The Israeli Ministry of Justice published a draft bill on January 27, 2026, titled the “Draft Bill on Application of Laws to a Foreign Business Directing Its Activities to Customers in Israel, 5786-2026” (the “Draft Bill”). The Draft Bill is open to public comments until February 17, 2026. The Draft Bill seeks to clarify which substantive law governs transactions between Israeli customers and foreign businesses, with a particular focus on standard form consumer contracts that typically govern such relationships.
Background
The Draft Bill follows a series of Israeli Supreme Court (the “Court”) decisions considering whether Israeli law applies to standard form contracts entered into between non-Israeli businesses and Israeli customers, even where the contract designates foreign law as governing law. Most notably, in a 2024 decision concerning a multinational company offering services in Israel, the Court held that where a foreign company deliberately targets Israeli consumers and invests substantial resources in the Israeli market, applying Israeli law, including Israeli consumer protection laws, is justified, even where the contract stipulates that the relationship is governed by foreign law.
Key Provisions of the Draft Bill
The Draft Bill proposes to extend the application of certain mandatory provisions of Israeli laws to foreign businesses that direct their activities to customers in Israel when selling goods or services.
Applicable Israeli Laws
The Draft Bill specifies that the following Israeli laws will apply to qualifying foreign businesses:
– Consumer Protection Law, 5741-1981
– Protection of Privacy Law, 5741-1981
– Standard Contracts Law, 5743-1982
– Payment Services Law, 5779-2019
To whom does the Draft Bill Apply?
A foreign business (defined as a business whose center of activity is outside Israel, whether or not registered in Israel) will be subject to the mandatory Israeli laws listed above if it “directs its activities” to customers in Israel. A business will be considered as directing its activities to Israeli customers if:
1. It takes targeted, proactive measures and invests resources to operate in the Israeli market and to promote sales to customers in Israel (including through third parties), as determined by a substantive assessment of the foreign businesses’ conduct in light of all circumstances; or
2. The transaction concerns real estate located in Israel.
Definition of “Customer”
Notably, the Draft Bill adopts a broad definition of “customer”, covering not only individuals who purchase goods or services for personal or household use, but also small businesses with up to five employees or with an annual turnover of no more than NIS 2 million, where they contract with other businesses on the basis of a standard form contract.
Practical Implications
Foreign businesses that direct their activity to Israeli customers through measures such as Hebrew-language websites, pricing and payment in Israeli currency, Hebrew customer service, or marketing aimed at Israeli customers may be subject to mandatory provisions of Israeli law, including consumer protection laws, regardless of any contractual choice-of-law provisions.
The Draft Bill also requires foreign businesses within the scope of the Draft Bill to either publish the address of their representative in Israel or prominently publish on their websites (if applicable)an email address for service of legal documents.
Next Steps
We are monitoring developments regarding the Draft Bill and will provide updates as the legislative process progresses.
As mentioned above, the Draft Bill is open to public comments until February 17, 2026. Our team is available to assist clients who are interested in submitting a comment to the Draft Bill.
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The above content is a summary provided for informational purposes only and does not constitute legal advice. It should not be relied upon without obtaining further professional legal counsel.
