there has been a defect. Such a material defect might lead to the revocation of the agreement and therefore also to revocation of the judgment that rests upon it, and the instance empowered to decide its revocation is the one that rendered the judgment (HCJ 124/59 Glaubhardt v. The Haifa Regional Rabbinical Court, PD 13 1490; CA 151/87 Artzi Investment Co. v. Rachmani PD 43(3) 489, 498-500). Additional expression of such ancillary jurisdiction occurs when there is a material change in the circumstances of the matter, that has occurred after the award of judgement by consent, which makes its continued performance unjust (Sima Levy Case, ibid, pp. 605-6; CA 442/83 Kam v. Kam PD 38(1) 767, 771; CA 116/82 Livnat v. Tolidano PD 39(2) 729, 732; CA 219/87 Rachmani v. Shemesh Hadar, Building Company Ltd et al. PD 43(3) 489, 498-500). The recognition of this ancillary jurisdiction is intended to bring about a proper balance between the judgment’s finality on the one hand, and the interest not to leave in effect a judgment, the enforcement of which has become extremely unjust due to a change in circumstances. Inherent jurisdiction is also vested in the judicial instance, including the Rabbinical Court, to retain jurisdiction in respect of a matter that is pending before it until the proceedings have been completed. So long as final judgement has not been awarded, jurisdiction continues until the judicial court has completed its work. Once a final, unconditional judgment has been awarded, the work is completed (Sima Levy Case, p. 607; CA 420/54 Ariel v. Leibovitz PD 9 1337; ALA 2919/01 Daniel Oshrovitz v. Yael Lipa (Fried) PD 55(5) 592; J. Zussman, The Civil Procedure (seventh edition, 5755) 550).

One of the expressions of ancillary jurisdiction relates to the existence of the Rabbinical Court's "continuing jurisdiction", the essence of which is that, under certain conditions, where the Rabbinical Court has in the past heard a particular matter, its continuing jurisdiction to hear it again will be recognized. The continuing jurisdiction also derives from the inherent power of the judicial instance. Its basic purpose is to give expression to the duty of mutual respect and the need for harmony between judicial instances where there is parallel jurisdiction between them, and in order to avoid parties running from one judicial instance to another. It has nevertheless already been explained that continuing jurisdiction is not intended to undermine or derogate from the original powers vested in the judicial instances in accordance with statute. Its purpose is essentially "to vest power to vacate or modify an earlier decision due to a change that has occurred in the circumstances upon which the first decision was based" (per Justice Cheshin in the Sima Levy Case, ibid, p. 608, 610). Such are matters of child support and custody, which by their nature are subject to material changes of circumstance, and the original judicial instance therefore has inherent jurisdiction to reconsider them when the appropriate conditions arise.

It should be made clear that no inherent power has been recognized for a civil or religious court to exercise its original authority again in order to interpret a judgement awarded by it. Hence, a Rabbinical Court that has granted a divorce does not have inherent jurisdiction to interpret the divorce agreement and the judgement that awarded it force and effect (Sima Levy Case, ibid, pp. 612-13).

These are the characteristics of the original jurisdiction that is vested in the Rabbinical Court in accordance with the statute, alongside its ancillary powers that are sparingly exercised in special circumstances by virtue of its inherent jurisdiction, in order to complete the judicial act and make it a complete and just deed.

We shall now examine the question of whether the Rabbinical Court has jurisdiction to adjudicate a dispute by virtue of the parties' agreement, where such jurisdiction is not set in the statute empowering the Rabbinical Courts, and is not within the scope of the ancillary jurisdiction vested in it.

The Rabbinical Court's Jurisdiction by Virtue of the Parties' Agreement

15. The parties' agreement to vest jurisdiction in the Rabbinical Court might take on two guises: one, simple agreement to grant the Court jurisdiction in a particular case, regardless of the provisions the Rabbinical Courts Jurisdiction Law; second, agreement intended to empower the Court to hear and rule on a dispute as an arbitrator. Can such agreement by the parties vest power in the Court that is not granted to it by the empowering statute or embodied in its ancillary powers?

The Israeli state judicial system and the various different judicial instances, derive their powers from statute. It is the statute that establishes them, it is what delineates the bounds of their activity and it is what defines the sphere of their subject matter and territorial jurisdiction. This is also the case in respect to the civil judicial instances; and so it is with respect to the special judicial systems, including the courts of Israel's different religious communities. These include the Rabbinical Courts in Israel.

By defining the powers of the various different judicial instances in Israel, the statute intended not only to delineate the function and responsibility of the system and its various different arms. It also sought, at the same time, to deny the power of a judicial instance to hear and adjudicate a matter which it was not charged with by the statute and which is not within its inherent jurisdiction. The definition of the judicial instances' powers has a dual dimension, both positive and negative: it constitutes a source of power and responsibility on the one hand, while denying the exercise of authority and power that have not been so conferred; the judicial instance has only what the statute that established it has vested in it, and insofar as it has been made responsible to adjudicate disputes within the scope of the power vested in it, it is under a duty that derives from the statute and the concept of democratic government not to try or adjudicate a matter that is beyond its statutory power.

A preliminary and mandatory condition for the satisfactory activity of any judicial system is a clear and exhaustive definition of the framework of powers and the apportionment of functions that rest with its various different instances. Without an exhaustive and specific definition of powers the systemic structure, built in accordance with the statute, is blurred and the stability of its functioning is not secured. The harmony necessary in the area of operation of the different judicial arms and the relationship between them is impaired; the allocation of professional, administrative and budgetary resources to the different instances is disrupted, and direct harm might occur to the efficacy of the judicial system and the level of judicial performance. The uniqueness of the responsibility owed by the judge, which requires the existence of a clear framework of authority, alongside which is the responsibility and duty to rule, becomes blurry. Thus, recognizing the power of a judicial instance to adjudicate matters, the power and responsibility for which have not been legally transferred to it, might materially disrupt the internal balance required in the structure of the judicial system and severely undermine its standing and performance.

A consequence of the aforegoing is that the power of a judicial instance, as such, be it civil or religious, is acquired by law and it has no power to be derived from the parties' agreement, except where the statute itself has seen fit to recognize such agreement in certain circumstances as a source of the power to adjudicate. Thus, for example, with regard to the effect of the parties' agreement, the law has distinguished between the apportionment of subject matter jurisdiction and territorial jurisdiction between judicial instances. It is willing to acknowledge, in certain conditions, the parties' agreement as a valid source for changing the territorial jurisdiction that has been prescribed. Section 5 of the Civil Procedure Regulations, 5744-1984 provides that when an agreement between parties as to the place of jurisdiction exists, the lawsuit will be filed to the court in that area of jurisdiction. The relative flexibility regarding territorial jurisdiction, and the willingness to recognize the parties' agreement as the source of such jurisdiction, stems solely from the statute and derives its power from its provisions. That is not the case in respect of subject matter jurisdiction. Generally, the law does not recognize that the parties' agreement has power to depart from the rules of subject matter jurisdiction, as crafted by state legislation.

A similar approach is also taken with regard to the judicial instance's power to adjudicate by way of arbitration. Since the state judicial instance merely has the subject matter jurisdiction conferred to it by statute, it is not vested with power to hear and rule a matter as an arbitrator by virtue of the parties' agreement, unless it has been expressly given that power by statute. In general, a judicial instance is not supposed to adjudicate a matter that is referred to it as arbitrator. However, in certain circumstances, the law has expressly recognized the power of a civil instance to adjudicate a dispute in departure from the ordinary rules of procedure. Thus, for example, in the area of small claims, section 65 of the Courts Law (Consolidated Version), 5744-1984 provides that if a lawsuit has been filed in the small claims court, the judge may, with the parties’ consent, try the claim as arbitrator, and the provisions of the Arbitration Law will govern the matter, with certain restrictions; in addition, a court hearing a civil matter has been empowered, with the parties’ consent, to decide a matter before it by way of settlement (section 79A of the Courts Law) or to refer a matter, with the parties' consent, to arbitration or conciliation (sections 79B and 79C of the Courts Law). The said authorities are all vested in the court by virtue of statute. They assume that the subject of the dispute is within the subject matter jurisdiction of the court hearing the case and they give it special procedural means that are intended to facilitate and expedite the process of deciding the dispute and bringing about a just result. The various judicial instances have not been generally empowered by law to hear and decide matters that are not included in the scope of their subject matter jurisdiction by virtue of the parties' agreement, either as arbitrators or otherwise. Since such authority has not been conferred to them, it is, ipso facto, denied and does not exist.

The Rabbinical Courts are an integral part of the Israeli judicial system. They were established by virtue of the Rabbinical Courts Jurisdiction Law and they derive their power and authorities from the state statute. They have nothing other than what is vested in them by the statute, and they are subject to the set of powers of the statute in their judicial work, as interpreted over the years by case law. Along those lines, this Court has held in the Katz Case that the Rabbinical Court is not empowered to issue a Letter of Refusal in monetary matters that is intended to compel a party to submit to the Rabbinical Court's jurisdiction by ostracizing and disgracing the recalcitrant party; and in HCJ 2222/99 Gabai v The Great Rabbinical Court PD 54(5) 401, the opinion was expressed that the Rabbinical Court lacks legal authority to issue a forced settlement decision, without the parties' consent, thus forcing a judgment on the parties without determining facts on the basis of evidence, if it is unable to decide in accordance with the law.

It emerges from this that the parties' agreement as such cannot, per se, grant jurisdiction to the Rabbinical Court, unless, it has been recognized by the law as a primary source of authority. Thus, the parties' agreement has been recognized as a source of the Rabbinical Court's jurisdiction pursuant to section 9 the Rabbinical Courts Jurisdiction Law, in matters of personal status of Jews pursuant to article 51 of the Palestine Orders in Council or according to the Succession Ordinance, which are within the parallel jurisdiction of the Rabbinical Court and the civil instance. Nevertheless, the Rabbinical Court does not have power to hear and decide a matter that is not of the kind found within its exclusive jurisdiction in accordance with the statute or within its parallel jurisdiction, even if the parties have given their consent to its jurisdiction. Such agreement does not derive from a legally recognized source of authority in the law and it cannot, per se, vest jurisdiction in a state judicial instance.

The Rabbinical Court's Jurisdiction by Virtue of an Arbitration Agreement

16. According to the same line of reasoning, the Rabbinical Court has no power and authority to decide a dispute as an arbitrator by virtue of an arbitration agreement between the parties in a matter, which by its nature is not within its legal jurisdiction. The Court has not been vested with jurisdiction by law to decide disputes as an arbitrator and the parties' agreement cannot vest it with such power.

The issue of the Rabbinical Court's jurisdiction to arbitrate financial and other matters that go beyond the powers granted to it in accordance with the Rabbinical Courts Jurisdiction Law has caused consternation and confusion over the years. It appears that, in reality, the Rabbinical Court assumes the role of arbitrating matters that are beyond the scope of its subject matter jurisdiction (Katz Case, ibid, pp. 606-8; CA 376/62 Bachar v. Bachar, PD 17(2) 881, 882, 885; CA 688/70 Doar v. Hamami, PD 25(2) 396, 399; M. Alon, Jewish Law – History, Sources and Principles, third edition, vol. III, 5748, 1529). Justice Barak considered the inherent difficulty of a state judicial instance's need to adjudicate a dispute by arbitration where it was not empowered to do so by law, saying:

"The first possible argument is that the motion to the Rabbinical Court is like that to an arbitrator and embodied in the Arbitration Law, 5728-1968. That possibility – which has used in practice and can be encored as a year-long custom - raises serious problems in principle. Thus, for example, it can be asked whether it is proper for a judicial entity, whose powers are prescribed by law, to assume additional judicial powers, by being empowered as an arbitrator. Is it conceivable that parties would motion the magistrate’s court to try a pecuniary claim, that is outside its jurisdiction, as an arbitrator? From the state's point of view, is it justifiable to use judicial time and tools (whether of the civil or religious courts) for matters outside the jurisdiction that the law has granted the judicial authorities? Is there no fear that the public be confused as to which decisions the judicial instance has awarded as the government and those that it has awarded as arbitrator?"

(HCJ 3023/90 Jane Doe (a minor) v. The Rehovot Regional Rabbinical Court PD 45(3) 808, 813-14; see also S. Ottolenghi, Arbitration, Law and Procedure (fourth edition, 5765) 167-8; Schiffman, ibid, vol. I, 37.)

In HCJ 2174/24 Kahati v. The Great Rabbinical Court, PD 50(2) 214, this Court (per Justice Dorner) once again referred to the practice, adopted from time to time by the Rabbinical Courts, of deciding disputes as arbitrators in matters that are not within their jurisdiction. It expressed skepticism with respect to the validity of the practice. However, as in the previous case, it again left this question open without making any conclusive ruling, since such a ruling was not necessary in that case (cf. Aminoff, ibid, pp. 792-3).

17. There is indeed an inherent difficulty in recognizing the Rabbinical Court's power to decide a dispute in a matter on which it has not been given jurisdiction by law (cf. Ottolenghi, Dispute Resolution by Alternative Means, Israeli Law Yearbook, 5752-5753, p. 535, 550-1). In the past, the Mandate government empowered the Rabbinical Courts to act as arbitrators by means of section 10(d) of the Israel Knesset Regulations of 1927, but upon the establishment of the State, the “Israel Knesset”, within its meaning under the Mandate, ceased to exist and it was held that those Regulations no longer had any force or effect (Crim. App. 427/64 Yair v. The State of Israel PD 19(3) 402; HCJ 3269/95, ibid, p. 622-3; Schiffman, ibid, p. 39). It cannot therefore be argued that the said section might serve as the source of the Rabbinical Courts' power as arbitrators. Moreover, upon enactment of the Arbitration Law, it was proposed that an arbitration decision made by a religious court when ruling as an arbitrator would in all respects, except with regard to the appeal, be treated as a judgement of the court sitting in accordance with its jurisdiction prescribed by statute, and that the award would not require confirmation under the Arbitration Law. That proposal was not accepted (Knesset Proceedings 5728, pp. 2966-7).

It is indeed difficult to settle the governing perception that views the judicial system as an arm of government, which derives its power and authority from statute, while acknowledging the possibility that the selfsame system can acquire other subject matter authorities deriving merely from the parties' agreement that do not originate from the empowering law. The Israeli Rabbinical Courts, that are part of the Israeli judicial system, integrate with the said perception and, like the other judicial instances, operate in accordance with the principle of legality of the arms of government (see the dissenting opinion of Justice Tal in the Katz Case, distinguishing between the power of religious courts as a state authority and the power they have, in his opinion, by virtue of Jewish law, which is not connected with state law).

18. Apart from the essential difficulty inherent in the judicial decision of the Rabbinical Court as an arbitrator, which is not consistent with the principle of legality of the government authorities, other difficulties arise from the said procedural practice. The practice blurs the spheres of the Court's own activity in respect of the procedural basis upon which its decision rests: is it a decision within the scope of the Court's state power that is subject to review by the High Court of Justice in accordance with section 15 of the Basic Law: the Judiciary, or is it an extra-statutory power that is built on a different foundation originating from the parties' agreement and subject to review by a different judicial instance, like the District Court, in accordance with the Arbitration Law (cf. Jane Doe Case, ibid, para. 7)? In more than a few cases the parties might misunderstand the nature of their agreement to vest jurisdiction in the Rabbinical Court as they do not always understand the meaning and implications of their consent. Moreover, usually, in the course of such adjudication, strict attention is not paid to enquiring into the existence of an arbitration agreement or the application of the Arbitration Law and the rules pursuant thereto, such, for example, the mechanism for the confirmation and revocation of an arbitral award and the role of the District Court as the competent instance in accordance with the Arbitration Law (Ottolenghi, ibid, p. 168; Dichovski, The Standing of a Rabbinical Court Dealing with Property Law As Arbitrator, The Jewish Law Yearbook 16-17 (5750-5751) 527; MF 268/88 Delrahim v. Delrahim, DCJ 49(3) 428; SC 2329/99 Kfir v. Kfir, PD 55(2) 518, para. 5). An arbitral judgment made by the Rabbinical Court frequently does not undergo confirmation or revocation proceedings in the District Court as required by the Arbitration Law for the purpose of its execution, and the Rabbinical Court has no power to confirm an arbitral judgment (Kahati, ibid, p. 220; HCJ 5289/00 Mograbi v. The Great Rabbinical Court, Takdin Elyon 2000(2) 581; Kfir Case, ibid, para. 5). Furthermore, a situation in which the District Court, by virtue of the Arbitration Law, might oversee the Rabbinical Court's decisions as an arbitrator might harm the proper balance between the instances and aggravate the tension between the civil and religious judicial arms (A. Porat, The Rabbinical Court As Arbitrator, Kiriat Mishpat II (5762) 503, 521-4; Dichovski Case, ibid, p. 529).

The Rabbinical Court, purporting to act as an arbitrator between the parties, still operates under cover, and with the characteristics, of its state role. To that end it makes use of the court's physical and organizational system, which is financed by the state; it adjudicates disputes as an arbitrator in the scope of the court calendar, as part of its ordinary work; the overall services, the organizational and professional arrangement and the government budget are also used by it in that function, which by its nature does not have a state character. The time that it should devote to matters of personal status in its official capacity is partly assigned by it to a different judicial function that is not for the state, despite appearing to carry the state seal in the eyes of the public at large, who finds it difficult to distinguish between the judicial function and the extra-statutory function performed by the Court. This intermingling of functions is inconsistent with the principle of legality and a correct definition of the functions and powers of a state judicial instance (Katz Case, ibid, p. 608; Schiffman, ibid, pp. 37-8).

19. Mention ought to be made to the approach of Prof. Shochatman in his paper entitled The Rabbinical Courts' Jurisdiction in Matters Other Than Personal Status (Bar Ilan University Yearbook on Humanities and Judaism, vols. 28-29 (5761) p. 437, p. 449 et seq.). As he sees it, the Rabbinical Court might acquire jurisdiction by virtue of the parties' agreement in matters outside its jurisdiction in accordance with the Rabbinical Courts Jurisdiction Law by virtue of section 15(d)(4) of the Basic Law: the Judiciary, thereby acquiring jurisdiction as an arbitrator. According to that Law, which defines the High Court of Justice's power to review religious courts, the question of a religious court's jurisdiction can only be referred to this instance when it was raised at the first opportunity. The author infers from this that where there is prior agreement between the parties to vest subject matter jurisdiction in the religious court, a party who has so agreed may not later dispute jurisdiction. By virtue of that preclusion the religious court acquires subject matter jurisdiction, and the High Court of Justice is itself precluded from intervening therein. According to this approach, such an agreement vests subject matter jurisdiction and is not limited solely to matters of personal status. It might encompass numerous spheres that are beyond the subject matter jurisdiction of the religious court, as defined in the Rabbinical Courts Jurisdiction Law.

I cannot agree with this position. The interpretation expressed by Prof. Shochatman assumes that it is possible to recognize the existence of subject matter jurisdiction of an Israel state judicial instance by means of the parties' consent, combined with the doctrine of preclusion and estoppel that prevents someone who has agreed to jurisdiction from later disputing it. That approach is fundamentally inconsistent with the principle of legality that obligates judicial instances, including the religious courts. It is not consistent with the starting point whereby subject matter jurisdiction is vested in a judicial instance by a positive arrangement, and its existence is not to be inferred by an indirect interpretation of provisions of law concerning estoppel and preclusion. The Rabbinical Court's powers are granted to it by virtue of the Rabbinical Courts Jurisdiction Law and they cannot be added to by an indirect interpretation of statutory provisions, the purpose of which is not the vesting of power. Moreover, it has already been held (in Sima Levy Case, ibid, p. 618-19) that the element of preclusion emerging from section 15(d)(4) of the Basic Law: the Judiciary was not intended to vest in the Rabbinical Court subject matter jurisdiction that is not vested in it by virtue of the Rabbinical Courts Jurisdiction Law. The said preclusion is based on the assumption that the matter being adjudicated by the Rabbinical Court is of the type that are within the parallel jurisdiction of the civil court and Rabbinical Court, and regarding the latter, jurisdiction is conclusively consummated if both parties have agreed to it. In those circumstances, and only in them, a party's prior agreement or silence, or subsequent denial of jurisdiction, might lead to preclusion with respect to a lack of jurisdiction argument in the High Court of Justice - that and nothing more. An interpretation that takes the doctrine of preclusion out of context, and assumes the existence of a potentially unlimited Rabbinical Court subject matter jurisdiction, the final consummation of which is dependent only upon the parties' agreement, is directly opposed to the principle of legality, upon which the concept of democratic government is based. It is inconsistent with the subject matter jurisdictions vested by statute in the arms of government, including the judicial system.

Alternative Decision-Making Systems

20. The need of various different circles in the religious world to entertain alternative systems for the resolution of disputes is proper and recognized. Indeed, alternative rabbinical judicial systems that are not associated with the state rabbinical judicial system, which decide disputes between litigants in the community, are recognized. They can be granted powers to act as arbitrators by agreement of the parties. The need of different communities for alternative dispute resolution systems specific to them can be met by reference to internal arbitration frameworks that are not part of the state judicial system, within which disputes can be settled by virtue of the parties' agreement. This alternative course to litigation in the state judicial instances can be developed and strengthened in accordance with the different needs and preferences of the communities. This was considered by Justice Zamir in the Katz Case (ibid, p. 606), who stated:

"As is known, there are still observant Jews who prefer to litigate in matters of property according to religious law before a religious court rather than the state court. The state's law does not preclude that, if both parties to the dispute so desire, and it is even willing to give the force of arbitration to such litigation, if the litigants fulfil the provisions of the Arbitration Law. Indeed, in practice, such courts exist in various communities around Israel, not by virtue of state law or as official institutions but as private entities. That is, for example, the case of the rabbinical court of the Edah Chareidis [the Haredi Community] in Jerusalem. However… in these cases we are not dealing with a private entity but a state court, and the law applies to it just as any other of the state's courts. Like any court, in fact, like any government agency, the Rabbinical Court is also subject to the principle of legality, meaning that it has nothing other than what was granted to it by the law… In this respect, the Rabbinical Court in Jerusalem is distinguished from the rabbinical court of the Edah Chareidis in Jerusalem. The Israeli Rabbinical Court, which has jurisdiction in accordance with the Basic Law: the Judiciary, is not like one of the rabbinical courts of the Jewish communities in the Diaspora. Unlike them, it has the power and authority of a government institution. So too, unlike them, it is also subject to the restrictions that apply to any government institution".

Consensual Resolution – Looking to the Future and to the Past

21. The scope of the Rabbinical Courts' subject matter jurisdiction to decide a dispute by virtue of the parties' agreement outside the framework of the law looks to the past and the future. It calls into question the validity of the Court's rulings based on the parties' agreement outside the scope of the statute, not merely henceforth, looking to the future, but also with respect to the past. The outlook to the future seeks to find a binding definition of the limits of the Rabbinical Court's jurisdiction and to strictly observe those limits hereafter. However, the outlook to the past calls into question the binding legal validity of the Rabbinical Court's decisions that have been made over the years by virtue of the parties' agreement as aforesaid. That issue is far from simple; there is no need to decide it here, and it will wait until its time comes.

From the General to the Particular

22. Let us return to the respondent's suit against the petitioner in the Rabbinical Court and examine whether it is within the subject matter jurisdiction of the Rabbinical Court; the test of jurisdiction depends on the nature of the cause of action, and whether the cause falls within the jurisdiction of the Rabbinical Court.

The Cause of Action – Enforcement of a Contractual Indemnity Clause

23. The respondent's cause of action in the Rabbinical Court is the enforcement of a contractual clause concerning property, which is contained in the divorce agreement that was made between the couple for the purpose of the divorce proceedings. It provided that if the respondent were sued for an increase in child support and the satisfaction of any of the children's needs or if a stay of exit order was granted at the initiative of the wife, then the petitioner would compensate him, in the language of clause 4(e) of the agreement, with half the property. That provision is also mentioned in clause 5 of the agreement, which is headed "Indemnification", and according to the substance of the provision, and also its location and wording, it is an indemnity clause. The respondent sues for the enforcement of a property condition for his indemnification due to a breach of contract by the wife, and he gave expression thereto by heading his claim as one for "specific performance". That is to say, we have here a property claim for the enforcement of the contractual indemnity clause in a divorce agreement that received the effect of a judgement of the Rabbinical Court and further to which the parties' divorce was completed.

The Rabbinical Court's Jurisdiction to Adjudicate a Property Claim for the Breach of a Contractual Indemnity Clause in a Divorce Agreement after the Parties' Divorce

Does the respondent's suit, according to its cause, fall within the scope of one of the sources of the Rabbinical Court's jurisdiction? Because of the great similarity between the instant matter and the case of Sima Levy, we shall draw guidance and direction from that case.

Original – Primary Jurisdiction

24. The source of the Rabbinical Court's exclusive jurisdiction in matters of marriage and divorce, as provided in section 1 of the Rabbinical Courts Jurisdiction Law, does not apply in the instant case because the subject of the suit is a property matter after the dissolution of the parties' marriage and a matter of "marriage and divorce" is, no longer involved. Nor is it a matter "connected with a divorce suit", including support for the wife and children, within the meaning of section 3 of the Law. After divorce, a property claim in respect of the breach of an indemnity clause is not connected with the divorce suit, which has ended and no longer exists. The respondent's cause of action is a new one, the subject of which is the enforcement of a divorce agreement or an application for the enforcement of a divorce judgment, based on a divorce agreement. The cause is based on the breach of a divorce agreement after the award of the divorce and completion of the couple's divorce, and such a new cause is naturally not to be bound up with the matters that were in the past connected with the divorce suit.

With regard to the property cause of action, which surrounds the breach of an indemnity clause of a divorce agreement, the Rabbinical Court does not have jurisdiction by virtue of the parties' agreement pursuant to section 9 of the Law, which deals with the Rabbinical Court's parallel jurisdiction that is vested by virtue of the parties' agreement in matters of personal status according to article 51 of the Palestine Orders in Council and the Succession Ordinance. Section 9 of the Rabbinical Courts Jurisdiction Law raises the question of whether jurisdiction can be vested in the Rabbinical Court by consent in a matter included in its parallel jurisdiction after completion of the divorce, or whether its jurisdiction pursuant to that provision is limited solely to matters within its parallel subject matter jurisdiction that arise in connection with, and until, the divorce and its completion, but not afterwards. Whatever the answer to this question, it is in any event clear that the subject matter jurisdiction pursuant to section 9 is limited solely to the matters mentioned therein, that is, matters of "personal status" as defined in the Palestine Orders in Council and the Succession Ordinance. In a dispute that is not within the bounds of those matters, even the parties' agreement cannot vest jurisdiction in the Rabbinical Court (Schiffman, ibid, vol. I, p. 37; Jane Doe Case, ibid, p. 812). The power of the parties' stipulation is restricted solely to the matters defined by the statute (MF 358/89 Zalotti v. Zalotti PD 43(4) 41, 42; Porat, ibid, p. 510).

Clause 11 of the divorce agreement in this matter looks to the future, and provides that if differences arise between the couple after the divorce, then they undertake to bring their claims solely in the Rabbinical Courts. That agreement is effective only to vest jurisdiction in the Rabbinical Court pursuant to section 9 of the Law in respect of matters of personal status according to article 51 of the Palestine Orders in Council or the Succession Ordinance. A property claim for the enforcement of a contractual indemnity clause in a divorce agreement is not a matter of personal status within the meaning of the Palestine Orders in Council or the Succession Ordinance, and thus, the parties' contractual agreement in respect of such a dispute cannot vest jurisdiction in the Rabbinical Court pursuant to section 9 of the Law.

The Rabbinical Court therefore does not have original jurisdiction to adjudicate the respondent's claim.

"Ancillary" Inherent Jurisdiction

25. Does the Rabbinical Court have "ancillary" inherent jurisdiction to adjudicate the respondent's claim? The answer is in the negative.

In the instant case, the Rabbinical Court's ancillary jurisdiction is irrelevant insofar as it relates to the revocation of a divorce award because of a defect in the making of the divorce agreement. It is not a defect of fraud, mistake, deceit, duress or similar that occurred in the making of the agreement and that might have given the Rabbinical Court ancillary jurisdiction to consider its revocation.

Similarly, the Rabbinical Court has not acquired ancillary jurisdiction by virtue of a material change in circumstances after granting the divorce judgment that allegedly justifies revoking the divorce agreement and the divorce judgment in order to achieve a just result. On the contrary, the respondent's suit is for the specific performance and enforcement of the divorce agreement, not its revocation. Although, in the Great Rabbinical Court, the respondent pleaded that his suit was to revoke the divorce agreement because, according to him, the Get had been given by mistake (the Great Rabbinical Court's decision of May 4, 2003). These arguments were made as an "embellishment" at a late stage of the trial and do not reflect the real cause of action; the motion to revoke the divorce agreement and the act of divorce is inconsistent with the respondent's claim in his suit to compensate him with half the property (the apartment, the contents and the gold), which is nothing other than a claim for the enforcement of the divorce agreement (cf. CA 105/83 Menashe v. Menashe PD 38(4) 635; Yadin, The Contracts (Remedies for Breach of Contract) Law 5731-1970, Second Edition, 5739, p. 44).

Again, the Rabbinical Court's ancillary jurisdiction to retain jurisdiction in a matter pending before it until the proceedings conducted before it are concluded will not vest it with jurisdiction in this case. The Regional Rabbinical Court had granted a final and unconditional judgment and awarded the effect of judgement to the divorce agreement. Indeed, the divorce agreement does contain an indemnification provision, which by its nature looks to the future, but this fact cannot transform a judgement that gave effect to a divorce agreement into a judgment that is not final, leaving the Rabbinical Court with jurisdiction that has not yet been exhausted to continue adjudicating with respect to the divorce agreement's future performance in this property matter. A financial-property dispute that has arisen between the parties after the award of judgement gives rise to a new cause of action and necessitates the institution of new proceedings in accordance with the jurisdictional framework prescribed by law (see Sima Levy Case, pp. 607-608; CA 468/85 Dondushanski v. Don PD 40(2) 609; D. Bar Ofir, Execution - Proceedings and Law (Sixth Edition, 2005, pp. 164-5)).

Nor has the Rabbinical Court acquired jurisdiction to hear this matter by virtue of the doctrine of "continuing jurisdiction". It should be kept in mind, that continuing jurisdiction is vested where an instance has tried a particular matter in the past and, in special circumstances, a need has arisen to vacate or modify an earlier decision due to a material change that has occurred in the circumstances upon which the original decision was based such, for example, in matters of child support and custody. The instant case is fundamentally different. The motion does not seek to modify or revoke the divorce agreement made between the parties. On the contrary, it seeks to enforce the agreement, and such a claim has no place within the continuing jurisdiction vested in the Rabbinical Court. A decision on property matters is a final one and not a matter for continuing jurisdiction, as the Court stated in Sima Levy (Justice Cheshin, ibid, p. 611):

"As distinct from decisions concerning the payment of support or child custody – which by their nature are not final and the doctrine of continuing jurisdiction applies to them – a decision on a property matter is in principle a final one" (emphasis added).

The property aspect of the divorce agreement, including the indemnification clause, and the divorce judgment that gave it effect, are therefore not within the Rabbinical Court's continuing jurisdiction.

And finally, the Rabbinical Court does not have ancillary jurisdiction to adjudicate the new cause that arose following the divorce agreement in order to interpret the agreement. Firstly, the Rabbinical Court, having completed and exhausted its power to rule on the matter of divorce, no longer has ancillary power to interpret the divorce agreement or the divorce judgment (cf. HCJ 897/78 Yigal v. The National Labour Court, PD 33(2) 6, 7; CA 5403/90 The State of Israel v. RAM Revhiat Ibrahim PD 46(3) 459). Moreover, in the instant case, the question of the agreement’s interpretation hasn’t risen as such, but a claim for its enforcement has been brought instead. Hence, the Rabbinical Court does not have ancillary jurisdiction in this respect either.

In conclusion: the Rabbinical Court does not have primary original jurisdiction, or ancillary inherent jurisdiction, to adjudicate a property claim for enforcement of a contractual indemnification clause in a divorce agreement that has given the effect of judgement, once the couple's divorce has been completed.

The Rabbinical Court's Jurisdiction by Virtue of Consent

26. As can be recalled, clause 11 of the divorce agreement provides that differences between the couple after the divorce are to be adjudicated solely in the Rabbinical Courts. The couple's agreement as such cannot vest the Rabbinical Court with jurisdiction where there is no legal source for it. The agreement in this case concerns something that is not a matter of personal status according to section 9 of the Rabbinical Courts Jurisdiction Law, and it was therefore given for this purpose outside the scope of the law, and is ineffective.

Indeed,

"where the subject of the litigation is not within the jurisdiction of a particular judicial entity, no agreement in the world has power to grant the entity jurisdiction that the statute has not given it; it is the statute that gives and it is the statute that takes away" (Sima Levy, p. 617).

The Regional Rabbinical Court's decision of June 18, 2002 and the Great Rabbinical Court's decision of May 4, 2003, according to which the Rabbinical Courts have jurisdiction in principle to try the claim by virtue of the law, are inconsistent with its provisions.

The Rabbinical Court's Jurisdiction by Virtue of an Arbitration Arrangement

27. It was further argued that clause 11 of the divorce agreement is an arbitration provision that vests the Rabbinical Court with power as an arbitrator to adjudicate the respondent's claim of a breach of the agreement's indemnification provision. Although not strictly necessary, we have considered the question in principle of whether a Rabbinical Court can be empowered to decide a dispute between litigants in arbitration, in a matter that is not within its subject matter jurisdiction according to the statute. We have answered that question in the negative and the answer is applicable to the case herein.

In the instant case, the conclusion that the Rabbinical Court lacks jurisdiction to try the matter as an arbitrator is also reinforced by another reason. Studying the contents of clause 11 of the divorce agreement shows that it cannot be construed as an arbitration clause, equal to an "arbitration agreement" between the parties. It is well known that the power of an arbitrator to decide a dispute between parties derives from an arbitration agreement. Without an arbitration agreement, no arbitration arises. An "arbitration agreement", according to the Arbitration Law, is "a written agreement (between parties) to refer to arbitration a dispute that arises between them in the future, whether an arbitrator is named in the agreement or not" (section 1 of the Arbitration Law). The condition precedent for arbitration is therefore the existence of an agreement to refer a dispute to arbitration. If parties have agreed to refer disputes between them to the decision of some entity but it is not clear that a decision in arbitration is involved, then there is no arbitration agreement (ALA 4928/92 Aziz Ezra Haj v. Tel Mond Local Council PD 47(5) 94; Ottolenghi, ibid, pp 9-41).

In this case, the parties undertook to refer any disputes arising between them after the divorce solely to the Rabbinical Courts. No intention can be inferred from that agreement to refer such disputes to the Rabbinical Court qua arbitrator. In Jane Doe (para. 6 of Justice Barak's opinion), as in the case herein, the couple mistakenly believed that their consent to the Rabbinical Court's adjudicating disputes connected with the divorce agreement could vest it with power to decide as a state judicial instance, rather than as an arbitrator. Indeed, the wording and contents of clause 11 of the divorce agreement do not demonstrate the parties' intention to treat it as an arbitration clause purporting to empower the Rabbinical Court to act as arbitrator. Consequently, even if we assumed that the Rabbinical Court could be empowered to act as an arbitrator in matters in which it has no original or ancillary jurisdiction by virtue of the law, there is still no effective arbitration agreement, as pleaded.

A Note before Closing

28. The issue of the Rabbinical Court's power to adjudicate by virtue of the parties' agreement, outside the scope of the law, has arisen in earlier contexts in the past, and although different opinions have been expressed in such respect by the courts, no binding decision has been necessary in connection therewith. This absence of a ruling has permitted the continuation of a procedural practice that is inconsistent with the organizational structure of the courts and the division of powers between them in accordance with state law. This custom has enabled a judicial practice that is inconsistent with the principle of the administration's legality and the legality of the judicial system. The time has come to move from the stage of expressing an opinion to the stage of making a ruling, which is necessary to ensure the proper function of the judicial system within the scope of its powers, and thereby to protect the basic foundation that defines the boundaries of its activity based on the principle of legality and the rule of law. This will not harm, in a any way, the need and ability of various social groups to entertain alternative resolution systems outside the state judicial instances, based on the principles of arbitration regulated by law or on the basis of other agreed and recognized rules of procedure. However, at the same time, it is necessary to safeguard, and protect against blurring the boundaries between the state judicial systems and alternative resolution systems that are built on the parties' agreement, in order to protect the proper operation of the different arms of the judicial system and the public's confidence in the way in which its powers are exercised and its judgments.

Conclusion

29. By deciding the respondent's lawsuit against the petitioner for the enforcement of a contractual indemnification clause in the divorce agreement, the Rabbinical Courts exceeded the power vested in them by law. Consequently, the decisions of the Regional Rabbinical Court and the Great Rabbinical Court in the respondent's claim are void. The result is that the order nisi that has been awarded should be made absolute. The respondent shall bear the petitioner's professional fees in the sum of NIS 12,000.

Vice President (Ret.) M. Cheshin

I concur.

Justice S. Joubran

I concur.

Therefore, held as stated in the opinion of Justice Procaccia.

Awarded today, this eighth day of Nissan, 5766 (April 6, 2006).

___________________	___________________	___________________
Vice President (Ret.)	Justice	Justice

Full opinion:

Amir v. Great Rabbinical Court in Jerusalem.pdf

Link to original Hebrew text of decision on official ISC website:

http://elyon1.court.gov.il/files/03/380/086/R08/03086380.r08.pdf

Bar-On v. Knesset

Case/docket number:

HCJ 4908/10

Date Decided:

Thursday, April 7, 2011

Decision Type:

Original

Topics:

Administrative Law

Judicial review

Basic Law: Human Dignity and Liberty

Basic Law: The Government

Government Contracts

Economy

Abstract:

Is it possible to circumvent a constitutional principle enshrined in a temporary provision set to remain in effect only for the duration of the current government’s administration term?

Background: on June 22, 2010 Basic Law: The State Budget (Special Provisions) (Temporary Provisions) (Amendment) (hereinafter: “Basic Law Temporary Provision” or “the Law”) was passed to set the budget for years 2011 and 2012, as a biannual budget in one statute. Basic Law Temporary Provision is a continuation of a previous Basic Law that established, also in a temporary provision, that the state budget for years 2009 and 2010 would be a biannual budget (hereinafter: the original temporary provision). Basic Law Temporary Provision, like the original temporary provision, revises the provisions established in sections 3(a)(2), 3(b)(1) and 3A of Basic Law: The State Economy according to which the state budget is to be set for one year only. The Petitioners ask the Court to pronounce Basic Law Temporary Provision void, or alternatively to strike it down. The parties’ arguments raise two primary questions. First, whether Basic Law Temporary Provision is indeed a basic law for all intents and purposes? Does using a temporary provision infringe the validity or status of the Law and a basic law? And assuming that Basic Law Temporary Provision is indeed a basic law, should it be struck down for changing the balance of powers between the Knesset and the Government in the process of approving the state budget?

The High Court of Justice (by President Beinisch, with an expanded panel of seven justices) denied the petition for the following reasons:

The formal test: the use of the term “basic law” and the fact that the year of its legislation is not noted in the title were adopted in the case law as a test for identifying basic laws. However, the argument that the formal test was overly simplistic and that a substantive test or a combined test designed to identify a basic law were in order has been raised more than once. Still, even this proposal has both advantages and disadvantages. In this petition, there is no need to determine the issue of how to identify a basic law. Moreover, both applying the formal test and applying the combined test lead to the conclusion that Basic Law Temporary Provision is a basic law.

Does using a temporary provision infringe the validity or status of the Law as a basic law? As a general rule, “it is highly doubtful whether the motivations for enacting a basic law – even were it possible to argued they are improper – may themselves constitute a legal flaw warranting judicial review.” Therefore, even were the motivation for enacting the Law, as the petitioners argue, the coalition’s desire to avoid needing to approve the Budget Law once a year, this reason in itself does not call for judicial review, particularly where the requested remedy is declaring a basic law void. On a separate level, there is the question whether the mere fact that the Law was enacted as a temporary provision constitutes an “abuse of power” of the constitutive authority, in a way that infringes the validity of Basic Law Temporary Provision as a basic law.

In an ideal situation, where there is a regulated and rigid mechanism for changing and amending the constitution, it is doubtful whether changing the constitution by way of a temporary provision would be possible. However under the current state of the law, in the absence of a Basic Law: The Legislation, the restrictions on legislative procedures or the amendments of basic laws are limited, and in order to enact a basic law in Israel there is no need for special procedures in the Knesset. Under these circumstances, it can not be summarily determined that a basic law can never be changed by way of a temporary provision and it cannot be said that the mere fact that the basic law was enacted by way of a temporary provision inherently voids it or puts it in a lower legislative status than a regular statute, as the Petitioners argue.

However, in can also not be said that this practice is free of difficulties. Setting a temporary legislative arrangement does indeed harm the status of basic laws and should be done sparingly, if at all. In certain cases, which cannot be detailed or determined in advance, it is possible that enacting a basic law by way of a temporary provision may amount to an “abuse of power” of the title “basic law” in a way that would justify judicial intervention in the basic law’s legislation. In examining each case, we must consider, among others, the existence of extreme circumstances that justify making a temporary arrangement rather than a permanent one, the subject matter regulated by the basic law, and the measure of the temporary basic law’s infringement upon principles of governance and other basic rights.

Having said all this, the Knesset would do better to refrain from using temporary provisions to amend constitutional instructions in the future. In any event, as long as no path was established for legislating, changing, and amending basic laws, such a legislative procedure must be reserved for extreme, uncommon and unique circumstances, in light of the status of basic laws.

Other arguments regarding the reasonability of the basic law and the majority with which it was passed in the different readings in the Knesset were similarly rejected. Without taking any position on the advantages or disadvantages of a system of biannual budgeting, considerations of the Law’s reasonability are not among the considerations that warrant the Court’s intervention in basic laws. Arguments that the Law should have been passed by a majority of 61 Knesset Members in all three readings are also unsubstantiated, as section 36A of Basic Law: the Knesset is not protected. Any change to it, therefore, does not require a special majority. The argument that Basic Law Temporary Provision explicitly or implicitly changes section 24 of Basic Law: The Knesset, and thus the Knesset must have enacted it with a special majority, must also be rejected. Section 34 is not a general section that defines when the Knesset can be dispersed, but rather a section the addresses the Knesset’s authority to decide to disperse – a decision that may be made by a statute passed by a majority of Knesset Members. Therefore, moving to a biannual budget cannot be considered an implicit change to section 34 of Basic Law: The Knesset.

Additionally, the argument that the Law must be struck down because it changes the balance of powers between the Knesset and the Government in the process of approving the budget was also rejected. This argument puts up for discussion the doctrine of the non-constitutional constitutional amendment – the Court’s authority to void a Basic Law because it infringes the basic principles of our legal system. This doctrine was discussed at length in foreign legal systems and it is also mentioned in several obiter dicta of this Court’s jurisprudence, but it has yet to be used in Israel. Indeed, there are several basic principles that may not be altered, which are at the foundation of our existence as a society and as a state, any harm to which may raise hard question of authority, including doubts as to whether they alter the constitution or establish a new constitution. However, in this case, and without determining the question of the application or the scope of the application of the non-constitutional constitutional amendment doctrine in Israel, the harm caused to the Knesset as a result of the move to a biannual budget does not amount to a harm to the over-arching principles of our system in a way that justifies voiding the basic law under the non-constitutional constitutional amendment – regardless of the scope of its application in Israel.

Finally, the High Court of Justice called for completing the legislative project and enshrining the procedures for enacting basic laws and their amendment through Basic Law: The Legislation.

Voting Justices:

Beinisch, Dorit

Primary Author

majority opinion

http://elyon1.court.gov.il/files/10/080/049/n08/10049080.n08.pdf

Author

concurrence

Naor, Miriam

Author

concurrence

majority opinion

majority opinion

majority opinion

majority opinion

Full text of the opinion:

HCJ 4908/10

1. MK Ronnie Bar-On

2. Kadimah Party

1. Israel Knesset

2. Speaker of the Knesset

3. Knesset Finance Committee

4. Joint Committee of the Finance Committee and the Law and Constitution Committee for deliberation of the Economic Efficiency and State Budget for the Years 2009 and 2010 Bill

5. Chairman of the Finance Committee

6. Chairman of the Law and Constitution Committee

7. Government of Israel

8. Prime Minister of Israel

9. Minister of Finance

The Supreme Court sitting as the High Court of Justice

[January 11, 2011]

Before President D. Beinisch, Vice President E. Rivlin, Justices A. Grunis, M. Naor, E. Arbel, E. Rubinstein, U. Vogelman

Israeli legislation cited:

Basic Law: Freedom of Occupation

Basic Law: The Government (old and new)

Basic Law: Human Dignity and Liberty

Basic Law: Israel Lands

Basic Law: Jerusalem the Capital of Israel

Basic Law: The Judiciary

Basic Law: The Knesset

Basic Law: The Military

Basic Law: The President of the State

Basic Law: The State Budget (Special Provisions) (Temporary Provision) (Amendment)

Basic Law: The State Comptroller

Basic Law: The State Economy

Basic Law: The State Economy (Bills and Reservations Involving Budgetary Expenditures) (Temporary Provision) 2002,

Basic Law (Temporary Provision)

Budget Law 2012

Elections to the Eighth Knesset and to Local Government (Temporary Provision) Law 1974

Law of Return, 1950

Foreign legislation cited:

Basic Law for the Federal Republic of Germany, art. 79(d)

Constitution of the Republic of Turkey, art. 4

Israeli Supreme Court cases cited:

[1] CA 6821/93 United Mizrahi Bank Ltd. v. Migdal Cooperative Village [1995] IsrSC 49(2) 221.

[2] HCJ 5160/99 Movement for Quality Government in Israel v. Law and Constitution Committee [1999] IsrSC 53(4) 92.

[3] EA 1/65 Yardur v. Central Elections Committee for the Sixth Knesset [1965] IsrSC 19(3) 365.

[4] HCJ 142/89 La’Or Movement - One Heart and One Spirit v. Central Elections Committee for the Sixteenth Knesset [1990] IsrSC 44(3) 529.

[5] CA 733/95 Arpel Aluminium Ltd. v. Klil Industries Ltd. [1997] IsrSC 51(3) 577.

[6] HCJ 4676/94 Mitral Ltd. v. Israeli Knesset [1996] IsrSC 50(5) 15.

[7] HCJ 6427/02 Movement for Quality Government in Israel v. Israel Knesset (not yet reported, 11.5.2006).

[8] HCJ 4124/00 Yekutieli v. Minister for Religious Affairs (not yet reported, 14.6.2010).

[9] HCJ 1438/98 Conservative Movement v. Minister for Religious Affairs [1999] IsrSC 53(5) 337.

For the petitioners — E. Rosovsky, E Burstein

For respondents 1-6 — E. Yinon, G. Blai

For respondents 7-9 — D. Briskman, Y. Bart

Petition to the Supreme Court sitting as the High Court of Justice for an Order Nisi

JUDGMENT

President D. Beinisch

1. On 22.6.2010, Basic Law: State Budget (Special Provisions) (Temporary Provision) (Amendment) (hereinafter: the Law or Basic Law (Temporary Provision)) passed its second and third readings in the Knesset. Basic Law (Temporary Provision) provides that the state budget for the years 2011 and 2012 will be a biennial one, enacted in a single law. Basic Law (Temporary Provision) is the continuation of an earlier basic law that stated, also as a temporary provision, that the state budget for the years 2009 and 2010 would be a biennial one (hereinafter: Original Temporary Provision). Basic Law (Temporary Provision), like the Original Temporary Provision, changes the provisions of ss. 3(a)(2), 3(b)(1) and 3A of Basic Law: The State Economy, whereby the state budget is to be set for a single year only.

2. The background to the enactment of the said basic laws, as emerges from the pleadings of the parties, lies in the unfolding of events after the resignation of the then Prime Minister, Ehud Olmert. On 11.2.2009, general elections were held, and a new government was sworn in on 31.3.2009. Parallel to these events, the global economy was experiencing an economic crisis, one whose ramifications for the Israeli economy could not be assessed. These events made it impossible to approve the 2009 budget before the second half of the year, and the budget was based on that of the year 2008. On 5.4.2009 the Government decided to submit to the Knesset for approval a biennial budget for the years 2009 and 2010 by way of a temporary provision. The Explanatory Notes to the Bill stated that due to the unique situation that had arisen as a result of the delay in approving the state budget for the year 2009, and the negative impact of the global crisis on Israel, it was proposed to introduce a special arrangement, one that would apply to the state budget for the years 2009 and 2010.

3. The introduction of a biennial budget proved to be a successful experiment, as evident from the pleadings of the respondents and from the protocols of the discussions in the Joint Committee of the Finance Committee and the Law and Constitution Committee (hereinafter: the Joint Committee or the Committee). Senior officials in the Treasury were therefore of the opinion that the possibility of transitioning to a system of biennial budgets on a permanent basis should be considered. For this purpose, it was proposed to conduct a trial, for an additional two years, in which the budget would be biennial. Accordingly, a proposal was submitted to amend the Original Temporary Provision to make it applicable to the budget for the years 2011 and 2012 as well. In the Explanatory Notes to the Memorandum of the Basic Law (Temporary Provision) Bill it was noted that following the implementation of the biennial budget, the Government became aware of the advantages of this system of budgeting, leading it to think about changing the budgetary system in Israel. The Memorandum to the Bill lists the advantages of a biennial budget, together with the disadvantages of this system. For example, the creation of greater certainty for the government and the economy, and the freeing up of management resources in order to make long term plans comes up against the difficulty of predicting state income for a period of two years, which requires special professional experience. It was therefore proposed –

‘To conduct a full examination of the application of the biennial system by way of a trial in the years 2011 and 2012, as a temporary provision of the Basic Law, for two main reasons:

1. In the absence of recognized experience in other states, most of the learning will be done in “real time”, while implementing the first full biennial budget, as proposed.

2. In the course of the biennial budgetary period it will be necessary to examine the ability to devise a biennial budget and to act upon it, primarily from the perspective of dealing with the difficulties involved in devising a biennial forecast, as well as the need to adapt the provisions of the law, including the adaptations of the Basic Law, according to the experience that has accumulated.’

In the Memorandum to the Bill it was also mentioned that –

‘In view of the significance of the process of fixing the budget from the point of view of the regime, society and the economy, it is important that the process of consolidating a permanent arrangement of this matter and its enactment be done in a wise, orderly fashion, on the basis of the maximum amount of information that has accumulated, and accompanied by an appropriate public investigation. This is also taking into consideration the fact that amendment of basic laws ought to be done in moderation’ (Memorandum to Basic Law: The State Economy (Special Provisions) (Temporary Provision) (Amendment) pp. 4-5).

4. On 17.3.2010 the Bill was discussed in the plenum of the Knesset and passed its first reading, and on 22.6.2010 it passed its second and third readings. A few days later, MK Ronnie Bar-On and the Kadimah Party (hereinafter: the petitioners) filed the present petition. The petition raised three main questions in relation to Basic Law (Temporary Provision): first, can the principle stated in Basic Law: The State Economy, whereby the Knesset determines, annually, the priorities of the state in the process of approving the budget, be changed by means of a temporary provision which endures for the duration of the term of office of the present government? Second, is it possible, by means of a temporary provision with limited application, to nullify the constitutional principle whereby if the approval of the Knesset for the budget is not forthcoming once a year, the Knesset will be dissolved and new elections will be held? Third, is it possible to disturb the constitutional balance between the legislature and the executive branch by means of a temporary provision and without obtaining a majority of 61 Members of Knesset at each of the legislative stages?

5. The petition was first heard before three justices. At the end of the hearing, which was held on 4.10.2010, an order nisi was issued, with the agreement of the respondents, ordering them to appear and to show cause why the Court should not order as follows: that Basic Law (Temporary Provision) is void or alternatively that it should be voided; and that the Israeli Knesset acted ultra vires when it approved the amendment of the Basic Law by means of Basic Law (Temporary Provision) and with a majority of less than 61 Members of Knesset in the first and second readings. It was further decided that the panel of justices should be expanded. Accordingly on 11.1.2011 the Court held a second hearing with an expanded panel of seven justices.

In both the written and the oral pleadings the parties raised serious constitutional questions. A significant number of these questions have not yet been considered or decided in Israeli law. These questions relate, either directly or indirectly, to the status of the basic laws and to the way in which it is possible to refashion constitutional arrangements in Israel. The arguments of the parties also highlight the inherent difficulties in Israel’s constitutional system due to there being no Basic Law: Legislation, and in view of the fact that the formal requirements for amending most of the basic laws are few. Let us mention at this early stage that we believe it is possible at this time to leave some of the questions for future consideration. Although difficulty arises from the arguments of the petitioners, we are not convinced that the present case justifies unprecedented intervention in the legislation of the Knesset in its function as a constituent authority. At the same time, we find it appropriate to outline several principles regarding the legislation and the amendment of basic laws in Israel, in order to lay out a partial roadmap for the Knesset in the absence of Basic Law: Legislation.

Pleadings of the Parties

6. The petitioners have asked the Court to declare that Basic Law (Temporary Provision) is invalid, or alternatively, to strike it down. According to the argument, Basic Law (Temporary Provision) came about due to considerations connected to the survival of the Government, which sought to take advantage of its parliamentary majority in order to change basic principles of governance. The petitioners argue that approval of the Budget Law on an annual basis is considered a cornerstone of democratic policy, and it is the central tool in the hands of a parliament for overseeing the work of the government and the priorities that it sets. Basic Law (Temporary Provision) detracts from the capacity for oversight by the Knesset, and in fact, it is designed to weaken the Knesset vis-à-vis the government. Basic Law (Temporary Provision), so it is argued, is contrary to the longstanding trend to increase oversight of the government by the Knesset, inter alia by regulation of the specific times at which the government must present the budget to the Knesset plenum. The petitioners add that weakening the power of the Knesset has real practical significance, which manifests itself in preventing the possibility of dissolving the Knesset and toppling the government in the event that the budget is not passed. The petitioners argue that whereas for the purpose of toppling the government by means of a no confidence vote, the opposition must enlist a majority of at least 61 Members of Knesset, for the purpose of dissolving the Knesset and holding new elections by way of non-approval of the State budget, a majority of only 60 Members of Knesset is required. According to the petitioners, this is a very powerful tool, which can bring about a change in the leadership of the State, and it is available to the Knesset only once a year. Basic Law (Temporary Provision) confines the use of this tool to once every two years, in a manner that is detrimental to the intricate web of power and relations between the government and the Knesset.

Regarding the substance of the amendment to the Basic Law, the petitioners argue that in practice, this legislation suffers from lack of reasonability, for two main reasons. First, so goes their argument, it will not allow for effective oversight of the government by the Knesset, due to the amount of information that will be presented to the Members of Knesset in the case of a biennial budget, particularly if it comes together with a broad Omnibus Law of Arrangements in the State Economy, forestalling any possibility of studying the material in the period of time allocated for approval of the budget legislation. Secondly, the petitioners believe that advance approval of the budget for a period of two years requires that accurate predictions of state expenditures and costs be drawn up – a mission that according to them is impossible, especially in the Israeli reality. In addition, the petitioners stress that if the next state budget is not approved on the due date, then by law, the Budget Law for the year 2013 will be derived from the Budget Law of 2012, so that in fact, it is possible that the biennial budget law will actually become a triennial one.

The petitioners also challenge the fact that a basic law was amended by way of a temporary provision. They argue that the attempt to legislate a basic law in a temporary provision stands in clear contradiction to the case law of this Court, whereby basic laws are laws of an “eternal” nature that were designed to constitute chapters of the future constitution of the State of Israel. Therefore, it is argued, basic laws cannot be temporary laws, enacted ad hoc with the aim of serving the temporary political needs of a given majority at a particular time. It was further argued that Basic Law (Temporary Provision) does not merit being considered a basic law – both by virtue of a formal criterion and by virtue of a criterion of substance. According to the petitioners, the fact that the name of the Law mentions the years during which the temporary provision is intended to apply detracts from its validity as a basic law under the formal criterion, and the fact that the Law lacks an element of “eternity” detracts from its validity under the substantial criterion. Finally, the petitioners claim that the very process of enactment of Basic Law (Temporary Provision) was defective in that it was not passed with a majority of 61 MKs at each reading. The petitioners argue that this majority is required in view of the fact that Basic Law (Temporary Provision) limits the possibility of Members of Knesset dissolving the government and the Knesset through non-approval of the budget to only once every two years; for this reason, it constitutes an implicit change to s. 34 of Basic Law: The Knesset, which determines when the Knesset is permitted to dissolve itself prior to the end of its term; this, they argue, is an entrenched section.

Arguments of the Respondents

7. Respondents 1-6 (hereinafter: the Knesset) submitted their response to the petition on 16.8.2010, and their reply after the order nisi was issued, on 5.12.2010. In the response it was argued that even if Basic Law (Temporary Provision) “raises not inconsiderable difficulties with respect to damage to the parliamentary oversight of the Government and the balance of power between the Knesset and the Government,” these arguments still do not justify the intervention of this Court. The Knesset further argued that although there is no disagreement that laying down a norm concerning a biennial budget law in the framework of a temporary provision “raises an inherent conceptual difficulty”, this does not make of Basic Law (Temporary Provision) a “regular” or “inferior” law relative to other basic laws.

The Knesset’s reply cited at length the discussions that were held in the Finance Committee and the Joint Committee. It was also pointed out that most of the arguments raised in the petition were also raised in these Committees, whether by members of the Committee or by people who appeared before it, or by the legal advisors, including the Legal Advisor to the Knesset, the Legal Advisor to the Finance Committee, the Legal Advisor to the Ministry of Finance and the head of the Public Law Division of the Department for Legal Advice and Legislation in the Ministry of Justice. All the legal advisors referred to the difficulties raised by the Bill, including the difficulty inherent in amending a basic law by way of a temporary provision. The position of the Legal Advisor to the Knesset, as expressed before the Joint Committee, was that although “there is no dispute that a basic law and a temporary provision are contradictory things”, nevertheless, as long as the Knesset has not yet enacted Basic Law: Legislation, which is intended to regulate the process of legislation in Israel, the Knesset Rules of Procedure are the sole normative source for legislative procedure in the Knesset, and these do not make any provision regarding the enactment of basic laws or their amendment.

In the Knesset’s reply it was further argued that the petitioners’ contention that Basic Law (Temporary Provision) is not in fact a basic law, and that its normative status is inferior to that of a “regular” basic law, should be dismissed. According to the approach of the Knesset, the accepted criterion in Israel for identifying a basic law is that of form. Under this criterion, conferring the title “Basic Law” on the law and not mentioning the year of its enactment are sufficient to transform a piece of legislation from a “regular” law into a basic law. It was also argued that review of the contents of basic laws is permissible only in exceptional, extreme cases of detriment to the meta-principles of our legal system, and that the Knesset is competent to change the balance between the different authorities.

8. In their response, respondents 7-9 (hereinafter: the State) described the circumstances that led to the enactment of the Basic Law as a temporary provision, and principally, wanting to allow for a trial period in which the transition to a biennial budget as a permanent arrangement would be examined. According to the argument, the representatives of the Ministry of Finance believed that it was more appropriate to make a change in the basic laws that would expire automatically after two years than to make a permanent change in the basic laws – which, after a trial period – may prove to have been unnecessary. According to the approach of the State, opting for the enactment of a temporary provision that expires automatically after two years allows for the preservation of the stability of the basic laws and prevents their frequent amendment.

The State rejected the petitioners’ argument that the normative status of a temporary provision – whether enacted in the framework of a regular law or a basic law – is inferior to that of a regular law or a basic law. According to the State, because the process of legislating a “regular” basic law and a basic law by way of temporary provision is the same, the Knesset is competent to choose the way in which to legislate, and there is no room for intervention in this discretion. In effect, it was argued, in the past the Knesset occasionally employed the legislative technique of temporary provisions in primary legislation, including basic laws. For example, Basic Law: The State Economy (Bills and Reservations Involving Budgetary Expenditures) (Temporary Provision) 2002, stated that for a trial period of one year, a budgetary law would be passed by the Knesset only with the support of at least 50 MKs. After a year, this arrangement became embedded, with several changes, in the provisions of s. 3C of Basic Law: The State Economy. The State also referred to several laws that were enacted by way of temporary provisions which regulated important matters with far-reaching ramifications, including the electoral system in Israel and deferral of military service for full-time Talmudic Academy students.

The State further argued that Basic Law (Temporary Provision) is a basic law for all intents and purposes, by virtue of both the formal criterion and the substantive one, and the fact that it was enacted by way of a temporary provision cannot affect its normative status. Furthermore, the State also held that in view of the “stable and unchanging” status of the basic laws, it is preferable that in appropriate circumstances, changes to the basic laws be effected by means of temporary provisions and not by means of “regular” basic laws. The State also dismissed the argument whereby Basic Law (Temporary Provision) changes the provision of s. 36A of Basic Law: The Knesset, or changes the balance of power between the branches of government. According to this argument, the purpose of the above section is not to express no confidence in the government, but to express no confidence solely in the budget proposal. The State contends that even if in practice, the result of expressing no confidence in the budget proposal is dissolution of the Knesset, Basic Law (Temporary Provision) cannot be viewed as containing any substantive change of the balance of power between the government and the Knesset. The State does indeed agree that “the power given to the Knesset to approve the budget is [ ] a ‘sacrosanct’ power”, but, according to its approach, “there is nothing ‘sacrosanct’ about the Knesset using this power annually.” The State further argued that even if Basic Law (Temporary Provision) may have the effect of changing the balance of power between the authorities, it is within the power of the Knesset to make changes to this balance of power. This change, so goes the argument, does not need to be passed with a majority of at least 61 Members of Knesset in each of the readings, as argued by the petitioners, in view of the fact that s. 36A is not an entrenched section. Similarly, there would be no requirement for such a majority even if the argument of the petitioners, whereby Basic Law (Temporary Provision) implicitly changes the provision of s. 34 of Basic Law: The Knesset, were accepted, for neither is the said s. 34 entrenched. The State also dismissed all the other arguments of the petitioners regarding the motives of the Members of Parliament in enacting Basic Law (Temporary Provision), regarding the concern about expanding the Arrangements Law and regarding the unreasonableness of the Basic Law. These arguments, contends the State, are not acceptable on their merits and in any case they are not arguments by virtue of which it would be justified to strike down a basic law.

Deliberations

9. The arguments of the parties raise two major questions. First, is Basic Law (Temporary Provision) indeed a basic law for all intents and purposes? Determination of this question, naturally, impacts on the validity of the amendment to Basic Law: The State Economy and on the extent of intervention of the Court in the arrangement laid down in Basic Law (Temporary Provision). Examination of this question necessitates a discussion of two secondary questions. The first relates to the manner of identification of the outcome of the activity of the Knesset as a constituent authority. Is the criterion for the identification of a law as a basic law one of form, one of substance, or a combination of the two? The second question relates to the fact that the amendment of Basic Law: The State Economy is for a set, predetermined period of time. Is the use of a temporary provision detrimental to the validity or the status of the Law as a basic law? The second central question – on the assumption that Basic Law (Temporary Provision) is indeed a basic law – is whether it is in order to nullify it because it changes the balance of power between the Knesset and the government in the budgetary approval process?

We will begin with the first question.

Are we Dealing with a Basic Law?

10. As is known, basic laws in Israel are the outcome of that historical compromise reached by the constituent assembly – the “Harari decision” of 13 June, 1950 – whereby the Law and Constitution Committee was charged with preparing a draft constitution for the State, “that would be built chapter by chapter in a manner such that each chapter would constitute a basic law in itself” (D.K. 5, 1743 (1950)). Over the years, several basic laws were enacted, the hope that they would eventually be united in a whole constitution, and the conception was accepted whereby in enacting the basic laws, the Knesset was acting as a constituent authority (see the majority opinion in CA 6821/93 United Mizrahi Bank Ltd. v. Migdal Cooperative Village [1995] IsrSC 49(2) 221, which was accepted against the minority opinion of Justice M. Cheshin).

It is this constitutional structure, in which the same body – the Knesset – acts as both the constituent and the legislative authority that creates a need to identify the characteristics of the legislative outcomes and determine whether a law that is produced by the Knesset belongs with those legislative acts that have a meta-legal normative status or whether it belongs to the family of “regular” laws. Over the course of the years, this identification was made on the basis of a formal criterion, both by the various Israeli parliaments and by this Court. And thus, all those laws that bore the title “Basic Law” without mention of the year of enactment in the title, were considered to be basic laws that are part of the nascent constitution of the State. Accordingly, over the years twelve basic law were enacted: Basic Law: The Knesset; Basic Law: Israel Lands; Basic Law: The President of the State; Basic Law: The Government (old and new); Basic Law: The State Economy; Basic Law: The Military; Basic Law: Jerusalem the Capital of Israel; Basic Law: The Judiciary; Basic Law: The State Comptroller; Basic Law: Human Dignity and Liberty and Basic Law: Freedom of Occupation.

11. The formal criterion received further support in the ruling in Bank Mizrahi v. Migdal [1]. In the majority opinion the formal criterion was determined to be that by which basic laws are identified. Justice Barak, with whom the majority concurred, stated in his written opinion (at p. 403):

‘When does a norm that is created [by the Knesset] have constitutional status, and when is it said that the norm is a “regular” law? In my opinion, the answer is that the Knesset uses its constituent authority … when it gives this external expression in the name of the norm and views it as a “basic law” (without indicating the year of enactment).’

Underlying the decision to adopt the formal criterion was the assumption that a simple criterion was needed for identifying basic laws, so that problems and uncertainty would not arise with respect to laws whose normative status was meta-legal. As President Barak pointed out: “This formalistic criterion – use of the term ‘basic law’ – is easy to apply. It grants security and certainty” (ibid., p. 406; and see also ibid., at p. 394: “The reply of the constituent authority doctrine to the distinction between an act of constitution and an act of legislation is simple and clear, for it uses a simple, formalistic criterion”). And indeed, the formal criterion made – and still makes – it possible to classify those legislative acts that constitute part of the state constitution in a class of their own. The formal criterion also enables the Knesset to know in good time when it is acting as a constituent authority, to “enter into” that commitment that is necessary for basic legislation and to “don” its constituent authority hat prior to debating a bill that is destined to become part of the constitution of the state.

12. The argument has been raised more than once that the formal criterion is too simplistic (see, e.g., Amnon Rubinstein and Barak Medina, The Constitutional Law of the State of Israel, Vol. 1: Basic Principles (6^th ed., 2005) 96 (Hebrew) (hereinafter: Rubinstein & Medina); see also Aharon Barak, “The Constitutional Revolution: Protected Human Rights” Mishpat Umimshal 1 (1992), 9, 19 (Hebrew) (hereinafter: Barak, Constitutional Revolution); Ariel Bendor, “The Legal Status of Basic Laws” in Aharon Barak and Haim Berenson, eds., Justice Berenson Book, vol. 2 (2000), 119, 140-142 (Hebrew) (hereinafter: Bendor). President Barak himself, in his book on constitutional interpretation, raised the argument that in the formal criterion there is no reference to the substance of the legislation (see: Aharon Barak, Legal Interpretation, Vol. 3: Constitutional Interpretation (1995), 46 (Hebrew) (hereinafter: Barak, Constitutional Interpretation). This being so, provisions that regulate subjects which, from the point of view of their substance, are suitable for inclusion in the constitution, but do not bear the title “Basic Law”, will not be considered part of the constitution. Amongst the regular laws that ought to be endowed, according to the argument, with constitutional status, it is accepted to mention the Law of Return, 1950 (see, e.g. the words of MK Bar-Yehuda, who in presenting (to the Second Knesset) Basic Law: The Knesset – which is the first basic law to have been enacted – points out that during the term of the Second Knesset, “several laws that are clearly in the nature of basic laws, even if not in form, have been enacted; it is sufficient to mention the Law of Return and the Law of Judges (D.K. 15, 57 (5714)). On the other hand, some provisions find their way into the state constitution, despite their questionable suitability for inclusion therein (see, for example, Prof. Itzhak Zamir’s critique of Basic Law: The Knesset, which “spreads over 46 sections, bloated with minute details which ought to have been laid down in a regular law”: Itzhak Zamir, “Basic Laws on the Way to a Constitution”, Introduction to Amnon Rubinstein and Raanan Har-Zahav, “Basic Law: The Knesset”, Commentary to the Basic Laws, (I. Zamir ed., 1992), 11, 13-14 – hereinafter: Zamir). Therefore, the argument is often heard that the substantive criterion should be applied alongside the formal criterion, in such a way that inclusion of the words “basic law” in the title of a law will constitute a preliminary condition, but not a sufficient one, for recognition of the law as a basic law (see: Rubinstein & Medina, p. 96).

13. This proposal to institute a combined criterion for identification of basic laws has both advantages and disadvantages. On the one hand it allows for an extensive examination of a piece of legislation that is destined to become part of the constitution of the State. The substantive criterion or the combined criterion helps to overcome the problematic nature of the formal criterion, and it ensures that the title “basic law” will not be misused in order to entrench arrangements that are not suited, from the point of view of their substance, to be part of the constitution. On the other hand, recourse to a substantive criterion or some kind of combined criterion is not without its problems. First and foremost, it involves a degree of uncertainty with respect to existing and future legislation regarding the question of whether it constitutes part of the constitution. There is another real difficulty inherent in the substantive criterion, which, in the words of President Barak, “touches on the very relations between the constituent authority (of the Knesset) and the judicial authority (of the court)” (Bank Mizrahi v. Migdal [1], at p. 406), in whose hands will be placed the power to decide whether a statute is suitable, from the perspective of its substance, for inclusion in the constitution.

14. The question of whether a combined criterion should be applied in Israel is a complex one which I believe can be left for future consideration and which need not be resolved in the framework of the present petition. Indeed, there is merit to the argument that there are some laws which, from the point of view of their substance, ought to be included in the constitution. Similarly, there is merit to the argument that there are sections and provisions in the basic laws in relation to which it is doubtful whether they are of the type of provision that merits inclusion in the constitution. At the same time, this fact alone does not necessarily lead to the conclusion that there is call for departing from the criterion that was accepted to date. There is no dispute that the use of the formal criterion requires self-restraint on the part of the legislature, which has the central authority to determine a priori, which legislative acts will be endowed with constitutional status. The formal criterion supposes that the legislature will not misuse its constituent power by attaching the title “basic law” to legislation that is not worthy of being part of the constitution. A review of the enactment of the basic laws from 1958 till the present shows that there was no such misuse (see also Barak, Constitutional Interpretation, p. 46 n. 51; Bendor, “The Legal Status of Basic Laws”, p. 143). The constitutional history of Israel shows that the Knesset used the term “basic law” in cases in which it was clear to the Knesset and to its members that they were operating within the framework of their competence as a constituent authority that is preparing to enact a chapter in the future constitution of the state. This conclusion emerges from an examination of the protocols of the debates in the plenum when draft bills for the enactment of basic laws were submitted for their first, second or third readings: the Members of Knesset specifically mention the fact that the proposed basic law is part of the constitution of the state (inter alia see: D.K. 15, 57 (1954); D.K. 36, 963 (1963); D.K. 74, 4002 (1975)). To this must be added that even from the relatively small number of basic laws we learn that the enactment of basic laws was not taken for granted, but was considered to be the act of the constituent authority in determining the highest norm of the state.

15. Furthermore, it is not necessary to decide on the question of the criterion for identifying basic laws in the present case, since recourse to the combined criterion too, leads to the conclusion that Basic Law (Temporary Provision) is a basic law. By virtue of the terms of the formal criterion, the title of Basic Law (Temporary Provision) includes the words “basic law”, and the year of its enactment is not mentioned. The petitioners argued that the fact that the title of the Law includes the years of its application is equivalent to mention of the year of enactment. This argument is not convincing. Mention of the period of application of a basic law is not analogous to mention of the year of its enactment, and it cannot detract from the validity of the Law under the formal criterion. Under the substantive criterion too, the conclusion of the petitioners that the status of Basic Law (Temporary Provision) is that of “legislation that is even inferior to a regular law” is unfounded, even if it is agreed that the Law gives rise to not inconsiderable difficulties. The material dealt with by the law – the state budget – is material that has been regulated in Basic Law: The State Economy, and recognized as an area that constitutes part of the basic laws in Israel. Basic Law (Temporary Provision) changes the constitutional arrangement pertaining to the state budget, in its determination that the budget for the years 2011-2012 will be set as a biennial budget instead of an annual one. For this reason, too, it cannot be said that the Law, from the perspective of its contents, is unsuitable for inclusion in our basic laws.

For all these reasons, I am of the opinion that in the circumstances of the case before us it is not necessary to decide on the question of the application of a combined criterion for identifying basic laws, which raises, as we have said, complex issues regarding both the characterization of legislation as basic legislation and the division of authority between the legislature and the judiciary.

16. A separate question is whether in the case before us there was misuse of the title “Basic Law”. The petitioners argued at length that it is not possible to override a constitutional principle that is anchored in basic laws by means of a temporary provision whose period of application is determined solely for the duration of the term of the present government. According to this argument, the Israeli Government wishes to exploit its parliamentary majority in order to change the rules of the parliamentary game, “abusing the automatic majority that the present government enjoys in the elected parliament, in order to change a basic law in a temporary and tendentious manner – only until the end of the term of this present government” (petition of 3.6.2010, pp. 2-3). The petitioners further argued that “It was not considerations of the good of the parliamentary regime or the good of democracy that the architects of the Law had in mind, but rather, considerations of convenience and the survival of the government (even at the expense of basic principles)” (ibid., p. 3). According to the petitioners, if the Members of Knesset had wished to conduct a “real” experiment in operating a biennial budget, they should have decided that the biennial budget would apply from the next Knesset onwards.

17. Let it be said first that as a rule, “it is very doubtful whether motives for the enactment of a basic law – even if it may be argued that they are not worthy – are liable, per se, to constitute a juridical flaw that constitutes cause for judicial review” (HCJ 5160/99 Movement for Quality Government in Israel v. Law and Constitution Committee [1999] IsrSC 53(4) 92, 96). Even were I prepared to assume that the motivation for enacting this Law, as claimed by the petitioners, is the desire of the Coalition to avoid the need to approve the budget annually, this reason alone, cannot justify judicial review; particularly where the relief sought is an order nullifying the Basic Law. A separate question is whether the very fact that the Law was enacted by way of a temporary provision constitutes “misuse” of constituent authority, thereby affecting the validity of Basic Law (Temporary Provision) as a basic law. The petitioners’ approach, as described at length in the introduction, is that the attempt to define a temporary provision as a basic law is a “contradiction in terms that leads to a degradation of the enactment of basic laws and of the status of the Knesset as a constituent authority” (reply of the petitioners to the response of the respondents dated 4.1.2011, p. 11). According to this argument, there is no conceptual and theoretical possibility of establishing a temporary provision in a basic law, and therefore, it is totally without force.

The respondents, and particularly respondents 1-6, did not deny the conceptual difficulty in establishing a basic law whose period of application was defined in advance and limited in time. The legal advisor to the Knesset, who was invited to the deliberations of the Joint Committee, also gave his professional opinion to the Committee to the effect that this involves an inherent, inbuilt problem. However, according to respondents 1-6, as long as the procedures for the enactment of basic laws have not been set in the framework of Basic Law: Legislation, it is possible for the Knesset to change a basic law by means of another basic law, even if it is a temporary provision. Respondents 7-9 added that indeed, as a rule, the provisions in basic laws are not time-bound, but in suitable circumstances the Knesset has the authority to make temporary provisions even in basic laws; and, on their approach, there is “no contradiction between a piece of legislation being a basic law, and it being a temporary provision.” Moreover, the State also argued that in certain cases, it is possible that “in view of the stable and unchanging status of the basic laws, there is a certain preference for making changes to them, when the continued validity of the changes is doubtful, by means of basic laws that are temporary provisions” (Response to the petition on behalf of respondents 7-9 of 20.9.2010, p. 16).

Does the Fact that the Basic Law was Enacted by Way of a Temporary Provision Affect its Validity?

18. The question of whether a basic law may be enacted by way of a temporary provision has already arisen in the Knesset. See Movement for Quality Government in Israel v. Law and Constitution Committee [2], in which Amendment no. 9 of Basic Law: The Government, which cancelled the limit that had been set in that Basic Law on the number of members of the government, was reviewed. It is noteworthy that in the deliberations in the Law and Constitution Committee on this proposed Law, the position of the then Attorney General, E. Rubinstein, was presented, whereby alongside the interest in the stability of the constitutional structure, and the need to avoid, insofar as possible, frequent changes to basic laws, it cannot be stated that there is any legal bar to enacting a basic law as a temporary provision. Furthermore, the Knesset already changed a basic law by means of another basic law that was set in a temporary provision (see: Basic Law: The State Economy (Bills and Reservations Involving Budgetary Expenditures) (Temporary Provision) 2002), but this matter has not been considered by this Court in the past.

19. The possibility of enacting a constitutional provision whose beginning and end are predetermined for a set period of time brings to light a series of difficulties in Israeli Constitutional law. It should be recalled that the constitutional structure in Israel is special and it is not complete. Indeed, it is indisputable that the constitutional enterprise in the State of Israel has progressed significantly since the enactment of the first Basic Law in 1958, but this enterprise has not yet been completed (see, e.g., Aharon Barak, A Judge in a Democratic Society (2004), 79). For this reason, our constitution is lacking many characteristics that are normal in states which have a completed constitution. Thus, for example, some basic rights are not protected in basic legislation. Some of the provisions that appear in the basic laws are entrenched, whereas others may be changed by a regular majority. Some of the provisions are formulated in ceremonious, general and brief language whereas some of the provisions are too detailed and convoluted (see: Zamir, Basic Laws on the Way to a Constitution). Some of the basic laws regulate subjects which by their nature were destined to become part of a future constitution, whereas some of them regulate subjects that are not, generally, included in those constitutions of other countries with which we are familiar. Some of the major subjects in constitutions of other countries are not regulated in Israel in basic laws at all, and a question arises as to their constitutional status (see the opinion of President Barak in United Mizrahi Bank Ltd. v. Migdal [1], at pp. 402-403). This is the constitution “Israeli-style”. To a considerable extent, it is a constitution that is still in the process of consolidation.

20. There is a glaring lacuna in our constitutional regime insofar as the manner of enactment of basic laws is concerned. In view of the fact that Basic Law: Legislation has not yet been enacted, there is as yet no blueprint for amending and changing the constitution; for the majority required for amending the constitution; and for the possibility, if at all, of amending the constitution or amending it in a temporary manner. As a result, the Rules of the Knesset are the central mechanism that applies to the procedures for the enactment of the basic laws, and they do not include a special provision that differentiates between the procedure for enactment of “regular” laws and the procedure for enactment of basic laws. For this reason, basic laws can be enacted by any majority in the Knesset; and basic laws may be changed – unless they are specially entrenched – by any majority as long as the amending law is a basic law. In practice, an examination of the history of the amendments to our basic laws reveals that the basic laws were amended or changed a great number of times (seem e.g., Ariel Bendor, “Flaws in the Enactment of Basic Laws”, Mishpat Umimshal 2 (1995), 443, 444-445 (Hebrew)); much more often than amendments to constitutions in other democratic states (the American Constitution, for example, has been amended 18 times (and in total, 27 amendments) over the 227 years of its existence; the Dutch Constitution, which was passed in 1814, has been amended 24 times; the French Constitution has been amended 8 times since it was passed in 1958. On constitutional amendments in general, see: European Commission for Democracy Through Law (Venice Commission) Report on Constitutional Amendment (2010)).

21. The ease with which Israel’s basic laws can be changed detracts from their status. The major characteristic of a constitution – a characteristic that is part of the basic definition of a constitution and also part of the advantages inherent in the existence of a constitution – is its stability. A constitution is intended to withstand frequent changes, and to stand firm in the face of changes in the political composition of the regime and in the face of various social changes. A constitution serves as a normative yardstick for society. It is the complex process of amending the constitution that allows this yardstick to stand firm and unwavering even in the face of a tumultuous society and a changing regime. In Israel this is not the situation. Most of our basic laws are not entrenched, and they can therefore be changed by the Knesset with a regular majority by means of regular enactment procedures. This constitutional reality derives to a great extent from the fact that our constitution is coming into being chapter by chapter, and not in a one-time constituent act subsequent to which every change requires a rigid, and special, process. The basic laws in Israel were enacted over a long period of time. They were not enacted as part of the constituent document of the establishment of the State, nor even in a time of revolution, war, or as a reaction to some other radical change in society or of the regime (see, e.g., Jon Elster, “Forces and Mechanisms in the Constitution Making Process”, 45 Duke L.J. (1995), 364).

22. At the same time, it may be said that the basic laws have taken root in our juridical culture and in the political and public tradition as part of the constitution of the State. To a not inconsiderable degree, the strength of a constitution and of a proper constitutional regime is tested by the ability of the constitution to serve as a normative yardstick for the legislature, the executive, the judiciary and for individual citizens. The greatness of a constitution lies in its success in directing the behavior of individuals and of the state authorities, and in limiting the legislator’s ability to upset constitutional arrangements. As such, the answer to the question of whether the basic laws “have become rooted” in our constitutional tradition is not dependent only on the judicial review undertaken by this Court, but it is also – and even especially – evident in those cases in which the matter does not come to court because the elements involved in the legislative processes, as well as the executive, have internalized the accepted rules of play of the constitutional regime.

23. In Israel, the superiority of the basic laws and their meta-legal normative status find expression both in the judicial review of regular legislation exercised by this Court and in the legislative procedures in the Knesset in recent decades. In practice, the question of the relationship of a proposed law to the existing basic laws has become one that is inseparable from the procedures for examining proposed laws. The directive of the Attorney General even states that “when a proposed law is submitted on behalf of the government for discussion by the government or by a ministerial committee, attached to it will be an opinion … on the question of the validity of the proposed law in light of the basic laws” (The relevant part of the Directive appears in Amnon Rubinstein’s article, “The Knesset and the Human Rights Basic Laws”, Mishpat Umimshal 5 (2000), 339, 352-3 (n. 9) (Hebrew)). A constitutional examination of proposed laws in light of the basic laws is conducted at each stage of the legislative process by the staff of the legal advisor to the Knesset (see ibid., p. 352). The deliberations in the Knesset plenum and in the various Knesset committees also indicate that the Members of Knesset are aware of the constitutional status of the basic laws and of the legislative constraints that derive from the superiority of the basic laws. This is evident, as will be discussed at length below, in the present case as well. The constitutional awareness that expresses itself in the process of examining the compatibility of the proposed legislation with the basic laws is a necessary process in every properly-functioning constitutional state, particularly so in the special circumstances of the constitutional law in Israel, which demand a great deal of self-restraint on the part of the Knesset in order to preserve the status of the basic laws and the stability of the arrangements they embody. Alongside this self-restraint, there is also a need for judicial review by the Court aimed at ensuring that legislation, acts and decisions of the authorities and other public bodies do not change the basic laws or detract from them, but rather that they comport with the conditions established in the basic laws themselves and in the case law of this Court.

24. Where does Basic Law (Temporary Provision) fit into the constitutional tapestry that we have described? Does self-restraint on the part of the Knesset mean that there is no room for changing basic laws for short, defined periods of time? It appears that no one would argue that a temporary provision contradicts the basic idea whereby the provisions of the constitution are fixed, and some would say even eternal. As stated, at the basis of a constitution stands the will to ensure stable principles, social identity and common values that are not easily changed, in order that they endure beyond that which is temporary and passing. The amendment of a constitution by way of a temporary provision assumes that it is possible to revoke a constitutional principle for a limited time. Is this unlawful?

In an ideal state of affairs, in which there exists a regulated and rigid mechanism for changing and amending the constitution, it is doubtful whether amendment of the constitution by way of a temporary provision would be possible. See, for example, the ruling of the Constitutional Court in the Czech Republic from September 2010: 2009/09/10 – PL. US 27/09 (for an English translation of the decision, see: http://www.usoud.cz/en/decisions/?tx_ttnews%5Btt_news%5D=468&cHash=44785c32dd4c4d1466ba00318b1d7bd5) in which the constitutional court struck down a constitutional act that shortened the term of office of the sitting Chamber of Deputies and led to early elections. The reason for this nullification was that the one-off provision was incompatible with the eternity clause fixed in the Constitution. It is doubtful whether this rigid approach would be suited to the basic constitutional conception in Israel. In any case, according to the present situation in Israel, the rigid approach in relation to the legislative processes does not have a suitable framework. As stated, in the absence of Basic Law: Legislation, the restrictions on the procedures for legislation or amendment of the basic laws are few, and in order to enact a basic law in Israel there is no need for special procedures in the Knesset. In these circumstances, it cannot be said that the very fact that the basic law was enacted by way of a temporary provision fundamentally disqualifies it or places it on a normative rung that is lower than a regular law, as the petitioners contend. At the same time, it may also not be said that this practice is problem-free. Setting a temporary constitutional arrangement indeed denigrates the status of the basic laws, and it should be done only sparingly, if at all. In certain circumstances, which cannot be determined in advance, it is possible that the enactment of a basic law as a temporary provision may amount to “misuse” of the title “basic law”. In considering each case on its merits, attention must be paid, inter alia, to the existence of exceptional circumstances that justify the making of a temporary arrangement rather than a permanent one; the subject being regulated by the basic law must be examined; and an assessment must be made of the extent of damage wrought by the temporary basic law on the principles of the regime and other basic rights. It is important to note that application of these criteria to an examination of the constitutionality of a temporary provision is linked, by its very nature, to the question of the applicability of a substantive criterion for the identification of basic laws. At the same time, this question can also stand as an independent one. As stated, in certain, exceptional circumstances, the very recourse to a temporary provision may justify intervention in the basic legislation.

25. From the discussions in the Joint Committee it transpires that the decision to enact the Basic Law under discussion by way of a temporary provision derived from the professional position of senior Treasury officials, who felt that they do not have the tools to determine that the advantages of the biennial budget are greater than its disadvantages without conducting an actual “experiment”. The Treasury officials therefore sought to avoid a permanent amendment to the basic laws until after a “pilot” had been conducted, following which the Ministry would formulate a recommendation as to whether there should be a transition to a permanent biennial budget (see the protocol of the Joint Committee of the Finance Committee and the Law and Constitution Committee, 11.5.2010).

The problems involved in enacting a basic law by way of a temporary provision did not escape the Members of Knesset. The members of the Joint Committee devoted several discussions to the subject, and sought to ascertain the legality and the constitutionality of the draft law before them. As part of this effort, two legal opinions were submitted for review by the members of the Committee, and four legal advisers appeared before the Committee. The Committee also allowed the petitioner, MK Ronnie Bar-On, to address it at length. MK Bar-On laid out in detail the main arguments that were raised in the present petition. Inter alia, MK Bar-On spoke about the alleged harm to the balance between the powers, and about the central role of the Knesset in its oversight of the government in the process of approving the budget. MK Bar-On also mentioned his position that enactment of the amendment to Basic Law: The State Economy by way of a temporary provision constitutes misuse of the Basic Law for the purpose of obtaining a short-term political goal (Protocol of the Joint Committee, 11.5.2010, pp. 5-20). In two written opinions submitted by the legal adviser to the Finance Committee, the legal adviser pointed out that “it is a commonplace that basic laws and temporary provisions are contradictory concepts, and they are not compatible”, and it was also mentioned that a change to a basic law must be done in a basic law, and that determining the state budget is a constitutional norm. It was further pointed out in the written opinion that “the enactment of the biennial budget law is reserved for exceptional circumstances and ought not to be turned into the norm barring such circumstances without a comprehensive discussion of the basic values of our system”; and that transitioning to a biennial budgetary regime is liable to upset the balance between the executive branch and the legislative branch with respect to approval of the budget. In the wake of these opinions, and in the wake of what was said in the Committee, the members of the Joint Committee invited the legal advisor of the Treasury to its sessions, and asked for the professional opinion of the Ministry of Justice regarding the enactment of the Law by way of a temporary provision. Advocate J. Baris, the legal advisor to the Ministry of Finance, gave his opinion:

‘This matter [of determining an arrangement by way of a temporary provision], it must be stated clearly, is a matter that is very exceptional and one that must be avoided insofar as possible. This is not a trivial matter … At the same time, it must be understood that this question, more than being a legal question is one of constitutional policy. In other words, does the Knesset as a constituent authority, as a matter of policy for determining constitutional arrangements, believe that this matter justifies a temporary provision or not … The starting point is that today, from a professional point of view, from the point of view of the matters that arise, there are advantages that resulted from the partial attempt that was made at an almost biennial budget … as opposed to the advantages, there are concerns … and the concerns are great and therefore from a professional perspective we are in a situation in which the clear professional recommendation is not to move over to a permanent provision for a biennial budget’ (Protocol of the Joint Committee, 11.5.2010, pp. 43-44).

Adv. Baris added that according to the Ministry of Finance, the present Temporary Provision is exceptional against the background of the accepted temporary provisions in Israeli law. Adv. Baris stated as follows:

‘In our legislation there are two types of temporary provision from a conceptual point of view. There are temporary provisions that stem from a temporary need, when I make a temporary provision in view of that need and it provides a response for that temporary need. There are temporary provisions that begin as a trial and a test … in general there is sometimes a need to conduct a trial, we go into something and we don’t yet know how it will work out, and you want to test the matter.

…

Now I want to be more accurate and to say that we are on the seam of these two types of temporary provisions. The temporary provision of last year (the original temporary provision) was of the type of a clear temporary need … we saw the particular advantages of this partial attempt, and then we are at the transition to a temporary provision of the second type where you say that we do not have an annual budget so let’s experiment. I do not know whether in a basic law … you would say that we will move over from situation A to situation B as an experiment, but if you are already in situation B and you say, should we go back to situation A or extend by two additional years in order to make the experiment possible, this is our situation and this is a coming together of circumstances according to which we believe that there are circumstances in which it is possible to propose a draft basic law as a temporary provision … in these circumstances we have reached the conclusion that it is precisely respect for the basic law that [lies] in the temporary provision. If we were to make a temporary provision in a basic law where there is a possibility that in two years or whenever we will have to submit to the Knesset a repealing provision because the concerns proved to be overriding or to be founded or to be real in the general balance and to justify a return to the annual budget, to submit a counter amendment is less seemly than in these circumstances to say that we are extending the temporary provision that began due to the special circumstances of the period in which we can for the first time truly examine the biennial budget (ibid., pp. 44, 45-46).

Adv. Eyal Zandberg, Head of the Public Law Section of the Advice and Legislation Department of the Ministry of Justice, pointed out to the Committee that several options for changing the Basic Law were available to the Government; one of these was the option that was chosen – that is, the enactment of a temporary provision for two years. Like Adv. Baris, Adv. Zandberg too pointed out that this track is not problem free, although it is possible from a legal standpoint. According to Adv. Zandberg:

‘… from a legal standpoint, from the point of view of the idea, the problem, and this is the problem here and I admit that there is a problem. I do not think that it disqualifies the proposal, but there is a problem, it cannot be ignored, with a temporary provision in a basic law … We asked and we were convinced that there is no desire here to protect the current government, there were professional explanations why this arrangement is required for two years, and for two years only …. Hence the conclusion was … that it cannot be said to the Government that it is not within its authority to submit a bill that amends a basic law and establishes, in circumstances as I have described, this arrangement as a temporary arrangement for a specific period of time that is actually intended to allow the State as a whole, not only the Government, to try this out … and we did not think it correct to say that such an amendment to a basic law amounts to an illegal amendment. What is more, it must be said, that not every text that bears the title “basic law” legitimizes what is written beneath the title. This is not our position – let this be clear. I do not think that it may be argued that the contents of the basic law are in themselves unsuited to a basic law, according to their substance, and the difficulty is a conceptual one, how is it that a basic law, a segment of the law [should be “constitution”, D.B.], a permanent arrangement – how can the foundation stones be temporary? How can those walls of stone be built as plasterboard, which may easily be cut? This is a difficulty, but this is the explanation that we found for our professional legal opinion’ (Protocol of the Joint Committee of the Finance Committee and the Law and Constitution Committee from the discussion of the Economic Efficiency and the State Budget for the years 2009-2010, 31.5.10 p. 3).’

26. After hearing these opinions, the legal advisor of the Knesset, Adv. Eyal Yinon, was also invited to appear. Like the legal advisors who presented their views to the Joint Committee before him, the legal advisor to the Knesset, too, explained to the members of the Committee the complexity of the issue facing them. Adv. Yinon said that “it is clear that the biennial budget is a constitutional matter, a matter pertaining to the regime”, in that it is the type of provision that appears in constitutions throughout the world and in basic laws in Israel. Adv. Yinon further stated that “no one disputes that basic laws and temporary provisions are contradictions in terms”, but, in his view –

‘Due to the absence of a legislative arrangement of the issue of amendment of basic laws, it is difficult to argue that the proposed amendment is not constitutional or is not compatible with the basic values of the system. But of course the MKs must understand that their assent to an amendment of this type, beyond detracting from the ability of the Knesset to oversee the government … also contains an erosion of the status of the basic laws and of the protection that the Knesset is supposed to afford to the basic constitutional principles of our regime’ (Protocol of the session of the Joint Committee relating to the Economic Efficiency and State Budget Law for 2009-2010, 15.6.2010, pp. 5-6).

The members of the Joint Committee were persuaded that it is possible to enact that Basic Law as a temporary provision, but in order to address the difficulties that arose from the Bill, including the concern about weakening the Knesset’s power of oversight of the government, the Joint Committee made several changes to the proposal. The framework of the biennial budget was retained, but it was determined that the government will be obliged to submit the budgetary plan within 90 days prior to the commencement of the 2012 fiscal year; a section relating to a budget of adjustments for the fiscal year 2012 was introduced, designed to allow flexibility in the mode of execution of the budget in the course of implementing the biennial budget; a duty was imposed on the Minister of Finance to report to the Joint Committee within 120 days from the beginning of the 2012 fiscal year regarding his position on the transition to a biennial budget on a permanent basis; the Knesset Finance Committee was authorized to determine the date for submission of the budgetary laws to the Knesset under s. 3(b)(1) of Basic Law: The State Economy. It is noteworthy that this last amendment was a permanent amendment and not a temporary provision.

27. We have cited at length what was said in the Joint Committee because in our view, the professional and detailed discussion in the Joint Committee indicates that the enactment of the Basic Law by way of a temporary provision was a conscious decision; in the process of enactment there was a serious discussion and the question of the possibility of enacting the Basic Law as a temporary provision was duly considered. This fact must be taken into account when the constitutionality of the Law is being considered, for it can demonstrate that the Knesset acted with the understanding that it was applying its constituent authority while relating to the complexity this involved.

28. The entire array of circumstances in the present case – including the identification of Basic Law (Temporary Provision) as a basic law under both the formal and the combined criteria; the material it regulates; and the combination of circumstances that led to the decision to introduce a biennial budget for two years – leads to the conclusion that even if we identify substantial difficulties in temporary enactment or amendment of basic laws, a determination that Basic Law (Temporary Provision) is void is unwarranted. As emerges from the deliberations in the Knesset, it was the special circumstances that gave rise to the wish to attempt to implement a biennial budget that lay at the basis of the decision to introduce a temporary change to Basic Law: The State Economy. As pointed out by Adv. Baris, the Ministry of Finance refused to draw up a permanent amendment, because it was not possible, from a professional point of view, to support a permanent transition to a biennial budget. Were it not for the economic crisis and the unexpected elections that led to the approval of a biennial budget for the years 2009-2010, it is doubtful whether the senior Treasury officials would have proposed conducting such an “experiment”. However, in the circumstances that unfolded, it was decided to examine the advantages of the budget and to study the ability of the Treasury to correctly assess the forecast of expenses and income of the State for a period of two years. We will further mention that even had we thought that additional considerations underlay the legislation before us, this too would not have been enough to constitute cause for intervention in the legislation, and certainly not in basic legislation (see para. 17 above).

29. In summary: We are of the opinion that Basic Law (Temporary Provision) is a basic law for all intents and purposes. In the circumstances of the case before us, there is nothing in the use of a temporary provision in itself that would justify a determination that the basic law is void or that it should be struck down. At the same time, it would be better if in the future, the Knesset would avoid resorting to temporary provisions for amending constitutional provisions. In any case, as long as the framework for the enactment, amendment and change of a basic law has not been determined, a legislative procedure of this kind should be reserved for exceptional, extreme and special cases, due to the status of the basic laws. In this context, the words of Justice D. Levin are apt:

‘Amendment of a constitution should not be done as a matter of routine; a constitution and the constitutional values it embodies should never bend and change with every passing wind. The stability of the law, and a fortiori, of the constitution, are a value in themselves. Therefore, the legislature should consider this before passing a law, for a law, and a fortiori a constitution, are intended to lay down norms and principles that must guide the citizen’s conduct through the days and the years to come’ (United Mizrahi Bank Ltd. v. Migdal [1], p. 456).

30. The additional arguments that were raised by the petitioners concerning the reasonability of the Basic Law and the majority by which it was passed in the various readings in the Knesset must also be dismissed. Without taking any position on the advantages or disadvantages of a biennial budgetary system, considerations regarding the reasonability of the Basic Law are not among those considerations that justify the intervention of this Court in basic legislation. Arguments whereby the Law should have been passed by a majority of 61 MKs in the three readings are also not founded, for s. 36A of Basic Law: The Knesset is not an entrenched section. Its amendment, therefore, does not require a special majority. The argument whereby Basic Law (Temporary Provision) explicitly or implicitly changes s. 34 of Basic Law: The Knesset, and therefore the Knesset should have passed it with a special majority, must also be dismissed. We accept the State’s position and that of the Knesset whereby s. 34 is not a general section that defines when the Knesset is dissolved, but rather a section that deals with the possibility of the Knesset deciding on its own dissolution – a decision that can be made by a law that is enacted by a majority of Members of Knesset. Consequently, the transition to a biennial budget should not be viewed as an implicit change of s. 34 of Basic Law: The Knesset.

The Doctrine of the Unconstitutional Constitutional Amendment

31. Having determined that Basic Law (Temporary Provision) is indeed a basic law, let us now address another central argument raised by the petitioners in the petition – although they would appear to have abandoned it in the course of the oral pleadings – that concerns the possibility of the Court nullifying Basic Law (Temporary Provision) because it contradicts fundamental values of our legal system. This issue, which in comparative legal literature is termed “the unconstitutional constitutional amendment”, deals with judicial review of a constitutional amendment made by the constituent authority.

According to this argument, Basic Law (Temporary Provision) upsets the constitutional balance between the legislative authority and the executive authority, and violates the constitutional principle under which if Knesset approval of the budget is not secured once a year, both the government and the Knesset are dissolved (in accordance with s. 36A of Basic Law: The Knesset). The petitioners cited many legal sources and extra-legal sources as the basis for their argument to the effect that approval of the budget in a democratic state in general, and in the State of Israel in particular, has special significance. In approving the state budget, so argue the petitioners, the Knesset gives concrete expression to its sovereignty and superiority vis-à-vis the government; and in the period of approval of the state budget, the government is under the review of the Knesset, and conducts debates with the Knesset concerning the priorities of the state (see, inter alia: Chen Freidberg and Reuven Chazan, Knesset Oversight of the Government (Israel Democracy Institute, 2009) pp. 33-34 (Hebrew)). Basic Law (Temporary Provision), it is argued, weakens the Knesset and detracts from its ability to oversee the work of the government, its mode of operation and the priorities that it sets. This, according to the petitioners, justifies the intervention of this Court by way of nullification of a basic law, since “approval of the Budget Law on an annual basis is considered one of the foundation stones of a democratic state the world over, and in Israel in particular” (Petition of 30.6.2010, p. 3). Moreover, the petitioners argued that the Basic Law violates another fundamental principle – the ability to bring about the dissolution of the Knesset and new elections by means of only 60 Members of Knesset, if the state budget is not approved within three months of the beginning of the fiscal year.

32. The doctrine of the unconstitutional constitutional amendment has been discussed at length in foreign legal systems (for a comparative review of this issue see: Kemal Gözler, Judicial Review of Constitutional Amendments: A Comparative Study (2008); and see: Aharon Barak, “The Unconstitutional Constitutional Amendment” (forthcoming, Bach Book) (Hebrew)). At its base, the doctrine of the unconstitutional constitutional amendment addresses the question of whether the courts have the authority to examine the constitutionality of amendments to the constitution. The answer to this question is directly connected to the nature and the character of the constitution in the framework of which the constitutional amendment is examined. Accordingly, there are states whose constitutions include “eternity clauses” – constitutional provisions that cannot be amended (see, e.g., art. 4 of the Constitution of the Republic of Turkey; art. 79(d) of Basic Law for the Federal Republic of Germany). In a number of states, courts have struck down amendments to the constitution on the basis of eternity clauses. There are states, such as India, in which the constitution does not include an eternity clause, but despite that the court has struck down amendments to the constitution for the reason that they were injurious to “the basic structure of the constitution” (for a review of the decisions of the Indian Supreme Court, see Gözler, pp. 88-95). In both situations – cases based on eternity clauses and those in which there was no such clause – the courts that were prepared to subject constitutional amendments to judicial review did so where the constitutional amendment breached or changed a fundamental, basic meta-principle of the constitution and the regime in the relevant state (such as the republican structure and the secular regime in Turkey. See also the abovementioned ruling of the Czech Constitutional Court, which nullified the law for bringing forward the elections based, inter alia, on an eternity clause in the Constitution according to which “any changes in the essential requirements for a democratic state governed by the rule of law are impermissible.” For further examples, see Gözler, ibid.).

33. This doctrine, which recognizes “eternal” meta-principles in some form or other, has also been mentioned several times in obiter dicta in the case law of this Court, but it has not yet been applied (see: EA 1/65 Yardur v. Central Elections Committee for the Sixth Knesset [1965] IsrSC 19(3) 365, 389-390, per Justice Y. Sussman; HCJ 142/89 La’Or Movement - One Heart and One Spirit v. Central Elections Committee for the Sixteenth Knessset [1990] IsrSC 44(3) 529, 551-554, per [then] Justice A. Barak; Bank Mizrahi v. Migdal [1], pp. 394, 546, per President A. Barak and Justice M. Cheshin; CA 733/95 Arpel Aluminium Ltd. v. Klil Industries Ltd. [1997] IsrSC 51(3) 577, 629-630, per Justice M. Cheshin; HCJ 4676/94 Mitral Ltd. v. Israeli Knesset [1996] IsrSC 50(5) 15, 28, per President A. Barak; Movement for Quality Government v. Law and Constitution Committee [2], p. 96, per Justice D. Dorner; HCJ 6427/02 Movement for Quality Government in Israel v. Israel Knesset (not yet reported, 11.5.2006), per President A. Barak, para. 74; per Deputy President (ret.) M. Cheshin, para. 11). In Israel, in view of the fact that a complete constitution – including, in that framework, the procedures for enacting and amending the basic laws – has not yet been established, the doctrine takes on special meaning. In these circumstances, the question of whether the court in Israeli is competent to strike down basic legislation because it contradicts meta-principles of our system is a complicated one that reaches to the very root of the legitimacy of the constituent authority instituting constitutional arrangements that change the nature of the basic laws, and to the core of the competence of the Court to exercise judicial review of the outcome of the acts of the Knesset as a constitutive body. At the same time, the courts in Israel have recognized the existence of principles that are irrevocable. Our basic laws, too, have laid down a central constitutional principle, the ability to change which is doubtful, relating to the Jewish and democratic nature of the State. When the constitution of the State will be complete, the question of the inclusion of eternity clauses that express the meta-principles of the regime and society in Israel will come up for discussion. In this context, President A. Barak made the following observation in his article on this subject:

‘With the conclusion of the enterprise of basic laws and its ratification by the people, and with the introduction of a new complete constitution, there will be room for making a decision concerning the unconstitutional constitutional amendment. It may be that the constitution itself will solve this problem explicitly; it may be that it will contain eternity clauses that can help provide a solution to the question; the constitutional text may have nothing to say on this issue and the Supreme Court will be required to make a decision on whether to adopt the doctrine of the basic structure of the constitution or some similar doctrine or to reject them; it is possible that amendment of the law will be so difficult and complicated that the question will not even come up for discussion.

Does this mean that at the present stage of constitutional development in Israel, there is no call to consider the place of the question of unconstitutional constitutional amendment? Indeed, in the comprehensive, complete sense of this doctrine in comparative law, it has no place in Israel. This is because the concept of constitutional “amendment” is in itself problematic in Israel. The constitutional enterprise is an enterprise in the making. The mission is not yet complete. The “complete” is yet to be completed, and in any case the constitutional amendment has not yet ripened. Nevertheless, in Israel there is a process of establishing basic laws. At times, a basic law is enacted in an area in which there was previously no basic law; at times, an amendment to an existing basic law comes about by way of enacting an amending basic law. Against this background, the following question may be raised in Israel: are there constraints on the power of the Knesset, as a constituent authority, in its determination of the substantive contents of the basic laws, such that we can talk about an unconstitutional basic law? In this regard is there a difference between an area which has already been addressed in basic laws and needs amendment and between an area in which no basic law has yet been established?

…

In my opinion, there is room for an approach according to which the constituent power of the Knesset is not absolute. This is so regarding the establishment of a new basic law and regarding the amendment of an existing basic law. In both cases the Knesset, as a constituent authority … must act within the framework of the basic principles and basic values of our constitutional structure … The Knesset was not given authority to harm the “democratic core, and the minimum requirements for the character of the state as democratic.” Similarly, it was not authorized to harm the core of Israel as a Jewish state and the minimum requirements for this aspect of its character’ (Barak, Unconstitutional Constitutional Amendment)

34. Indeed, I too believe that there are basic principles standing at the very basis of our existence as a society and a state, the breach of which would raise difficult questions of authority, including doubts as to whether at issue is a change in the constitution or the establishment of a new constitution. In such a case – and it would be best were it never to occur – the Court will be called upon to decide whether the Knesset has overstepped its constituent authority and violated the basic foundations of the state as a Jewish and democratic state. The case before us is not such a case. True, the relationship between the government and the Knesset in the process of approving a state budget is undoubtedly a very important relationship that expresses the principle of separation of powers. There is also no dispute that Knesset oversight of the government is an integral part of the principle of separation of powers. But does the requirement that the approval of the Knesset be obtained once every two years instead of annually constitute, for example, a negation of the democratic or Jewish character of the State? Does a decision to adopt a biennial budget for two years constitute a breach of the fundamental principles of the regime, as expressed in the Declaration of Independence? The answer is negative. Even if there is a detraction from the authority of the Knesset when it is asked to approve the budget once every two years instead of annually, the Members of Knesset have the option of choosing to change the period of the budget. To this must also be added the special positon of the Budget Law on the scale of constitutional norms (see: HCJ 4124/00 Yekutieli v. Minister for Religious Affairs (not yet reported, 14.6.2010); HCJ 1438/98 Conservative Movement v. Minister for Religious Affairs [1999] IsrSC 53(5) 337). Hence, the damage caused to the Knesset as a result of the transition to a biennial budget does not amount to damage to the meta-principles of our system in a way that would justify the nullification of the basic law by virtue of the doctrine of the unconstitutional constitutional amendment – whatever be the scope of its application in Israel. In the circumstances of the present case it is not necessary for us to decide on this question.

35. In conclusion: for all the reasons elucidated above, I propose to my colleagues to deny the petition. Basic Law (Temporary Provision) is indeed a basic law, and the harm that it allegedly harbors is not of the type that justifies the intervention of the Court in basic legislation, even if the Law was enacted in a manner which it would have been better to avoid. As stated, we leave pending the question of the possibility of applying a substantive criterion for identifying basic laws, and we do not think that we ought to decide on the question of the application, or the scope of application, of the doctrine of the unconstitutional constitutional amendment in Israel. Determination of these two issues is not necessary in the case at hand, and we hope that we will not require it in the future.

36. Apropos of the above discussion we would point out that above all, the present petition is an indication of the need to complete the constitutional enterprise and to entrench the procedures for enacting and changing basic laws through the mechanism of Basic Law: Legislation (see, in this context, the various Basic Law: Legislation Bills that have been submitted to the Knesset; see, for example, Basic Law: Legislation Bill, H.H. 5761 2988 and the earlier draft laws mentioned in the Explanatory Notes. See also Dan Meridor, “Major Principles in Basic Law: Legislation Bill” Mishpat Umimshal 1 (1992), 387 (Hebrew)). The fact that the procedure for changing basic laws is liable to have significant ramifications for the constitutional regime cannot be ignored. The manner in which basic laws may be changed and the degree of rigidity of the procedure have a direct impact on the status of the basic laws, on the stability of the arrangements they prescribe, and on the extent of the power of an accidental majority to change the political, social and value-related identity of the State of Israel (see also, on the argument that the procedure for amendment affects the nature of the regime that the constitution establishes, Avichai Dorfman, “The Theory of the Rule of Constitutional Change” Mishpat Umimshal 10 (2007), 429 (Hebrew)). As stated, there have been several attempts in the past to formulate draft laws to regulate the procedures of enactment of basic laws. These bills did not develop into a fully-fledged comprehensive basic law. It would seem that today, ten decades after the enactment of the first basic law, the time has come to do so.

Justice U. Vogelman

I concur.

Justice M. Naor

1. I concur in the opinion of the President.

2. The question that is central to this petition, as emerges from the discussion that took place before us in the hearing on 11.1.2011, is whether the fact that the Basic Law was changed by way of a temporary provision is a reason for striking down the Law. In my opinion too, this must be answered in the negative. My colleague the President emphasized the need to complete the legislative enterprise and to entrench the procedures for enacting basic laws and their amendment by means of Basic Law: Legislation. In the present legal situation, however, it cannot be ruled categorically that a basic law may never be changed by way of a temporary provision. All appear to agree that there are exceptional situations in which there is no avoiding a change in this manner. An example of this may be found in the provisions of the law that postponed to a small extent the date of elections to the Knesset and the Local Authorities due to the 1973 Yom Kippur War, thereby extending the term of the sitting Knesset. The Law to which we are referring is the Elections to the Eighth Knesset and to Local Government (Temporary Provision) Law, 1974, the provisions of which apply notwithstanding the provisions of Basic Law: The Knesset (s. 10). This temporary provision was at the time dictated by reality.

3. Indeed, creditable constitutional arrangements must leave a narrow opening at least for changing basic laws by way of temporary provisions, due to what the legal advisor to the Ministry of Finance, Adv. Baris, in the section cited by the President, called “the needs of the hour”. The matter at hand is not one of “the needs of the hour”, but the present constitutional structure in Israel does not rule out the amendment of a basic law by way of a temporary provision that is a basic law. I agree with my colleague that determining a temporary constitutional arrangement detracts from the status of the basic laws, and it should be done sparingly.

4. The present case touches upon the fabric of the relations between the legislative and the executive authorities. This is not a matter of a violation of human rights, nor, in my view, of a breach of the fundamental principles of the regime. The determination that a budget will be an annual one (as opposed to a biennial one) is not, in my opinion, a fundamental constitutional principle. I can understand the objection of the petitioner, who feels that the amendment was intended to achieve a political end, even though an examination of the legislative history does not evince this. However, like the President I do not find cause for the intervention of the High Court of Justice regarding the constitutionality of the Law only because the Basic Law was amended by way of a temporary provision.

Justice E. Rubinstein

1. This case, even if outcome is denial of the petition, highlights, in my opinion, a resounding systemic failure – to instill in the Israeli people, and even sadder, in its parliamentary representatives, a constitutional awareness. The fact that the constitutional texts – basic laws – are “as clay in the potter’s hands; he expands it at will and contracts it at will”, in the words of the prayer recited in the Synagogue on the Eve of Yom Kippur , is sad evidence of this. We live in ongoing eras of, on the one hand, “quasi-constitution” – basic laws, including constitutional judicial review within the bounds of Bank Mizrahi v. Migdal [1] and the subsequent rulings, and on the other hand, a degradation of the basic laws as if they were a “request program”. The question facing us is whether it is possible, by way of judicial action, to achieve greater respect for the constitutional text? The answer is not clear.

2. The specific issue at hand is in my mind a two-fold one. One is whether a basic law may be changed by way of a temporary provision. The second, continuing from this, is the slippery slope of the degradation of the constitutional dignity of a basic law.

3. On the juridical plane it is hard to state categorically that a law cannot be changed by way of a temporary provision absent Basic Law: Legislation, and even more so prior to completion of the constitution. The reply of the Knesset quotes from my letter of 19.7.99 – when I was serving as the Attorney General – to the chairman of the Law and Constitution Committee of the Knesset which was discussing the attempt of the Government to change Basic Law: The Government so as to remove the limitation that then existed in the Basic Law on the number of ministers. The proposal seemed problematic from a legal perspective, and I expressed my reservation in view of the constitutional entrenchment in the existing Basic Law of the number of ministers; my reservation also related to “the interest in the stability of the constitutional structure and the need to refrain, insofar as possible, from frequent changes in the basic laws …”. I added, however, that “to the extent that this is done in accordance with the provisions of the relevant Basic Law, I cannot say that there is a legal bar to this.” In view of the problematic nature of the matter, and in order to achieve a balance between what the Government wants and the needs it has presented on the one hand, and wanting to refrain from fixing the extension for a long period on the other, the Ministry of Justice suggested – and the Government agreed – that the proposal be entrenched in a temporary provision for the term of that Knesset. In another letter to the Chairman of the Committee dated 21.7.99, I pointed out that for the sake of lessening the problem, I had raised the possibility of a temporary provision, and that it could indeed be argued that –

‘It is preferable and dignified to amend a basic law by way of a temporary provision, because we are dealing with a constitutional document. However, matters must be weighed on the scales of profit and loss in the long term as well, and in my view the damage done by transmitting a message of the possibility of permanently expanding the government outweighs the difficulty – which I do not underestimate – of amending a constitutional text by means of a temporary provision (and regrettably, we have not yet succeeded in endowing most of the constitutional texts, the basic laws with the aura of “constitutionality” in the public and in the Knesset for various reasons).’

I was of the opinion that a temporary provision would necessitate the instigation of renewed processes in the future, and that the wheel would possibly turn back; at that time too there were examples of temporary provisions – s. 10 of Basic Law: Freedom of Occupation. I was of the opinion therefore that “the balance is tending towards a temporary provision, in order not to permanently fix something that is liable to transpire as being a temporary necessity.” The Knesset ultimately decided on a permanent amendment, with which we are living to this very day in our minister-rich governments.

4. I cited the above at some length in order to explain the circumstances of “Woe to me from my Creator and woe to me from my evil inclination” (B. T. Berachot 61a). The Basic Laws have not been accorded the status that they deserve, as evinced, inter alia, by the vicissitudes of Basic Law: The Government, which was enacted, amended (not necessarily by way of a temporary provision) and replaced, in large part according to changing situations of coalition needs which mostly have no relation to constitutional dignity (and see my article: “Basic Law: The Government in its Original Formulation – Theory and Practice” Mishpat Umimshal 3 (1996) 521, 578-583 (Hebrew), published also in my book Paths of Government and Law (2003) 79, 86-91 (Hebrew). Therefore, when the Government wished to increase the number of ministers in 1999, I thought, as the Attorney General, that this was an error and it was a pity that it should be fixed (as ultimately occurred) as an “eternal lament”; consequently I was of the opinion that a temporary provision was preferable, as stated, in the sense of “choosing the lesser of two evils”, in the words of the Mejelle. Today, too, I cannot say unreservedly that a constitutional temporary provision has no basis in law such that it would have to be struck down, as we are asked to do today, and I say this with regret.

5. The subject on which the petition turns is not a trivial one. Suffice it to say that the budget is one of the central pillars on which parliamentary oversight of the government rests. I personally do not believe that a constitutional text is an experimental field, as those seeking the amendment would like to argue. Let us admit the truth: a temporary provision that stems from clear necessity – for example the temporary provision concerning the elections after the Yom Kippur War, as mentioned by my colleague Justice Naor (para. 3) – is rare. Temporary provisions will usually stem from coalition and political needs, which are virtually unrelated to a constitution that symbolizes permanence, eternity of the state and the nation, human citizens’ rights, including the rights of minorities. In the present case, the idea of a biennial budget is not in essence conjunctural and it has some basis – as demonstrated to us – in the professional approach and from the international perspective, but it involves, as stated, the ability of the Knesset to exercise oversight of the Government; ought it to be the subject of constitutional experimentation and a weather vane?

6. Furthermore, I will not refrain from stating here that a biennial budget might well appear to be the younger sibling of the Arrangements Law, which is not well thought of – not to say infamous; a Law that continues, despite several improvements following a certain parliamentary awakening and legal and judicial remarks, to accompany every budget as a persistent slap in the face to the notion of creditable legislation, and in my view also as lack of respect for the Knesset, and much has already been written and said on this, and to add would be to detract.

7. But after having said all this, in order to strike down the Basic Law (Temporary Provision) a stronger juridical entrenchment than that which exists would be required, even though I would not padlock the door with a view to the future; in the circumstances there is not the critical mass which would entail its nullification. My colleague Justice Naor (in para. 3 of her opinion) stated that “indeed creditable constitutional arrangements must leave a narrow opening at least for changing basic laws by way of a temporary provision.” I would leave this pending future investigation; for example, in the United States an amendment to the Constitution (under art. 5 thereof) necessitates an extensive, drawn-out procedure, that combines Congressional decisions with the consent of the States. But I certainly can agree with Justice Naor, that if the thing is done and the temporary provision is passed, it must be done sparingly, and as far as I am concerned, exceedingly sparingly. In any case at the present time and in the present case and in the existing juridical situation, we cannot dignify the Knesset more than it dignifies itself, and therefore we cannot grant the petition.

I will conclude by concurring in the words of my colleague the President with respect to the need for completing the constitutional enterprise. I will say clearly and somewhat stridently: the main reason for it not having been completed until now, so it seems to me – and let us recall that for nearly two decades, not even one basic law has been passed, despite efforts having been made – is not because of what will be written in the Constitution, but apparently because of the question of who will interpret it. The last basic laws came into being in 1992, but in 1995 a ruling was handed down in the case of Bank Mizrahi v Migdal [1] which determined the constitutional authority, and since then there has been a “silence of the constitution” in the operative sense, as opposed to various proposals. It seems that parts of the Knesset are not happy with the constitutional authority of this Court, and are afraid that additional constitutional texts will add to its power. I will merely say that not only is the power of judicial review exercised by this Court cautiously and sparingly, but whoever looks into the matter will find that when it has been exercised, it has always been in areas that for the most part are not the areas that worry those who are concerned. We live in a world of appearances and public and media-related perceptions that feed off themselves. It would be good if the scrutiny would sometimes be directed at the substance of issue, if one may make this modest request, even though criticism is of course legitimate, and also in the court itself there are majority and minority decisions. But scrutiny is always a good thing, so that the criticism can follow and not come before. Why do I believe in the importance of completing the constitution, although we in fact live in a quasi-constitutional regime? For educational reasons, to perpetuate the values of Israel as a Jewish and democratic state, as a text that will teach and will constitute a historical fountain spouting the values of the nation and the individual as one. The Declaration of Independence, which constitutes a major source of interpretation by virtue of s.1 of Basic Law: Freedom of Occupation and s.1 of Basic Law: Human Dignity and Liberty, can fill some of these roles (see the article by myself and N. Solberg, “The Declaration of Independence of the State of Israel – After it has (Almost) Waxed Old, Shall It Have Pleasure”, Netivei Mimshal Umisphat 179, 191-195 (Hebrew)). But a complete constitution would be an upgrade and an empowerment on the educational plane and for the long term, and for this reason it ought to come into being.

9. As stated, in the circumstances I concur in the ruling of my colleague, the President.

Justice E. Arbel

I concur in the judgment of my colleague, the President.

Vice President E. Rivlin

I concur.

Justice A. Grunis

I concur.

The petition was denied as stated in the ruling of the President D. Beinisch. There is no order for costs.

3 Nissan 5771.

7 April 2011.

Full opinion:

Bar-On v. Knesset.pdf

Link to original Hebrew text of decision on official ISC website:

Doe v. Ministry of Health

Case/docket number:

HCJ 4077/12

Date Decided:

Tuesday, February 5, 2013

Decision Type:

Original

Topics:

Parenthood

Agreement to have children

Abstract:

This is a petition against the First and Second Respondents’ decision not to permit the Petitioner (a single woman, born in 1974) to use sperm donations by an anonymous donor (the Third Respondent), which were preserved for her (for a fee). The Petitioner had her first daughter from the Third Respondent’s donation. She is now interested in undergoing an additional insemination process with that same donation in order to ensure a full genetic match between her children. The Respondents’ decision was made in light of the donor’s decision to withdraw his consent and his donation due to changes in his worldview – becoming a “Ba’al Tshuva”, i.e. an observant Jew – so that sperm donations he had made in the past would no longer be used. It should be noted that the consent form sperm donors (currently) sign is silent on a donor’s right to change his mind. The Petitioner argues that the Respondents’ decision to prevent her from using the sperm donations that were preserved for her violates both her constitutional and contractual rights, is unreasonable, and must be overturned. Generally, the Petitioner’s arguments may be divided into two categories – the first, is on the public law level, primarily in terms of violating her right to parent. The second are arguments on the civil law level, including claims stemming from contracts between the parties, property rights and others. The donor claims he has autonomy rights in terms of deciding whether his sperm can be used.

The High Court of Justice (in a decision authored by Justice Rubinstein, with Justices Barak-Erez and Amit, concurring) rejected the Petition for the following reasons:

Needless to say that the High Court of Justice – as well as the attorney for the Respondents and even the anonymous donor himself – sympathizes with the Petitioner, who wishes that her children, conceived with the help of sperm donations, will carry the same genetic code. However, the donor’s position and his personal autonomy must prevail. As much as we understand the Petitioner’s arguments in terms of civil law, contract law, even in terms of administrative law, and her reliance interest – as values, these cannot dominate over personal autonomy in these circumstances. The donor formed his position as a “Ba’al Tshuva” and it seems his position has a religious aspect. But even absent the religious aspect, one’s position reached thoughtfully – although it did not occur to him in the past when he decided based on whatever considerations to donate sperm – that he does not wish for there to be any additional children in the world whom he did not choose and whose mother he did not choose, with whom he would have no relationship, and whom he would not raise is understandable. This is even if he owes them no duty under existing law (and incidentally, it is possible that under Jewish law, even if they have no right to his support, they may have a right to his estate). The autonomy aspect eclipses other considerations.

The right to parent is seemingly a significant value in and of itself, it is natural and primal and holds a top spot on the human list of priorities. This is joined by the autonomy reflected in the personal choices that come along with the right to parent. The right not to parent, on the other hand, does not include a protected independent value, but is designed to protect one’s personal autonomy in electing it (that is, electing not to parent, or not to co-parent with a particular man or woman). It should be noted that even those who support defining this right as merely an interest apparently still view it as one that must be legally protected.

However, limiting the Petitioner’s right to be impregnated by a particular person, or her right to a child with a particular genetic background is not a violation of the right to parent. This limit does not reach the core of the right to parent – the actual ability to enter the class of parents – and to bear a child. At most, and this is highly doubtful, this is a limitation at the periphery protected by the right to autonomy (without addressing, at this point, the issue of the scope of this protection, and whether indeed the right was infringed and whether under proper balancing it is worthy of protection).

Still, and if presumably according to existing law the donor owes no financial, social or other duties to the child, it is clear that the harm to the donor in terms of genetically parenting additional children against his will constitutes a violation of his autonomy. In this context, it has been pointed out, among others, that the harm to the donor is not merely in inability to choose not to be a father, but also includes his autonomy to decide about his status as a father. In other words, a man who sees his genetic-biological parenthood, or “blood ties”, as creating his moral obligations as a father, suffers injuries to his autonomy both in terms of lack of choice and in terms of failing to fulfill his duties according to his conscience or religious beliefs.

This is not to say that in any event a sperm donor’s request not to use his sperm would prevail. The stage in which the request is made is relevant, even crucial. There may be good and weighty reasons not to permit a donor to change his mind and the Court lists these potential considerations (this is not an exhaustive list). Such was the situation in Nachmani, let alone when a pregnancy has already occurred. But outside of such circumstances, the right to change his mind and the violation of his right are weighty and tip the scale in his favor. Indeed, the donor gave consent and accepted payment, but it is not a regular “transaction”, rather an issue that holds strong emotional aspects. The donor’s conscience and feelings are a matter of values and cannot be quantified in the simple legal sense.

Even had we assumed that the issue is a violation of the Petitioner’s autonomy to choose whom to parent with, she cannot prevail. This is a choice that needs the cooperation of two (whether within a marriage or other family unit, including – even if with significantly mitigated force – a same-sex family unit requiring a sperm donation) or some third party as a sperm bank, in order to be realized. Of course, these situations may be distinguished, and may under certain circumstances change the outcome, but in this matter there is no justification for the donor’s interest to yield to that of the Petitioner’s.

Protection for the Petitioner’s right to have children of the same genetic code ends where it clearly conflicts with the donor’s rights. In a regime of relative rights, there is no right that affords its holder absolute supremacy in its exercise. Therefore, the obvious interests at the basis of the Petitioner’s claims succumb to the donor’s right to autonomy.

Even had we assumed, for argument’s sake, that the Petitioner’s right to autonomy is violated, and Justice Rubinstein does not believe it was – in any event, not to a great extent – as distinguished from Nachmani, the conflict and determination here concerns the Petitioner’s right to autonomy in the face of the donor’s right to autonomy. In the conflict between these two autonomy rights is seems the donor should prevail because, from his perspective, we are dealing with “active” law – a use of his sperm, while for the Petitioner this is “passive” law – preventing the use of the donor’s sperm.

Before concluding, Justice Rubinstein briefly adds Jewish law’s perspective on the issue of sperm donation and the status of the donor. This analysis demonstrates that applying the law and principles mentioned above lead to the same outcome under contract law as well. Among others, Justice Rubinstein emphasized that the option of withdrawing a donation does not constitute a donor’s “veto right” at every point in the process. The point of no return, where the balance of rights and interests shifts and the donor loses the legal possibility of terminating the contract and withdraw his donation, may change according to various considerations. In our case, several considerations lead to accepting the donor’s withdrawal of consent, particularly a lack of any physiological link between the donation and the Petitioner at this stage.

The primary concern arising from this matter is the harm to the stability of sperm banks in Israel by permitting carte blanche to donors who may wish to pull their donations. The concern is that beneficiaries of donations, such as the Petitioner, who have requested that a specific sperm bank preserve additional donations for them, would discover this option is no longer guaranteed. The stability of this institution is a human and public interest of the highest order. The uncertainty that exists as a result of the tenuous statutory regulation, harms, from the outset, the public’s possibility to rely on sperm donations. The cure for this is in the legislature’s hands.

In the interim, and as a temporary measure, the Petitioners ought to amend donors’ and beneficiaries’ consent forms to ensure that all the parties involved know and understand their rights. As long as legislation that regulates and defines the possibility of a donor to withdraw consent is lacking, sperm banks must accurately present to beneficiaries the legal context in order not to guarantee what may not be realized.

Finally, the decision to donate sperm must be a result of deep thought and consideration. Donors must know that their informed consent to give sperm to another is relied upon by others who seek to plan their lives and produce offspring. This however, is not a decision that can be taken back easily, and the ability of withdrawing consent is in any event not guaranteed. It is contingent upon the stage of the process, that in the absent of a comprehensive statutory regime, is subject to the considerations detailed in the opinion.

Justice Barak-Erez joins the crux of the conclusions, and adds her position regarding some of the rationales behind them. Justice Amit also joins the outcome, though in his opinion, in the conflict between the Petitioner and the donor through the lens of civil law alone, the Petitioner must presumably prevail. (The choice whether to opt for applying only civil law depends on the value-based issue of the weight we are willing to attribute to the sperm’s uniqueness as “property”.)

Voting Justices:

Doe v. Ministry of Health.pdf

Primary Author

majority opinion

Amit, Isaac

Author

concurrence

Barak-Erez, Daphne

Author

concurrence

Full text of the opinion:

At the Supreme Court sitting as the High Court of Justice

HCJ 4077/12

Before: The Honorable Justice E. Rubinstein

The Honorable Justice I. Amit

The Honorable Justice D. Barak-Erez

The Petitioner: Jane Doe

V e r s u s

The Respondents: 1. The Ministry of Health

2. The Sperm Bank – In Vitro Fertilization Unit Rambam Medical Center

3. John Doe

Petition to grant an order nisi and an interim order

Date of Hearing: Heshvan 29, 5773 (November 14, 2012)

On behalf of the Petitioner: Adv. Gali Nagdai

On behalf of the Respondents: Adv. Danna Bricksman

Judgment

Justice E. Rubinstein:

The petition before us concerns an apparently precedential case of the request of a sperm donor, John Doe (Respondent 3), to retract his consent and donation due to changes that have occurred in his world view; such being subsequent to the Petitioner having her first-born daughter by his sperm donation, and being presently interested in undergoing another insemination procedure by the same donation, in order to maintain full identity of the genetic constitution of her children. The Petitioner seeks to receive the donor's additional sperm donation, which is stored at the sperm bank. The position of Respondents 1-2 is that there is no justification to allow this. We are concerned with an issue of a sort unimagined by our forefathers, which was impossible several decades ago, and which developments in medicine and technology have created.

The "genetic era" and the increasing use in recent decades of artificial reproductive techniques, have brought a real blessing to many who would have remained childless "in the old world"; reality has changed immeasurably, and technology presently enables many of those whose path to parenthood was previously blocked, to bring children into the world and have a family. This is one of the dramatic developments, which creates a new social and legal reality, and gives rise to complex and sensitive human questions. The

legal world has not yet had the time to properly address these issues, and it falters behind them, as it does following the other dramas of the superior technology era. This was described nearly two decades ago by author Y. Green (In Vitro Fertilization through the Prism of Consent (1995)):

"The longing for a child is common knowledge that requires no proof. Spouses, who experience difficulties in having children, make and will make any effort in order to be blessed with children: emotional, physical and financial. They are also willing to 'sign' any undertaking, provided that their heart's desire is fulfilled. Medical technology in the fertility field has developed at an incredible pace in recent years. Solutions, which were considered science fiction only a few years ago, are slowly becoming an almost daily reality. There is a great blessing alongside this development, which grants more and more couples of various degrees of infertility a chance to expand the family. However, as chances increase and the potential of being blessed with children increases, so increases the risk involved in the various stages of the process, both to those born (sic.) and to the infant to be born in this way" (ibid, p. 9).

Before us is a chapter in this complex whole, on an unfinished road, and we will clearly not attempt – nor need we in this case – to encompass the full human issue, nor the legal one, relating to parenthood in the modern era; as we shall hereinafter see, this issue may be reviewed through the prism of more than one family of law, but none is exhaustive. As President Shamgar (Retired) stressed already at the outset:

"Any conversation with respect to issues of birth affairs is, by nature, pretentious and stirs oversensitivity. It is pretentious – since before us are complex and multifaceted issues, the legal aspect of which is unable to exhaust their nature and description. There is a kaleidoscope of elements here, which are anchored in various disciplines, medical, philosophical, theological and social, which do not fit within the standard legal compartmentalization and are not fully exhausted by the employment of legal criteria alone. Thus, in such areas, cautious legal treading is suitable… These issues evoke oversensitivity, because they directly touch on the exposed nerve of existence. Although the vast majority of legal issues of various types are taken, by mere nature, from life, there are issues that attack the problematic nature of our human existence head-on, at the core, rather than indirectly…" (President Meir Shamgar "Issues on Matters of Fertilization and Birth" 39(a) HaPraklit 21 (1989).

This is also the case before us, and therefore we shall guide ourselves with this advice before we embark on the journey. This is the order of the discussion: firstly, we shall briefly address the normative framework concerned, the factual background of the case and the parties' claims; we shall examine the nature of the right to parenthood, and we shall examine the standing of the Petitioner vis-à-vis the standing of the donor, who asserts autonomy in deciding the use of his sperm, in view of this right. We shall thereafter briefly address additional aspects of the issue, and mainly the contractual regulation of sperm donation. Finally, we shall articulate the evident need, in this case, for the in-principle regulation of the entire field by the legislator.

We shall forerun and state the principal part of our ruling. Needless to say, we feel – as does the attorney for the Respondents and even the anonymous donor himself – human sympathy for the Petitioner, who requests that her children by a sperm donation carry an identical genetic constitution, which apparently proved successful – thank God – with her first-born daughter. However, we have come to the conclusion that precedence should be afforded to the donor's position and to his personal autonomy. With all due understanding of the Petitioner's claims in the field of private law, contract law and even in the field of administrative law, with respect to the reliance interest – these do not amount in value to the dominancy of the aspect of personal autonomy under the circumstances of the case. The donor has formed his position, according to what he stated orally (his written response is more general) as a penitent (Chozer B'Tshuva), and it appears that there is also a religious facet to his position. However, even without such facet, one can understand the position of a person who, after reflection, reached the conclusion – which had not occurred to him in the past, when deciding to donate sperm for such or other considerations – that he no longer wants there to be children by his sperm in the world, whom he did not choose and whose mother [he did not choose], with whom he has no relation and who will not be raised by him; it being [the case] even if he is not liable to them under the presently practiced law (and incidentally, there is a possibility that under Hebrew law, even if they are not entitled to child support from him, they are entitled to inherit him). In our opinion, the autonomy aspect overshadows the other considerations, as we shall explain below.

The Normative Framework

Sperm donation and the management of sperm banks in Israel are currently not regulated by primary legislation, but rather by the Public Health (Sperm Bank) Regulations, 5739-1979 (the "Regulations") and circulars of the Director General of the Ministry of Health, which are issued thereunder (these regulations were promulgated by the Minister of Health by virtue of the Consumer Services Act (Sperm Bank and Artificial Insemination), 5739-1979; for criticism, see Pinhas Shifman "Determination of the Paternity of a Child Born by Artificial Insemination", 10 Mishpatim 63, 85 (1980); further see (in respect of the status of administrative directives) Yoav Dotan Administrative Directives (1996), 27-39). The last Director General Circular, of May 22, 2008, entered into effect on January 1, 2009, and is the principal part of the normative basis, on the administrative directives' level, for our discussion at this point. The Director General Circular mainly regulates the conditions for recognition of a sperm bank and prescribes rules with respect to the retention of information regarding sperm units and donors – a problematic issue in and of itself, as we shall briefly mention hereinafter. The Director General Circular also defines the procedure required both of the donor and of the recipient of the donation.

The donor, alongside whose donation there is a certain financial benefit, fills out a "Donor Card" form (Exhibit B to the Respondents' response), which requires general details, including name, identity number, a general description of appearance, and data regarding physical examinations, which are intended to negate the existence of illnesses in his body. The donor also fills-out a "Consent of a Sperm Donor" form (Exhibit C to the Respondents' response), in which he declares by his signature as follows:

"I agree to donate of my sperm for use thereof for the artificial insemination of women or for research purposes, according to the considerations of the sperm bank. I hereby agree and declare that I will not be entitled to receive any details of the identity of the women, and their identity shall remain confidential. Furthermore, my name and my identity or any detail about me will not be provided to any person and will also remain confidential, except for a cross-check of these data with a center for national donor registration and national registration of persons ineligible to marry".

This statement is required under Section 25(e) of the Director General Circular, which determines that "[T]he sperm of a donor shall not be taken nor received nor used for artificial insemination, unless the donor shall have given his consent to the use of the sperm" (emphasis added - E.R.). The donor also states that he is willing to undergo medical examinations and that to the best of his knowledge he is not suffering from an illness or family history, which might disqualify his donation. The forms do not address the issue of consent withdrawal or additional issues such as a quantitative limit of the possible amount of inseminations by the donation (such as inseminations that produced a pregnancy, as distinguished from unsuccessful attempts).

A similar personal data card is filled-out by the recipient of the donation (Exhibit D of the Respondents' response), which one of two consent forms is added to, in accordance with her family status: one consent form for spouses, and another consent form for a single mother [who is] a "single woman" (Exhibit E-1 and Exhibit E-2 to the Respondents' response). The second form, which is the one relevant to the case at hand, mainly includes a statement as to the explanation the recipient of the donation received with respect to complications and side effects (and a waiver of future claims in respect of such matters), and as to the practical prospects of impregnation as a result of the insemination. As pertains to the sperm and the donor, the recipient of the donation states as follows:

"I consent that the donor or donors of the sperm that will be used in the insemination, or the sperm itself, be chosen by the physician and according to his discretion and with his consent and I will not be allowed to know the identity of the person whose sperm is used, or his attributes, or any other detail related to him or to his family" (emphasis added – E.R.).

As we can see, the only documents that include the parties' consent, each separately, do not address the issue of donation withdrawal at all. These matters were presented somewhat in length, since, in the situation before us – a ruling on which is "the lesser of two evils", and involves a measure of harm to one of the parties – it is appropriate to examine how to avoid such situations in the future, rather than merely how the current situation will be resolved.

The Case At Bar

The Petitioner is a single woman, born in 1974, holding Israeli and American citizenships, and a resident of the Unites States for the past 17 years. In 2010, the Petitioner's first-born daughter was born via fertilization treatments, during which use was made of the sperm donation of an anonymous unknown donor (Respondent 3, hereinafter the "Donor"), which the Petitioner received from the sperm bank at the Rambam Medical Center in Haifa (Respondent 2, hereinafter: the "Sperm Bank"), which is under the supervision of Respondent 1 (hereinafter: the "State"). Following the birth of her first daughter, the Petitioner purchased - apparently at the first opportunity she had – the option to use five additional sperm units of the Donor, to be kept at the Sperm Bank for an annual fee. For this purpose, the Petitioner filled out a sperm reservation form and paid the required amount. It was stated on this form that:

"The sperm bank undertakes to use its best efforts to keep these sperm units, but will not be responsible in any manner for a loss, harm or other use of these sperm units" (emphasis added – E.R.; Res/3).

On December 1, 2011, the Sperm Bank received a letter from the Donor, in which he stated his wish that use of the sperm donation that he had made in the past be discontinued, among other things, in view of a change in his lifestyle (Res/4); following is his letter verbatim:

"My name is ________, in the past I was a sperm provider to the sperm bank managed by you and I ceased this activity several years ago.

Due to a change in my lifestyle, use of my sperm by the sperm bank at the present and future time raises a problem for me. I approached you several months ago with a request to cease use of my sperm. At first I was told that I had no right or say on the matter, and afterwards it was said that in any event the use of my sperm had already been discontinued, so that there was no problem.

After a medical-legal inquiry, it was clarified to me that I have a veto right on the matter, despite the contract between us.

My request to you is a formal letter of statement that no use is presently made nor will it be made in the future by the entity managed by you (the sperm bank)".

Following this letter, the Bank notified the Petitioner (on January 10, 2012), that she would no longer be able to use this sperm donation. Subsequently and in view of the Petitioner's appeals to the Bank's manager, the Bank's manager contacted the legal advisor to the Ministry of Health and forwarded the reply of the legal office to the Petitioner, whereby "[A] consent which is unlimited in time is not "everlasting" and the sperm donor who previously agreed to donate his sperm may recant at any time [so long] as "irreversible reality" has not been created". It was stated that under the facts of the case, such a reality had not been created, and it was assured that the money that had been paid for reservation of the sperm units would be refunded (letter of January 11, 2012 by Dr. A. Leitman, Manager of the Sperm Bank; Res/5). The Petitioner requested not to destroy the donation and to allow her to exhaust the legal avenues; the Sperm Bank's manager accepted her request.

The Petition

On May 22, 2012, the present petition was filed claiming that the Respondents' decision to prevent the Petitioner from using the sperm units that had been saved for her infringes upon her constitutional and contractual rights, is unreasonable and should be annulled. The Petitioner's claims may be separated, in general and for the sake of discussion, into two levels. The first, claims on the level of public law, and mainly the impingement on her right to parenthood. The second, on the level of civil law, rights by virtue of a contract between the parties, by virtue of proprietary ownership and more.

First Level – the Right to Parenthood

The Petitioner claims that there is presently no dispute as to the standing and importance of the right to parenthood, a "fundamental human right which every person is entitled to", a natural right which is established in Basic Law: Human Dignity and Liberty; hence, this right may be limited – as argued – only under the conditions of the Limitation Clause (to substantiate her position, the Petitioner referred to the rulings of this court in CA 451/88 John Does vs. the State of Israel, IsrSC 44(1), 337 (1990); in CFH 2401/95 Nachmani vs. Nachmani, IsrSC 50(4) 661 (1996); in HCJ 2458/01 New Family vs. the Committee for Approval of Embryo Carrying Agreements, the Ministry of Health, IsrSC 57(1) 419 (2002)). The Respondents' decision impinges – so it is mentioned – on her right, since following the birth of her first-born daughter it may "seal the Petitioner's fate, remaining a mother of a single child only, and forgoing her wish to have the family she was hoping to have" (Paragraph 21 of the Petition).

Moreover, per the Petitioner's position, there is a parallel infringement upon her right to a family, another derivative of the protection of human dignity and the autonomy of individual will. To her mind, this right has a higher status than the other constitutional human rights, such as the right to property and to freedom of occupation. Furthermore, beyond the infringement on her constitutional rights – so it is argued – the Respondents' decision is marred by unreasonableness, and is therefore void ab initio. It is further argued that the Respondents' decision impinges upon her daughter's rights to siblings in general, and to biological siblings in particular.

Second Level – Contractual and Other Causes

The Petitioner also claims that the Donor gave his consent to use of his sperm – informed consent; and therefore his present request to prohibit the use of his sperm constitutes a breach of contract, both vis-à-vis the State and the Sperm Bank, and vis-à-vis herself, as a third party to the contract. Moreover, the State and the Bank are themselves in breach of the contract they entered with the Petitioner: the Petitioner fulfilled the procedure determined thereby as required; she gave financial consideration for the sperm units. As stated, at no stage of the proceedings was the possibility of the Donor withdrawing his consent raised before her. Since the Petitioner relied on this representation (in view of the manner of presentation of the sperm donation by the State and the Director General Circular) and chose to bring her first born daughter into the world from the Donor's donation, it may no longer be said, per her position, that an "irreversible reality" has not been created. It is difficult – so it is argued – to assume that the Petitioner would have consented to undergo the insemination process knowing that the Donor might change his mind at any time. It is further argued that the Donor sold his sperm, and therefore cannot retroactively demand that no use be made of the donation without cause under law, like any other sale contract that confers ownership upon the purchaser.

The Petitioner also claimed that a change in the circumstances of the Donor's life may not serve as cause for his retraction of the consent, and the reversal of the Respondents' decision does not constitute an impingement on the best interests of the child or on public policy. It was further argued that the damage to be caused to the Petitioner as a result of the upholding of the Respondents' decision is disproportionate; it is argued that the Petitioner's time to undergo another fertilization is running out, beyond the fact that the mere impediment to having additional children who have the same genetic constitution, as aforesaid, might prevent her from having more children. Conversely – it is so claimed – the Donor "has finished his part", and no cooperation is required of him for the purpose of continuing the process; he is not the parent of the child to be born, and therefore this does not involve the coercion of parenthood; his right to personal autonomy is thus not violated.

It is finally argued that upholding the Respondents' decision will have severe across-the-board implications on sperm recipients of donations in Israel. The donor's option to retract his consent at any time creates uncertainty in the planning of a future family, as it leaves the recipients of donations under the shadow of the "concern that the donor they chose will change his mind". This compromises the ability to plan a family according to the circumstances of every woman's life and wishes. This might – as asserted – lead to many donors withdrawing their consent, and gravely harm sperm banks in Israel and their stability. In order not to render the Petition redundant, an interim order has been sought to order the Respondents to prevent the disposal of the donation until the Petition is decided.

The Response of the Respondents and the Hearing before us

On July 10, 2012, the State's response was filed, which argued that indeed it is undisputed that the core of the right to parenthood and the right to family gives rise to a protected constitutional right deriving from the right to dignity, and established in Basic Law: Human Dignity and Liberty. However, the case at bar does not concern the exercise of the right to parenthood, but rather the right to birth children who are full biological siblings, and the right of a child to a sibling or a full biological sibling; these rights do not exist in law, and therefore the Petitioner cannot point to an infringement on her constitutional rights. The State emphasizes that the Petitioner's aspiration is understandable in and of itself, yet under the circumstances of the matter – even if the Petitioner's position is accepted as to the infringement on the rights conferred upon her – her right is outweighed by the right of the Donor not to be a biological parent against his will. It is argued that, although in re Nachmani it was decided to hold the right to parenthood superior to the right not to be a parent, the factual situation in that case was such that Ms. Nachmani no longer had the option of being impregnated by other sperm, i.e., a situation of the absence of a possibility of biological parenthood other than by means of Mr. Nachmani's sperm. This is not – so it is argued – the situation at hand, and the Petitioner has other options for exercising her right to parenthood. Furthermore, the Petitioner has no "biological link" to the sperm contemplated in the Petition, as was the case in re Nachmani (which, as may be recalled, concerned fertilized ova) – and a fertilization process has not commenced in the case at hand.

With respect to the second level of arguments, it is maintained that although the Sperm Bank offers recipients of donations a same-donor sperm storage service (for a fee), such storage, at most, creates "a priority" over other recipients of donations; such storage does not ensure use of the sperm, nor does it obligate the sperm donor or the bank to make use of the sperm in circumstances where this is impossible. It is further asserted that the Petitioner cannot claim that had she been aware that the Donor may retract his consent she would have used other sperm, because this right is available to each one of the sperm donors, whoever they are, so long as no irreversible reality has been created. It is emphasized that in the consent form that the Petitioner signed, it was clarified that the choice of sperm is ultimately entrusted to the physician according to his discretion; that is to say, the choice is subject to the discretion of the representative of the sperm bank from the outset, and is not guaranteed to the recipient of the donation in advance. On the contractual level, it is argued that a contract whose expiration date has not been determined is not in force and effect forever and ever, and after a reasonable time, in the framework of the duty of good faith, a party to the contract may – so it is claimed – notify the other party of his intention to be released from the contract; such – in view of the elapse of time and change of circumstance.

To reinforce its position, the State sought to draw an analogy from the Ova Donation Law, 5770-2010, which expressly regulates the option of an ovum donor to withdraw her consent "at any time prior to the performance of the act, which she agreed to designate the ova retrieved from her body to, and in respect of consent to designate ova for implantation – at any time prior to the fertilization of the ova" (Section 44 of the Ova Donation Law). It is also claimed that a similar analogy may be drawn from the Patient's Rights Law, 5756-1996, which prescribes that the patient's consent is required not only at the medical treatment stage, but throughout the continued treatment in its entirety (Section 13(a) of the Patient's Rights Law). According to the State's position, it emerges from these two laws that the legislator adopted an approach whereby infringement upon a person's right to autonomy is only merited in rare events of concern of grave danger, or at the stage of "irreversible reality"; this is not the case in the matter at hand. It was agreed that an interim order be issued, which prevents the disposal of the sperm donation until the court rules on the Petition. It was also requested that the Donor be joined as a respondent in the Petition, as the person whose rights might be compromised as a result of the Petition.

The Donor, who was joined in as a respondent, had been requested to provide his response to the Petition (the decision of Justice Solberg of July 13, 2012, in which the interim order in consent was issued, as well as aforesaid), and after numerous attempts and efforts by the Sperm Bank's manager his response was received. At first, the Donor had notified the Sperm Bank's manager that he was willing to meet outside hospital grounds, in order to refrain from exposure "due to his current situation as a penitent", but failed to hold the appointment (notice by the State of August 15, 2012). Following the decision of November 6, 2012 (toward the hearing), in which the Donor's position had been requested once more, and it had been stated that if such response is not presented, "the court may consider this conduct in his ruling, without, of course, expressing an opinion as of this time", the Donor provided his position. In a letter of November 13, 2012, the Donor noted that, at the time of the donation "I had considered the act an ideal thing for childless women, and I am not playing innocent here, the money given was also a motive, but the desire to do good was the main thing"; however, "Afterwards, I changed my lifestyle and beliefs. The aforesaid act is presently incompatible with my world view, and in my opinion, the damage it holds is greater than the benefit, both to me, to my relatives, and to the woman who is the recipient of the donation and her children who are born by the sperm of a stranger". The Donor expressed his sympathy for the Petitioner's wishes, he also explained that since providing the donation, he got married and had a son; he is not interested in adding injury to his wife and hurting his children by adding a terrible uncertainty to their lives, "in the knowledge that they have siblings they do not know"; and it was further stated: "I am not interested in having a child born by me, without me being able to give him love, and without me loving his mother". At the bottom line, the Donor requested that use no longer be made of his sperm and expressed his apologies to the Petitioner for all the sorrow he had caused her as a result of these proceedings.

In the hearing before us, on November 14, 2012, the Petitioner's attorney reiterated her arguments with respect to the infringement on her right to parenthood and her reliance on the representation before her. At the same time, the State's attorney reiterated the difficulty in recognizing the Petitioner's right, and asserted the need to regulate the area through primary legislation.

Ruling

We are not dealing with a binary decision between "good and bad", or between right and wrong – both of the parties before us are "right" from their subjective point of view; we are dealing with human emotions of the both of them, and as pertains to the Donor – also internal feelings that derive from a current viewpoint. I believe that our decision must reflect the weight of the values of the law in a proportionate manner; there is no illegitimate position before us, as stressed by Justice (his former title) Witkon a long time ago:

"As with most problems of law and of life in general, it is not the choice between good and bad that makes the decision difficult for us. The difficulty lies in the choice between various considerations, all of which are good and worthy of attention, yet in contradiction with one another, and we are required to determine the order of priority among them" (CA 461/62 Zim Israel Navigation Company Ltd. vs. Maziar, IsrSC 17(2)1319, 1337 (1963)).

Such is also the case before us. It does not concern the elimination of one of the interests that lie in the balance, but rather the relative preference of one over the other. As we have noted at the outset, this case raises questions of numerous fields of law. The issue may be looked at through the prism of contract law, property law, and, naturally, from the angle of administrative law. Each one of these perspectives may serve as fruitful grounds for a rich and innovative discussion. However, I believe that, at the end of the day, the most appropriate and correct perspective for a ruling on the issue is through the right to dignity and autonomy conferred upon any person to tell the story of his life, as we shall see below. Therefore, the discussion will principally revolve around this angle of the subject, yet, as aforesaid, we shall also address some of the claims raised by the parties on the other levels of discussion. We shall already state at this point that it is worthy to once more call upon the legislator to regulate the issue through primary legislation.

Preface – Of Interests and Rights

Legal reality often summons a fundamental contest between various legitimate considerations and values; obviously, such cases raise uncertainties and the need for an objective outline, to the greatest possible extent, of the craft of ascribing priority among them. Not every interest is protected by the law, and it depends upon circumstances even where a fundamental legal right has been recognized by law (of the classification of interests as rights, see HCJ 1514/01 Gur Aryeh vs. Second Television and Radio Authority, IsrLR 267, 275 (2001), in the judgment of President Barak, and compare to the dissenting opinion of Justice Dorner, ibid, p. 284; HCJ 6126/94 Senesh vs. the Chairman of the Broadcasting Authority, IsrSC 53(3)817 (1994); Oren Gazal Ayal and Amnon Reichman, "Public Interests as Human Rights", 41 Mishpatim 97 (5771)). Thus – for example – freedom of speech, which is recognized as a fundamental right in our legal system (HCJ 806/88 Universal City Studios vs. Films and Plays Censorship Board, IsrSC43(2)22 (1989)), receives legal protection on the political level, as the core of the right, but will not necessarily receive a similar protection on the level at the distant periphery of the recognized right, which collides with other interests; the farther you go from the core of the recognized right, so it is possible that under certain circumstances a certain act will not fall within the protection of the law. The question is thus twofold: whether the act falls under the definition of the fundamental right, and whether, under the circumstances, it is protected by the law, after the balance against other interests and rights (see ibid, p. 33-34, President Barak). In order to complete the picture, we shall note that the classification of the considerations at stake as rights or as interests defines the formula of the balance between them, and the normative superiority of one value over the other or their equal value (see Re Gur Aryeh, p. 284); however, the mere classification and the balancing manner ("horizontal" or "vertical") do not necessarily decide the concrete question before the court, since a weighty interest in vertical balancing, such as the interest of the security of the State and the public, may prevail in certain cases over a fundamental right (see HCJ 7052/03 Adalah – the Legal Center for Arab Minority Rights in Israel vs. Minister of the Interior, [2006](1) IsrLR 202, 339 - President Barak; and compare with the position of former Deputy President Cheshin, p. 457-459, and the position of Justice (his former title) Rivlin, p. 555-559 (2006)).

The tough question – which was raised in re Nachmani under the special circumstances thereof – with respect to the classification of the right to parenthood against the right not to be a parent and the normative status of the one against the other, is not raised in the case at bar; because, as we shall see, harm to the core of the right to parenthood has not been proven, and, in fact, if harm has taken place in the matter at hand, it pertains to the right to autonomy; in this situation again, at most the issue concerns the right of the Donor to autonomy against the right of the Petitioner to autonomy, all as shall be specified below.

Of the Right to Parenthood

Indeed, on the one hand, the Petitioner stands before us with her heart's desire to bring into the world another child from the Donor's donation, having full genetic siblinghood with her daughter. On the other hand, there is the Donor, who asks to prevent further use of the sperm donation he made in the past, and prevent an insemination process, that would make him, against his will, a genetic father to at least one more child, even if without ties with the child and obligations to him. Justice Strasberg-Cohen described this in re Nachmani as two sides of the same coin (see re Nachmani, p. 682), yet, according to her statements as well, a mixture of interests lies at the balance, and even if these interests may be referred to under the general term of right to parenthood and the right no to be a parent, this matter is not thereby exhausted; see the essay of the scholar Daphne Barak-Erez, "Of Symmetry and Neutrality: Reflections on the Nachmani Case", Iyunei Mishpat, 20(1)197, 198 (5756). I shall note already at this point that I do not believe that this case requires legal innovation with respect to the right to parenthood and the right not to be a parent, since the Petitioner's right to parenthood is undisputed, and the question is whether one should recognize the interest of parenthood necessarily by the sperm of the specific donor, as protected under one of these rights.

Indeed, despite the different reasoning in re Nachmani and the disagreement between the members of the panel, including among the justices of the majority, it appears that there is presently no longer a dispute with respect to the status in-principle of the right to parenthood – and this is true also in the case at bar. In other cases as well, the perception that the natural right to parenthood is conferred upon every person has been established, as emphasized in CFH 7015/94 the Attorney General vs. Jane Doe, IsrSC 50(1)48, 102:

"It is the law of nature that a mother and father will naturally hold their son, raise him, love him and see to his needs until he grows and becomes a man. This is the instinct of existence and survival in us – 'the call of blood', the ancient longing of a mother to her child – and it is common to man, beast and bird. 'Even sea-monsters [jackals – M.C.] offer their breast and nurse their young' (the Book of Lamentations, 4:3)…this tie is stronger than anything, and is beyond society, religion and state…the law of the state did not create the rights of parents toward their children and toward the entire world. The law of the state addresses something already made, it aims to protect an inborn instinct within us, and it transforms an 'interest' of parents to a 'right' under law, to the rights of parents to hold their children" (Justice (his former title) M. Cheshin).

And elsewhere, Justice Cheshin emphasized:

"The State argues and maintains as follows: a woman does not have the "right" to surrogacy; it is as though the issue of surrogacy is 'off-limits' and therefore a discrimination argument is an unmerited argument. According to this claim, because a woman is not entitled, ex hypothesi, to need a surrogacy process, a woman's claim of discrimination will consequently not be heard …I have found this argument difficult to comprehend…undoubtedly, the argument of a 'right' under law is a misplaced argument, certainly after the Surrogacy Law, which regulates the issue of surrogacy as it does. Whereas prior to the Law (and the regulations that preceded it), and there being no prohibition on surrogacy, one might argue that a woman, any woman, did have, a 'right' to surrogacy. In any event, the argument of a right to surrogacy is not to the point, yet, the main thing is that the 'right' we speak of – the right to parenthood – is a right that nature brings to us; it is of this right that we speak, not of the right to surrogacy by law (HCJ New Family, p. 445; emphasis added – E.R.).

These words are also relevant to the matter at hand (also see HCJ 2245/06 Dovrin vs. the Israel Prison Service (June 13, 2006): "Family and parenthood are the consummation of the natural urge for the continuity of generations and the self-fulfillment of the individual in society"; ibid, paragraph 12 – Justice Procaccia). It is only natural that we mention at this point, that one of the first and foremost commandments is "[B]e fruitful and multiply and fill the earth" (Genesis, 1:28). And this is a deep aspiration, not to be taken lightly. Rachel says to Jacob (Genesis, 30: 1) "[G]ive me children, or else I die". The longing of the mothers, Sara, Rebecca and Rachel, and Hanna, the mother of Samuel, as well as the mother of Samson, all of these are documented in the Bible. The divine promise is " [T]here shall be no male or female barren among you..." (Deuteronomy, 7:14). The visitation of barren women is entrusted to the Almighty and to the righteous (Genesis Rabbah, 77), but the key of birth ("key of life" – "Maftea'ch shel Haya") is not entrusted to an agent and remains in the hands of the Almighty (Babylonian Ta'anit 2, 1-2); see also the ethics book Messillat Yesharim [lit. "Path of the Upright"] by the RaMHaL (Rabbi Moshe Haim Luzzato), the Sanctity chapter. Indeed, in any situation in which the person claiming a right to parenthood requires the approval of use of a new technology in order to enter the world of parenthood, a claim may be voiced that such person does not "hold the right to a particular treatment", he does not hold the right to insemination treatments, to surrogacy and the like. However, the core of the right to parenthood is the practical ability to bring children into the world. Just as the State does not require a "parenting license", so it may not prejudice a person's right to parenthood without weighty pertinent reasons (see CA 413/80 Jane Doe vs. John Doe, IsrSC 35(3)57, 81-82 (1981)). In such situations, wherein a person requires a certain medical treatment in order to be included in the parent circle, non-administration of the treatment infringes upon his right. Naturally, the right to parenthood is also relative, but there can be no dispute that in such cases there is a concrete infringement on the protected interest.

I shall briefly address the classification of the right to parenthood (also see the words of Justice Goldberg, re Nachmani, p. 723-724). This point was extensively articulated by Justice Strasberg-Cohen (in a dissenting opinion) in re Nachmani:

"The classification of norms that regulate activity in relationships between man and his fellowman has occupied more than a few legal scholars and academics of various fields…legal rights in their strictest sense are the interests that the law protects by imposing duties on others in respect thereof. Conversely, legal rights, in their broadest sense, also include interests that are recognized by the law, against which there is no legal duty. These are liberties…Where a person has a right, which is a liberty or permission, he is under no duty toward the State or toward another to refrain from committing the act, just as he is under no duty to commit the act, which he is at liberty not to commit. A right, which is a freedom or a liberty, does not hold the power to impose a duty on another and to demand that he commit an act, which he is free not to commit…

The right to be a parent is, by its very nature, essence and characteristics, a natural, innate right, inherent to human beings. It is a liberty against which there is no legal duty, neither in the relationship between the State and its citizens nor in the relationship between spouses. The right not to be a parent is also a liberty, it is the right of an individual to control and plan his life. Indeed, non-parenthood in and of itself is not the protected value. The protected value in non-parenthood is the liberty, privacy, free choice, self-fulfillment and the right to make intimate decisions..." (ibid, p. 681-682; emphasis added – E.R.).

And like her, Justice Dorner in the same case:

"Liberty in its fullest sense is not merely the freedom from outside interference by the government or by others. It also includes a person's ability to direct his lifestyle, fulfill his basic wishes and choose from a variety of possibilities while exercising discretion. In human society, one of the strongest expressions of an aspiration, without which many would not consider themselves to be free in the full sense of the word, is the aspiration for parenthood. This is not merely a natural-biological need. It concerns a freedom, which, in human society symbolizes the uniqueness of man. 'Any man who has no children is as good as dead' said Rabbi Yehoshua Ben Levi (Nedarim, 64, B [19]). Indeed, whether man or woman, most people consider having children to be an existential necessity that gives their lives meaning. Against this basic right, which constitutes a key layer in the definition of humanness, we are required to examine the right not to be a parent. The foundation of the right not to be a parent is the individual's autonomy against the interference of the authorities in his privacy." (re Nachmani, p. 714-715).

Hence, the right to parenthood is a liberty, in the legal sense thereof – the right that fellowman and the State not interfere in the individual's actions and not obstruct the fulfillment thereof; a right against which there is no positive duty to act. However, an additional distinction emerges from these words, which pertains to the two layers of this right. The first layer, which holds value in and of itself, is the ability to fulfill the reproductive ability and become a biological mother or father. The second layer, which is also the one underlying the right not to be a parent, is the ability of a person to choose how to fulfill his natural right, i.e., the first layer. The second layer is at the periphery of the right to parenthood, it is not intended to protect the value of bringing children into the world in itself, but rather other values, such as the right to privacy, autonomy and the free choice of with whom, how and when, if at all, to bring children into this world (including the ability to plan a family). This point was articulated by the scholar Green in his aforementioned book:

"There are two facets to the right to be a parent: one facet, which to distinguish from the other shall be referred to as the factual, biological-physical facet, namely the right to belong to the parent population and have the status of a parent. The other facet is the right to decide if, when, with whom and in what way to exercise the first facet of the right to parenthood" (Green, p. 68).

The right not to be a parent, as aforesaid, is based on the protected value of autonomy; on the face of it, in Israeli society in particular and perhaps in the free world in general, there is presently no value in and of itself in not being a parent; even if the Sages have said "[I]t is better for a man not to have been created than to have been created" (Babylonian, Eruvin, 13, 72), they added in the same breath "[and] now that he has been created, let him examine his deeds". In re Nachmani (p. 710-711), Justice Tal emphasizes the commandment "[B]e fruitful and multiply" (Genesis 1:28), which we have mentioned, and the words of the Sages (Babylonian Yevamot 63, 2): "Tanna, Rabbi Eliezer says that every person not engaged in bearing fruit and multiplying is as though spilling blood". Indeed, Rabbi E.M. Shach, may he rest in peace, told the story of the Chofetz Chaim, Rabbi Israel Meir HaCohen, may he rest in peace (HaMe'ot, the 19^th-the 20^th), who was deliberating in his times whether to give a couple a blessing for fertility because "children are an immense responsibility, it being a deposit from Heaven", and he saw the difficulty in raising children in a generation whose behavior is lawless and immoral (see Rabbi Asher Bergman The Use of Torah (Year 5758), 139). However, one way or another, everyone, or virtually everyone, would certainly agree that the right to parenthood includes a core value which stands on its own – to bring children into the world – and protects the value of autonomy. Scholar Barak-Erez wrote of this rationale in her aforementioned essay:

"This assumption of symmetry between the rights requires further inspection. Albeit captivating, it is far from being self-evident. It is not at all clear whether the right to be a parent and the right not to be a parent should be discussed on the same level only due to their allegedly being symmetric. In other words, the existence of symmetry between the two rights may not be assumed merely because they hold both ends of the rope of parenthood.

As a rule, the right to "have" and the right to "not have" are not always equivalent. Is the right to life completely equivalent to the right to die? ... This is not a sole example. From the fundamental principle of freedom of speech develops both the right to speak and the right to be silent. However, does it thence result that the right to speak is always equivalent to the right to be silent? … In order to decide the question of balancing the rights, one must address the justifications that underpin them … Justice Strasberg-Cohen determines that 'the right to parenthood derives from the right to self-fulfillment, liberty and dignity'. If the focus is on 'self-fulfillment', the right to parenthood is part of the idea of the autonomy of will: the law respects the individual's choices, including the choice of self-fulfillment through parenthood. When the right is perceived in this way, when it is the will that takes the focus, the balance between it and the decision to avoid parenthood is supposedly simple, since the court also respects this decision in the name of the autonomy of will.

However, there is only a semblance of simplicity here. Firstly, even were we to deem the right to parenthood and the right to avoid parenthood merely as derivatives of the autonomy of will, the symmetry between them would not be imperative. We do not respect every will, nor should every will be respected to the same degree. Beyond this, the main criticism is directed against the narrow perception … in my opinion, one should unravel in it [in the right to parenthood – E.R.] many additional facets. The right to be a parent is an independent right, rather than a mere expression of the autonomy of individual will. The realization of the option of parenthood is not just a possible way of life, but rather it is rooted in human existence. One may find it a cure for loneliness; another will thereby cope with the consciousness of death. Indeed, the choice to avoid parenthood is a possible way of life, which society and law need to respect" (p. 199-200).

We shall also recall the position of Justice Goldberg, who noted in re Nachmani that "[I]n the dispute before us a positive right and a negative right face one another", both of which are derived from the right to autonomy (ibid, p. 723); but, in contrast, the position of Justice Turkel in that same case, who emphasized:

"The modern view, social and legal, recognizes the autonomy of the will of the individual. Hence derive and stand, ostensibly, one against the other, the right to be a parent and the right not to be a parent… Indeed, as cited by Joseph Raz from the essays of Prof. Gans and Dr. Marmor: 'An autonomic person is a person who writes his life story himself'. However, to use this simile, is there indeed symmetry between the rights of each of the spouses to write his own life story himself? In my view, there is no symmetry between the rights, despite the 'external' similarity between them, and the right to be a parent may not be deemed merely as a derivative of the autonomy of will, which stands against the right not to be a parent. Still, even if we deem both of the rights as such derivatives, they are not of equal value and standing, as though existence and nonexistence are equal to one another, and as though they are the symbols 1 and 0 on the computer under the binary method" (ibid, p. 736-737).

I believe that this last position is closer to the position I support, whereby the right to parenthood includes an independent value component that exceeds the right to the autonomy of will, unlike the right not to be a parent, which is anchored in the autonomy.

We have thus found that the right to parenthood is, on the face of it, a cardinal value in and of itself, natural and primeval, and with high-ranking on a human scale of values; this is joined by the autonomy embodied in the choices of the individual related thereto. We have also seen that, in contrast, the right not to be a parent does not include a protected independent value, but is rather intended to protect the personal autonomy of a person in his choice (not to be a parent, or not to be a co-parent with a certain woman or man). It shall be noted that even those who side with this right being only an interest, see it – so it appears – as an interest that should be protected legally; see the words of Justice Tal in Re Nachmani (ibid, p. 701), who had reservations with respect to this classification. Now that we have established the characterization of the right to parenthood and the right not to be a parent, we shall now move forward to an examination of the standing of the Petitioner and the Donor.

Of the Standing of the Petitioner

It appears that, in the case at bar, the infringement upon the Petitioner's right does not pertain to the core of the right to parenthood. The primary basis of this right is the practical ability to be included in the "parent circle", and bring a child into this world; there is no actual dispute that such option is, thank Heavens, available to her from a practical standpoint. The Petitioner is healthy and fit to bring a child into this world and is not bound (as was the situation with Ms. Nachmani at her time) to the Donor in the case at bar. She is able to act soon to receive another sperm donation at her preferred timing for undergoing additional insemination treatments. The Petitioner claims that impingement upon the ability to choose with whom to bring children into this world is sufficient in order to be sheltered by the legal right to parenthood. However, in practice, this is not an infringement upon the right to parenthood, but rather, as explained above, at most, and this is highly doubtful, an infringement upon the periphery protected by her right to autonomy (without, for now, addressing the question of the scope of protection, whether the right was indeed violated and whether, on proper balance, it is deserving of protection). It is a major question, and I believe that as a rule the answer thereto will not be positive, whether the right to autonomy has been infringed upon by the focusing thereof on the sperm of John Doe the Donor and no other, at any rate where an anonymous donor is concerned.

It is claimed in this respect that "once the Petitioner arrived at the decision to bring children into this world from one donor only, and once she executed this decision when giving birth to her first-born daughter…the Respondents' decision infringes upon the Petitioner's right to parenthood" (Paragraph 21 of the Petition). However, as emerges therefrom, the Petitioner is not seeking protection of the core of the right to parenthood or of her autonomy, but rather of her right to parenthood from a specific person, or her right to a child having a specific genetic constitution.

In order to assert the difficulty in legally protecting the Petitioner's interest to again conceive by the same genetic constitution, we shall compare her situation with the situation of a married woman who gave birth to a first child in wedlock, and whose husband promised her that they would have another child. This is not identical, of course, but both of them hold the same promise in-principle, that the second child to join the family would have the same genetic constitution of the first child, i.e. a biological son or daughter by the same father. Can the law enforce this promise when the husband decides to dissolve the marriage, and consequently also infringe on the mother's interest of parenthood to children of the same genetic constitution (or the right of the child to a full genetic sibling)? Can one point to a protected legal interest, other than the interest of reliance, and the prima facie interest that contracts should be honored, although, of course, one may not, as a rule, disparage them? It is my opinion that the answer to these questions cannot be affirmative, and the power of the interest of reliance and agreement is insufficient. Moreover, the infringed interest in the case of the married woman as described may even be stronger in relation to the case at hand, since her reliance is perhaps greater in view of the close relationship between her and her husband; it is recalled that in the case at hand the choice is also subject to the discretion of the treating physician, as aforesaid (see above, according to Annex E-2 to the Director General Circular). Indeed, on the face of it, one might argue that the contractual relationship in a case of sperm donation attests to a choice to follow a different path to parenthood, "businesslike" or "financial", of the type that grants security that is not extant in an intimate set of understandings. We shall hereinafter return to an analysis of the issue on this basis, and shall already state here that this proposition cannot be held.

Interim Summary

We have addressed the nature of the right to parenthood and the right not to be a parent. We have seen that the first includes a separate independent value, recognized by law, which concerns the mere possibility of bringing children into this world, as well as an additional protection of the value of the autonomy of the designated parent (in this case – the Petitioner); the second principally includes the value of the Donor's autonomy. In the case at hand, we have found that the Petitioner is not fighting here for her core right to parenthood, which, in itself, no one is infringing on, but is rather seeking protection over her choice and her desire for parenthood from a specific person. We shall now move forward to examine the standing of the Donor. Such examination shall address, inter alia, the Petitioner's claim that the Donor's right to autonomy is not infringed upon (see Paragraph 15 above).

Of the Status of the Donor

As aforesaid, the core of re Nachmani was the difficulty to weigh, one against the other, the will of Mr. Nachmani not to be included in the "parents group" against his wishes, and the wish of Ms. Nachmani to enter such group. Both parties held the entrance key together, with one pulling out and the other pulling in; things also went as far as the biological stage of fertilization, which naturally intensified the difficulty, and the infringement upon the core of the parties' protected rights. In the case at hand, can the Donor point to a similar infringement? The issue we are concerned with indirectly raises a question complex in its own right that has yet to be fully addressed by law, which is the determination of the paternity of a child born by sperm donation; the question of what weight to ascribe the interest of autonomy – or none at all, as the Petitioner claims – of the Donor is inseparably linked to the question of in what social and legal sense he is a father.

In the case at hand, we shall not rule on this question, which may be deserving of determining by the legislator, but we shall hereinafter address it in the Halakhic context. The question before us is a complex question of values, and therefore the legislator takes precedence over the court in the ability to reach a comprehensive and balanced arrangement, within which the gamut of the considerations of principle and practicality that are relevant to regulation will be taken into account. This was carried out in the Ova Donation Law, and the Agreements for the Carriage of Fetuses Law (Approval of Agreement and Status of the Newborn), 5756-1996 (even if there may be such or other criticism of these arrangements).

The normative framework – which includes, as aforesaid, the aforementioned Consumer Services Act, the regulations promulgated thereunder and the Director General Circular – does not decide this question; the courts that addressed this issue also refrained from setting a broad "paternity test", which exceeded the concrete case of the parties before it. In Re Salameh (CA 449/79 Salameh vs. Salameh, IsrSC 34(2)779 (1980)), it was ruled that a husband, who had given his consent to an insemination procedure, is liable for child support for the child born by the sperm donation of a stranger. It was ruled that the origin of child support was contractual, and therefore the question of the husband's status as a father did not require deliberation. Presently, as a solution in-principle for this matter as aforesaid, the consent forms of spouses include an explicit undertaking by the male spouse to assume full legal responsibility over the child. It should be noted that in Re Salameh and in the other cases raised in case law, a relation of paternity of the anonymous donor was never claimed; but, such rulings are instructive in a qualified manner with respect to the lack of status of the donor. The discussion of the husband's obligations for child support implies that there is no intention to attribute a similar legal liability to the anonymous sperm donor:

"At the base of these decisions, there implicitly lies the assumption that the sperm donor is not a father, although an unequivocal announcement in this spirit cannot be pointed to (Ruth Zafran "Family in the Genetic Era –Defining Parenthood in Families Created through Assisted Reproduction Techniques as a Test Case", Din U'Dvarim, B 223, 252 (Year 5766); original emphasis – E.R.).

Indeed, as the author shows, there are also different voices (see AP (Tel Aviv) 10/99 Jane Doe vs. the Attorney General, IsrDC 5760(1)831, 855) – but, in any event, there is no positive determination of parenthood with respect to the donor. To summarize this point, on the face of it, current law does not attribute "paternity" to a sperm donor in the classic legal sense of imposing child support. However, I believe it is clear that the mere fact that the donor does not owe legal duties to the infant born by his sperm does not negate the infringement on his autonomy – as the Petitioner claimed. We shall hereinafter address the mental implications of this infringement; prior thereto, we shall address the differences between the case at bar and re Nachmani.

Following the decision in re Nachmani, Mr. Nachmani was to become a father, both genetically and psychologically-socially: the theoretical child (who, as aforesaid, was not born at the conclusion of this sad story), was meant to know his father, and his father was meant to know him. Moreover, even if an indemnification contract could have been made between Mr. and Ms. Nachmani, which exempted the father from any future obligation, including the right (and the obligation inherent thereto) to visitation, beyond the aforementioned obligation of child support (since no consent of the unborn child to waive his rights was granted), the infant would have had the ability to insist upon his rights himself. It is also clear that it is not self-evident that an agreement between parents would negate, in effect, all of the father's duties (see Isaac Cohen "The Independent Legal Standing of a Minor in Family Law – Processes, Trends and Methods for Rebalance" Mishpatim 41 255 (5771)). Justice Strasberg-Cohen clarified these implications (in a dissenting opinion) in re Nachmani:

"Refrainment from forcing parenthood on a person unwilling to assume it is reinforced in view of the nature and hefty weight of parenthood. Parenthood involves an inherent limitation of the future freedom of choice, in imposing on the parent a duty that encompasses most of the fields of life. A person's introduction into parent status involves a significant change of his rights and obligations. Once a person becomes a parent, the law imposes on him the duty to care for his child. This care is not a casual one, but rather the duty to place the best interests of the child at the top of his priorities. A parent cannot deny the needs of his child simply because it is inconvenient for him to fulfill them. The responsibility of a parent to the well being of his child also holds tortious and criminal aspects. This responsibility incorporates the normative expectation of our social values and legal system, from the individual, with respect to his functioning as a parent. The highly significant implications that stem from this status mandate that the decision to be a parent be entrusted to the person and to him alone" (ibid, p. 683-684; emphasis added – E.R.).

The situation at hand is materially different. As aforesaid, if the Petition is approved, there is a certain chance that the Donor will become the genetic father of additional children (to the extent that the medical treatment is successful). Indeed, in the practical sense, this is an anonymous donor – with respect to whom, unlike other places in the world and other proceedings such as adoption, the child is not entitled to request information at the age of majority) (Rule 24 of the Director General Circular; for a discussion on the question of donor anonymity, see Report of the Public Committee for Examination of the Legislative Regulation of the Issue of Fertility and Reproduction in Israel, p. 34-36; Ruth Zafran "'Secrets and Lies' – the Right of AID Offspring to Seek Out their Biological Fathers" Mishpatim 35 519 (5765)). At this stage, it should be noted that the question of anonymity is a topic for debate in its own right, since against it stands the right of "a minor child, not to be suppressed all of the days of his life from knowing the identity of the father that had begot him" (see CA 548/78 Sharon vs. Levi, IsrSC 35(1)736, 758 – Justice (his former title) M. Elon); however, this question has not yet been examined in the context of the sperm donor. The fact of anonymity in the present state of affairs detaches the donor from nearly any "fatherly" context other than the genetic context, which remains concealed. On the face of it, according to present law, the donor owes no financial, social or other duty to the infant. In fact, it is not at all clear if and how the donor would know that he became a father, since, as aforesaid, this is subject to the success of the medical procedure, and without an inquiry on his part he will not learn about it. This also emerges from the statements of President Barak in re Nachmani, underscoring the situation of Mr. Nachmani compared with the one of an anonymous donor:

"At the foundation of the understanding between the parties – whether we deem it a contract or an agreement which is not a contract, and whether we deem it common property or we deem it a unique "phenomenon of law" – is the premise of a shared life. Once this foundation is removed, the foundation on which the relation between the parties is based is removed. If Danny Nachmani had been asked prior to the commencement of the fertilization procedure, whether he would be willing to go through with it even after separating from Ruth Nachmani, his sure answer would have been negative. It may be assumed that this would have also been the answer of Ruth Nachmani. In truth, they had not entertained this question, but the essence of the agreement (or the understanding) between them – an agreement for the birth of their child in common – is based on this premise. This is the basis for any act in the fertilized ova. This is the foundation of their entire inter-being. This is the infrastructure of their parenthood. It is not 'single family' parenthood. The sperm donor is not unknown. It is co-parenting on each and every ground" (ibid, p. 790; emphasis added –E.R.).

It may be gathered from these words, that the infringement upon Mr. Nachmani's autonomy was a harsh one, and pertained to the core of the right not to be a parent. In contrast, the infringement in the case at hand is weaker, which does not pertain to the core of the right. The remaining link, excluding possible changes in the law, is principally genetic – "a genetic father", not a father in the full social and legal sense of the term. However, as we have reiterated above, the fact that, in the case at hand, the impingement is reduced to the genetic element of parenthood does not nullify the infringement upon the autonomy. It is this issue that we shall now address.

Infringement against the Donor

In the broad context, no few writings have addressed the weakening of the model for determining parenthood on a genetic basis compared with models of physiological parenthood, social-functional parenthood (or, by another name, "psychological parenthood"), and other models such as the model of the best interests of the child and models based on the parties' consent (for elaboration, see Y. Margalit "Of the Determination of Legal Parenthood in Consent as a Solution to the Challenges of Determining Legal Parenthood in Modern Times" 6 Din U'Dvarim 553 (5772), and mainly the review in Chapter E thereof). Without expressing a position with respect to the dilemma of determining parenthood in such situations, it is clear today, when the genetic model no longer stands alone, and all the more so in a case of sperm donation, wherein no one "operatively" claims the donor's paternity, that such genetic connection is possibly not the be-all and end-all (see CA 3077/90 Jane Doe vs. John Doe, IsrSC 49(2)578, 599-605 (1995)).

Indeed, after years of going hand in hand with the genetic model exclusively (a position reflected in two of the central legislative acts in respect of the determination of parenthood – Section 3(a) of the Women's Equal Rights Law, 5711-1951 and Section 14 of the Legal Capacity and Guardianship Law, 5722-1962 – despite there being no definition of the term parent), the legislator also went some distance in the movement away from the genetic model, in determining parenthood in the new Surrogacy Law not by the direct genetic model, but rather by a "parenthood order" (the Agreements for the Carriage of Fetuses Law, Section 10); similarly, Section 42 of the Ova Donation Law also prescribes: "An infant born as a result of an ovum donation, will be the child of the recipient of the donation for all intents and purposes" (emphasis added –E.R.), i.e., a determination of parenthood without a genetic relation to the recipient of the donation, but rather merely a physiological connection.

However, even if we were to find voices – and these are not the central voices – according to which the genetic link has weakened in the social and legal sense, especially in the context of sperm donation, it still carries a hefty weight; however, in any event, the infringement upon the autonomy is still concrete and strong, and it ultimately tips the balance in the case at bar. This is how the Donor himself described it in his aforementioned letter:

"The aforesaid act [the sperm donation – E.R.] is presently incompatible with my world view… I am not interested in having a child born by me, without me being able to give him love, and without me loving his mother. I see a connection between my genetic constitution and these conditions…"

The harm to a man, as a result of his feeling – even if it came about later and at first he had believed otherwise – that a child who is the fruit of his loins "walks about the world", and he is unable or unwilling, whether on religious grounds or in terms of the resources of time and emotion, to dedicate his love and attention to him – is inevitable, and touches upon his subjective moral conscience. The legal and Halakhic distinctions mentioned above are of no use to this person; this harm was described by the scholar Chaim Ganz:

"My sights are set on the interests that people have not to be in situations in which they are not fulfilling what they consider to be their emotional and moral duties, or the interests they have not to be in situations in which they pay too high a price in order to fulfill their moral duties, or not to be in situations in which they are indecisive as to whether to fulfill their emotional and moral duties or feel guilty for not fulfilling the same (Chaim Ganz "The Frozen Embryos of the Nachmani Couple" Iyunei Mishpat 18 83, 99 (5754)).

It appears to me that these words may be on the mark with respect to the Donor's feelings in the case at hand, as reflected in his letter to the court. It is for this purpose that the rule determined is that society may not, in the absence of weighty reasons, interfere with the intimate questions of reproduction. We must keep in mind that the sperm donor is not expressing a position in principle against bringing children to the world, as he has also married and has had children. Rather, it is hard for him to feel that the children to be born by his donation will not be his children, nor will they have the benefit of his affection, nor will they be the fruit of his love. We cannot dispute the weight of these things. As stressed by Justice (his former title) Or in Re Daaka:

"This right of a person to shape his life and his fate encompasses all of the central aspects of his life - where he shall live; what he shall do; whom he shall live with; what he shall believe in. It is central to the being of each and every individual in society. It bears an expression of recognition of the value of each and every individual as a world all its own. It is essential for the self-definition of every individual, in the sense that the gamut of the choices of each individual defines the individual's personality and life… The right to individual autonomy is not limited to this narrow sense, of the ability to choose. It also includes another tier – a physical one – of the right to autonomy, which pertains to a person's right to be left to his own devices…this right implies, inter alia, that every person has the liberty from interference with his person without his consent… the recognition of a person's right to autonomy is a basic component of our legal system, as the legal system of a democratic state…it constitutes one of the central expressions of the constitutional right of every person in Israel to dignity, which is established by Basic Law: Human Dignity and Liberty" (CA 2781/93 Ali Daaka vs. the 'Carmel' Hospital, Haifa, IsrSC 53(4)526, 570-571 (1999)).

Just as the initial choice, for such or other reasons, to make a sperm donation, with all of the implications entailed therein, was the Donor's – while his approach to values was different – so is the choice to retract his consent. As defined by the Director General Circular:

"Donor sperm shall not be taken, nor received nor used for artificial insemination, unless the donor shall have given his consent to the use of the sperm" (Rule 25(e); emphasis added – E.R.).

That is to say, consent is required for the mere taking of the sperm, for its receipt by the Sperm Bank and for the use thereof. Thus, for instance, it is clear that if a sperm donor had regrets, at the stage in which no use whatsoever had been made with his sperm – the bank would not have conceived of claiming that the donor had no right to recant (and for the purpose of further discussion, that the donor breached the contract with the bank). The significance of this is not that a sperm donor’s refusal for his sperm to continue to be used will be accepted under any circumstances; the stage in which the request is brought forth is relevant and even critical. There may be good and hefty reasons not to allow a sperm donor to recant, such as in a situation like the one created in re Nachmani; all the more so if conception has occurred. But other than under such circumstances, his right to retract and the infringement on this right bear actual weight and tip the scales. Indeed, he had given his consent and had received payment, however this is not an ordinary "transaction", but rather an issue that holds a fierce emotional aspect. The command of the conscience and feelings of the Donor is a matter of values and cannot be simply quantified in the legal sense; as emphasized by Justice Goldberg in re Nachmani:

"[The issue – E.R.] is by nature not within the framework of an existing legal norm. It may not be cast in the legal molds of a contract or a quasi-contract. It is entirely within the emotional-moral-social-philosophical realm. Hence, an explanation of the normative vacuum and the inability of the customary legal rules to resolve the dispute" (ibid, p. 723).

Like him, Justice Kedmi stressed that "[T]he answer shall thus be found in the internal world of values of each one of us. I also do not hesitate to say that it may be found in the cache of emotions inside the heart of each one of us" (ibid, p. 735). Even if the case at bar is not the same "borderline case" as was re Nachmani, we must acknowledge our limits when assessing the degree of harm to the donor, whose present point of view imposes such and other moral duties on him, in which bringing children into the world, who would not grow up to be his actual children, is opposed to. We shall mention again, that the entry, as argued, of the Donor into the religious world brings with it a harm that stems from this world of values. As aforesaid, a common opinion in the Halakha prohibits a Jew from making a sperm donation due to the prohibitions of emitting sperm in vain, the concern of future mishaps such as consanguineous marriage, levirate marriage (Yibbum) or renunciation thereof (Halizah) (see Paragraph 57 below). We shall also hereinafter address the status of the infant. Insistence on autonomy in the question of what will be done with a man's sperm does not need to come from a religious source; but entrance into the religious world may enhance it, as probably occurred in this case, and this should be respected. Again – this is no trivial matter; sperm is a type of man's continuity, hence the importance of the autonomy of a man to decide as to the use thereof, even if he initially believed otherwise. This is "high-level autonomy".

Finally, the harm to the Donor is not limited to the ability to choose not to be a father, but rather also extends to his autonomy to decide with respect to his status as a father. That is to say, a man who sees the genetic-biological parenthood or the "blood relation" as giving rise to moral duties of his as a father is harmed in his autonomy by both the denial of the choice, in and of itself, and by the nonfulfillment of his duties according to his conscientious or religious approach.

The decision in the case at bar

I believe, that in view of the analysis presented thus far, in the conflict of interests at hand, the Donor's wish to not be a genetic father to additional descendants prevails, within the bounds of autonomy, over the Petitioner's interest to bring children into the world, sharing the same genetic constitution; this last interest is legally insufficient to nullify of the Donor's right to change his mind. The parental liberty requires the cooperation of two people, within a marriage or another family unit, including – although with much lower force – within a single-sex family unit, through sperm donation; and it may be through a third party such as the Sperm Bank. Obviously, there are differences between the aforesaid situations, which may, under different circumstances, change the outcome; however, in the matter at hand I found no grounds to justify subjecting the Donor's wishes to the purpose of upholding the Petitioner's wishes.
The protection of the Petitioner's right to have children sharing the same genetic constitution stops where it clearly conflicts with the Donor's right. In a regime of relative rights, there is no right which grants its holder absolute superiority of exercise. Therefore, the acceptable interests underlying the Petitioner's arguments yield to the Donor's right to autonomy (see and compare with the opinion of Justice Mazza in re Nachmani, p. 750-751).
I am afraid that – with all human understanding for the Petitioner's feelings – the interest of conceiving from a certain individual, as stated in the Respondents' reply, is not recognized by law and is not protectable. Moreover, even if we were to assume that the matter at hand may be deemed as violation to the Petitioner's autonomy to choose with whom to have children, the Petitioner would receive no protection; since as aforesaid, we are concerned with a liberty, the fulfillment of which requires the cooperation of another:

"The right to be a parent and the right not to be a parent are two rights which despite being two sides of the same coin, do not share identical characteristics. Each in itself lies within the framework of individual liberties; the distinction between the two levels of rights is not in the one being a positive right versus another being a negative one, but in the fact that the right to be a parent belongs to the group of rights which require the cooperation of another individual for its consummation, whereas the right not to be parent is reduced to the individual himself… if the right to be a parent had been one of the rights in the strict sense, with a respective duty against it, there would be no need – on the theoretical level – for consent from the outset, since once there is a duty the only remaining question is that of the appropriate remedy. Since the right is a liberty against which there is no corresponding duty, but rather an opposing right, and since two are needed for its consummation, the individual in need of the cooperation must obtain the same from the other party by obtaining his consent throughout. The right to be a parent requires – in the event of refusal by the partner – a positive coercive judicial act, whereas the right not to be a parent requires non-intervention and non-interference with the liberty of the individual who refuses to become a parent. Since the "refusing" partner has a right to not be a parent, he should not be subjected to such coercive order. Fulfilling the right of the individual seeking to be a parent by imposing a duty on an individual who does not is contrary to the essence of the liberty and violates its spirit" (the Nachmani case, p. 682-683 – Justice Strasberg-Cohen).

In re Nachmani – in which two rights weighed on the scale: the core right to be a parent, i.e. the mere ability to become a parent on the one hand, and on the other hand the right to autonomy, i.e. the right not to be a parent – it was ruled that under the circumstances the right to be a parent prevails. In the case at bar, on the other hand, the Petitioner cannot indicate violation of the right to be a parent. The issue at hand is her desire to conceive from the sperm of a specific person, against the wishes of that person to not be a parent again – even if, as aforesaid, a merely genetic parent – by way of sperm donation, it seems that there is no room to rule in favor of her petition.

It should be emphasized, as aforesaid, that in the case at bar, the Petitioner has indicated, at the most, violation of the right to autonomy. There is no violation of the Petitioner's right to become a parent herself, and the question is from whom she shall conceive; therefore – even if we assume, for the sake of the discussion, that the Petitioner's right to autonomy has been violated, and as aforesaid, I do not believe that it has been violated, and certainly not severely so– as opposed to the Nachmani affair, the conflict and ruling in the case at bar pertain to the Petitioner's right to autonomy versus the Donor's right to autonomy; and as mentioned, "we do not respect every wish, and not all wishes are to be equally respected" (Barak-Erez, p. 199). In the contest between these two "autonomies" it seems – without, of course, wishing to hurt the Petitioner's aspirations and feelings – that the Donor prevails. His case concerns an "active" legal measure – use of his sperm, whereas her case concerns a "passive" circumstance – preventing the use of the Donor's sperm.
It may be that the interest of contractual reliance was violated in this case, and perhaps also additional public considerations and interests (such as the lateral effects and the need to preserve the stability of the Sperm Bank). However, the law, as in similar cases, avoids coercion with respect to the intimate questions of human life in the absence of weighty considerations (see the aforementioned CA 413/80; Pinchas Shifman "An Involuntary Parent – Misrepresentation Regarding the Use of Birth Control", 18 Mishpatim, 459 (5749)). And we shall reiterate – the force of the Petitioner's interest – with no offense, cannot tip the scales against the Donor's autonomy.
We spoke at length, since – as aforesaid in the preface – the avoidance of future cases is to be considered, and the possible lateral effects should also be addressed. The issue at hand calls for the intervention of the legislator. At this point it should be mentioned, as noted by the scholar Y. Green in another book he wrote on the issue ("Procreation in the Modern Era: Law and Halakha (2008), p. 99): "Caution should be exercised when holding a discussion on the in-principle, theoretical level, which is detached from the specific case to be decided. There is nothing "easier" than a theoretical discussion, but the solution is required for the specific case. It seems that the discussion in the appeal in re Nachmani demonstrates so".

Ostensibly, the aforesaid should have sufficed to conclude the discussion in the present case, however, I deem it fit to briefly discuss the position of the Hebrew Law on the issue of sperm donation and the status of the donor, since in some of the contexts contemplated, and in particular on the issue of attributing the newborn to the sperm donor, Hebrew Law has significant weight in shaping the Israeli law as well as some of the arguments on other levels of the discussion mentioned, and explain why the outcome in the case at bar does not change.

The Position of Jewish Law

The possibility of giving birth as a result of artificial insemination, although by chance, is mentioned already in the Talmud (Babylonian, Tractate Hagigah 14, 72-15, 71) in reference to the prohibition of the High Priest to marry a woman who is not a virgin (Leviticus 21, 13 and 15): a pregnant woman who claims to still be a virgin is permitted to the High Priest since "she may have conceived in the bath", i.e. from the penetration of sperm to the uterus, other than by way of sexual intercourse but by chance, while washing in a bath to which human sperm was ejaculated. The Halacha distinguishes between questions such as whether the technique of artificial insemination is in itself permitted (and in the present context, whether sperm donation is prohibited), and the Halakhic and legal consequences of insemination that has taken place. Regarding the mere donation of sperm by a Jew, Prof. Rabbi Avraham Steinberg writes "New Technologies in Fertility Treatments – Halakhic Aspects" a chapter from his book in "Halakhic Medicine", which was discussed at the Rabbinical Judges convention in 5772, that "a Jew who donates sperm to an unknown woman violates the prohibition of wasting sperm…", this is according to various sources such as Rabbi Moshe Feinstein (Letters of Moshe Even HaEzer I titles 10-11) and Rabbi A.I. Waldinberg, et al. (Tzitz Eliezer 9, 51).
Regarding the status of the newborn, Halakhic literature offers – amongst the modern adjudicators and their interpreters – different opinions, of which some are stringent (i.e. frown upon the mere artificial insemination from an unknown Jewish donor, and consider the donor to be the newborn's father, and therefore – in the case of a married woman – there is a fear of bastardry), and some are lenient, severing the tie and not necessarily attributing the newborn to the sperm donor, and also permit him to enter the assembly with no fear of bastardry. One of the Halakhic questions is whether the child is deemed a "Shtuki", i.e., "one who knows his mother but not his father" (Mishnah, Kiddushin, 84 42), who is an doubtful bastard; see, among other interesting articles and dissenting opinions in Techumin 24 (5764); Rabbi M. Ralbag, in his article, "Attribution of a Newborn Conceived by Artificial Insemination" (p. 139), concludes that "a child who is born to a single woman by way of artificial insemination and with sperm taken from the sperm bank, either abroad or in Israel, shall not be deemed a Shtuki, who is prohibited for fear of bastardry, but is legitimate and may marry a legitimate Jewish woman" (p. 147). This is supported, inter alia, by central opinions in Halakhic adjudicative literature such as Rabbi Moshe Feinstein, Rabbi Shalom Mashash and others. On the other hand, see Rabbi Y. Epstein, "The Pedigree of a Newborn Conceived by Sperm From a Sperm Bank", ibid, p. 147, who concludes that "it seems that the child who is conceived by the fertilization of a single woman without knowing who is the sperm owner, increases the number of Shtukim in the world, and it should be avoided as much as possible" (p. 155); further see: Rabbi G. Orenstein "IVF – Attribution of the Newborn and the Command of Propagation", ibid p. 156, whose general approach (p. 156-157) is that the newborn is attributed to the father, which obviously adds to the Donor's dilemma. Also see: Prof. Rabbi Avraham Steinberg, Halakhic Medical Encyclopedia (Second Edition, 5748), p. 148; and his article "Artificial Insemination", Weekly Torah Portion Leviticus, edited by A. Cohen and M. Vigoda (5774), 102; A. Green "Procreate", p. 125-180. Prof. Rabbi Steinberg in his aforementioned essay "New Technologies in Fertility Treatments – Halakhic Aspects" believes that in general, "artificial insemination of a married woman by an unknown donor who is a Jew is prohibited, since this act entails so many Halakhic and moral-social faults". And he explains, that some believe that the prohibition is from the Torah, and some believe otherwise, and attribute the prohibition to moral-social considerations, such as detachment of the child bearer from marriage and turning "the birth of children into an arbitrary mechanical issue, denied of all the human qualities which make man God's partner in the act of creation". He further notes that there may be Halakhic complications of prohibited marriage of relatives and questions of inheritance – among other things, the newborn shall not receive, de facto, part of the inheritance of the sperm owner, even under methods which consider him his son. The sperm owner-donor – according to that method – is the newborn's father for all intents and purposes, and therefore the newborn is "prohibited to the relatives of the sperm owner, inherits his assets, his mother is exempt from Yibum and Halizah and he is liable for his child support" (I shall note that with respect to child support and similar issues, there are also other opinions). The aforesaid is in addition to the fact that "a priori, the artificial insemination of a single woman is prohibited. Under special circumstances, one should seek advice", and there are cases in which this shall be permitted, "such as when a single woman has made efforts to marry, and failed, and she reaches the end of her fertile years and she longs for a child, to be 'a cane to her hand and a hoe for her burial' (Yevamot 65, 2), all in accordance with the rabbinical judge's discretion, and the permitted conditions of artificial insemination". I shall add: in other words, the case of a woman who wants a child also in order to have someone to lean on in her old age – that would justify seeking the advice – and probably leniency.
And see, recently, the ruling of the Rabbinical Courts in (Beer Sheba) 90215/01 Jane Doe v. the Attorney General (Kislev 15, 5773, November 29, 2012), which concerned the status of a minor who was born to a single mother from artificial insemination, and the identity of the sperm donor was unknown. The Court ruled that the minor is allowed to enter the assembly, giving specific reason that artificial insemination creates no fear of bastardry, and it was, inter alia, stated (Paragraph H): "clearly if the newborn conceived by artificial insemination it not attributed to his father, there is also no fear of bastardry", since "the law that sperm is attributed to the sperm donor is not sufficiently clear and proven". And I shall add, that already two decades ago, Rabbi S. M. Amar, the present Rishon LeZion (Sephardic Chief Rabbi of Israel) and then a Rabbinical Judge in Petach Tikva, wrote in his book Hear Shlomo B', (Even HaEzer, Article B, p. 150-156) with respect to a child conceived by artificial insemination, that he should be permitted, and see the summary of the Halacha there, and this is also, as far as I am aware, his clear opinion today. Also see interpretation by Sara Hatab to the ruling of the Judicial Court in Beer Sheba ("Inglorious Bastards", Tsedek – Makor Rishon (Justice, Primary Source), Shvat 14, 5773 – January 25, 2013).
From the research literature which quotes the words of adjudicators, we will note that Prof. M. Corinaldi, in his book, "Laws of Personal Status, Family and Inheritance – Between Religion and State, New Trends (5764) also addresses the approach of the Hebrew law to the issue of sperm donation, pursuant to his previous essay – "The Legal Status of a Child who is Conceived by an Artificial Fertilization from an Unknown Donor or by an Ovum Donation" Jewish Law Annual 18-19, 295 (5752-5754). His starting point is the answer of Rabbi Peretz, one of the authors of Tosafot (annotations to the Talmud) in the 13^th century (of whose opinion has two versions); see p. 79-81. According to Rabbi Peretz, "a baby born to a married woman from the sperm of an unknown man – and not through prohibited intercourse – e.g. conception through a sheet – is not a bastard ("legitimate newborn") since there is no forbidden intercourse or partner". This answer is the Halakhic foundation, for example, for the aforementioned opinion of Rabbi Moshe Feinstein, see references on p. 81, note 30; in addition, the words of Rabbi A.I. Waldinberg are quoted (Tzitz Eliezer 9, 51 Section 200, 249), similarly to the opinion of Rabbi Feinstein, who believes that in the absence of ordinary intercourse, there is no fear of bastardry, since “anyway he did not come close to a woman, and it was for monetary consideration that he gave his sperm for that purpose, and the woman conceived anyway, without him positively taking action to consummate the conception. Moreover, in this case the act of the physician followed, in the absence of which the sperm of that man is allegedly discarded into the trees and stones…". Prof. Corinaldi concludes that the Halacha also makes room for a method whereby a man who agrees to the use of his sperm for an unknown woman "is deemed as a man who deposits his sperm in such a way as to expire the natural connection, and there is no genealogical connection formed between himself and the newborn – who is deemed as lacking pedigree on the father's side"; and Rabbi Bazmach Uziel (Shaarey Uziel B' 234) speaks in the same spirit. "For a man's pedigree is not attributed to him unless created in the usual manner through physical intimacy…" (p. 82-83). Dr. Michael Vigoda – "The Status of Those whose Conception is from the Sperm Bank", Weekly Torah Portion 5767 (282) – notes that Rabbi Yechiel Yaacov Weinberg, in Q&A Sridey Esh (Rabbi A.A. Weingurt's Edition) A', 49, considered an individual who was born by fertilization to be a Shtuki and is deemed as a bastard, but on the other hand Rabbi Ovadia Yosef ruled leniently. The author also quotes Rabbi Asher Weiss who tends to be lenient, as the insemination is completely detached from intercourse (similar to the aforementioned opinions of Rabbi Finstein and Rabbi Waldinberg); and see additional references there. Dr. Vigoda's conclusion is that "it seems that the proper solution is to properly regulate, at the very least, this highly sensitive issue and set forth rules of registration and control to ensure, on the one hand, that a woman shall not receive sperm from a relative or an illegitimate person, and enable the prevention of relative-marriages, and on the other hand, keep in confidence the identity of the donors… it is important to verify that the informed consent of those who need the services of sperm banks shall include an understanding of the Halakhic meanings of the procedure, and the sooner the better". With respect to the Sperm Bank, also see the lecture of the Rabbinical Judge, Rabbi David Malka, "Halakhic Aspects in the Activity of a 'Sperm Bank'", the Rabbinical Judges Conference, 5768. With respect to the Halakhic concept of parentage, also see Eran Shiloh, "More on the Halakhic Concept of Parentage – 'For Your Son to be Removed'" Weekly Torah Portion, 324 (5768).
It transpires from all of the aforesaid, that on the one hand there is a substantial school, mighty pillars to lean against, taking the position which detaches the parental connection from the donor, and some believe otherwise. As in this issue on the whole, I shall join Dr. Vigoda in his call for the legislator to intervene, and to my mind, in the directions he suggested. However, in the current state of affairs, a donor might find himself under a concern with respect to his Halakhic status in the various aspects, regarding both the donation itself and its consequences, and this might constitute a component of and support a position which has reservations regarding the donation and its consequences as expressed by him in the case at hand, without myself riveting or necessarily joining that.

The set of contracts between the parties and other arguments

Ostensibly, as aforesaid, we could have viewed this case also through the glasses of the private law and the contracts law; the term contract has different meanings and interpretations, but it is common to consider a document which expresses the parties' wishes and reflects a "promise" that is to be respected as a contract to which the contract law shall apply anyway (see Gabriela Shalev, Contract Law – General Part, Towards Codification of the Civil Law (5765) p. 13). Apparently, the aforementioned set of forms creates two contracts between three parties – between the donor and the Sperm Bank, and between the Sperm Bank and the recipient of the donation; indeed, there is no contract between the donor and the recipient of the donation. However, the application of contract law shall not change the outcome; the same values and consideration discussed thus far shall also be expressed here, through the principled concepts: the principle of good faith; public policy; and the principles of justice in the enforcement of a contract. Good faith, for example, is a window through which the values of our legal system and the values of public law flow into private law. The bottom line is therefore that the implementation of the aforementioned law and principles lead to the same outcome also according to contract law, although the potential problems as a result thereof are complex (for example, the question may rise, whether the contracts in the case at hand should be viewed as standard contracts pursuant to the Standard Contracts Law 5743-1982); it would not be appropriate to rule on these questions within a coincidental discussion, without sufficient foundation for the discussion.
In re Nachmani, Justice Dorner stressed why according to her, the contract law should not be applied to that case:

"… An agreement to have children is not a contract. It is presumed that spouses would not be interested in applying contract law to matters of that sort… anyway, even if it would have been proven that this was the parties' intention, it would still not be in their powers to give the agreement between them the effect of a contract, since a contract to have children is against public policy…

Nevertheless, the fact that an agreement to have children is not a contract does not entirely nullify the legal effect of the agreement or even a representation of consent, since in balancing the parties' rights there is room to also consider the fulfilment of the agreement between them, or the existence of a representation of an understanding. An agreement, as does a representation, may entail expectations and even reliance. These are to be considered among the other considerations affecting the balance (ibid, p. 717)).

Indeed, the picture in the case at bar is different: and in my opinion the set of agreements in the case at bar should not be deemed as void in view of public policy (see paragraph 35 of the Petition); it seems that the continuity of sperm banks, which assist many people every year to consummate the right to bring children into the world, is a public interest; therefore, the creation of a consensual and steady set of agreements which sustains the sperm banks is a public interest, and of course a clear interest of the parties. Certain reinforcement may be found in the attitude of case law to the aforementioned issue of child support; the Courts' willingness to recognize child support of a husband of a recipient of a donation by virtue of a contractual undertaking between them reinforces the conclusion that the contract law and the private law may resolve such issues. In this matter, see the Salameh case; FC ( Jer) 10681/98 John Does v. John Roe (September 19, 2000); and the opinion of Justices Or (p. 764) and Zamir (p. 780) and President Barak (p. 790) in the Nachmani case; also see Y. Margalit "Towards Determining Legal Parentage by Agreement in Israel", 42 Mishpatim 835; 887, (5772). Further reinforcement may be found in the approach of Israeli law to the violation of a marriage promise, an approach which deems the consent to marry a non-enforceable consent, however a compensable one (see CA 5258/98 Jane Doe v. John Doe, IsrSC 58(6) 209, 220-225 (2004)). Nevertheless, I must pose a "warning sign" here; as we are not concerned with "regular" contract law, of the economic sphere. The issue at hand comprises significant emotional components, and the perspective of contract law is only one part of the picture.

Still in the sphere of contract law, the Respondents argued, and rightly so, that the contract between the donor of sperm and the sperm bank can be viewed as a contract which is not limited in time, and therefore such that each of the parties may terminate following a change of circumstances, subject to the duty of good faith. Indeed, supplementary interpretation of a contract in which no time limit has been set forth as an integral part thereof, leads to the conclusion that the parties did not presumably intend to be bound by the contract indefinitely. (CA 9609/01 Mul HaYam v. Adv. Segev, IsrSC 58(4) 106, 141 (2004)). The Petitioner claims that the Donor's part ends upon the sale of the sperm to the bank, and the present case does not concern the termination of an indefinite contract. I cannot agree with this; there is great doubt in my mind whether we can draw an analogy to the sale of a car, for example, to the sale of sperm. I believe, with all due cautiousness, that an individual selling his sperm – if we call the donation a "sale" – does not confer upon others proprietary ownership of the "usual" kind in his unique genetic constitution (and so, for example, it does not seem that he confers the right to genetic "duplication" – had it been possible, of course); in other words, the sperm bank does not acquire "proprietary ownership" of the genetic code of the donor in a manner which detaches him – as per the Petitioner's claim – from the continuation of the process (and the same is relevant also to arguments regarding the acquisition of the right to preserve sperm units or any other proprietary right). This is a complicated question, but it seems that it can be assumed that this is a contract with no time limit, which does not confer a proprietary-ownership right – and therefore a party to the contract may withdraw his consent.
As aforementioned, this possibility is not a "veto right" of the donor throughout; the "point of no return", wherein the balance of rights and interests shall change, and that donor shall loose the legal possibility to terminate the contract and retract his donation, may vary in accordance with various considerations; these include, inter alia, the force of the consent and the way in which it was expressed at the outset (e.g. the difference between written and oral contracts), the point in time in which the termination of the contract is requested; the type of process and physiological affinity under discussion (in this way, for example, I doubt – as aforesaid – whether a way back is possible in case the sperm donation has already been fertilized into an ovum of the recipient of the donation within an IVF, and certainly, a fortiori, there will be no way back when a pregnancy is carried by the recipient of the donation's body or a surrogate mother's body); the law pertaining to the determination of parentage in such a case, the consent of the other parties to the cancellation of the process (since there may be more than two parties to the contract – e.g. in the case of full surrogacy); and obviously, the best interest of the born child – and the list is not a closed list (for the beginning of a discussion of these issues, see Y. Margalit, ibid, p. 874). Note that the dispositive consent in itself does not define the point of no return; it is determined by law. Such is the case also in the Ova Donation Law, from which the Respondents wish to conclude; see Section 44, whereby a donor or a patient may withdraw from a consent that was given with respect to the extraction of ova from her body "at any time prior to the performance of the procedure to which she had agreed to designate the ova extracted from her body, and with respect to consent to designate ova for implantation – at any time prior to the fertilization of the ova, and she will be under no civil or criminal liability for the withdrawal of her consent as aforesaid". It should be noted at this point, that even if the legislator made no statement in the matter at hand, this Law can serve us at least as reinforcement of the conclusion to which we have arrived, since it addresses, in essence, a very similar issue.
In the case at bar – as indicated above – not one of the contractual documents between the parties include reference to the possibility that for reasons other than the quality of sperm or its medical suitability, the recipient of the donation shall be unable to be inseminated by the sperm donation which she selected according to the general data available to her; most certainly there is no concrete addressing of the question of retrieving the donation – hence the Petitioner's reliance. The mere option to pay for safeguarding of sperm units implies that possibly the formulators of the said forms did not perceive a possibility of withdrawal of consent. However, as emphasized above, a priori and regardless of the donor's wishes, the wishes of the recipient of the donation are subject to the discretion of the attending physician (Annex E-2) in all aspects pertaining to the selection of sperm to be used, and the bank further disclaims any responsibility "in any manner whatsoever for the loss, damage or other use of such sperm units" (Res/3). In such a case, in which the parties did not address in advance the possibility of withdrawn willingness regarding the use of the sperm, it should be incorrect to assume for them that it does not exist (since the contract nevertheless does not, as aforesaid, prevail their lawful rights). Moreover, this issue also affects the legitimate reliance interest of the Petitioner, which unequivocally carries weight, but does not tip the scales, inter alia, in consideration of the aforementioned contractual situation. Furthermore, in terms of the aforementioned point of no return, additional considerations lead to the acceptance of the Donor's withdrawal of consent, and in particular the lack of any physiological affinity thereto by the Petitioner at this point in time.
Finally, and without making a definitive ruling, I shall also mention the rule stipulated in Section 3(4) of the Contracts Law (Remedies for Breach of Contract), 5731-1970, which determines the "justice exclusion" to the enforcement of a contract (see Gabriela Shalev and Yehuda Adar – Contract Law – Remedies: Towards the Codification of Civil Law (5769) p. 230). This issue was also discussed in re. Nachmani, as stressed by Justice Strasberg-Cohen (dissenting opinion):

"In the field of liberties, the law avoids forcing an individual to do that which he is not compelled to do, also in other contexts in the sphere of inter-personal relationships between humans. Every individual has the right to be married. However, there is not dispute that an individual who had been promised marriage, a promise that was broken, shall not receive from the Court a remedy of enforcing that promise. Every person has a right to start a family and have children. However, there is no dispute that the State – whether directly or through the Courts – shall not enforce an individual to have children against his will, even if he had promised his spouse to do so, and even if the spouse has relied thereon and perhaps even entered the marriage upon reliance and expectation of the same. And why is this not done? Not only because a mandatory injunction cannot force action (other than, perhaps, by way of contempt of court proceedings until the "recalcitrant" shall accede), but because of the in-principle and normative reason therefor, which is the law's refraining to call upon coercive measures for the purpose of fulfilling the heart's desires of one spouse, in contrary to the wishes of the other" (ibid, p. 683).

In my opinion, the aforementioned considerations are also relevant with respect to this exclusion, such that the contract – even if we accept the breach argument – may be viewed, in its current form and under the circumstances, as a non-enforceable contract (for a discussion of the considerations within the exclusion of justice, see Shalev & Adar, p. 231). Indeed, this brief discussion is far from exhausting the questions raised by this case; as aforesaid, I did not find that contract law indicates a weighty interest that calls for an outcome different to the one we reached. However, the tarrying in regulating the whole issue by legislation is evident.

Lateral Effects of the Case and a Call upon the Legislator

The main concern arising from the case at bar is the damage to the stability of the sperm banks in Israel, through the issuance of a "carte blanche" for donors to withdraw their donation as well as through recipients of donations who, similarly to the Petitioner, asked the specific sperm bank to reserve additional donations for them, and shall realize that this option is not guaranteed. The stability of this institution is, as aforesaid, a public and human interest of the highest degree. The uncertainty in this area – a result of the unsteady normative arrangement – undermines, a priori, the public's possibility to rely on the receipt of a sperm donation. The solution therefor is in the hands of the legislator.
For a review of the numerous problems arising from the lacking normative arrangement, see for example HCJ Salameh, p. 784; HCJ 998/96 Yarus Hakak v. the Director General of the Ministry of Health (February 11, 1997); Shifman, p. 85; Margalit "Towards the Determination of Consensual Legal Parentage", p. 885-889; Shamgar, p. 37-38; Corinaldi, p. 325-326. We are concerned with morally sensitive and complex issues, which should not remain in the sphere of uncertainty and partial regulation. We refer not only to the aforementioned lacking forms but also to additional aspects, such as determining fatherhood and the issue of anonymity, limitation of the number of sperm units from a single donor, the medical examinations for donors and recipients of donations and the way of management of the sperm banks (for background, see the comprehensive audit by the State Comptroller, Annual Report 57B for 2006, p. 417-447). It would not be farfetched to assume that had the issue been handled thoroughly, the unfortunate case at bar could have been prevented, or, in the very least, all concerned parties would have known their rights in advance, rather than in retrospect.
In the meanwhile, and as a temporary measure, it is appropriate that the Respondents shall amend the consent forms of donors and recipients of donations in order to ensure that all concerned parties are aware of and understand their rights. So long as there is no legislation in this field, to regulate and define the donor's option to withdraw his consent, sperm banks must present recipients of donations with an accurate picture of the legal situation, in order to not promise what might not be fulfilled.

Comments before conclusion

My colleague, Justice Barak Erez referred (paragraph 14) to the sensitive issue of organ donation and to the fact that organs are not deemed as negotiable merchandise, although it is currently acknowledged by the Organ Implantation law 5768-2008; in this matter, she mentioned also other bodily donations, but stressed that "the recognition of the possibility to donate blood, sperm or ova did not turn them into 'assets' for all intents and purposes". I shall note that in HCJ 5413/07 Jane Doe v. the State of Israel (2007) I had the opportunity to address the approach of the comparative law and the Hebrew law in the area of organ donation from the living (see paragraph 9). I consent with my Colleague's comment, and shall stress the special sensitivity in these issues which require – on the one hand – a broad human perspective, and on the other hand, taking one step at a time in making the arrangements.
My colleague further justly referred (paragraph 19) to Directive 1.2202 of the Attorney General (of Heshvan 1, 5763-October 27, 2003) in the matter of "the obtaining of sperm post-mortem and the use thereof". I was the Attorney General at the time this directive was issued, and I remember the in-depth discussions involved therein, "from a broad moral-social perspective, which attributes significant weight to the concrete wishes of the individual in question (the deceased)…" (Section 4). It was further stated there, that "the Attorney General's position is based mostly on two central principles: one is respecting the deceased's wish which derives from the principle of the individual's autonomy and right to his body, and the second is the wish of his spouse…" (Section 9). In the matter at hand, however, I shall stress that the individual's autonomy of will played a major role in the decision therein, and was a leitmotif of the Directive.
Reading the opinion of my colleague, Justice Amit, I shall note that his comment (in paragraph 8) regarding Section 3(4) of the Contract (Remedies) Law is based on FH 21/80 Wertheimer v. Harrari, IsrSC 35(3) 252 (1981); but see Sahlev & Adar paragraph 6.60-6.62 on p. 229-231 and note 189 there, with respect to the legal outline. As for justice itself, we are considering the enforcement of the contract on which the donor is signed, and enforcement is requested with respect to him, which is the reason for the reference made to the section in this context; and as recalled, to my mind, the decision lies in another legal field, such that the question I addressed related to the legal tool in the civil realm for applying these principles.
With respect to the relationship between the donor and the spouse in re Nachmani (paragraph 21 of my colleague, and paragraphs 40-42 of my opinion) as compared to the case at bar, indeed this is a "genetic" father who shall probably remain anonymous to his child, as obviously his child shall remain to him, rather than the "known" fatherhood discussed in re Nachmani. However, in my opinion the question, ultimately, is not whether the biological father shall come across the newborn, as could have been the case therein, but rather what goes through this father's mind, knowing that there is a child born of his sperm in the world, and such issue, as aforesaid, may permeate and deeply disturb his peace of mind, all in accordance to the individual in question and his feelings (as also noted by my colleague in paragraph 24).

Conclusion

The Petitioner's desire and wish to bring into the world another child from the sperm donation of the Donor are understood, and are also hard not to sympathize with. However, we cannot legally enforce that wish under the circumstances herein. The Donor's right to autonomy prevails over the interests at the basis of the Petition. The Nachmani case did not recognize an in-principle right to have children with a specific person; it recognized that in the absence of any other possibility to bring a child into the world, and under exceptional circumstances (inter alia, after the consummation of an IVF) the right to be a parent might prevail over the right of another person to not be a parent and to autonomy. This is not the situation in the case at bar. The Petitioner's right to be a parent, and her ability to parent, are not dependent on the sperm donor; furthermore, the Petitioner has no "advanced" affinity to the sperm, other than the payment for the storage of the specific sperm donation, prior to the Donor's request to withdraw his donation. Under these circumstances, the Donor's right to autonomy prevails. However, the current case highlights – as aforesaid – the necessity to regulate this area by the legislator, and as a first step, on the governance level, to amend the consent forms and the Director General's circular. We do hope that the Petitioner shall be able to consummate her right to be a parent as she wishes later on in life; the distress that was surely caused to her is not little, and we are deeply sorry for this. Indeed, the decision to donate sperm – and I find this term suitable also in view of the symbolic amount of money received by donors for providing the sperm – must be taken seriously and after considerable deliberation. Donors must know that their informed consent to give sperm to another person is relied upon by other human beings who wish to plan their lives and bring children into the world. Therefore, this decision cannot be easily revoked, and the revocation cannot be guaranteed under all circumstances, and it depends on the stage of the procedure; i.e. in the absence of a full normative arrangement, it is contingent on the circumstances, pursuant to the considerations reviewed above.
To conclude, we do not accept the Petition. Under the circumstances, there is no order for settlements.

Justice

Justice D. Barak-Erez

"If only I had a son, a little boy, with dark curly hair, and bright", wrote the poet, Rachel. It is hard to resist the natural yearning for parentage. However, despite the sympathy it raises, the focus of the Petition before us is nevertheless different. The question is not whether the Petitioner will be able to consummate her desire to be a mother of children, but rather whether she is entitled, under the circumstances, to consummate her plan to be a mother of children who all share one genetic father, and therefore share the same dark (or golden) curly hair.
Being the question at hand, I consent with the outcome reached by my colleague, Justice E. Rubinstein – although not without regret. I share the main conclusions of my colleague's comprehensive judgment; however I would like to clarify my opinion with respect to some of the reasons underlying the same, considering the legal and human complexity of the Petition.

The Framework of Discussion – Private Law or Public Law

A priori, the Petition before us was presented as based on contractual foundations. The Petitioner had her first daughter through the use of a sperm donation made by Respondent 3 (the "Donor"), which she received from the Sperm Bank of Rambam Medical Center, Respondent 2 (the "Sperm Bank"). After the birth of her daughter, the Petitioner made annual payments to the Sperm Bank to store for her additional sperm units donated by Respondent 3. Payment for the storage of the sperm units was arranged through a form of the Sperm Bank, titled, "Request for Storage of Sperm Units". The Donor, on his part, provided his sperm units to the Sperm Bank after having signed consent for their purpose of fertilizing women who apply to the Sperm Bank for that purpose, or for research purposes. In other words, the sperm donation was also regulated in a contractual form between the Donor and the Sperm Bank. The Petitioner therefore argues, that the contract law requires the acceptance of her Petition, as pacta sunt servanda. She argues that the contracts entered between the Donor and the Sperm Bank or between herself and the Sperm Bank contain no reservation regarding the regret of the sperm donor, and therefore the signed undertakings are valid and binding.
The first question to be reviewed is then whether the contractual framework upon which the Petition is based is the correct or exhaustive, normative framework for the discussion of the rights of the parties. Like my colleague, Justice Rubinstein, I believe that the answer to this question is negative. Indeed, there are two contracts executed with the Sperm Bank in the background of the parties' arguments – the Donor's donation contract on the one hand, and the Petitioner's purchase contract on the other. However, the existence of these contracts is not independent of the set of values at the basis of the legal system. The foundational values of the system "permeate" as well into the realm of contract law and affect their basic perceptions, including their public policy (see: Aharon Barak "Protected Human Rights and the Private Law" Klinghoffer Book on Public Law 163 (Itzchak Zamir, Editor, 1993); Daphne Barak-Erez & Israel Gilad "Human Rights in Contract Law and Tort Law: the Quiet Revolution" Kiryat HaMishpat H 11 (2009)). A different, and possibly more worthy, way to present the issue is that the constitutional law is the basic foundation on which other fields of law are built, which are therefore also shaped by the values and principles of constitutional law.
Hence, in my opinion, the correct path in examining the question before us should be based, first and foremost, on identifying the public rights and interests which are relevant to the case at bar. However, I will demonstrate below that in fact, the private law's perspective of this case does not yield a clear and unequivocal outcome as the Petitioner claimed. Moreover: insofar as we are concerned with principles from the sphere of private law, more than one legal framework may be perceived as relevant to the discussion of the case at bar – the law of property, contract law (including the distinction between a for-consideration contract and a gift contract) and more (for the possible effect of the legal sphere within which the issue is discussed, compare: Daphne Barak-Erez "Of Symmetry and Neutrality: Reflections on the Nachmani Case" 20 Iyunei Mishpat 197, 207-212 (1996) (hereinafter: "Barak-Erez, Symmetry)).

Public law: the right to be a parent, the right to dignity and the right to autonomy of will

In the present case, several rights play side by side in the legal arena, which should be well defined and distinguished. The Petitioner comes before this Court on behalf of two rights which she claims – the right to be a parent and the right to autonomy of will (which was also consummated under the circumstances in her contract with the Sperm Bank). Indeed, the right to be a parent was already recognized in the ruling of this Court, including in the present context, which concerns the desire to consummate the right through fertilization technology, in the series of rulings known as the "Nachmani Affair" (see: CA 5587/93 Nachmani v. Nachmani, IsrSC 49(1) 485 (1995) (the "First Nachmani Case"); CFH 2401/95 Nachmani v. Nachmani, IsrSC 50(4) 661 (1996) (the "Second Nachmani Case"; as well as other cases (also see: HCJ 2458/01 New Family v. the Committee for the Approval of Embryo Carrying Agreements, the Ministry of Health, IsrSC 57(1) 419 (2002)). The same applies to the right to autonomy of will, which was defined in the case law as one of the expressions of the right to human dignity (see for example: CA 294/92 Chevra Kadisah Burial Society "Jerusalem Community" v. Kastenbaum, IsrSC 46(2) 464 (1992)). In fact, the Petitioner's arguments, by virtue of the two rights, merge at least in part. Indeed, she presented an argument seeking to be founded upon the right to be a parent, but in fact she is seeking protection of the right to be a parent in a specific way – through control of the identity of the genetic father of her children. Considering the fact that she may consummate her choice to become a mother also through other sperm donors, her request is actually in the periphery of the right to be a parent, rather than in the center thereof, and it is connected, to a large extent, to the desire to protect the Petitioner's autonomy of will in all aspects pertaining to the consummation of the right to be a parent.
Against the Petitioner's right to autonomy in consummation of the right to be a parent, stands the Donor's negative right not to be a parent (in the format of anonymous biological parentage). This right to avoid parentage (and for the sake of accuracy, the genetic parentage of an additional child) is a right that is fundamentally tied to human dignity. Insofar as we are concerned with the right to be a parent, under the present circumstances the collision of rights can be described as the collision between a peripheral expression of the right to be a parent in its positive aspect (a demand to consummate it with respect to a specific genetic father) and the objection to be a parent, which is closer to the core of this right in its negative aspect (since it is a general objection to genetic parenting in the framework of sperm donation, and not just the genetic parenting with respect to a specific mother). The right to not become a genetic parent, which is derived from the negative aspect of the right to be a parent, is in some ways similar to other expressions of the right not to be a parent, but is also different from them – considering the lessened burdens entailed in merely genetic parenting, as distinct from parenting which creates further affinities between a father and a newborn, and imposes additional legal obligations. Hence, the balances pertaining to the scope of its protection shall also be different. See and compare: Glenn Cohen, The right not to be a Genetic Parent, 81 USC L. Rev. 1115 (2008) (in this article, wherein the author calls to recognize the right to avoid genetic parentage as a distinct right, he expresses his opinion that the waiver thereof is to be allowed, but only when the waiver is explicitly and clearly made). In any case, for the continuation of the discussion, the reference to the recognition of this right shall suffice. The balance between this right and the Petitioner's rights is yet to be reviewed.
Part of the complexity which the case at bar arises derives from the fact that the parties herein raise arguments concerning different aspects of the very same right – the right to human dignity, within which the Israeli constitutional law has recognized both the right to autonomy and the right to be a parent on its various aspects (including the right to avoid parenting). This is not a "vertical" balance made within the limitation clause of the basic laws, but rather a "horizontal" balance between rights, and to a great extent, between different aspects of the very same right.
In the past, this Court was required to face the question of balancing the right to be a parent and the right not to be a parent, in re Nachmani. After numerous disagreements, the majority opinion in the additional hearing supported the mother's right in that case to consummate her right to be a parent. In other words, in the balance between the right to be a parent and the right to non-parenting, the right to be a parent prevailed in that case. However, the circumstances of the case and the nature of the conflicting rights therein were different. In re Nachmani the Court was required to rule in the question of ova which were fertilized with the father's sperm, under circumstances in which the woman's chances to fertilize other ova of hers were extremely low, perhaps non-existing, i.e. deciding in favor of the woman was based on the protection of her right to any biological parenting – as distinct from protection of the manner of consummation of the right to be a biological parent, such as in the case at bar. The potential father's objection was raised at a time when the reliance of the woman on his consent was decisive and irreversible. The case at bar differs from re Nachmani in some important aspects. First of all, we are not concerned with the mere possibility of the Petitioner to become a mother. Second, we cannot indicate significant reliance such as in re Nachmani. The Petitioner paid to store additional sperm units of the Donor only after having given birth to her daughter. Indeed, as per her claim, which was not contradicted by the Ministry of Health, according to the policy of the Sperm Bank she only could have asked that sperm units are stored for her after the success of the first fertility treatment. This matter was not sufficiently clarified to us, but even if this is so, the Petitioner did not rely on the option to store the Donor's sperm units prior to the fertilization process. Moreover, if the Donor's position is accepted, the Petitioner shall not be required to undergo additional difficult physical treatments (such as the additional ova extraction). Essentially, the injury to the Petitioner is expressed in dashed, unfulfilled expectations. It is noteworthy that in protecting the rights of the female spouse in re Nachmani – by recognizing the existence of reliance – Israeli law (justifiably) went much further than the common practice of other systems. To compare, it is noted that in the matter of Evans v. United Kingdom, App. No. 6339/05 (2006), which addressed an issue similar to the Nachmani affair, the European Court recognized the right of a father to withdraw his consent to an IVF procedure even at a stage in which his sperm was already used for fertilization (similarly to the ruling in England in this matter – Evans v. Amicus Healthcare and others [2004] 3 All E.R. 1025. Anyway, as aforesaid, there is no doubt that the irreversible nature of the situation created in re Nachmani, as well as its affinity to the core of the right to be a parent, varies from the case at bar. It is important to emphasize that the point of "no return" in re Nachmani was the creation of the fertilized ovum, and therefore, in my opinion, there is no doubt (an addition which I make in reference to the opinion of my colleague, Justice Rubinstein in Paragraph 65 of his ruling) that had the fertilization of the Petitioner's ova by the Donor's sperm been completed in the case at bar, he could not have withdrawn his consent. In that state of affairs, accepting the Donor's position might have forced the Petitioner to repeat the painful procedure of ova extraction, and again go through the agonizing anticipation for the outcome of their fertilization (which is never guaranteed). This cannot be accepted.
In fact, the comparison to re Nachmani is illuminating in one other aspect pertaining to the grounds at the basis of the Donor's objection to the continuation of the fertilization procedure. In the First Nachmani Case, Justice T. Strasberg-Cohen supported – at that time as part of the majority opinion, and later in a dissenting opinion in the additional hearing – the prioritizing of the right not to be a parent, also in consideration of the economic burdens entailed therein (ibid, p. 501). In contrast, in the case at bar, the argument on behalf of the right not to be a parent is not at all based on the fear of monetary obligations towards the anticipated newborn, but is rather made on behalf of emotion, pain and identity (compare: Barak-Erez, Symmetry, p. 201). From this perspective, it is easy to be convinced that the emotional injury to the Donor is significant – clearly he is not motivated by additional reasons of an economic nature. Indeed, in some way the hurt to the Donor is less acute than in the case wherein the question is whether use can be made of a sperm donation for the purpose of first-time fertilization (a case wherein avoiding use of the sperm shall absolutely prevent the situation of being a parent to a child whom the Donor shall not know and not raise). The injury entailed by genetic parentage of the Donor to a boy (or a girl, in this case) unknown to him has already been partly inflicted, as far as he is concerned. However, one cannot dismiss the damage caused to the Donor by increasing the hurt through genetic parentage of additional children, against his will and understanding.
The distinction between the protection of the right to be a parent and the limited protection of the desire to consummate the right to be a parent in a specific way is also recognized in other contexts. Despite the in-principle recognition of the right to be a parent, parents cannot, under the usual circumstances, choose the sex of the fetus, although this can be done through using relatively simple technology and scientific tools. The right to be a parent, in this context, is the right to be a parent of a child, not a child whose sex was pre-chosen. The right to choose the sex of the fetus is regulated, for the time being, in the circular of the Director General of the Ministry of Health, and is only granted in very limited contexts (see: The Ministry of Health, Director General Circular" Selecting the sex of the fetus in IVF Procedures" (2004)), under circumstances of a genetic disease in the family, which is identified with one of the sexes. (see further: Ruth Zafran "the Scope of Legitimacy in Selecting the Genetic Characteristics of a Newborn by his Parents – Selecting the Newborn's Sex for Social Reasons as a Test Case" 6 Mishpat Ve'Asakim, 451 (2007)). Indeed, a distinction can be made between preference with respect to the newborn's sex for emotional and cultural reasons and preference such as the Petitioner's, to bring additional children into the world, to be full biological siblings to her daughter, a preference which may have rational reasons (such as in contexts in which a donation of organs is needed in the family). Therefore, the comparison between the situations is not complete. Moreover: apparently, the Petitioner's preference is also a known preference among those who are assisted by fertilization technologies in similar situations (see for example, the instance brought by Anne Reichman Schiff, Solomonic Decisions in Egg Donation: Unscrambling the Conundrum of Legal Maternity, 80, Iowa L. Rev. 265 (1995)). However, the said comparison indicates the fact that the protection of the right to be a parent does not mean protection for the full liberty with respect to the manner of its consummation. For that purpose, balances are required against other rights and interests, including the rights of the sperm donor, in the case at bar.
One might add, that also with respect to other rights, there is a distinction between the broad protection for the core of the right, and the limited protection for specific choices regarding its consummation, the price entailed in which it is to be balanced against other rights or other social interests. For example, the Israeli law recognized the right to education as a basic right. This right includes the rights of the parents to be senior partners in the formulation of their child's education. However, this right does not mean the right to always determine to which school their child shall attend and what would be the curriculum in that school (compare: Yoram Rabin, the Right to Education (2002)).

The law of property and the bounds of commodification

A first connecting point between the realm of human rights and that of the private law, in which the Petitioner claims her rights are grounded, is expressed in the assumption that the Petitioner has acquired full ownership of the Donor's sperm. This assumption is based on the perspective that "everything is negotiable", and raises a discussion regarding the boundaries of commodification. The question is whether body organs, or other intimate aspects of the human behavior, are indeed commodities for all intents and purposes. Is sperm donation really a tradable commodity, no different to a chair or a table, which were sold for a fair price? The answer to this question is not at all obvious. Not everything is for sale. As technology develops, new questions arise with respect to the scope of tradable commodities and the level of willingness to deem anything which can be technically transferred as a commodity (see, in general, Rethinking Commodification (edited by Martha M. Ertman & Joan C. Williams, 2005; Lori Andrews & Dorothy Nelkin), Body Bazaar – The Market for Human Tissue (2001); Michael Sandel, Justice – What is the Right Thing to Do? 88-112 (2012)).
At this time in Israel, human organs are not a regular, tradable commodity (for different opinions on this issue, see and compare: Joshua Weisman "Organs as Assets" 16 Mishpatim, 500 (1986); Gad Tedeschy "The Ownership of Organs Taken from a Living Person" 38 HaPraklit, 281 (1991)). Indeed, for pragmatic reasons, the possibility to donate body organs has been recognized, when the donation does not harm the donor's health (see: HCJ 5785/03 Gidban v. the State of Israel, the Ministry of Health, IsrSC 58(1) 29 (2003)). Today, this possibility is anchored in the Organ Implantation Law 5768-2008 (the "Organ Implantation Law") (see mostly Sections 13-17 of the Law). In addition, the transfer of tissues and cells which are perceived as renewable or non-vital is possible in the format of a donation or a quasi-donation (to which the Organ Implantation Law does not apply – the definition of "organ" in Section 1 of the Law excludes "Blood, bone marrow, ovum and sperm"). Blood donation is considered as not only possible, but also desired, and the Law recognizes the possibility to receive with respect thereto an "insurance" for the receipt of blood donation to the person, his spouse and children under the age of 18 (according to the blood insurance regulations of MADA). Over the years, in recognition of the renowned importance of the consummation of the right to be a parent, certain physiological aspects of the fertilization process also became transferrable, in a format which is defined as a donation, but in fact entails certain consideration, which is defined as compensation for effort and inconvenience, as opposed to payment of an actual price. The field of sperm donation has been regulated for quite some time now (pursuant to the People's Health Regulations (Sperm Bank) 5739-1979 (the "Sperm Bank Regulations")). Later on, the issues of surrogacy procedure were also regulated (pursuant to the Embryo Carrying Agreements Law (Approval of Agreement and Status of the Newborn) 5756-1996 (the "Surrogacy Law")), as was the issue of ova donation (pursuant to the Ova Donation Law 5770-2010 (the "Ova Donation Law")). It is important to note that in all of these instances, the laws or regulations did not recognize sperm, a uterus or ova to be an "ordinary" commodity on the market. On the contrary; despite the fact that in all of these cases payment is made to those defined as "donors", such payment is limited in scope, supervised and defined as compensation for effort and inconvenience, as distinguished from consideration for the body parts or the use thereof (see: Section 6 of the Surrogacy Law and Section 43(a) of the Ova Donation Law, similar to Section 22 of the Organ Implantation Law). The issue is not specifically regulated in the regulations pertaining to sperm donation, since this is not an overall arrangement within primary legislation. The decisions to open the door for such limited transference of body organs were no simple decisions. On the one hand, it is a necessity that should not be condemned, or at least is understandable, but on the other hand, they threaten to turn people into commodities or a container for potential commodities, which literally has a price. The disputes in this question continue. The recognition of the possibility to donate blood, sperm or ova did not turn them into "assets" for all intents and purposes.
The decision regarding the transferability or partial tradability of body organs, or renewable body organs as in the present case, does not need to be all embracing. As we realized, the arrangement applicable to sperm donations recognizes the possibility to transfer sperm for the use of the Sperm Bank, against some consideration, which is not a full market "price". However, this does not mean that the sperm thus turns into an ordinary tradable commodity. The limited commodification is embodied in strict regulation of the price and limitations on the transfer of sperm to third parties (which is only allowed for the purpose of fertilization or research). We face the question of whether the limited tradability of sperm cells should also be asserted through a withdrawal right, to be enfolded in the consent to donate sperm, and which allows the donor to withdraw his consent prior to the fertilization process. I believe that the answer to this question, in instances such as the case before us, in which the Petitioner did not change her position to the worse, is positive.
The necessity to recognize the limitations that should be imposed on viewing body organs as tradable and transferrable property may be demonstrated through examples that go beyond the facts of the current case. Would we perceive a situation whereby the "neutral" attitude towards the proprietary and business nature of purchasing the rights to the sperm cells would lead us to recognize the possibility to cast an attachment thereon? Would a person who donates his body to science be prohibited from reversing this decision, even though he signed an undertaking of a decisive nature in this matter?
This attitude is also reflected in the Ova Donation Law. Pursuant to Section 44(a) of that Law, "a donor… may withdraw her given consent… at any time prior to the performance of the procedure for which she agreed to designate the ova which were extracted from her body, and with respect to a consent to designate ova for implantation – at any time prior to the fertilization of the ova, and she will be under no civil or criminal liability for the withdrawal of her consent as aforesaid". The explanatory notes to the bill of the Ova Donation Law, 5767-2007, are illustrative of the issue we are concerned with: "the consent of a woman to donate ova from her body in accordance with the provisions of the proposed law, involves significant results – giving birth to a child who is the biological child of that woman, while she waives any parentage affinity towards him. Therefore, such a donor should be allowed to withdraw her consent with respect to the procedures performed in the ova extracted from her body, at any time prior to the performance of the procedure to which she has agreed to designate such ova, and with respect to consent to designate ova for implantation – at any time prior to the fertilization of the ovum" (explanatory notes to Section 42 of the bill).
Indeed, Israeli law does not specifically regulate the issue of withdrawal of consent in all aspects pertaining to sperm donations, since the issue is not yet established in primary legislation. However, it would be reasonable to conclude that the statutory arrangement applicable to ova donation reflects the perception of the Israeli legislator regarding the limitation, which would be appropriate to apply to the use of reproduction substances that are provided by way of donation. It is possible and appropriate to apply here the principle whereby acts of legislation that regulate similar issues should be interpreted such that they are consistent with one another, in a manner that promotes the values of the system.
The reluctance to apply a full property regime to sperm cells is also expressed in the regulation of the use of sperm cells of a deceased person. The use of sperm cells under such circumstances is decided in consideration of the wishes of the person from whom it was taken, and not on the grounds of proprietary principles. In Israeli law, the position that guides the regulating of this issue, as formulated by the Attorney General, is that the use of sperm cells of a deceased person is based on the assumption of his estimated wishes. See: "The Retrieval and Use of Sperm After Death " the Attorney General Guidelines no. 1.2202 (5763). A similar approach is also expressed in the rulings of the courts of other legal systems. In the precedential judgment, wherein a dispute took place over the rights to sperm of a deceased person, between a sperm bank and his widow – Parpalaix v. Cecos (1984), the court in France rejected the position of the sperm bank which claimed a proprietary right, and favored the widow, who presented indications to the deceased's wishes that she will be fertilized by his sperm (further see: E. Donald Shapiro & Benedene Sonnenblick, The widow and the Sperm: The Law of Post-Mortem Insemination, 1 J.L. Health 229 (1986-1987); Gail A. Katz, Parpalaix c. Cecos: Protecting Intent in Reproducting Technology, 11 Harv. J. L. & Tech. 683 (1998)). Likewise, in Hecht v. Kane, 16 Cal. App. 4^th 836 (1993), in which the parties to the dispute were the spouse of a person who had committed suicide, and his adult children. The California Court rejected the attitude that considers the frozen sperm units, which the deceased left behind, as property for all intents and purposes, belonging in his estate. This ruling stated that the question of using the sperm units should be answered after further investigation regarding the deceased's wishes. The ruling further clarified that insofar as his spouse shall be granted rights to these sperm units, she will be able to use them only in an attempt to conceive thereby, and not for any other purpose. This reservation once again brought into focus the limitation of treating sperm units as "ordinary" property (further see: Bonnie Steinbock, Sperm as Property, 6 Stan. L. & Pol'y Rev. 57 (1995); Ernest Waintraub, Are Sperm Cells a Form of Property? A Biological Inquiry into the Legal Status of the Sperm Cell, 11 Quinnipiac Health L. J. 1 (2007).

Contract law: Contract Interpretation and Waiver of Right

From the law of property to contract law. Insofar as we are in the realm of contract law, the first question is the scope of liability of the sperm donor, pursuant to the language of the undertaking form that he has signed. And to be more concrete: does the language confer upon him a right to change his mind, or alternatively – deny him the right to reverse?
The letter of consent, which a sperm donor is required to sign, appears in Annex C to the Circular of the Director General of the Ministry of Health "Rules regarding the management of a Sperm Bank and Instructions for the Performance of Artificial Insemination" (2007). This letter of consent includes the following language of undertaking: "I agree to donate from my sperm for the use thereof for artificial insemination of women or for research purposes, as per the considerations of the Sperm Bank". This language does not include explicit reference to the sperm donor being granted a right to change his mind. Yet, nor does it explicitly deny such a right. In other words, the (current) letter of consent signed by sperm donors is silent in this matter. An interpretive question therefore arises: how should this silence be interpreted? Considering the fact that the sperm donation pertains to the personality of the donor and his dignity, it is appropriate that the waiver of the right to reverse be regulated, at least, by an explicit reference to the issue in the letter of consent. A separate question is whether it is appropriate to allow an individual to irrevocably waive the right to withdraw the donation under circumstances in which no irrevocable reliance has been created by a fertilization procedure that has already begun. However, it may be stated that, in the least, the arrangement that denies the right to reverse in cases such as the one before us (prior to the use of the donor's sperm for the purpose of fertilization) should be explicit and clear (as also noted by Cohen in his aforesaid article). This is emphasized even more if we take into account the view of the sperm donation as a "donation" or "gift", in contrast to a "sale", as shall be specified below.
In order to complete the picture, it is important to reiterate that the Petitioner signed the documents pertaining to the storage of sperm units only after having given birth to her first child. These documents too, make no explicit reference to the question of the donor's withdrawal, and they further state that the Sperm Bank shall not be liable for the "loss, damage or other use of such sperm units".
It is noteworthy that such issues, which are so sensitive and so essential for the parties involved, as well as for the public interest in its broad sense, should be explicitly regulated, rather than requiring, in retrospect, the interpretation of experts – not only for legal considerations but first and foremost for reasons of fairness. Undoubtedly, one of the important lessons to be learned from this case is the preparation of suitable forms for the signature of sperm donors and women who wish to conceive by sperm donation, to be also accompanied by detailed and clear explanatory sheets.

Contract law: a for-consideration contract or a gift

Insofar as the case is also reviewed from the contractual perspective, it is appropriate to further inquire whether the consent to sperm donation is a regular consent, or one which is rooted in the Gift Law (pursuant to the Gift Law 5728-1968 (the "Gift Law")), or should at least be discussed while concluding from this law (see and compare: Mordechai A. Rabello, The Gift Law, 5728-1968 212 (Second Edition, 1996)). A major difference between the law which applies to a regular contract and that which applies to a gift contract (whether totally unilateral or accompanied by a condition is an obligation) is the recognition of the right of reversal which is granted under certain conditions to the giver of the gift, out of recognition that he is performing an act of benevolence, an act which benefits the other. Section 5(b) of the Gift Law 5728-1968 (the "Gift Law") stipulates, "so long as the receiver of the gift did not change his situation in reliance of the commitment, the giving party may withdraw it, unless he had waived this permission in writing". Section 5(c) recognizes the possibility of withdrawal of a gift also due to "considerable deterioration in the financial condition of the giving party". These provisions do not necessarily apply to the case at bar, since one may assume that the gift in this case was concluded in an act of conferral (Section 2 of the Gift Law). Furthermore, the sperm donation still involves payment, although not large. However, if only by way of syllogism, these arrangements indicate that the legislator chose to be compassionate and measured towards those who a priori expressed these virtues through their own altruistic act. In this context, it is particularly worthy to emphasize the following two: first of all, Section 5(b) stipulates that the prevention of withdrawal from the person who obligates himself to the gift requires "a written waiver of this permission". In other words, the wavier of the giver of the gift of the right to withdraw his obligation requires specific and formal arrangement. Secondly, Section 5(c) of the Gift Law refers to a change in the economic situation of the giving party since it concerns the typical case that the Law addresses – a gift of economic value. Insofar as a sperm donation is concerned, by way of syllogism, a change in the personal situation may be relevant, for the same reasons.
Indeed, sperm donors often do not attribute much importance to the personal aspect entailed in the donation. However, in those cases in which the sperm donor later feels sadness and remorse regarding his willingness to take part in this process, should society treat him with the same legal rigidity which should apply to a merchant who canceled a merchandise transaction? I think not. This is required by the virtue of humanness. In my opinion, in the present case, it is of no particular importance that the donor had a "change of heart" following repentance ("Tshuva"). The main issue is that he feels true remorse regarding the sperm donation, whether the reasons therefor are religious, moral or emotional (for a distinction between the right to freedom of religion and protection of religious feelings, see and compare: Danny Statman & Gideon Sapir "The Freedom of Religion, Freedom from Religion and Protection of Religious Feelings" 21 Mechkarei Mishapt 5, (2004)). I wish to further note, in this context (in reference to section 61 of my colleague's ruling), that I do not believe that the review of the Halakhic sources which he refers to eventually affect the conclusion we reached in this case. It seems that my colleague, Justice Rubinstein, does not believe so either. On the contrary, as my colleague noted, some adjudicators take a stance that detaches the parentage affinity between the sperm donor and the newborn, and consider the sperm of the donor to be "abandoned" (see: Michael Corinaldi "The Legal Status of a Newborn Conceived by Artificial Fertilization" 4 Kiryat Ha'Mishpat 361, (2004)). Also amongst the stringent adjudicators, who recognize the affinity of the newborn to the sperm donor, some limit this stringency to certain issues only (prohibition of incest) and not to others (such as child support and inheritance) (see: Yossi Green "Is There a Solution to the Problem of Bastardry through Medical Technologies in the field of Fertilization?" 7 Moznei Mishpat 411, 422-425 (2010)). Under these circumstances, in my opinion, no weight is to be attributed to the fact that other, more stringent, approaches can also be taken, of which the Donor himself did not claim.

Contract law, contractual adversary and normative duality

Insofar as the Petitioner's argument is seeking foundation in contract law, it is important to pay attention as well to the lack of contractual adversary between her and the sperm donor. Insofar as the Petitioner has a contractual right, such right derives from an agreement she had with the Sperm Bank (which on its part obtained the sperm donation within a separate contractual arrangement with the Donor). The payment made by the Petitioner was also transferred by her to the Sperm Bank, unrelated to the earlier payment made by the Sperm Bank to the Donor. Hence, the correct perspective for the review of the scope of her contractual rights should focus on the contract she has with the Sperm Bank. This contract is not only subject to the regime of contract law, but is also under the yoke of public law – being a contract made with a public body, in this case a governmental hospital. It is further subject to public law, alongside contract law, according to the concept that is called "normative duality" (see, for example, Daphne Barak-Erez, Citizen Subject - Consumer, Law and Government in a Changing State 234-238 (2012)). The governmental hospital is also expected to act in the framework of this contract out of commitment to the principles of public law that it is bound to. In this context, it must also examine whether the case calls for the application of the rule of rescission, which enables an administrative authority to be released from a contract it entered for the purpose of protecting an important public interest (see: Daphne Barak-Erez, "The Rescission of a Government Contract: A Test Case of Normative Duality" 11 Ha'Mishpat, 111 (2007)). The public interest in this case also includes the protection of the rights of sperm donors, as shall be specified below.
As a rule, we must additionally review the question before us from the perspective of the duties of the governmental hospital towards the sperm donor. The governmental hospital is to also take into consideration the donor's rights. In fact, the question is not if the governmental hospital should be considerate towards the donor, but rather what should the scope of such consideration be. To illustrate, a simpler case than the one before us can be imagined – that of a donor who regrets his donation after its delivery had been completed and before a specific woman had asked to make use of his sperm for the purpose of fertilization. Under these circumstances, would a stringent attitude of the sperm bank, whereby once the sperm donation is completed there is no longer room for regret, be accepted as reasonable? I think the negative answer to this question is obvious. On the other hand, the answer to the opposite extreme case is also clear, when use has already been made of the sperm for the purpose of fertilizing ova, such as in re Nachmani, and therefore reversal is no longer a possibility. The case at bar is an interim case. For the reasons explained thus far, I believe that here too, the "point of no return" is yet unformulated.

Comparative law and the limitations thereof

A new and complex question such as the one before us, ostensibly directs us to the almost infinite reserves of comparative law, as a source for inspiration and learning. In fact, this is a blessing, which in the present circumstances is of limited benefit. The answer to the question is necessarily founded on ethical and ideological views, which are often culture and geography dependent. Indeed, a sample review of other systems – wherein the discussion is often still unconcluded – indicates that there is no agreed answer to the question. Moreover, the answer provided for the question depends on resolving other questions, such as the question whether the identity of the sperm donors may be disclosed to the children born from their sperm upon their maturity. For example, in England, sperm donors are allowed to withdraw their donation (see: Human Fertilization and Embryology Act 1990, Schedule 3, Section 4(2). Further see: Peter D. Sozou & Others, Withdrawal of Consent by Sperm Donors, 339 British Medical Journal 975 (2009)). The English attitude regarding this issue is part of a broader perception which also recognizes the possibility of withdrawal of a donation when an ovum had already been fertilized by the donor's sperm, as ruled in re Evans, mentioned above, which expresses an opinion different than that of Israeli law, as formulated in re Nachmani (further see: Heather Draper, Gametes, consent and points of no return 10(2) Human Fertility 105 (2007)). Recognizing the option granted to sperm donors to withdraw their donation is expressed in Australian legislation (wherein the issue is not regulated on a federal level, but rather by state legislation only. See: Human Reproductive Technology Act 1991, Section 22 with respect to Western Australia, and Assisted Reproductive Treatment Act 2008, Section 20 with respect to Victoria). Canada offers another approach. The regulations which regulate the issue there – Assisted Human Reproduction (Section 8 Consent) Regulations, 2007, issued under the Assisted Human Reproduction Act, 2004 – distinguish between a situation in which sperm or ovum are provided for the purpose of fertilization within a relationship with the provider of sperm or ovum, and sperm or ovum donation for a third party. While in the first situation consent may be withdrawn at any time so long as no use was made of the sperm or ovum, this cannot be done in the latter situation, if notice had been given by the third party that the donated substance was designated for him (in fact, as in the case of the Petitioner). This arrangement is considered to set the "point of no return" much earlier, and was criticized on these grounds. See: The Standing Senate Committee on Social Affairs, Science and Technology, Ninth Report (14 February 2007), at p. 2. And further see: Porsha L. Cills, Does Donating Sperm Give the Right to Withdraw Consent? The Implications of In Vitro Fertilization in the United Kingdom and Canada, 28 Penn. Int'l L. Rev. 111 (2009). A relatively unconventional approach may be found in Spanish Law (Law 14/2006 dated May 26, 2006 on Fertility Assisting Technologies – Técnicas de reproducción humana asistida). Section 5 of this Law allows the sperm donor to withdraw consent, but limits this right to circumstances under which he needs the sperm cells for his own needs, and stipulates that under such circumstances the donor shall be required to compensate the relevant sperm bank. The Bill that was drafted by the American Law Institute regarding this issue – Model Act Governing Assisted Reproductive Technology – includes a detailed arrangement with respect to the manner of granting consent to IVF procedures, by all parties involved therein, including the donor. According to Section 201 of this bill, the information regarding the consent and its boundaries should also be provided orally as well as in writing, while explicitly addressing the question of the right to withdraw the donation, and the time at which it expires. The section further stipulates that the right of withdrawal is effective only so long as the sperm cells were not transferred, but this rule is intimately connected to the overall regulation of the issue of informed consent and the information provided prior to its granting.

Expectations, heart's-desires, protected expectations and rights

The Petitioner's heart-desire to be a mother of children who all share the same genetic father is therefore not fulfilled. Her expectations are frustrated. However, from the legal aspect, such expectations do not enjoy full legal protection. Essentially, the Petitioner did not rely on the possibility to receive additional sperm donations from the same donor prior to giving birth to her firstborn. She paid in order to secure the use of the donor's additional sperm units only after successfully conceiving from the donor's sperm. As transpires from the above discussion, it is possible that even the reliance of a woman on the purchase of several sperm units by the same donor would not suffice to prevail over the donor's right not to be a parent, under circumstances in which no further injury is caused to the woman. Nevertheless, in the case at bar, we cannot indicate reliance of the petitioner on the possibility to secure the use of several sperm units of the same donor prior to the original fertilization from which she had her daughter, as distinct from interrupting her expectations further down the road.
An additional perspective to review the case pertains to the comparison between the Petitioner's expectations to consummate parentage of several children with one genetic father, and the ability to protect this kind of expectation in the ordinary course of life. Indeed, in most cases, partners who choose to make a home and bring children into the world hope and plan that, insofar as they wish to have several children, their lives will enable them to jointly parent children who are full biological siblings to each other. This expectation may materialize, and indeed it often does. However, this is not always the case. Partners may separate, for example. In such cases, even if one of them did have an expectation to consummate joint parenting of several children with the partner from whom they separated – such expectation is not a protected one. Indeed, there is additional hardship in the situation of the Petitioner, who has no direct connection to the person from whose sperm she conceived. She cannot persuade him and directly appeal to his feelings, as distinct from the case of a "regular" separation. Truly, the Petitioner differs from a woman who conceived by a partner with whom she has an ongoing relationship which naturally experiences ups and downs, and in which it is obvious that family planning is the responsibility of both partners, and not just one of them. The comparison is therefore incomplete. However, it highlights the fact that the law does not protect, under regular circumstances, the expectation to give birth to full biological siblings. My conclusion in this context is similar to the conclusion reached by my colleague Justice Rubinstein (Section 35 of his ruling). In a broader perspective, the absence of legal protection of a family model which is close to that of a traditional family, a family which includes several biological siblings, integrates into the growing recognition that our society includes different types of families, whose members can and should experience happiness in their lives (further see: Sylvia Fogel Bijawi "Families in Israel – between the Familial and Post-Modernism" Gender, sex, Politics (Dafna Azrieli and Others, Editors, 1999)).
In view of the considerations presented in the discussion thus far, it is also doubtful whether the Petitioner's expectations are worthy of full protection. Such full protection would cause a disproportionate harm towards the sperm donor. In addition, broader policy considerations might add to the aforesaid, pertaining to over-deterrence of potential sperm donors in the future (and particularly in consideration of the fact that already now there is chronic shortage of sperm donors. See: Background Document regarding Sperm Donation in Israel 2 (the Knesset's Research and Information Center, March 1, 2005)). It can further be assumed that these considerations shall also be reviewed when additional questions regarding the rights of sperm donors are raised in the future, e.g. with respect to the expectations of children who are born from sperm donation to seek out the identity of the biological father (see and compare: Ruth Zafran "Secrets and Lies – The Right of an Offspring to Seek Out their Biological Fathers, 35 Mishpatim 519 (2005)). To emphasize: the Petitioner in this case is not paying the price of protecting these future donors, insofar as they shall seek such protection. The required outcome in the case at bar is also the desired outcome in other instances, and not vice versa.

Technology, Science and Law

The case at bar is yet another example of the new challenges presented by scientific and technological progress. From a medical aspect, a woman who seeks conception may select the preferred sperm donor after having reviewed his specifications as well as the availability of a sperm unit "inventory" provided by him. The availability of such possibilities to her join many other situations in which technology creates new opportunities – freezing ova or storing sperm (for future use thereof), early detection of embryo genetic diseases, and more. These situations repeatedly raise the question of whether the availability of a certain mode of action, as a matter of science and technology, necessarily entails the existence of a right to use it, and that the exercise of such right is not to be limited. In the present case, since there is a technical possibility to use the additional sperm units of the Donor, the assumption lying at the foundations of the Petition was that it would be possible to actually use them, without limitation. Indeed, the technology opens up new horizons, allowing us additional choices. However, the fact that certain scientific and technological possibilities allow us to take certain steps does not, in itself, confer the right to do so. Surely this must be considered when against the possibility to use the technology stands, not only a vague concern of potential implications for society, but a concrete sperm donor whose rights are expected to be injured.

Legislation and preliminary arrangements

The situation revealed to us with respect to the regulation of sperm donations is far from satisfactory. Such an essential issue, with implications on the consummation of the right to be a parent, as well as on family law in general, is lacking proper legislative regulation. The operation of a sperm bank is only loosely regulated by legislation, and even this is only by secondary legislation – the Sperm Bank Regulations. These regulations limited the management of a sperm bank to recognition by the Director General of the Ministry of Health, and further stipulated that the artificial insemination from a donor shall only be performed in a hospital which has a sperm bank and by sperm which was obtained from this bank. More detailed arrangements only exist in the form of a circular of the Director General of the Ministry of Health, as explained earlier, and this, too, lacks reference to fundamental issues, such as the one before us. The current situation therefore has two flaws: first of all, the current regulation does not address essential and important questions; second, in any event, the regulation is not by primary legislation which contains preliminary arrangements, as required by the Court's ruling (see: HCJ 3267/97 Rubinstein v. The Minister of Defense, IsrSC 52(5) 481 (1998); HCJ 11163/03 Supreme Monitoring Committee for Arab Affairs in Israel v. the Prime Minister of Israel, IsrSC 61(1) 1 (2006)). This state of affairs is improper, as a matter of principle, and further contributes to situations in which expectations are created in the hearts of the involved parties, in the absence of clear regulation. This is stated a fortiori, since the issue of sperm donations is not regulated by primary legislation at all, as distinguished from situations where primary legislation exists, but it is not sufficiently detailed (for various approaches regarding the scope and status of the duty to stipulate preliminary legislative arrangements, see: Gideon Sapir "Preliminary Arrangements", 32 Iyunei Mishapt 5 (2010); Yoav Dotan "Preliminary Arrangements and the New Principle of Legality" 42 Mishpatim 379 (2012); Barak Medinah "The Constitutional Rule regarding the Duty to Stipulate 'Preliminary Arrangements' by Law – Response to Yoav Dotan and Gideon Sapir" 42 Mishpatim 449 (2012)). A law addressing the issue, had one been enacted, could have clarified what is the "point of no return" in a sperm donation process, in terms of the donor's ability to withdraw his consent, and further stipulate rules in other matters of general public importance, such as the scope of use of sperm units donated by a single donor (through determining a clear boundary in this area). A law regulating the issue may also set forth arrangements pertaining to the scope of information which the sperm donor is entitled to receive (e.g., could he know whether children were born from his sperm). For example, under the current circumstances, a clear rule which would have "blocked" such information could possibly make it somewhat easier for the donor, since the implementation thereof would have spared him the positive knowledge that his sperm was practically used for a successful fertilization (although such a rule would not necessarily guarantee that future donors will not seek to withdraw their donation).

Of the law and beyond

Be that as it may, one can sympathize with the Petitioner, even though the law is not on her side. Although the Donor's refusal regarding use of his sperm for additional fertilization is founded on emotional grounds, which can be respected, the Petitioner's struggle and pain might lead him to further deliberation, after the legal proceeding is concluded. He is under no legal obligation to do so. He can most certainly consider it ex gratia.

Justice

Justice I. Amit

I concur with the outcome reached by my two colleagues, and like them, I too face the outcome we reached with a heavy heart.

Since my colleagues elaborated in their thorough analysis of the field, I shall limit myself to the odds and ends that they have left behind, and try to shed light on other aspects of the issue that are presented to this Court for the first time.

The Petitioner and the Donor in the prism of civil law

The outcome of the Petition is derived from the legal tools that we shall choose for analyzing the issue at hand. My opinion is that had we chosen the "realm" of civil law only, it seems that the Petitioner would have prevailed.
Two contractual systems apply to the "asset" under our discussion. The one – between the Donor and the Sperm Bank, and the other – between the Petitioner and the Sperm Bank, and there is no contractual adversary between the Donor and the Petitioner.

"Sale" is defined in Section 1 of the Sale Law 5728-1968 (the "Sale Law") as "the transfer of an asset in consideration for a price". In the relationships between the Donor and the Sperm Bank, the Donor may be deemed as having sold his sperm for a consideration – not symbolic but also not particularly high – and the ownership of the sperm transferred to the Sperm Bank, under Section 33 of the Sale Law, which stipulates that in the absence of another understanding, the ownership of the object of sale is transferred by delivery. My colleague, Justice Rubinstein, believes that sperm donation should not be deemed as a sale, since it is impossible to transfer proprietary ownership in the Donor's genetic code in order, for example, to "duplicate" him genetically (Section 63 of his ruling). My colleague, Justice Barak-Erez, indicated the ruling of the California court, which ruled that the deceased's spouse is entitled to receive his sperm units in order to try and conceive thereby, and not for any other purpose, as an additional example which illustrates that we are not concerned with regular property (Section 19 of her ruling).

However, these examples do not preclude the classification of the donation as a sale transaction, and the proprietary nature of the deal, since there is no prevention that a sale contract shall be executed for a specific purpose, while limiting the buyer with regards to the use of the object of sale, without this derogating from the validity of the transaction as a sale transaction, which transfers the ownership of the object of sale. In the case at bar, the form signed by the Donor explicitly states that the donation is made for the purpose of fertilization, or for research purposes. The contractual limitation with respect to the non-use of the Donor's genetic constitution for purposes other than fertility or research, does not, in itself, derogate from the validity of the sale contract and the effect of the proprietary transfer made thereunder.

My colleague believes that due to the nature of the object of sale, it should be assumed that the Donor did not intend for the contract to be indefinite, and since no expiry date has been determined therein, a built-in contractual withdrawal option exists, which requires the Donor's ongoing consent throughout the process. However, if we consider the sperm donation to be a sale transaction, this is not an indefinite contract, but rather a one-time agreement, exhausted upon the transfer of sperm to the Sperm Bank against the payment received by the Respondent, and therefore the Respondent cannot retract the contract. As far as I know, also according to the common practice at governmental and private sperm banks, the Donor's consent is not required in each and every instance in which any use is made of the sperm donated by him.

My colleague believes that an interpretive question arises regarding the way to interpret the silence of the letter of consent on which the sperm donor is signed with respect to the right to withdraw his consent. However, this question already includes the assumption that regular contract law should not be applied in our case. Indeed, a regular sale contract does not include a "withdrawal clause", and the withdrawal of consent is deemed by contract law as a breach of contract, which entitles the injured party to the remedies set forth in the contract or by law.

Even if we view the Donor not as one who has sold his sperm but rather as one who gave it as a gift – by reason of the use of the word "sperm donation" and the consideration, which totals several hundred Shekels only – this shall not suffice to change the outcome of the transfer of ownership of the sperm. The term "movable property" is defined in Section 1 of the Movable Property Law, 5731-1971 (the "Movable Property Law" as "tangible assets, other than land" and the Law also applies to rights, mutatis mutandis (Section 13(a) of the Movable Property Law). Hence, the Donor can be deemed as one who gave "movable property" as a gift, which was completed upon delivery of the sperm to the Sperm Bank. The ownership of a movable gift transfers immediately upon delivery, according to Section 2 of the Gift Law, 5728-1968 (the "Gift Law"), which stipulates that "a gift is completed upon the transfer of the object of gift by the giving party to the recipient, while both agree that the object was given as a gift". The aforesaid, together with Section 6 of the Gift Law, which stipulates that in the absence of specific provisions of the law, the "ownership in the object of gift transfers to the recipient upon delivery of the object to his hand, or by the delivery of a document which entitles him to receive, and if the object is in the possession of the recipient – upon the delivery of notice by the giving party to the recipient regarding the gift". Since we are concerned with a concluded gift, Section 5 of the Gift Law, pertaining to an undertaking to give a gift and the possibility of the giving party to withdraw the gift under certain circumstances, does not apply.
The aforesaid notwithstanding, I am willing to assume that had the Petitioner not been in the picture at all, then in the event that the Donor would have asked to retract the sale/gift transaction for reasonable arguments, there would be room to accept his demand, and had the Sperm Bank refused to do so, we would probably deem its position as insistence upon a right in bad faith, considering the special nature of the object of sale/gift. However, the state of affairs changes upon the introduction of a third party, which modifies the set of considerations. There are many examples therefor in legislation and case law, such as the provision of Section 15(b) of the Agency Law 5725-1965, which stipulates that if the third party did not know of the termination of agency, it is entitled to consider it as ongoing. This provision was elaborately discussed in the rulings in CA 4092/90 Mitelberg v. Niger, IsrSC 48(2) 529 (1994), and CFH 1522/94 Niger v. Mitelberg, IsrSC 49(5) 231 (1996), and see the opinion of Justice Cheshin in the appeal (p. 553):

"We do know, that Shmuel did not change his situation, that no third party came to the house, and the dispute remained inter partes – between the same parties and with no intervention of a third party. …to reiterate: had the interest of a third party been introduced into the system, we may have ruled otherwise. However, this did not happen, and therefore we ruled as we did".

On the level of the relationships between the Petitioner and the Sperm Bank, the Petitioner may be viewed as having acquired the Donor's sperm units. Indeed the sperm was not transferred to her physical possession, as sperm units are only stored at the sperm bank, through a special freezing method (in liquid nitrogen, at a temperature of minus 196 degrees), however the Sperm Bank agreed to store the Respondent's sperm for the Petitioner, as indicated by the form which title is "Request for Storage of Sperm Units". This fortifies the Petitioner's status as owner of the sperm, in view of the definition of storage in Section 1 of the Guarantee Law 5727-1967, as "lawful possession, which is not by virtue of ownership" – the lawful possession is by the Bank, however the Petitioner is the owner. Note that the Petitioner's consent to subject the use of the sperm to a physician's medical-professional discretion does not prejudice her proprietary ownership of the sperm. A condition whereby the Petitioner exempts the Sperm Bank from liability regarding "loss, damage or other use of such sperm units", has nothing to do with the issue of the Donor's withdrawal, and can be seen as an exemption clause in guarantee-owner relationships.
My colleague proposed to apply the exclusion of unjust enforcement pursuant to Section 3(4) of the Contracts Law (Remedies for Breach of Contract) 5733-1973 (the "Remedies Law"). However, this exclusion is applicable to the relationships between the Donor and the Sperm Bank, and there is doubt whether it can be applied to the relationships between the Donor and the Petitioner, since the ownership in the Sperm already transferred to the Petitioner, and also due to the absence of contractual adversary between the two (compare FH 21/80 Wertheimer v. Harrari IsrSC 35(3) 253 (1981), in which the majority opinion ruled that Section 3(4) of the Remedies Law applies to relationships between the first buyer and the seller, and justice considerations of the direct parties to the contract may be taken into account, whereas justice considerations of the second buyer may not). In any case, the application of justice considerations under Section 3(4) of the Remedies Law in favor of the Donor, cannot guide us on our way to solving the riddle, since the question of what is the just solution under the circumstances is the very question in dispute between the parties.
The aforesaid legal analysis, in the prism of civil law, is based on the assumption that sperm may be seen as "Movable property" as defined by the Movable property Law (See Section 5 above, and similar definition in the Interpretation Ordinance [New Version] and the Interpretation Law 5741-1981) and as a tradable asset, in proprietary and contractual aspects. The opinion of some adjudicators in accordance with Hebrew law, who deem the donor's sperm to be "abandoned", also ostensibly supports the proprietary aspect, as one of the clear characteristics of the right to ownership is the right to abandon or destroy the object of ownership (Joshua Weisman Property law: General Part 89, 108 (1993) ("Weisman Property Law")).

However, the question whether a human body organ is an "asset", in which ownership may be transferred, is not clear of doubts. It is hard to deem as "property" something that the legal system does not allow the purchase of ownership in, and the Israeli legal system objects to human trafficking and objects to organ trafficking, even though it does allow the donation thereof (Weisman Property Law, p. 91; Joshua Weisman "Organs as Assets" 16 Mishpatim 500 (1987)). With respect to renewable organs such as sperm, ovum, bone marrow or blood, and in contrast to organs such as kidney or cornea, the mere donation does not prevent the donor of personal use of the asset, which shall be available to him again in the future. Moreover, as far as I know, and with due cautiousness, as we were provided no factual foundation on the matter, there is trade and "import" of sperm from abroad to sperm banks in Israel (and perhaps also "export" of sperm overseas), which indicates the tradability of sperm as an asset for all intents and purposes. Therefore, it is easier to consider such "organs" as "assets", and it seems that this is why the legislator allowed their transfer from one person to another, and allowed the receipt of some consideration therefor (Gad Tedeschy ""Property and Transferability: the Ownership of an Organ Taken from a Living Person" 38 Hapraklit 281, 282 (1998); Daphna Lewinsohn-Zamir "Transplantation from a Living Body in Israel: Experience and Problems" 38 Hapraklit 300 (1988)).

On the other hand, an argument may be raised whereby sperm or ovum cannot be compared to other renewable organs, and not even to organs such as kidney or cornea, since the masculine and feminine gametes (sperm cells and ovum cells) enable the birth of a child, thus "perpetuating" the donor's genetic constitution for eternity. Through this prism, the donation of sperm or ovum is a very fateful matter.

The bottom line is, that even if there is room to implement civil law to the donation of sperm, and although "commercially" the definition of sperm differs from other body organs, we do not conclude that this is a regular "asset", and the sale of sperm is not the same as that of moveable objects, to which trade practice and market price can be applied. Therefore, apparently there is no dispute that as a rule, the donor should be allowed to withdraw his consent, so long as we are concerned with the relationships between himself and the Sperm Bank only. The real relevant question is whether sperm is such a special "asset", whose unique characteristics are of such force as to overcome the weight of a third party (the Petitioner) who enters the scene?

The answer to this question is a matter of ideology, and like my colleagues, I too believe that civil law is not the only applicable law in this case, and is definitely not exhaustive, and we must seek answer in other legal realms (on the importance of the classification and delineation of the legal realm, see: Isaac Amit "On the blurring of bounds and boundaries and uncertainty in the law" 6 Din U'dvarim 17 (2011)). The decision of which legal tool is selected, or in which "realm" of the law to classify the issue under discussion, is in itself a principled decision that might affect the final outcome.

Analogy to ovum donation

The legislator did not regulate the issue of sperm donation by primary legislation and therefore there is no legislative reference to the issue of withdrawal of consent by the donor. A private bill regarding sperm donations was submitted to the Knesset in March 2011 by Knesset Member Otniel Schneller, and it allows withdrawal of consent by the donor, only in such cases in which the sperm donor wishes to designate his sperm in advance for a specific recipient of the donation, and when he wishes to withdraw the donation prior to the performance of insemination in the recipient of the donation.

The circular of the Director General of the Ministry of Health, stipulating rules pertaining to the management of sperm banks (circular no. 20/27 dated November 8, 2007) refers to withdrawal of consent only in such cases in which a woman wishes to conceive a child in joint parenthood with a person who is not her spouse, and then they are both required to present an agreement which addresses the possibility of the parties to withdraw their consent, and what would be the use of the genetic constitution upon such occurrence (Section 31B of the circular). In Section 25(e) of the Director General's circular it is stated that "Donor's sperm shall not be obtained, received or used for the purpose of artificial insemination, upon the fulfilment of one of the following: […] the donor did not give his consent in writing, on a form as specified in the donor's file". Apparently, it can be argued that the donor's consent needs to be obtained in each and every stage, but it transpires from the form on which the donor signs, that his consent for the provision of sperm and the use thereof is given simultaneously and after the sperm is obtained and received, there is no need to receive separate consent for the use thereof. As aforesaid, and as far as I know (no factual foundation was presented to us with regards to this matter), this is also the common practice, and the various sperm banks do not inform the donor, all the same obtain his consent, prior to making use of his sperm.

Therefore, there is currently no reference by the legislator, or by the secondary legislator, to the question whether a sperm donor is allowed to withdraw his consent, and until what stage. Upon facing a void, we must resort to analogy. The law of analogy is currently established in our law by the Act of Foundations of Law 5740-1980, which stipulates that "had the Court encountered a legal question to be resolved, and found no answer thereto in a legislative act, in case law or by analogy…". And yet, with respect to an issue that is very close to the matter at hand, the legislator had set forth an arrangement in the Ova Donation Law, 5770-2010 (the "Ova Donation Law"). Section 16 of the ova donation Law stipulates four acts which the donor is entitled to order with respect to the ova extracted from her body, as follows: implantation of the ova; freezing ova for the purpose of future use by herself; research; exterminating of the ova. Consent with regards to implantation may be given for a specific or unlimited time. The possibility to withdraw consent is set forth by Section 44(a) of the Law, as follows:

Withdrawal of consent and change of designation

A donor or a patient may withdraw consent given by her pursuant to Sections 15, 16 or 27, as the case may be, at any time prior to the performance of the act to which she agreed to designate the ova which were extracted from her body, and with respect to consent to designate ova for implantation – at any time prior to the fertilization of the ova, and she will be under no civil or criminal liability for such withdrawal of consent.

An ovum donor is therefore allowed to withdraw her consent until that point in time in which the donated ovum has been fertilized. If and insofar as we adopt this solution by way of syllogism also to the case at bar, then we reached a solution for the issue submitted to us, and we are not obligated to resort to "the principles of liberty, justice, equity and peace of the Jewish heritage" and to the Hebrew law on which my colleague, Justice Rubinstein, elaborated in his ruling.

As determined by the legislator, the moment a shared genetic constitution is created, the interest of the donor no longer stands alone, and she cannot withdraw her consent due to the introduction of a third party – the other partner to the genetic constitution. In this perspective, it can be argued that the analogy between ovum donation and sperm donation is naturally called for – so long as no use has been made of the sperm, the donor may withdraw his consent, but upon use of the sperm and fertilization of the ovum, we face a "point of no return" in view of the shared genetic constitution which was created (with reflection to civil law, see Section 4 of the Movable Property Law, which addresses the combination and mixing of movable property).

Why does the Ova Donation Law establish the fertilization stage (and not the stage of implantation or re-implantation) as the "point of no return" with respect to the donor? Did the legislator seek to avoid the need to address the medical-legal-moral-philosophical-religious issues pertaining to the time of creation of life and the status of a number of cells that have divided following an IVF? I found no grounds for this assumption in the Ova Donation Law, in the explanatory notes thereto or in the legislative history, however it can be supported by common sense.

According to this explanation, setting the "point of no return" at the time of the fertilization of the ovum is not arbitrary. In this way, as long as no use has been made of the Respondent's sperm, it can be argued that the Petitioner has no right to a specific child from his sperm, since so long as the child is not conceived (non-existence), the concrete right to his birth is yet unestablished (compare to statements made regarding "wrongful life" – David Heyd "The Right to be born free of birth defects?" Moral Dilemmas in Medicine, 255, 258-259 (Raphael Cohen-Almagor, Editor, 2002)). This is not the case in the post-fertilization stage, when the vague right to a specific child now has a concrete object, and a right is established for the mother to bring into the world the child that had already begun to be created (for a discussion of the time of formation of actual existence as opposed to potential existence, see: David Heyd, Are "Wrongful Life" Claims Philosophically Valid? 21 Israel L. Rev. 574, p. 578 (1986). Some believe that after the fertilization, the interest of the embryo taking shape to be born is added to the set of balances (for a dissenting opinion, see Andrei Marmor "The Frozen Embryos of the Nachmani Couple: A Reply to Chaim Ganz "Iyyunei Mishpat 19. 433, 436-439 (1995)).

The simple meaning of the analogy is therefore supportive of the conclusion that also with respect to the sperm donor, the point of no return is the fertilization of the ovum. However, in my opinion, an in-depth review of the issue may lead the analogy to the Ova Donation Law to a different outcome, and at least to a conclusion that no analogy can be drawn between the case at bar and the arrangement set forth in that Law, in view of the material differences between sperm donation and ovum donation.

In contrast to ovum donation, the issue of sperm donations is yet unregulated by primary legislation. Even according to the private bill of Knesset Member Schneller, as well as pursuant to the current circular of the Director General, all that is required for a sperm donation in Israel is the obtainment of the donor's consent on the proper form. On the other hand, ova donors are required to receive a written approval from an approval committee which comprises of physicians, a social worker, a psychologist, an attorney and a representative of the public or a cleric; the donor is provided with specific written and oral explanation regarding the essence of the procedure and the donation; she is required to undergo a medical and psychological examination in order to confirm her fitness to give the donation; the approval committee is to be convinced that the donor's consent was given "of sound and disposing mind, out of her free will and free of family, social, economic or other pressure" (Section 12 of the Ova Donation Law). The reason for the aforesaid procedure derives from the fact that the donation of ovum involves a complex procedure for the donor, as distinct from sperm donation, which does not involve invasive procedures or medication treatment.

The procedure of sperm donation also varies greatly from that of an ovum donation. Sperm donation is performed, as aforesaid, through a sperm bank, and the sperm units are stored in freezing for many years, such that the recipients of donations can select from the supply available to them the sperm that meets their needs and desires. The sperm bank serves as a mediator between the sperm donor and the recipient of the donation, and in addition to the service of storing the sperm under the required conditions it is further responsible for the obtainment of the sperm from the donor and the transfer thereof to the recipient of the donation. In a sperm donation, the donor who already delivered the sperm unit is not at all involved in the procedure, and the recipient of the donation may acquire sperm units, which the donor gave at a time which is of no relevance to her, and is no longer depending on cooperation on his part.

This is not the case with the procedure of ova donation, which requires cooperation between the donor and the recipient of the donation. This is a complex procedure, in the course of which the donor undergoes hormonal treatment over a period of several weeks, aimed to stimulate the ovaries. During that period of time, the donor is being monitored, including ultrasound checkups and blood tests, and she is obligated to avoid smoking, drinking alcohol and having unprotected sexual intercourse. Concurrently, the recipient of the donation also undergoes hormonal treatment, which is aimed to thicken the endometrium such that it can accept the implanted ova. All of the above is carried out while "synchronizing" the menstrual cycle of the donor and the recipient of the donation, such that the uterus of the recipient of the donation shall be ready to receive the ova soon after its extraction from the donor. Immediately upon the extraction of ova from the donor (within a time frame that does not exceed several hours), they are fertilized by sperm in various techniques which are not relevant to the issue at hand, and which are related, inter alia, to the quality of sperm. The fertilized ovum is incubated in the laboratory, and after several days (48 hours to five days) the conceived embryos – or perhaps the divided cells – are inserted into the recipient of the donation's uterus. In contrast to sperm donation, the donation procedure involves risks for the donor, and contrary to sperm donation, the possibility to freeze ova is limited, since the quality of an ovum decreases after freezing and defrosting. For this reason, as far as I know, there is currently no "ova bank" in Israel, in contrast to an "embryo bank" of fertilized ova.

I elaborated on the medical procedure not in order to enrich the reader's knowledge of the wonders of creation and of technology and medicine, but rather to indicate the material difference between sperm donation and ovum donation. The procedure of sperm donation is simple, does not require any medical procedure, and the main medical burden is carried by the recipient of the donation. On the other hand, the procedure of ovum donation requires lengthy cooperation between the anonymous donor, who carries the main burden, and recipient of the donation.

As aforesaid, a [ova] donor may not withdraw her consent from the moment of fertilization of the ova, which is performed, as a rule, immediately after the extraction. The donor may not withdraw her consent even if the ova have not yet been implanted in the recipient of the donation's uterus, and even if the sperm by which the ovum has been fertilized is from an unknown donor who is not the recipient of the donation's spouse, even though the recipient of the donation does not ostensibly have a "strong" reliance interest, since the ova were not yet implanted in her uterus, and therefore the avoidance of conception does not involve an invasive procedure on her body.

The explanatory notes to this section state as follows: (Governmental Bills 2007, 311):

"A woman's consent to donate ova from her body pursuant to the provisions of the proposed law entails significant outcomes – the birth of a child who is the biological child of that woman, while she waives any parenthood affinity toward him. Therefore, such donor should be allowed to withdraw her consent with respect to the procedures performed in the ova extracted from her body, at any time prior to the performance of the procedure to which she has agreed to designate such ova, and with respect to consent to designate ova for implantation – at any time prior to the fertilization of the ovum. The donor shall be under no civil or criminal liability due to her aforesaid withdrawal. A donor who so withdrew her consent, shall return the compensation given to her for the extraction of ova for implantation purposes or for her consent to allocate the excess ova extracted from her body for implantation".

The explanatory notes seem to be "unsynchronized" with the language of the Law, which sets the point of no return at the stage of fertilization. It is ostensibly reasonable that had the legislator wanted to allow a donor to withdraw her consent, in view of the significant outcome of the birth of a child and waiver of parentage affinity towards him, he would have also allowed the donor to withdraw her consent prior to the implantation of the ova in the recipient of the donation, and in case of an unsuccessful implantation, allow her to withdraw her consent prior to an additional implantation in the recipient of the donation (which in turn requires receipt of a renewed approval in order to examine if the conditions stipulated by law for the implantation – Section 19(c) of the Law – still exist).

The reason for the determination of the time of fertilization as the point of no return is based in the aforementioned stages of fertilization and implantation, which are separated by several days at the most. Considering the complex procedure that the donor undergoes, the legislator enables her to withdraw her consent at any time until her share is completed and the ovum is extracted from her body and fertilized immediately thereafter. The extraction of the ovum and the fertilization should be viewed as one stage, and considering the implantation being performed within no longer than several days, perhaps the three stages (ovum extraction-fertilization-implantation) should also be deemed as one. After the donor had completed her share, the power of decision is transferred to the recipient of the donation, who also began hormonal treatments, although less complex. For this reason, there is doubt if one can draw an analogy to the consent withdrawal right which is granted to the ovum donor – whose cooperation is required up until the extraction of ova and the fertilization which is performed immediately thereafter – to a sperm donor who has no part in the medical procedure entailed in the fertilization and whose cooperation is not at all required before the fertilization.

Moreover, it can be argued that an analogy to the Ova Donation Law is called for in the case at bar, however such analogy leads us to an entirely different conclusion. Hence, the donor may indeed withdraw her consent until the stage of fertilization, but in fact, considering that the extraction of ovum and the fertilization are performed "as one" (at most within several hours apart), it can be stated that the donor is prevented from withdrawal, the moment of extraction of the ovum from her body. Similarly, the sperm donor shall be prevented from withdrawal after the sperm leaves his body. In other words, since the point of no return is, de facto, not the fertilization but actually the extraction of ova, which are then immediately fertilized, the analogy to the case at bar is the moment of ejaculation and delivery of sperm.
In view of the aforesaid, there is doubt whether an analogy can be drawn from the Ova Donation Law to the case at bar, and in any case, the analogy to the Ova Donation Law does not lead us to an unequivocal answer to the issue at hand.
Interim summary: we resolved that in the settling of the competition between the Petitioner and the Donor from the perspective of civil law, the Petitioner ostensibly prevails; however, the choice whether to follow civil law depends on the principled question of how much we are willing to attribute to the uniqueness of sperm as an "asset". On the one hand, we can allegedly conclude, by way of syllogism, from the arrangement set forth in the Ova Donation Law, that in the case at bar as well, the point of no return is the stage of fertilization; however on the other hand, in view of the differences in the procedure entailed in ova donation, an analogy to that arrangement might lead to the outcome that the point of no return is the delivery of sperm, and, in the least, that there is no room for such syllogism.

Having failed to find an answer to the question before us, we must continue wandering the paths of law in search for a solution.

Analogy from a woman who does not need sperm donation

My colleagues indicated that a married woman or a woman who has a spouse and does not need a sperm donation also has no conferred right that all of her children be born from her spouse, and she is not "immune" from separation and divorce, or – god forbid – death of her partner. Thus they conclude that the rights of the Petitioner should not be secured to a greater extent than in the ordinary state of affairs.

However, the comparison to a woman who has a spouse is incomplete, not from the point of view of the recipient of the donation and not from that of the father. A recipient of donation such as the Petitioner has a possibility to secure in advance, at a high level of certainty – subject to medical and other constraints – that all of her children be born from the same genetic father, since to that end she paid and "secured" the donor's sperm units. On the other hand, an "ordinary" spouse may bear an economic price (child support and property division) and an emotional-mental-social price involved in the process of divorce and separation, whereas the sperm donor pays no price for his withdrawal of consent (other than, perhaps, an obligation to return the amount received at the time for the sperm donation). Hence, the concern pertaining to negative lateral effects in issuing a "carte blanche" to all donors to withdraw their donation, as elaborated by my colleague in Sections 68-70 of his ruling.

Analogy to and distinction from the Nachmani case

My colleagues indicate several distinctions between the case at bar and the Nachmani case which indicate that the level of expectations and reliance of the Petitioner in this case, is far lower than that of the female spouse in re Nachmani. According to this method, the necessary outcome is that the Petitioner be denied.

However, this is not the case from the perspective of the donor in the case at bar, whose injury is far lower than that of the male spouse in re Nachmani. A involuntary father, who knows the identity of the mother and the child born to him against his wishes, and might also come across him in everyday life, as in re Nachmani, cannot be compared to the anonymous donor in the case at bar. In the ordinary state of affairs, the donor is not even supposed to know whether use has been made of his sperm for fertilization, how many times it has been used, if the use of his sperm was successful, whether his sperm was used for the fertilization of a married woman or a single one and the identity of the happy mother. In this aspect, the emotional injury to the donor in the case at bar is much smaller than that of the male spouse in re Nachmani. According to this method, the reduced magnitude of the injury to the Donor, tips the scales in the direction of the Petitioner.

Hence, also the comparison to re Nachmani may yield different outcomes. The injury to the Petitioner is smaller than that of the female spouse in re Nachmani, but so is the injury to the Donor smaller than that of the male spouse in re Nachmani.

Analogy from the laws of rescission of contract and administrative promise

My colleague proposed, inter alia, to apply to the hospital the principles of public law and the rule of rescission of contract. I shall add to the aforesaid an analogy to the law of administrative promise, which allows an authority to withdraw its promise upon the existence of legal justification.

Indeed in the case at bar we are concerned with a governmental hospital, but according to the Sperm Bank Regulations pertaining to sperm donation, a hospital is not necessarily a governmental hospital, and the implementation of the principles of public law shall not always be applicable. Essentially, the rule of rescission is contingent on public interest (essential public needs), and an administrative promise withdrawal is contingent on legal justification. This does not promote the issue at hand, since the question whether there is a justification or public interest to allow the Donor to withdraw his consent, is the very core of the dispute before us.

Between autonomy and parenthood, and between a right and an interest

My colleague, Justice Rubinstein, based his opinion on a principled preference of the Donor's right to autonomy, over the Petitioner's interest to conceive specifically by his sperm.

The case law and legal literature provides us with the distinction between protection or injury of a right, and protection or injury of an interest (see, for example: Oren Gazelle Ayal and Amnon Reichman "Public Interests as Human Rights?" 41 Mishpatim 97 (2011); Zamir Ben Bashat, Erez Nachum & Amir Colton "The Public's Right to Know: Reflections following APA 398/07 The Movement for Freedom of Information v. the Tax Authority" 5 He'aarat Din 106 (2009) and the references there). Between rights it is common to make a horizontal-internal balance, whereas the balance between a right and an interest is vertical-external (Gideon Sapir "Old versus New – on Vertical Balancing and Proportionality" 22 Mechkarei Mishpat 471 (2006)).

The mere distinction between a right and an interest sometimes serves to determine a different level of legal protection, in the words of my colleague: "the classification of the considerations at stake as rights or as interests defines the formula of the balance between them, and the normative superiority of one value over the other or their equal value". Alas, sometimes it is unclear whether the outcome preceded the classification or vice versa (Michael Dan Birnhack "Constitutional Geometry: The Methodology of the Supreme Court in Value-based Decisions" 19 Mechkarei Mishpat 591 (2003)). In my opinion, the injury to the Petitioner should not be classified as an injury to an interest, but rather as an injury to the positive right to be a parent, against which stands the injury to the Donor's negative right to autonomy, as per Section 6 of the ruling of my colleague, Justice Barak-Erez (on the right to be a parent in the context of fertilization, see: Vardit Ravitsky "The Right to be a Parent in the Era of Technological Fertilization" Moral Dilemmas in Medicine 137, 141 (Rafael Cohen-Almagor, Editor, 2002)). Therefore, a horizontal balance is called for between the two conflicting rights, and the distance from the core of the right shall be expressed in the outcome of the balance and not in the mere classification as interest against right.

The outcome of the balance depends on the distance of the right from the core of the right, and this may provide an answer to the issue before us. The farther the right is from its core, the lesser its force and vice versa, the weaker the force of the right is, it shall be positioned further away from the core of the right. Clearly this is not a scientific-physical measurement of the distance of the right from the "magnetic pole" wherein it stands, and the force of the right also derives from the motives at its basis. To demonstrate:

Would we recognize the Petitioner's (sic) right to withdraw his consent had he declared that he objects the use of his sperm for the fertilization of a single woman, but is consenting with regards to the fertilizing of a married woman?

And had the Donor casted a "veto" on the use of his sperm for the fertilization of a woman from a certain ethnic group, as distinguished from another ethnic group?

[Parenthetically – Section 13(e)(4) of the Ova Donation Law requires informing the recipient of donation if the donor is married or of a religion different than hers].

And had the Donor's withdrawal of consent been totally arbitrary, with no reasoning and no explanation? And had it been based in greed, attempting to get the Petitioner to pay him additional amounts?

I believe that in the aforesaid cases we would say that the Donor's right is weakened, and removed further from the core of the right, since the motivations on which it is founded are not "solid", and as such, we shall not be willing to view as justifications for the withdrawal of consent. Therefore, I believe that the Donor's "change of heart" with respect to this willingness to donate sperm is not enough, and we should further examine the reasons and motivations which lead him to withdraw his consent, and accordingly determine the degree of the right, and consequently – its distance from the core of the right.

The difficulty multiplies in view of issues that are not limited to the balance between the Donor and the Petitioner. For example, would the outcome change had it transpired that the daughter conceived by the recipient of the donation from the Donor's sperm has an interest of her own in the birth of the "potential sibling", such as her need of bone marrow donation? (And I am not referring to the legal-ethical questions that such a situation of "my sister's keeper" might raise).
The task of concluding is not ours, and we shall leave, questions and challenges to be resolved when they occur.

In the case at bar, it seems that the (positive) right of the Petitioner to conceive from the same genetic father is distant from the core of the right to be a parent, whereas the (negative) right of the Donor not to be an involuntary father is at the core of the right to autonomy, and I see no relevance, in this respect, to the fact that the Donor already has an offspring from his sperm. To the Donor, the question is "to be or not to be" – whether to at all be a father to another offspring carrying his genetic constitution or not, whereas for the Petitioner the question is not whether to be a mother but rather who shall be the father. Indeed, it cannot be denied that the Petitioner's wishes that all of her children shall carry the same genetic constitution are of considerable force. In the case at bar, the ovum is of the Petitioner's and even if her petition is denied her children will still carry her genetic constitution, and shall be half-siblings. This is different from a theoretical case in which also the ovum is not from the recipient of the donation, and the use of the sperm of a different donor for each fertilization shall mean that the children are not even genetically half-siblings, which would have increased the force of the recipient of the donation's right.

The bottom line in the case at bar is that in the competition between the Donor's core-negative right (the right to autonomy) and a right which is not the core of the positive right (the right to be a parent), the Donor prevails. I shall end with a short quotation from the letter sent by the Donor to the Court, speaking for itself: "I am not interested in having a child without being able to provide love to him, and without me loving his mother".

To conclude, I concur, although with a heavy heart, with the outcome reached by my colleagues.

Justice

Decided as per the ruling of Justice E. Rubinstein.

Issued today, 25 Shvat 5773 (February 5, 2013).

Justice

Full opinion:

Link to original Hebrew text of decision on official ISC website:

http://elyon1.court.gov.il/files/12/770/040/t06/12040770.t06.pdf

Alumni Association of the Arab Orthodox School in Haifa v. Minister of Finance

Case/docket number:

HCJ 3429/11

Date Decided:

Sunday, January 15, 2012

Decision Type:

Original

Topics:

Basic Law: Freedom of Occupation

Equality Before the Law

Freedom of Expression

Alumni Association of the Arab Orthodox School in Haifa v Minister of Finance.pdf

Education

Right to Education

Abstract:

Facts: The Budget Elements Law was amended in 2011 to include a new section 3b, which provided that if an entity that receives support or budgeting from the government incurs an expense that falls within any of several listed categories, the Minister of Finance can reduce the entity’s budget or support by an amount no greater than three times the size of the said expense. Of the categories listed, the petitioners focused their challenge on two of them: the first, sub-section 3b(b)(1), referring to an expense which was “in essence” a negation of the values of the State of Israel as a Jewish and democratic state; and the second, sub-section 3b(b)(4), referring to an expense which was “in essence” a marking of the day of Israel’s establishment as a day of mourning. A decision to reduce the budget in accordance with this section requires that the Minister of Finance first receive an opinion from a professional team composed of representatives from various ministries, the approval of the minister in charge of the budget item through which the entity received funding, and an opinion from the legal adviser to the Ministry of Finance. In addition, he must also grant the relevant entity a hearing on the matter.

The petitioners are the alumni association of an Arab school in Haifa, which runs various activities that are held at the school, dealing with issues of Arab and Israeli identity; several parents of students in a bilingual Arab-Jewish school, whose goals include education about respect for other cultures and in which activities are held that commemorate both Israeli Independence Day and Nakba events; and an academic who is the proponent of a model/theory that describes Israel as an ethnocracy, rather than as a democracy. All the petitioners argued that they could be harmed by the exercise of the Budget Elements Law’s provisions; the statutory provisions were also challenged on the ground that they effectively constituted a violation of the right to education, collective identity and freedom of expression and of occupation.

Held: Justice Naor held that the petition should be denied on the basis of the ripeness doctrine and because of the availability of an alternative proceeding and remedy. Because the statutory provisions had not actually been implemented against any of the petitioners or any other parties at all, and because there was therefore no way of knowing how the law would be implemented, if at all, against the petitioners, the Court could not reach an informed decision regarding the constitutionality of the manner and scope of its hypothetical application. The uncertainty (and consequently, the absence of sufficient ripeness) was heightened by the fact that the law itself prescribed an extensive process of supervision and review before any decision to reduce funding could be implemented. Justice Naor also found that the petition to the High Court of Justice could be denied because of the availability of an alternative proceeding and remedy; once the Law had been implemented, a petition challenging a reduction in funding could be brought in the Administrative Matters Court. An indirect attack on the constitutionality of the Law would also be permissible in that context. President Beinisch and Vice President Rivlin concurred, with President Beinisch adding that there was no need to decide the matter of the availability of an alternative proceeding and remedy.

Voting Justices:

Naor, Miriam

Primary Author

majority opinion

Beinisch, Dorit

Author

concurrence

Rivlin, Eliezer

Author

concurrence

Full text of the opinion:

HCJ 3429/11

Petitioners 1. Alumni Association of the Arab Orthodox School in Haifa

2. Radwan Badarneh

3. Ayman Miari

4. Hazar Hijazi

5. Ron Shapira

6. Arik Kirshenbaum

7. Professor Oren Yiftachel

8. Adalah – Legal Center for Arab Minority Rights in Israel

9. The Association for Civil Rights in Israel

Respondents 1. Minister of Finance

2. Knesset

The Supreme Court sitting as the High Court of Justice

[5 October 2011]

Before President D. Beinisch, Vice President E. Rivlin, Justice M. Naor

Petitions for an order nisi and for an interim order.

Facts: The Budget Elements Law was amended in 2011 to include a new section 3b, which provided that if an entity that receives support or budgeting from the government incurs an expense that falls within any of several listed categories, the Minister of Finance can reduce the entity’s budget or support by an amount no greater than three times the size of the said expense. Of the categories listed, the petitioners focused their challenge on two of them: the first, sub-section 3b(b)(1), referring to an expense which was “in essence” a negation of the values of the State of Israel as a Jewish and democratic state; and the second, sub-section 3b(b)(4), referring to an expense which was “in essence” a marking of the day of Israel’s establishment as a day of mourning. A decision to reduce the budget in accordance with this section requires that the Minister of Finance first receive an opinion from a professional team composed of representatives from various ministries, the approval of the minister in charge of the budget item through which the entity received funding, and an opinion from the legal adviser to the Ministry of Finance. In addition, he must also grant the relevant entity a hearing on the matter.

Held: Justice Naor held that the petition should be denied on the basis of the ripeness doctrine and because of the availability of an alternative proceeding and remedy. Because the statutory provisions had not actually been implemented against any of the petitioners or any other parties at all, and because there was therefore no way of knowing how the law would be implemented, if at all, against the petitioners, the Court could not reach an informed decision regarding the constitutionality of the manner and scope of its hypothetical application. The uncertainty (and consequently, the absence of sufficient ripeness) was heightened by the fact that the law itself prescribed an extensive process of supervision and review before any decision to reduce funding could be implemented. Justice Naor also found that the petition to the High Court of Justice could be denied because of the availability of an alternative proceeding and remedy; once the Law had been implemented, a petition challenging a reduction in funding could be brought in the Administrative Matters Court. An indirect attack on the constitutionality of the Law would also be permissible in that context. President Beinisch and Vice President Rivlin concurred, with President Beinisch adding that there was no need to decide the matter of the availability of an alternative proceeding and remedy.

Petition denied.

Legislation cited:

Budget Foundations Law (Amendment No. 40) 5771 -2011

Administrative Courts Law, 5760-2000

Disengagement Plan Implementation Law, 5765-2005

Civil Wrongs (State Liability) Ordinance (Amendment No. 7), 5765-2005

Public Education Law, 5713-1953

Israeli Supreme Court cases cited:

HCJ 7190/05 Lobel v. Government of Israel (unreported, 2006) [1]........................... 10

HCJ 731/86 Micro Daf v. Israel Electric Corp. [1987] IsrSC 41(2) 449 [2].............. 13

HCJ 6163/92 Eisenberg v. Minister of Construction & Housing, [1993] IsrSC 47(2) 229 [3] 13

HCJ 991/91 David Pasternak Ltd. v. Minister of Construction & Housing, [1991] IsrSC 45(25) 50 [4] 13

HCJ 2009/07 Klein v. American Friends of Israel Scouts (unreported, 2007) [5].... 13

HCJ 453/84 Iturit Communications Services Ltd. v. Minister of Communications [1985] IsrSC 38(4) 617 [6] 13

HCJ 217/80 Segal v. Minister of Finance [1980] IsrSC 34(4) 429 [7]....................... 13

HCJ 1842/04 Michai v. Ministry (unreported, 2003) [8]............................................... 14

HCJ 1431/05 Orian v. Minister of Transportation (unreported, 2005) [9]................ 14

HCJ 128/09 Basiso v. Minister of Defense (unreported, 2009) [10]............................ 15

HCJ 6556/11 Glickman v. Major-General Sami Turjeman, Commander of the IDF Land Forces (2011) (unreported) [11] 15

HCJ 8276/05 Adalah – the Legal Center for the Rights of the Arab Minority in Israel v. Minister of Defense (2006) (unreported) [12] 15

HCJ 7052/03 Adalah – the Legal Center for the Rights of the Arab Minority in Israel v. Minister of the Interior (2006) (unreported) [13].................................................................................................................................................. 16

HCJ 3248/09 Sari v. Minister of Justice, (2009) (unreported) [14]............................. 17

HCJ 6972/07 Lakser v. Minister of Finance (2009) (unreported) [15]....................... 17

HCJ 1468/11 Ben Sa’don v. Minister of Religious Affairs (2011) (unreported) [16] 20

HCJ 2208/02 Salameh v. Minister of the Interior, [2002] IsrSC 56(5) 950 [17]....... 21

HCJ 212/03 Herut National Movement v. Chairman of the Central Committee for the Election of the 16^th Knesset [2003] IsrSC 57(1) 750 [18]........................................................................................................................................... 21

HCJ 2426/08 Ben Atar v. State of Israel – Ministry of Transportation (2008) (unreported) [19] 21

HCJ 6715/10 Hina v. State of Israel, Ministry of Defense, Department of Rehabilitation (2010) (unreported) [20] 21

HCJ 2055/02 Sheikh Abed Al Karim Abayet v. Minister of Defense (2002) (unreported) [21] 21

HCJ 1076/07 Maman Eilat Group Ltd. v. Minister of Finance (2009) (unreported) [22] 21

HCJ 6090/08 Berger v. Minister of Justice (2008) (unreported) [23]......................... 21

US Supreme Court cases cited

Abbot Labs et. al. v. Gardner, 387 U.S 136 (1967) [24]................................................. 15

United Public Workers of America (C.I.O.) et. al. v. Mitchell et. al., 330 U.S. 75 (1947) [25] 18

For the petitioners — H. Jabarin, S. Zahar, D. Yakir

For respondent 1 — S. Rotsenker

For respondent 2 — Dr. G. Blay, E. Yanun

JUDGMENT

Justice M. Naor

The Budget Foundations Law (Amendment No. 40), 5771 - 2011 authorizes the Minister of Finance to reduce the budget of a supported or financed entity under certain circumstances and after a specific procedure; the reduction may be ordered when it is found that the entity has incurred an expense which is, in its essence: a rejection of the existence of the State of Israel as a Jewish and democratic State, or the marking of Independence Day or the date on which the State of Israel was established as a day of mourning. The procedure to be followed before the reduction can be ordered is that the Minister of Finance must first receive an opinion from specified parties, grant a hearing to the entity and obtain the consent of the minister in charge of the matter. The petition before us is directed against the constitutionality of the provisions of this law.

Background

On 4 January 2009, the Draft Independence Day Law (Amendment – Prohibition of the Marking of Independence Day or the Date of Israel’s Establishment as a Day of Mourning) – 5769-2009 (hereinafter: “the Draft Independence Day Law”) was placed before the Knesset. The amendment sought to anchor the prohibition of any activity or event that refers to Israeli Independence Day as a day of mourning or a day of sorrow. This proposed law was abandoned (passively) and on 6 July 2009 its backers placed before the Knesset the Draft Budget Foundations Law (Amendment – Prohibited Expense) 5769-2009 (hereinafter: “the Draft Budget Foundations Law” or “the Draft Law”). This Draft Law was supported by the Ministers Committee on Legislation, subject to coordination of the legislative processes with the Minister of Justice and the Minister of Finance. Coordination between the various parties led to changes being made in the text of the original Draft Law, after which it passed a first reading in the Knesset. After more changes were introduced in the text in anticipation of the second and third readings, the Knesset, on 23 March 2011, passed the Budget Foundations Law (Amendment No. 40), 5771-2011 (hereinafter: “the Law”). The key issue raised in the petition before us is the constitutionality of the provisions of sections 3b(b)(1) and (4) of the Law. The relevant sections provide as follows, with an emphasis added to those parts whose constitutionality is being challenged:

‘1. The following will be inserted after s.3a of the Budget Foundations Law, 5745 -1985:

3b. (a) In this section –

“Entity” – a financed or supported entity, as these are defined in s. 21, and a supported public entity pursuant to s. 3a:

“Expense” – includes a waiver of income.

(b) If the Minister of Finance finds that an entity has incurred an expense which is in its essence one of the items listed below (in this section – “an unsupported expense”), he may, with the consent of the minister in charge of the budget item pursuant to which the entity is financed or supported, and after affording the entity a hearing, reduce the amounts that are to be transferred from the State budget to that entity pursuant to any law:

(1) Rejection of the existence of the State of Israel as a Jewish and democratic state;

(2) Incitement to racism, violence or terror;

(3) Support for an armed struggle or terrorist act, of an enemy state or of a terrorist organization, against the State of Israel;

(4) Marking of Independence Day or the date of the establishment of the State of Israel as a day of mourning;

(5) An act of destruction or physical contempt which defiles the State flag or the State symbol;

(c) No reduction pursuant to sub-section (b) may exceed an amount which is three times the size of the unsupported expense.

(d) (1) The Minister of Finance may make a decision pursuant to sub-section (b) after obtaining an opinion from the legal adviser to the Ministry of Finance regarding the fulfillment of the provisions of that sub-section, and after he has received the recommendation of a professional team regarding the scope of the unsupported expense; the consequences of the reduction for the entity or for other parties related to it; and the proper amount of the reduction, given all the circumstances of the matter.

(2) In this sub-section, the term “professional team” shall mean a team appointed by the Minister of Finance whose members include an employee of the Ministry of Justice, at the recommendation of the Minister of Justice; an employee of the Ministry of Finance; and an employee of the ministry whose minister is in charge of the budget item pursuant to which the entity is financed or supported, at the recommendation of that Minister.

Arguments raised in the petition

2. Before responding to the petitioners’ arguments, I wish to briefly present the seven petitioners in this case. Petitioner 1 is a non-profit organization which includes approximately 90 alumni of the Arab Orthodox High School in Haifa (hereinafter: “the School”). Petitioner 1 was incorporated for the purpose of supporting the School and increasing cooperation among its alumni. Each year, Petitioner 1 organizes several activities in various areas, which include discussions of the State’s identity, the status of its Arab citizens and the “Future Vision of the Arabs in Israel” documents. In addition, Petitioner 1 conducts educational activities dealing with Palestinian history and its activities are carried out in the School. Petitioner 1 believes that some of its activities are likely to fall within the framework of those items that constitute grounds for reduction of its budget pursuant to the Law, and that the size of the School’s budget’s will consequently be at risk.

3. Petitioners 2-6 are parents of students who study in the “Galil” school in the town of Misgav, which is a bi-lingual and bi-national school (hereinafter: “the Bilingual School”) and a formal educational institution that is recognized by the Ministry of Education. It seeks to promote a shared lifestyle as well as education about equality and respect for the cultures of other groups within the society in which the students live. In order to achieve its objectives, the Bilingual School conducts various activities in anticipation of Memorial Day and Independence Day, the purpose of which is to mark both Independence Day and the Nakba events. Petitioners 2-6 fear that the Bilingual School will be forced to restrict its activities and that its abilities to achieve its goals will thus be impaired.

4. Petitioner 7 is an academic who developed a model according to which he argues that the Israeli regime is a type of “ethnocracy”. As this model indicates, Petitioner 7 believes that the State of Israel cannot be defined as Jewish and democratic. Petitioner 7 is concerned that the Law will impair the possibility of conducting an academic and public discussion of the model that he has developed, since such a discussion is likely to refer to the negation of the existence of the State of Israel as a Jewish and democratic state. Petitioner 7 is also concerned that the Law will have serious consequences for his writings and publications.

5. We now move on to the petitioners’ claims. The petitioners have, as stated, attacked two of the grounds listed in subsection 3b(b). The petitioners argue that the other three grounds set out in the Law for reduction of budgetary support will also create substantial constitutional difficulties in that they restrict freedom of speech. They also see a constitutional difficulty arising from the fact that these sections empower the Minister of Finance to impose measures that are in essence punitive sanctions with respect to actions that are defined as offenses – but without stipulating that a due process proceeding be held in a court to determine that a criminal offense has been committed. Nevertheless, the petitioners have focused their petition and their constitutional challenge only on the two grounds listed in sections 3b(b)(1) and 3b(b)4. According to the petitioners, the damage done by these sections is “the most harmful”.

6. According to the petitioners, the Law harms the historic memory of the Arab minority by allowing the majority to use its power to repress the narrative of the Arab minority with respect to events, facts, feelings and ideologies. According to their argument, there is no difference between the marking of the Nakba, on the one hand, and the non-recognition of the State of Israel or the non-recognition of the self-determination of the Israeli Jews, on the other hand, since the use of the term “Al-Nakba” – which means “the tragedy of all tragedies” – is intended to stress the historic aspect of the tragedy. They argue that the Law seeks to indirectly deter the occurrence and development of a cultural discussion regarding the concept of “Al-Nakba” and the constitutional definition of the State. According to the petitioners, the scope of the damage is very serious, and the Law “uses vague and unclear terms, which creates considerable uncertainty as to how the Minister of Finance and the courts will interpret its provisions.”

7. The Petitioners then point to a list of rights that they argue are violated by the Law’s provisions. I will discuss their arguments only briefly, because I see no need to discuss the details more extensively, given my ultimate conclusion regarding the issue raised in the petition. The argument made is that the Law violates the freedom of political, artistic and academic expression. It is argued that the prohibition of political expressions on the basis of their content alone is inconsistent with the “near certainty test” for permitted prohibitions of expression, as established in the case law. They argue further that the Law is likely to violate freedom of artistic expression, which has also been given special broad protection even when real offense is given to the sensitivities of a part of the public, and even when such freedom clashes with official political positions. It is also argued that the violation of freedom of expression is especially sweeping in that a single act which falls within the scope of either of the two challenged grounds for budget reduction, even if only marginal, will be sufficient to justify the imposition of a financial sanction.

8. In addition, the petitioners argue that the Law violates their right to equal treatment because it discriminates on the basis of nationality and on the basis of social or political ideology. According to this argument, there is a serious concern that the Law will prevent Petitioner 1 from carrying out those of its communal and cultural activities that have a cultural-political character – activities that are directed at developing a discussion of the status of Arab citizens and of the historic wrong that has been done to them. In contrast, the Law will have no impact on the alumni organizations of Israeli schools which conduct various activities relating to the identity and Jewish character of the State. The Law will not affect activities directed at commemoration of the Jewish-Zionist narrative, either. It is also argued that the violation of the right of Petitioners 2-6 to equal treatment is reflected in the fact that the bilingual schools such as the school in which these petitioners’ children study will not be able to realize their central and essential objectives – objectives that include the exposure of Jewish and Arab students to the nationalist narratives of groups other than their own. In contrast to this, other special schools will be able to continue their activities that are directed at the achievement of their educational objectives. In addition, it is argued that Petitioner 7 will suffer from discrimination based on his scientific and academic research, and that his position within the academic world is likely to be substantially impaired. In contrast, it is argued, academics who promote undemocratic positions that refer to Israeli Arabs as constituting a demographic threat will continue to maintain their academic status, without any infringement of their work.

9. The petitioners argue that a budgetary statute that discriminates on the basis of nationality or political ideology through the adoption of a nationalist-ethnic ideology is an unconstitutional discriminatory statute. It is further argued that although the Law is worded in a neutral manner and applies equally to the activities of both Arabs and Jews and to both Arab and Jewish institutions that receive state financing or support, it is clear that the intention is to impact primarily on Arab citizens.

10. Another argument made is that the Law violates the right to education. The Law will prevent the children of Petitioners 2-6 and others from receiving an education based on the Palestinian nationalist narrative, and is thus in violation of the objective of public education, as such is defined in s. 2(11) of the Public Education Law, 5713-1953. It is also argued that the violation will maintain and even increase the suppression that has developed because of the Ministry of Education’s strict monitoring of the education provided in Arab schools. An additional claim made is that the Law violates the right of the students’ parents to freely choose an educational institution for their children in accordance with their own educational ideology and philosophy.

11. The petitioners also argue that the Law’s provisions lead to a violation of the right to freedom of occupation for all those who in the framework of their work are involved in a critical examination of the nature of the state as a Jewish state (such as Petitioner 7 and the teachers in the Bilingual School). It is also claimed in this context that Petitioner 7’s right to equal treatment in exercising his freedom of occupation is restricted, as opposed to other academics with political perspectives that conform to the views of the majority.

12. Finally, the petitioners claim that the Law violates the right of Arab citizens to collective dignity. It is argued that the Palestinian narrative is an integral part of the identity of most Israeli Arabs, and that the attempt embodied in the Law’s provisions to restrict the discussion of this narrative violates a constitutive element of the identity of these Arab citizens. It is also argued that the attempt to prevent opposition and legitimate protest against the values of the state as a Jewish and democratic state violates the collective dignity of the Arab citizens because it prevents them from objecting to the fact of the discrimination to which they are exposed. It is argued that the Law seeks to shape and outline the values and perspectives of the Arab minority, as well as its behavior, by using a tool that is tied to the state budget.

13. The Petitioners argue that the Law does not comply with the provisions of the limitations clause of the Basic Law: Human Dignity and Liberty. The Law gives the representative of the executive branch broad discretion, in that its provisions do not provide clear criteria that indicate when a budget reduction will be allowed; the Law’s sections are broad, vague, ambiguous and general. It is argued that these statutory provisions do not comply with the tests for primary legislation arrangements as established in this Court’s case law, and that the violation of constitutional rights therefore contravenes the provisions of the Basic Law: Human Dignity and Liberty, which require that any violation either be anchored in a statute or permitted pursuant to a statute. It is also argued that the violation of these constitutional rights does not have an appropriate objective, in that the violation is caused in an arbitrary fashion, it involves political considerations and it penalizes the petitioners in particular and the Arab population in general. It is also argued that the Law has no proper objective because it violates the public interest – an interest which specifically requires protection of the principle of cultural pluralism, freedom of expression, equality, freedom of occupation and dignity. It is further argued that the Law lacks a proper objective because it violates democratic values and indirectly allows the imposition of collective punishment, since the entire group of those benefitting from a particular service may be harmed because of a single act, or because of the act of a single individual. According to the petitioners, in light of the fact that the Law is not a statute as defined in the Basic Law, and because it lacks an appropriate purpose, there is no need to examine the matter of whether it is proportionate, since the Law’s purpose is the starting point for the three-part test for proportionality.

14. Finally, it is argued that the Law has a “chilling effect” and deters certain activities, because of a concern that such activities will be covered by the Law’s provisions, and will thus lead to the imposition of budgetary sanctions.

The position taken by Respondent 1

15. Respondent 1 argues that the petition challenges the constitutionality of a law before the manner of its implementation and application has been examined by the authorized parties; Respondent 1 argues further that the petition is based on various extreme scenarios that the petitioners presented, even though the likelihood of their occurrence is completely unknown and it is also unknown whether the Law will in fact apply to them. Respondent 1 therefore argues that it is too early to reach a decision regarding this petition, because as of the current time, the Minister of Finance has not yet been asked to implement the Law in any concrete situation and no interpretative content has yet taken form with respect to his authority pursuant to the Law; and that this petition is thus overly generalized and theoretical. Respondent 1 emphasizes that pursuant to the provisions of the Law, a professional team must be established in order to exercise the granted authority, and the Minister of Finance must receive an opinion from the legal adviser to his Ministry and hold a hearing for the entity regarding which he is considering exercising his authority. In addition, the Law requires that the Minister of Finance obtain the approval of an additional minister (other than himself) – the minister who is in charge of the relevant budgetary item. Regarding this issue, Respondent 1 cites the position that I took in HCJ 7190/05 Lobel v. Government of Israel [1], in which I chose to make use of the “ripeness” doctrine that has been applied in the past in the field of constitutional law. According to this doctrine, a court may refrain from deciding an abstract dispute if there is no clear and complete factual background that has been presented to the court with respect to the issue facing the court.

16. Respondent 1 offered an additional threshold argument, relating to the legal forum in which the petition should have been brought. The argument is that even if a concrete decision to reduce a budget had been reached pursuant to the Law, the proper forum for the deliberation of the issues raised regarding such a decision would be the Administrative Matters Court, as provided in Item 40 of the First Schedule to the Administrative Courts Law, 5760-2000 (hereinafter: “the Administrative Courts Law”). Respondent 1 argues that this Court cannot take the place of the entity that is authorized pursuant to that law, and issue a forward-looking legal opinion with regard to the manner in which the authority granted in the Law should be exercised.

17. The argument is also made that the Law, on its face, does not apply to the petitioners, as they do not fall within the Law’s definitions of a “financed entity” or a “supported entity”.

18. In light of the conclusion I have reached, I see no need to respond at length to Respondent 1’s substantive arguments. I will note briefly that Respondent 1 believes that this Court’s intervention would not be justified, as the Law passes the test set out in the limitations clause for a statute’s constitutionality. Respondent 1’s argument is that the Law fits into Israel’s framework of statutes that sustain its existence as a Jewish and democratic state, while preserving the state’s right to protect its basic principles. Respondent 1 also argues that the state has the prerogative to direct the allocation of its budget and not to finance activities the purpose of which is to undermine the basis for its existence. The core principles on which the state is based are a legitimate consideration in terms of the distribution of budgets, and the state may choose not to finance activities that are not consistent with these core principles. In addition, it is argued that the Law establishes a mechanism of restraint, balance and supervision through which decisions about budget reductions are reached. The intention is not to have the Law apply to marginal or minimal activity, but instead only to those activities which in their essence negate the character and existence of the state, including its character as a Jewish and democratic state.

19. Regarding the petitioners’ claim that there has been a violation of various basic rights, Respondent 1 argues that the Law does not violate freedom of expression. Respondent 1 argues that the supported or budgeted entity retains the right to choose whether or not to carry out those activities that conflict with the grounds for budget reduction that are stipulated in the Law, but the Law allows the Minister of Finance to decide – when dealing with a supported or budgeted entity that engages in such activity – that the state will not finance the entity’s activity that falls within the categories listed in the Law. For this reason, it is also argued that there is no violation of a right to collective dignity. In addition, the Minister of Finance argues that even if there is a violation of freedom of expression, that violation nevertheless complies with the terms of the limitations clause of the Basic Law: Human Dignity and Liberty. Regarding the petitioners’ argument that the Law violates the principle of equality, Respondent 1 argues that the Law applies to any supported or financed entity whose activities are covered by one of the grounds enumerated in the Law. Respondent 1 notes that a claim that the Law may be abused, in that it might be enforced in an arbitrary fashion, is only a theoretical claim. Respondent 1 argues that the claim regarding a violation of the right to education should also be rejected. It is argued in this context that, inter alia, the state may and is entitled to promote those goals that it wishes to emphasize and to budget resources for the purpose of achieving those objectives. In the instant case, the relevant objectives are the goals of public education and the principles underlying the Declaration of Independence. In response to the claim concerning a violation of freedom of occupation, Respondent 1 argues that this is again a remote and theoretical concern – one that is not based on the facts. Respondent 1 argues, at length, that even if there has been a violation of a constitutional right, it is a violation which is permitted pursuant to the conditions set out in the limitations clause.

Response of Respondent 2

20. Respondent 2 describes at length the reasons that justify a denial of the petition. Some of its claims are similar to those of Respondent 1, and there is therefore no need to repeat them, as they have already been noted above in the discussion of Respondent 1’s claims.

21. Regarding the right to equality, Respondent 2 argues that this case involves a budget reduction for certain entities, pursuant to the Law, which is carried out on the basis of the relationship between the activities of such entities and the basic principles of the state, and without any connection to the national identities represented by those entities. Respondent 2 also notes that there are Jews who wish to deny the Jewish character of the state, such as Petitioner 7. Respondent 2 argues that the Petitioners’ claim is far-reaching and suggests that any time that the state wishes to promote Zionist or Jewish values, even without discriminating directly against individuals on the basis of their nationalities, it will be seen as discriminating against members of the Arab nationality. Respondent 2 argues further that the state of Israel recognizes its Jewish and Zionist values alongside its democratic values and its constitutional framework. Thus, the granting of a particular position to these values within the framework of the state’s laws is presumptively not an unlawful discriminatory act.

22. Next, Respondent 2 argues that even if the right to education (a right that the petitioners claim is also being violated) is recognized as a constitutional right, this Court has held in the past that the State may determine different levels of financing for educational institutions in accordance with their compliance with the core studies program established by the Ministry of Education; this Court has held that such a determination is neither discriminatory nor a violation of the right to equal education. Accordingly, Respondent 2 argues that even though the petitioners are free to promote a curriculum which is based on the Palestinian national narrative, the State is not required to finance that curriculum.

23. With respect to the claim that there has been a violation of the freedom of employment, Respondent 2 argues that this right is a protective right which is intended to ensure for each individual an area in which he can support himself without interference from others. It is therefore argued that the Law does not violate the right to freedom of employment, as it does not prohibit the employment of teachers or lecturers who wish to promote values that deny the Jewish and democratic nature of the State, and who mark Independence Day as a day of mourning. The Law also does not prevent any individual from teaching content that falls within the definition of such activity. The Law only provides that the State will not participate in the financing of such activities.

Discussion and determination

24. My position is that at this stage, the petition should be denied without any decision being made regarding the constitutional questions presented to us, and I will suggest to my colleagues that we so hold. I do not deny that the petition before us raises important and fundamental questions and issues. Despite the importance and complexity of these issues, this is not the time to respond to their substance. I will explain myself as follows:

25. As is known, the power granted to the High Court of Justice pursuant to s. 15(c) and (d) of the Basic Law: The Judiciary is a power that the Court may or may not exercise, in accordance with its own discretion (see: HCJ 731/86 Micro Daf v. Israel Electric Corp. [2], at p. 456; HCJ 6163/92 Eisenberg v. Minister of Construction & Housing, [3], at p. 243; HCJ 991/91 David Pasternak Ltd. v. Minister of Construction & Housing [4], at pp. 58-59; and HCJ 2009/07 Klein v. American Friends of Israel Scouts [5], at para. 11). Over the years, rules have been developed regarding the circumstances in which this discretion may be exercised in the form of the rejection of a petition. These rules do not constitute a numerus clausus, and they can be changed and given new content as needed at a specific time and location (see: HCJ 453/84 Iturit Communications Services Ltd. v. Minister of Communications [6], at p. 620). The rules allow for the rejection of a petition under, inter alia, the following circumstances: when alternative relief is available, when there has been a previous petition or when there may be a theoretical later petition regarding the same matter, when there has been delay or an absence of clean hands on the part of the petitioner, when a petition is overly general, or when the route for legal proceedings has not been fully exhausted, etc. This is not, as stated, a numerus clausus. Justice A. Barak referred to these rules, which qualify as “judicial creations”, in his remarks in HCJ 217/80 Segal v. Minister of Finance [7], at p. 440, in which he noted that they are intended to regulate the pace at which appeals are addressed to the Court.

26. As noted, the above-mentioned list of grounds for rejecting a petition is not a numerus clausus. In Lobel, the petitioners sought to attack the constitutionality of the Disengagement Plan Implementation Law, 5765-2005 (hereinafter: “the Disengagement Law”) by challenging the section of that law which permitted the imposition of criminal sanctions on parties who were being removed from the Gaza Strip, and who remained in the area after the removal day. An expanded panel of this Court summarily rejected the petition, on the ground that there was an alternate remedy: the constitutional claims could be raised in the framework of a criminal proceeding brought against an individual who had violated the Disengagement Law. Note that in that case, the state, at the end of the day, decided not to prosecute residents who had violated only the provisions of the Disengagement Law. The criminal sanctions were imposed only against those few residents who used violence against the security forces, and who committed additional criminal offenses. The circumstances of that case led me to the conclusion that the petition should be rejected because of the availability of an alternate remedy, and I therefore joined in President Barak’s opinion; however, I also supported a rejection of the petition because the issue it presented was not yet ripe. In my view, there was no reason at that stage to decide an issue of principle in the framework of a direct constitutional attack on the Disengagement Law in the High Court of Justice. And I stress that the ripeness doctrine was not used for the first time in the Lobel opinion cited by the state here. It had already been mentioned in this Court’s earlier case law. Thus, in Segal [7], Justice A. Barak remarked that the grounds established by this Court for a summary dismissal included the ripeness doctrine as well:

‘We may also mention the doctrine relating to an academic or unripe issue, or an issue that is not justiciable. These doctrines attempt to give the court – each from a different perspective – legal mechanisms with which the court can lock its gates when it believes that the particular matter should not be dealt with’ (Segal [7], ibid., at p. 440).

Indeed, from time to time, we encounter petitions that we decide to reject on the grounds that, for various reasons, the questions they present are not ripe for decision. Non-ripeness as a ground for dismissal has been mentioned both in response to petitions relating to administrative cases and, often, in response to petitions relating to constitutional matters. (For examples of petitions that were submitted in connection with administrative cases and were rejected on the grounds that they were not ripe, see the following: in HCJ 1842/04 Michai v. Ministry [8], this Court held that as the competent authority had not yet decided the petitioners’ case, the petition was early and unripe; in HCJ 1431/05 Orian v. Minister of Transportation [9], we rejected a petition that was general and theoretical, and was for that reason held to be unripe for decision; and in HCJ 128/09 Basiso v. Minister of Defense [10], the petitioner asked that she be allowed to return to her home in the Gaza Strip. This Court rejected the petition because we found that the petitioner had just left the country, and that the planned time for her stay abroad had not yet passed; it was therefore held that her petition regarding her ability to return to her home was not ripe for decision. In HCJ 6556/11 Glickman v. Major-General Sami Turjeman, Commander of IDF Land Forces [11], the Court rejected an appeal that was directed, inter alia, at a Chief of Staff Order concerning the service of male and female soldiers together. We held that under the circumstances of that petition, there was no need to study the interpretation of the order or its applications, because a staff team was still working on a study of the subject. In such a situation, it was held, a petition seeking to subject the army’s instructions to judicial review was not yet ripe. For examples in which petitions dealing with constitutional issues have been rejected on the ground that they were not yet ripe, see Lobel [1] and HCJ 8276/05 Adalah – the Legal Center for the Rights of the Arab Minority in Israel v. Minister of Defense [12], (“Adalah I”) discussed below.

27. The source of the ripeness doctrine is American constitutional law (see Lobel [1], per Justice Naor, at para. 5). The United States Supreme Court faced the issue in Abbott Laboratories, et. al. v. Gardner [24] at pp. 148-149, when it held that the rationale at the basis of the doctrine is the Court’s need to avoid deciding issues before the time is ripe for the Court to do so:

‘Without undertaking to survey the intricacies of the ripeness doctrine it is fair to say that its basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.’

28. I believe that the circumstances here justify the application of the ripeness doctrine. At this stage, the issue raised by the petition is not yet ripe for a judicial determination, due to the absence of a clear, complete and concrete set of facts – the type of fact pattern that is essential if a judicial determination of the principle of the issue is to be properly made. The importance of a crystallized dispute for the purpose of making a determination regarding a constitutional issue has been discussed by my colleague, Vice President E. Rivlin, in his opinion in HCJ 7052/03 Adalah – the Legal Center for the Rights of the Arab Minority in Israel v. Minister of the Interior [13] (“Adalah II”), at para. 6:

‘The deliberation is not fruitful when it takes place too early, before the dispute is known, or when it has not yet crystallized.’

The Minister of Finance has not yet, on any occasion, carried out those sections that the petitioners wish to have stricken, and we cannot know whether, when and in what circumstances the Minister will make use of the powers that these sections confer upon him. The mechanism established in the Law provides that before the Minister of Finance decides to impose the financial sanction, the issue must go through several stages of review and approval. The Minister’s decision will only be carried out in coordination with various other parties, and only after their opinions are obtained. Thus, for example, the Law requires that in order for a financial sanction to be imposed, the minister in charge of the budgetary item through which the entity in question is either budgeted or supported must agree to the imposition of that sanction. Additionally, the budgeted or supported entity that will be affected must be given a hearing before the sanction can be imposed. Furthermore, pursuant to sub-section (d) of the Law, the Minister of Finance can only reach a decision to reduce funding after receiving an opinion from the legal adviser to the Ministry of Finance and only after the specially-appointed professional team has made its recommendation. The Law provides that the professional team will be composed of an employee of the Ministry of Justice, an employee of the Ministry of Finance, and an employee of the ministry whose minister is charged with the budget item through which the entity is either budgeted or supported. I note here that the mechanisms established in the Law were the fruit of various discussions held in the Knesset’s Committee on the Constitution, Law and Justice. As may be recalled, the original draft law placed before the Knesset was the Draft Independence Day Law – a draft law which sought to prohibit any activity or event which includes a marking of Independence Day or a reference to the fact of the establishment of the State of Israel as a “day of mourning” or a “day of tragedy”. This prohibition was accompanied by a penal sanction of up to three years imprisonment. This proposal was abandoned, as stated, and the Budget Foundations Law was tabled in its place. However, the Draft Budget Foundations Law also went through many changes before it was enacted in its final form; for example, Respondent 1’s Response indicates that the definition of a “prohibited expense” was narrowed and it was determined that it would apply only to activities which were in their essence the equivalent of one of the grounds listed in the section and not for every expense that “could” fit within one of those grounds. The Law also provides for a controlled and careful decision-making process, which I have noted above – a process that includes, as stated, professional opinions, a hearing, and the consent of the minister in charge of the relevant budgetary item. The Law also provides that the budget reduction for the supported or budgeted entity may not be of an amount greater than three times the amount of the expense that has led to the imposition of the sanction. (Originally, the amount of the reduction was up to twenty times that amount, which was then reduced to ten times the amount of the expense).

29. Thus, the Law requires that a long road must be travelled before the sanction created by the Law can be imposed. I will not take any position at this stage regarding the mechanism established in the Law or regarding the Law’s constitutionality. However, at this stage, before the Law has been implemented and when the mechanism established therein has also not yet entered into operation, I do not believe that there is any reason to engage in speculations and estimations regarding the manner in which the power granted in the Law will be exercised. As I noted in Lobel [1], a well-informed judicial determination must be tightly connected to concrete facts that are presented in the case before the court, even if a constitutional question has arisen. (See: Lobel [1], at para. 6. See also HCJ 3248/09 Sari v. Minister of Justice [14], at para. 3; HCJ 6972/07 Lakser v. Minister of Finance [15], at para. 26). In this case, there have not yet been any incidents in which a question has arisen regarding the application of the Law, its interpretation or its consequences. The situation was similar in Adalah I [12], in which this Court was asked to decide the issue of the constitutionality of the Civil Wrongs Ordinance (State Liability) (Amendment No. 7), 5765-2005. With regard to the provisions of that law, President (emeritus) A. Barak held, and his colleagues concurred, that s. 5c of the law was invalid. However, it is his discussion of s. 5b of that law that is relevant to our discussion here. Regarding that section, it was held that the issue presented in the petition was not yet ripe. Some of the remarks made in that case are also pertinent here:

‘The question of the constitutionality of s. 5b of Amendment 7 arose before us in a marginal manner only . . . We were not presented with any cases in which the question of its application arose. All this reflects upon the question of the constitutionality of the section. In these circumstances, as long as these questions have not been properly addressed, the time has not come to decide the constitutionality of s. 5b. Much depends on the manner in which it is implemented and the interpretation that is given to the provisions of the section. . . . Naturally, the parties have the right to raise their arguments concerning the constitutionality of s. 5b as it will arise in specific cases. The civil courts are competent, in specific tort cases, to examine arguments concerning the constitutionality of the section. In the circumstances of this case, we see no reason to decide the question of the constitutionality of s. 5b of Amendment 7. (Emphasis in the original – M.N.) (Ibid. [12], at para. 31).

30. The United States Supreme Court dealt with a similar issue in United Public Workers of America (C.I.O.) et. al. v. Mitchell et. al. [25]. In that case, the plaintiffs, who were all federal employees, challenged a statute that prohibited their participation in political activities. Except for one employee, none of the plaintiffs had actually violated the statute, but they had all declared their intention to become involved in political activity of the type that had been prohibited by the statute. The Court held that other than the issue presented by the single plaintiff who had already violated the statute, there was no legal question that could properly be decided. The Court noted the employees’ concern that if they did violate the law they would lose their jobs, but held that because the employees had not yet violated the statute, this was a purely hypothetical-speculative concern which did not justify a judicial determination or the granting of judicial relief:

‘The power of courts, and ultimately of this Court, to pass upon the constitutionality of acts of Congress arises only when the interests of litigants require the use of this judicial authority for their protection against actual interference. A hypothetical threat is not enough. We can only speculate as to the kinds of political activity the appellants desire to engage in or as to the contents of their proposed public statements or the circumstances of their publication. It would not accord with judicial responsibility to adjudge, in a matter involving constitutionality, between the freedom of the individual and the requirements of public order except when definite rights appear upon the one side and definite prejudicial interferences upon the other’ (ibid. [25], at p.89-90).

Justices Douglas and Black presented the minority view, and wrote that the dispute could be adjudicated. Justice Douglas wrote that the plaintiffs did not need to wait until they actually lost their jobs. To remove doubt: I also believe that there can be cases in which even in the absence of a concrete foundation for a dispute, it would be wrong to postpone the adjudication of a particular petition until a specific factual background – one that can cause substantial harm to the petitioners – has arisen, and in such cases it would be proper to decide a question even if it has not yet become fully ripe. However, even if we agree with the minority view in United Public Workers [25], the outcome in our case would not change. In the instant case, even if the Law’s provisions had been put to use, the impact on the petitioners would not be immediate. As stated, because of the complex decision-making mechanism prescribed by the Law, a multi-staged process separates the initial decision by the Minister of Finance and its actual implementation. In any event, if the Minister does exercise his power pursuant to the Law and such exercise is likely to harm some of the Petitioners, the option of initiating legal proceedings remains open. It should also be noted that one element of the mechanism established in the Law is the holding of a hearing for an entity that is likely to be harmed.

31. As stated, not every petition that lacks a concrete factual foundation should be summarily dismissed on the ground that it is unripe. Each case must be judged on its merits. As noted, the lack of ripeness is a threshold ground for dismissal, and a court may exercise discretion in deciding whether or not to rely on it. It is certainly possible that on some occasions, even in the absence of a concrete factual background, a court should nevertheless address the issue raised in the petition. We can draw an analogy to the fact-pattern of United Public Workers [25], and find that the Court’s intervention at an early stage would be justified if the circumstances are such that if a petitioner is asked to wait for his case to become ripe, he will pay too heavy a price. Thus, for example, if the Draft Independence Day Law had been enacted as law, and if the petitioners had sought to attack its constitutionality, this Court might have responded to the petition even before use had been made of its provisions in a concrete case. This judicial response would have been needed because of the harsh criminal sanction that was contained in Draft Independence Day Law (three years imprisonment). However, this does not mean that whenever a petition challenges the constitutionality of a law which contains a criminal sanction, this Court must address it despite its lack of ripeness. (Regarding this matter, see Lobel [1], opinion of Justice Naor.) As I have noted, the Court must exercise its judgment in each case, based on the specific circumstances that are presented.

32. Moreover, the Response submitted by Respondent 1 indicates that we cannot be certain that the Law will apply to the petitioners in this case. In addition, even if the Law does apply to the petitioners, there is still uncertainty regarding the degree to which it will apply to them or to others, and in what circumstances it will apply. The use of the ripeness doctrine does not mean that the courthouse doors are permanently closed before the petitioners or before others, or that the Court will not deliberate the issue in the future. It may be that in the future – if and when the Law’s provisions are put into use and the petitioners or others feel that they have been harmed by that use – the petitioners will be able to address the competent tribunals who will adjudicate their claims. In such a situation, and on the basis of a concrete factual background, the disputed issue will certainly be more coherent, and this will make the deliberation more efficient; the Court will be able to render a wiser decision, based on concrete facts (see HCJ 1468/11 Ben Sa’adon v. Minister of Religious Affairs [16]). Nevertheless, it may also be the case that the passage of time will render a deliberation of a petition irrelevant, as the petitioners’ concerns may never be realized (compare, Lakser [15]) – either because the Minister of Finance may fail to exercise the power conferred upon him by the Law, or because the provisions will be exercised in a manner that does no harm to the petitioners; other factors may allay the petitioners’ original concerns as well. However, in the current situation, the operative significance of the Law is not yet clear and it is not yet the right time for us to respond to the substance of the claims (compare Ben Sa’adon [16]).

33. I wish to add the following to these remarks: the ripeness doctrine is, as stated, one of the tools that this Court can use to establish the pace at which petitions are brought before it. It allows the Court to regulate, to a certain degree, the flow of matters submitted to it and to refrain from deciding matters when the Court believes that there is no justification at that particular time for determining the issues presented (see Segal [7], supra). The Court has discretion to determine the circumstances in which it will apply the doctrine, in the framework of the power the legislature has conferred upon it in s.15 of the Basic Law: The Judiciary. When it weighs the various considerations for and against the deliberation of a particular petition, the Court must also consider the need to organize its time, given that the time available to us is a finite resource. When this Court is faced with a petition that is particularly urgent, we work night and day to decide the issue that is before us. However, when the submission before us is a petition that is not yet ripe – a petition that does not include a clear, complete and concrete set of facts – the Court must consider whether a theoretical adjudication is justified at that particular stage.

34. Furthermore, I believe that alongside the above-mentioned threshold ground for dismissal based on a lack of ripeness, the petition here should also be denied because an alternative proceeding and remedy are available. In Lobel, I noted that the ripeness doctrine is sometimes combined with other threshold grounds for dismissal, such as the availability of an alternative proceeding and remedy. This is because the ripeness required for an informed determination concerning the constitutional issues is likely to take shape in the context of the pursuit of an alternative remedy (see ibid., at para. 8). That is the case here. In the framework of the amendment of the Law, the Knesset also amended the Administrative Matters Court Law, such that the list included in First Schedule of that law was expanded to include a new item 40; this item confers on the Administrative Courts the power to adjudicate petitions dealing with the reduction of financial support pursuant to a decision by the Minister of Finance. It is black-letter law that the granting of power to the Administrative Matters Courts does not negate the power of this Court (see HCJ 2208/02 Salameh v. Minister of the Interior [17], at p. 953; HCJ 212/03 Herut National Movement v. Chairman of the Central Committee for the Election of the 16^th Knesset [18], at p. 756). However, the choice to petition the Administrative Matters Court is a choice to take the intended main road. Of course, the petitioners may also raise their claims regarding the constitutionality of the Law in the context of a petition to the Administrative Matters Court. The authority of the High Court of Justice to adjudicate claims regarding unconstitutionality does not prevent a deliberation of such claims in an “ordinary” court (see HCJ 2426/08 Ben Atar v. State of Israel – Ministry of Transportation (2008) (unreported) [19], per Justice Naor, at para. 3; HCJ 6715/10 Hina v. State of Israel, Ministry of Defense, Department of Rehabilitation [20], at para. 5; HCJ 2055/02 Sheikh Abed Al Karim Abayet v. Minister of Defense [21], at para. 5; HCJ 1076/07 Maman Eilat Group Ltd. v. Minister of Finance [22]; Adalah I, supra). A party who believes that he has been harmed by the implementation of a law may thus turn to the Administrative Matters Court by filing a petition. In the context of such a petition, the party may use an indirect attack to present arguments regarding the constitutionality of the particular law. It has already been held that trial courts can adjudicate a particular litigant’s matter through an indirect attack, even if the litigant can, in principle, submit a petition to the High Court of Justice. This has also been allowed in cases in which the “indirect attack” was brought by the litigant who initiated the proceeding, and did not use it as a defensive claim (see: HCJ 6090/08 Berger v. Minister of Justice [23], at para. 5; Hina, supra; Lakser [15], at para. 29). The ability to present their claims in the form of an “indirect attack” also gives the petitioners the ability to pursue an alternative remedy (see: Hina, supra; Berger [15]; Orian, supra; and see: Sheikh Abed Al Karim Abayet; and see: Lobel [1], per President A. Barak, at para. 12, and per Justice Naor, at para. 1). And furthermore: in the context of an administrative petition, it will be possible to ask for temporary relief in the form of an order for the non-implementation of the sanction.

35. The existence of an available alternative proceeding and remedy in this case reinforces the conclusion that this petition is not ripe for decision by this Court. If a petition does need to be filed, it will be filed in the Administrative Matters Court, and to the extent necessary, it will be based on a concrete factual background, and not on hypothetical scenarios, as is the case in the petition which is before us now. The concrete facts will also allow that court to decide whether or not a concrete interpretation of the Law justifies the particular decision reached by the Minister of Finance, or whether the constitutional question needs to be decided.

36. In conclusion: the petition before us contains complex questions that are of public importance, but at this stage, there is no need to render a judicial decision concerning the claims that have been presented. The petition is not ripe because of the absence of a concrete factual background – and we must have a concrete factual background in order to reach a decision regarding the various issues raised by the petitioners. In addition, if the petitioners or any of them or others are harmed as a result of the Law’s implementation, they have an alternate proceeding and remedy available to them in the Administrative Matters Court, where they will also be able to file an application for an order nisi preventing the implementation of the Law with respect to them.

37. I propose to my colleagues that the petition be denied without an order regarding expenses.

President D. Beinisch

I agree with my colleague Justice M. Naor that the petition before us raises complex questions which are of public importance. I stress that these questions can, in certain circumstances, reach the core of the problems that currently divide Israeli society. However, I accept my colleague’s position that the petition before us is not ripe for judicial review. At a declarative level, the Law raises, on its face, difficult and complex questions, but the constitutionality of the Law is largely dependent on the interpretive content that is given to its provisions, and the nature of this content will only become clear when the Law is implemented by the relevant authorities.

Before a judicial determination can be made regarding the circumstances to which the Law will apply and the scope of its implementation, the executive needs to be allowed to set the boundaries and procedures for its implementation. The petitioners have painted various scenarios of hypothetical possibilities, and we cannot yet determine the likelihood that any of these scenarios will be realized. We do not know to whom they will apply, whether they will indeed relate to the petitioners, or what event will justify the implementation of the Law. We must therefore leave for a later time a deliberation of the constitutionality of the Law’s provisions – if indeed there is a need for such at the stage when they are put to concrete use, if such a stage is reached, and if the chosen form of implementation passes through the relevant filters established in the Law itself.

As of now, I also do not see a need to decide the question of the availability of an alternative remedy, and whether, when the time comes, a decision reached pursuant to the Law should be deliberated in the Administrative Matters Court or in this Court. That question will also be decided in the future, on the basis of the particular circumstances that arise.

I therefore join in the result reached by my colleague.

Vice President E. Rivlin

I join in the judgment of my colleague Justice M. Naor. I believe that under the circumstances, we are far from the concrete stage of the implementation of the law. This is because according to the law itself, a long way must be travelled between the occurrence of an event mentioned in the Law and the actual imposition of a sanction – and there are many obstacles to overcome over the course of this distance. Furthermore, it is not at all certain that the Law will actually apply to the petitioners. With respect to constitutional judicial review, this natural selection is the result of the absence of factual circumstances which raise the constitutional question. In foreign systems which implement concrete factual examinations, this natural selection precedes constitutional review. Such examination often renders the actual constitutional review redundant.

For these reasons and for the reasons described by my colleague Justice M. Naor and those listed in the judgment written by my colleague President Beinisch, I join in their decisions.

Decided as per Justice M. Naor

10^th of Tevet 5772.

15 January 2012.

Full opinion:

Link to original Hebrew text of decision on official ISC website:

http://elyon1.court.gov.il/files/11/290/034/c04/11034290.c04.pdf

ACUM v. EMI

Case/docket number:

CA 5365/11

Date Decided:

Tuesday, September 3, 2013

Decision Type:

Appellate

Topics:

Freedom of Expression

Abstract:

In 2004 the Director-General of the Antitrust Authority determined that the activity of ACUM (a corporation that operates to manage its members’ copyrights in musical works in Israel) constitutes a monopoly on managing copyright over musical works. In 2011 the Antitrust Tribunal (“the Tribunal”) approved the activity of ACUM as a cartel, subject to a series of requirements (“the permanent requirements”), which would be in force for five years starting from the date of their approval. The disputes at the center of the appeals related to the requirement that at least a third of ACUM’s board of directors consist of external directors (the ACUM appeal) and the requirement regarding the exclusion of rights in a work from management by ACUM. It was argued that the mechanism was overly narrow, as consent of all joint owners of a work is necessary for exclusion, or for segmentation under the four specific categories that permit partial exclusion of the rights (the EMI Israel appeal).

The Supreme Court (opinion written by Justice D. Barak-Erez, Justice Z. Zylbertal and Justice E. Rubinstein concurring) dismissed both appeals on the following grounds –

The requirements for ACUM’s operation should balance the authors’ property rights in their works with the public interest in a market free of monopolistic effects, a unique interest when in the context of a market of works, which inherently must be accessible to the public (albeit for payment). The analysis focused on two issues: the requirement to appoint public directors and the scope of the rights exclusion mechanism. Both should be examined from the unique perspective that combines the purpose of copyright law with that of antitrust law, considering the balance that both fields of law must achieve between individual property rights and economic interests, on the one hand, and the general public interest, on the other hand.

Regarding the requirement that at least a third of appointed members to the board of directors be external public directors (the practical meaning of which was the appointment of a total of four such directors), ACUM failed in its challenges to both the requirement itself and the number of external directors it was obligated to appoint.

The appointment of public directors is one of the mechanisms that facilitates supervising a company’s conduct and that of its directors and controlling shareholders. It helps deal with the various representative problems associated with its activity. Their appointment also adds a professional dimension to the company that would increase its adequate management; the appointment of public directors to ACUM’s board is consistent with the purpose of the cartel’s approval. Although ACUM is not a public company, it effectively manages a resource that has clear public aspects, and in fact those aspects of ACUM’s activity are the basis for the cartel's approval. At the same time ACUM’s monopolistic characteristics and its status as a cartel in the copyright of musical works per se grant it a public dimension. The requirement to appoint public directors to provide another layer of supervision over ACUM’s activity is therefore warranted by and inherent to the rationale of the cartel’s approval from the point of view of protecting both authors and users. The Court added that making the cartel’s approval subject to the appointment of public directors, even when a public corporation in the ordinary sense is not involved, has already been done in the past, for example with respect to the recycling corporation. Moreover, the public directors might represent cross-group interests that carry broader considerations as to the general interest of artists as a whole, rather than representing the interest of certain artists groups, which may conflict. Moreover, without laying down rigid rules, there is prima facie basis for the argument that the importance of a public director is in fact greater in a corporation like ACUM, which is not led by a clear control group and has diverse ownership.

In fact, ACUM itself also acknowledged the advantages of appointing public directors, and the updated language in its articles of incorporation now requires the appointment of two public directors. The basic aspect of the dispute, which had to a certain extent become one of extent and degree, had thereby been somewhat resolved. In this respect, the Court believed that the proportion of directors that was fixed – one third of the total members of the board – was not excessive or unreasonable, considering the character of ACUM as a corporation with diverse ownership and especially in light of the concern for abuse that always exists regarding a cartel.

Under the circumstances, there is no need to rule on whether ACUM should be regarded as a hybrid entity, and in any event a complete discussion of the criteria for recognizing an entity as such is unnecessary. However, it is not superfluous to note that ACUM’s activity does fit many of the factors mentioned in case law as indicative of a hybrid entity. Those factors, even if insufficient to categorize ACUM as a hybrid entity in the ordinary sense of the term, do shed further light on the basic justification of the Director-General’s requirement. Although the appointment of public directors is not ordinarily considered one of a hybrid entity’s duties, the fact that ACUM is an entity that owes important duties to the public can serve as a factor in how the Director-General of the Antitrust Authority exercises power when subjecting a cartel to requirements.

Two questions were at the root of the dispute regarding the requirements about the rights exclusion mechanism. First, whether the requirement for consent by all joint owners of a work in order to exclude it from ACUM’s catalog is justified or whether that power should be held individually by each of the artists; and secondly, how delicate and precise should the “segmentation” mechanism be in the scope of the exclusion ability, in light of distinctions between a work’s different types of use.

As a point of departure it can be assumed that works of the type that ACUM manages are often ones to which several artists share the rights. Conditioning exclusion upon the consent of all rights owners will undoubtedly burden the individual artist who seeks to exclude her own work. However, this is not an undue burden considering the purpose of the permanent permit.

The most important tool available to ACUM in the collective management of the rights is the grant of a sweeping license, known as a “blanket license,” which permits the licensee to use ACUM’s entire catalog. From the perspective of transaction costs, the advantages of a blanket license are the primary reason for ACUM’s activity, despite the conflicts with antitrust law. Given the typical ownership structure of a musical work, an exclusion ability that is not conditional upon the consent of other owners effectively means that a single author, regardless of their role in creating the work, may exclude the entire work from ACUM’s blanket license system. 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 blanket license from ACUM. Such a state of affairs would greatly limit the benefit the cartel provides the user public to the point that it is doubtful whether the cartel is indeed “in the public interest” in terms of section 9 of the Antitrust Law. Furthermore, accepting that consent by all joint owners of the work is not necessary in order to exclude it might also allow for some of the artists’ opportunistic exploitation of the exclusion, creating “extortion” or “free-riding” problems.

Ultimately, even in the narrow exclusion regime joint artists can contractually regulate the scope of the work’s exclusion from collective management in advance. Indeed, the narrow exclusion regime merely provides the default for the inclusion of a joint work in ACUM’s catalog. Insofar as the authors wish to regulate decision-making differently in managing joint works, they are at liberty to do so. Presumably such an arrangement, which would be made in a timely manner and before any of the parties is in a position to potentially exploit or become a free rider, would help to limit the coordination challenges in obtaining consent for excluding joint work, as detailed by EMI Israel and Anana. Therefore, the default prescribed – that in the absence of agreement to the contrary between owners of rights in a joint work, all of their consent is necessary in order to exclude it from management by ACUM – is a proper one.

Finally, the Court considered the rights exclusion mechanism that enables artists to exclude their rights in some – rather than all – uses but only in one of four specific alternatives – “exclusion packages” that make limited “segmentation” possible according to types of use. The dispute between the parties revolved around the precision of the necessary segmentation. While the current segmentation mechanism essentially distinguishes between audio and audio-visual uses, EMI Israel (supported by Anana) also wished to distinguish between use in “old media” – like television and radio – and use in “new media” – like Internet and cellular phone services.

Here, the Court held that the exclusion mechanism approved by the Tribunal should be upheld, subject to the question of excluding “new media” – on conditions and restraints – being comprehensively reviewed during the cartel approval’s renewal proceeding.

The distinction between “new” media and “old” media raises fundamental and practical difficulties. The issue is a developing one and more experience and study are necessary to achieve a proper balance. The world of communications is characterized by constant, rapid technological development. In light of this reality the distinction between “old media” and “new media” is not a binary dichotomy, nor is it permanent or stable.

Reviewing the implications of excluding “new media” shows that there is not necessarily any justification for completely prohibiting excluding works from “new media” uses. Nevertheless, there are clear indicators that the same applies only to a limited exclusion mechanism, which focuses on certain types of “new media” uses and strives to minimize harm to users. Such exclusion mechanisms cannot be based merely on the technological distinction between “old media” and “new media” and allow a sweeping exclusion of all uses of the latter, as EMI Israel and Anana propose. In any event, examining the possibility of another “new media” exclusion category and fashioning the boundaries of that category should be done with care after studying interested parties’ positions about the issue and all the relevant facts. As mentioned, this is a matter that the Antitrust Tribunal ought to consider when the extension of the cartel’s approval comes before it. This position is also supported by a factor that concerns the temporary nature of the approval – for only five years. At the end of that period (two years of which have already elapsed), the Tribunal will reconsider approving the cartel, at which time it can also reconsider the extent of the exclusion mechanism’s “segmentation,” in light of the five years’ experience gained with a “narrow” exclusion mechanism. International experience could also enrich the set of information available to the Tribunal.

In conclusion, the Court dismissed the appeals, deciding not to intervene in the requirements attached to the cartel’s approval. Currently, the requirements for the permanent permit, including those challenged in the appeals, are all necessary to dispel the concerns naturally raised by a cartel concerning the collective management of copyright. These conditions are necessary to ensure that the cartel’s benefit to the public does indeed exceed the harm perceived from it. At the same time, the possibility remains that the proper balance between the rights of authors and the general public interest might in the future dictate a result different from that reached by the Tribunal in terms of integrating the distinction between different types of “new media” and “old media” in the rights exclusion mechanism.

Voting Justices:

Barak-Erez, Daphne

Primary Author

majority opinion

Zylbertal, Zvi

majority opinion

http://elyon1.court.gov.il/files/11/650/053/a09/11053650.a09.pdf

Author

concurrence

Full text of the opinion:

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.

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)

Full opinion:

ACUM v. EMI.pdf

Link to original Hebrew text of decision on official ISC website:

Gottesman v. Vardi

Case/docket number:

CA 1697/11

Date Decided:

Wednesday, January 23, 2013

Decision Type:

Appellate

Topics:

Communications

Basic Law: Human Dignity and Liberty

Right to Privacy