Israeli Parliament to Advance Class Action Reform During Summer Recess
The Knesset's Constitution Committee is set to discuss amendments to the Class Action Law during the parliamentary recess, likely in September, following agreements between coalition and opposition members in the "Agreement Committee." The reform aims to address the surge in class action lawsuits affecting small and medium-sized businesses, a campaign led by former MK Avir Kara. The amendment, which passed its first reading earlier in 2024 but stalled since, seeks to limit abuses of the law by restricting class actions against very small businesses, defined as those with up to five employees or annual revenues under 2 million shekels.
Key provisions include requiring early warnings for minor violations such as spam law breaches and packaging weight rules, allowing lawsuits only if the business fails to correct the issue. If corrected, claimants may receive a fixed compensation of 2,000 shekels, but no further lawsuits can be filed. The reform also proposes capping lawyers' fees in class actions and enabling courts to impose legal costs on attorneys when justified. Additionally, it limits the number of class actions a single plaintiff can file to five per year and mandates reporting to authorities in cases of unlawful collection.
Supporters like Constitution Committee Chair MK Simcha Rothman and Avir Kara emphasize the need to protect productive businesses from predatory lawsuits, calling the reform a correction of a "terrible injustice." Shahar Turgeman, president of the Federation of Israeli Chambers of Commerce, also backs the changes, stating the goal is to restore class actions to their original purpose of protecting the public from genuine harm. However, Doron Raday, chair of the Central District Class Actions Committee of the Israel Bar Association, warns that the reform disproportionately expands protections for large entities and public bodies, suggesting that small business protections should be addressed through targeted legislation instead.
The reform has been under development for four years at the Ministry of Justice and has sparked strong reactions from business owners and legal professionals alike. The upcoming discussions during the recess aim to finalize the law within the current Knesset session.
