| Telenier system
The Tel Aviv District Court (Economic Department) accepted the Attorney General’s position last Thursday, which was submitted as part of a request for a retrial in a decision to approve a class action lawsuit against Sargon Networks (NASDAQ 🙂 and its directors, and ruled that in order to fulfill the purpose of the dual registration arrangement Sweeps the foreign liability rules – in relation to violations of the foreign reporting rules – on all dual companies.
At the time relevant to the lawsuit, Sargon was a dual public company whose shares were traded on both the Tel Aviv Stock Exchange (TASE 🙂 and the Nasdaq Stock Exchange in New York, by virtue of the dual listing arrangement. Public reports to Israel according to the reporting rules customary in the foreign country in which they are traded). The matter of the request for approval in the plaintiffs’ claim for misleading Sargon’s investors in publishing a financial forecast to the public – a publication that was conducted in accordance with the provisions of American law.
In light of the aforesaid, the preliminary question discussed in court is what is the applicable law in relation to the civil liability of foreign companies and companies in general registered in the double registration arrangement, in relation to their reports. The district court ruled in the original decision that the rules of civil liability that should apply to society will be the rules of liability under Israeli law and not the rules of liability under foreign law.
The Attorney General’s position submitted to the court hearing the request for reconsideration of the decision stated that the provisions of the original decision were inconsistent with the purpose of the dual listing arrangement, which is to increase the number and variety of companies traded on the Tel Aviv Stock Exchange. Investors in Israel will be achieved through the uniqueness of the double listing arrangement for world-class stock exchanges, in the case of which it was explicitly decided that the laws applicable to the companies listed in them adequately protect the investing public in Israel. In fact, the double registration arrangement was enacted with the intention of minimizing the level of “friction” of the dual companies with Israeli law, while maintaining foreign law as the main law applicable to the corporation.
In its decision, the court accepted the Attorney General’s position and ruled that it is appropriate and correct to apply the foreign liability rules in relation to violations of the foreign reporting rules – to all companies. The court noted in its decisions (paragraph 55) that the heaviness involved in imposing Israeli liability rules on dual companies could harm the overall set of incentives for companies to register for trading in Israel. Thus, the imposition of such liability rules may jeopardize the primary purpose of the dual registration arrangement.
The Attorney General’s position was formulated through Adv. Liav Weinbaum of the Tel Aviv District Attorney’s Office (Civil) in conjunction with Advice and Legislation (Economic Law) and the Securities Authority.
Adv. Amir Wasserman, the legal advisor of the Securities Authority, commented on the decision and said:
“The double listing arrangement sought to expand the number and variety of companies traded on the Tel Aviv Stock Exchange by encouraging Israeli companies listed on the world’s leading stock exchanges to register for trading in Israel as well. Foreign law, along with supervision and market discipline abroad, constitute satisfactory substitutes for Israeli law. A second premise is that companies will find it very difficult to implement two legal systems at the same time. The decision of the court in the retrial in the Sargon case clarifies that these basic assumptions of the double registration arrangement remain intact. The application of two regimes of liability is inconsistent with the principle on which the double registration arrangement is based, and therefore the position adopted is that the rules of liability follow the rules of disclosure. At the level of protecting the investor public, the right to sue is not violated, but claims will be clarified in accordance with the rules according to which the dual registration company acted when it provided the disclosure to investors. “
The article was first published on the Telniri website.
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