Social Media Policy – Does Your Company Need One?

May 15th, 2011

Dr. Yuval Karniel, Adv. and Aya Inbar, Adv. of Shibolet & Co., Tel-Aviv, discuss the reasons as to why Social Media Policies are becoming more and more popular with employers.

Dr. Yuval Karniel (partner) heads Shibolet’s Internet and Communication group along with partner Itai Leshem. He is an expert in the field of communications, a senior lecturer and researcher in communications, society and law. His main focus is on copyrights, Internet and technology, freedom of speech and crises communication. Dr. Karniel is the Chairman of the Ethics Committee for the Second Authority for Broadcasting and in addition, he serves as a panelist for the Israeli Internet Association in resolutions regarding domain names. 

Aya Inbar is an attorney is involved in representing clients in a variety of intellectual property issues matters, including patents, copyrights, trademarks and internet law. Aya obtained her LLM degree in Intellectual Property from the Benjamin N. Cardozo School of Law.

The Development of Social Media Policies

The growth of social networks such as Facebook, Twitter, and LinkedIn has created a new workplace reality for both employers and employees. The lines between private and public, between home and work and between one’s personal life and professional life are being blurred with every new player entering the world of social networks. Many employees are answering personal emails, engaging in chats and forums and sending and receiving SMS messages even when they are at work.

Social media is quickly becoming a major form of communication. Friends at work are likely to be friends on these networks, and some of the work communication takes place, often without management’s knowledge, on the convenient and friendly social networks. Just like in the past when companies had to figure out how to deal with email communication, now they have to figure out how to deal with communications through social media.

Do you need a Social Media Policy?

It is clear that this new reality requires some type of evaluation by employers. On the one hand, this is a chance to strengthen the connections between employees, and an opportunity for positive exposure for the organization and the brand that represents it.

On the other hand, the presence of employees on these social networks poses a threat as employee’s time spent on these networks means less time at work, and comes at the expense of work. One recent research in England show that employees spend an average of 30 minutes a day surfing social networks in the work place, an activity that results in loss of 12.5 million U.S. Dollars.

In addition, an employee’s activities on these networks can lead to disclosure of sensitive information by the employee about the employer, clients and their colleagues. In many cases the information is released without any awareness on the part of the employee who innocently shares information about his daily activities.  Recently, Microsoft Seattle was forced to dismiss one of its most senior employees who disclosed sensitive and confidential information about future developments of the company. The employee unintentionally shared information on Linked-in, which he is a member of. A blogger, who was methodically following activities of Microsoft employees, immediately spotted the sensitive information, published it prominently on his website and from there it was a short way to the headlines of the financial papers.

Activity on social networks can expose employees and employers to lawsuits by parties who may have been damaged by information disclosed or alleged through social networks, on grounds such as defamation, violation of privacy issues or copyright infringement. It is important to state that this type of activity by employees, which may expose their employers to lawsuits, can be done during the employee’s free time as well. Many workers identify themselves on social networks as employees of a certain company. Their professional identity is interwoven with their personal one and forms part of their profile on the Internet. These employees may dispense advice, professional opinions, or express their opinions which later may be attributed to their employer.

 Employers need to recognize this reality and formulate clear policies to deal with it. The policies need to be made in conjunction with the employees and need to be transparent and public.

What is a Good Social Media Policy?

Social Media Policy (SMP) is becoming an essential tool in management of personnel in the Internet era. A social media policy outlines for employees the corporate guidelines or principles of communicating in the online world.

The technologies and the faces of the online world change frequently; this is a factor which may require prompt adjustments to your policy. From a legal prospective, there are several key points that should always be considered when writing a Social Media Policy. One key point is the right to privacy. It is important that the policy defines the right (or the lack thereof) of privacy when it comes to using social media. If the employer makes it clear that he reserves the right to monitor the use of social media in the work place the employee will have no expectation to privacy in this area.

Another point to consider is other company policies such as anti-harassment and ethics. It is important to clarify that those policies extend to all forms of communication, including social media, both inside and outside the workplace. Employers need to make sure that the policies cover all of the employees of the company and make sure that the employees are aware that such policies exist and can be enforced at any time. The policy should be very clear about what an employee is allowed and not allowed to do when using social media, in the work place or outside (especially if it can affect the company). Copyright and trademark issues should also be addressed to prevent possible infringements by employees that may impact the company in the future.

A smart policy can help both the employee and employer, and may prevent crisis situations and damages that are inherent to irresponsible activity on the Internet.  It is important to remember that this type of policy involves complex legal issues such as rights of employees, protection of privacy, protecting confidential and proprietary information and intellectual property rights. The policy must therefore be formulated together with personnel, the marketing team and legal advisors.

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International Arbitration – Pros and Cons

May 1st, 2011

Arbitration is a dispute resolution process in which the disputing parties present their case to an arbitrator or tribunal (three or more arbitrators) who will issue a binding decision, based on an examination of the evidence presented by the parties.  Arbitration has become a popular method of resolving business disputes, both domestically and internationally.  As the international marketplace continues to expand, businesses are emerging, and business transactions are taking place in new world regions. These regions may be unprepared for such transactions as a result of a young (and hence unpredictable) judicial system, political or economic pressures or an inefficiency that would make court-based adjudication impractical.  Arbitration is also beneficial for multi-national operations due to their exposure to varying legal regimes, institutions, and customs.  As a result, more and more international contracts are mandating that arbitration be used to resolve any disputes that may arise in the future.  In this article we will take a closer look at international arbitration, the arbitration process and present major advantages and disadvantages of arbitration.

THE PROCESS:

Arbitration can be administered through an established arbitration institute or ad hoc.

There are a number of internationally recognized arbitration institutions that provide parties with administrative assistance, physical facilities, an established format of rules for conducting the arbitration and support services.  The institution will provide the parties with a list of arbitrators tailored to the issue being disputed, often based on parameters set by the parties, including language, governing law and cost.  Each of these institutions have their own set of procedures thereby avoiding conflicting procedures between various countries. Some of the more recognized international institutions include the International Chamber of Commerce based in Paris, the London Court of International Arbitration, the American Arbitration Association, the International Center for Dispute Resolution in New York, the Stockholm Chamber of Commerce, the Singapore International Arbitration Center and the Hong Kong International Arbitration Center. 

Under a non-administered ad hoc arbitration the parties are responsible for establishing the rules, procedures, applicable law and administrative support governing the arbitration.  Typically, the arbitration clause of the business contract will be the controlling provision.  Where the parties have not included an arbitration clause in their business contract, but wish to resolve their dispute through arbitration, they will be required to agree to the terms after the dispute arises.  Parties that choose to proceed ad hoc must be very careful when drafting the arbitration clause so as to prevent inconsistencies that may invalidate the clause in a given jurisdiction.  The lack of clarity or omission in an arbitration clause could result in litigation, delay and additional expenses.  The basic provisions that should be included by the parties in the arbitration clause: (1) the number of arbitrators; (2) the method of selecting the arbitrators; (3) the place or situs of the arbitration; (4) the language of the arbitration; (5) a governing law provision; (6) a notice provision and (7) authorization for a court to enter judgment on the award.  Depending on the nature of the business to be conducted, the parties may also consider addressing the following issues in the arbitration clause: (1) confidentiality; (2) discovery; (3) multi-party arbitration; (4) consolidation; (5) currency of the award; (6) split clauses requiring litigation of some issues and arbitration of others; (7) scope of award; and (8) authorization to adapt the contract or to fill gaps in it.  

 BENEFITS OVER COURT-BASED ADJUDICATION

1.  Enforceability of Arbitration Awards

The ability to enforce an arbitration award is perhaps the greatest advantage over traditional litigation.  In contrast to arbitration, there are no international treaties that require domestic courts to recognize and enforce foreign court judgments.  The New York Arbitration Convention, however, provides for recognition and enforcement of arbitration agreements and the resulting awards in over 130 Contracting States.  When entering into an international business contract, parties should consider whether the country where they expect to enforce an award (usually the country where the weaker party is located) is a signatory to the New York Convention or another treaty that obligates it to enforce arbitral awards.

 2.  An Impartial and Knowledgeable Decision Maker

Whether conducted ad hoc or through an institution, the parties will select the arbitrator(s) from a list of independent and impartial professionals.  The custom in international arbitrations is to have a tribunal of three arbitrators for matters involving significant monetary amounts; otherwise one arbitrator will oversee the dispute.  Having the ability to select the arbitrator(s) provides parties with a sense of control and a level of trust that their dispute will be resolved fairly.  In a court-based adjudication, the court will randomly assign a judge to handle your dispute with limited regard to the matter or issues being disputed.  Since many arbitrations, especially in the international setting, will deal with complex technical issues, arbitration allows the parties to construct a panel of arbitrators that are knowledgeable experts in the field of the subject-matter being disputed.

 3.  Confidentiality

In general, the arbitration process is a private matter that allows participants to avoid disclosure of personal information, trade secrets, financial reports and other nonpublic information.  Unlike court proceedings, arbitration is not part of any public record.  Some arbitration institutions impose a confidentiality requirement on the parties and on the arbitrator but there is no universal confidentiality requirement.  Parties that are concerned with confidentiality will want to include special provisions in their contract to ensure that both parties keep the arbitration process private.

4.  Brevity

In traditional litigation, procedural requirements, motion practice, adjournments and the availability of the right to appeal can result in disputes playing out for years without resolution.  While the length of any arbitration will depend on the complexity of the conflict, generally, arbitration will provide parties with a much quicker resolution of their dispute.  Unless the agreement provides otherwise, arbitration awards are final and cannot be appealed or overturned in the absence of a showing of extraordinary circumstances (for example, fraud, bias or other inappropriate actions on the part of the arbitrator).  Thus, once a decision is rendered, the matter is resolved.

 5.  Limited Expenses

Arbitration is perceived to be less expensive than traditional litigation.  This is because of the limited discovery, lack of appeal and ease of enforcing arbitration decisions.  However, the costs will vary significantly depending on the complexity of the arbitration and how the parties plan to conduct the arbitration (see the disadvantages below).  Depending on the chosen location and language for the arbitration, there will be additional costs for transportation (parties, witnesses and documents), translators and the translation of documents.  Parties will also have to pay the fees and expenses of the arbitrator.  If an arbitration institution is used, there will be additional fees.  Similar to litigation, an award may dictate that the prevailing party may be reimbursed for these fees by the losing party.

DISADVANTAGES OVER COURT-BASED ADJUDICATION

The disadvantages of arbitration stem from the same characteristics as the advantages listed above.

1. Finality of Awards 

Arbitration takes decision-making power away from the parties.  As noted, once a decision is rendered it is not appealable as of right and the parties are generally bound to the award of the arbitrator.  Without the right to appeal, there is always the risk of being subject to the whims and prejudices of a single arbitrator.

2. Potentially High Fees

The more professional and knowledgeable an arbitrator is, the higher her fees are likely to be.  If the fees are not limited in advance, the costs of arbitration can exceed the costs of a court-based adjudication.  It is therefore recommended to agree to a fee structure at the outset of the arbitration process.  Also court fees are typically lower than the registration fee of arbitration organizations.

3. Dispute over Arbitrator Selection

Unless agreed upon in advance, the process for selecting an arbitration institution, the specific arbitrator and the number of arbitrators could significantly delay the arbitration process.  As in most cases, it is worthwhile considering these matters and making these decisions before a dispute arises.

4. International Challenges

An international arbitration may present the practical challenges associated with international business dealings, and while such challenges may be present in court-based adjudication, they are worth briefly noting. For example, an international arbitration may require learning the substantive law of a foreign jurisdiction, or new rules of procedure which may appear “backward” compared to any previous experience. In addition, challenges such as linguistic differences and the need for use of a translator (or even multiple translators) may further complicate and draw-out the arbitration proceeding. 

CONCLUSION

In the business world, where maintaining relationships is important and time is money, a quick resolution is often preferable.  As this article has highlighted, there are many advantages in providing for arbitration of disputes when conducting business with foreign partners.  If you are considering entering into a foreign business venture or would like to draft an arbitration provision for a current business venture, we recommend contacting an attorney who can help structure an agreement that is best suited to you as well as ensure that your interests are fully protected.

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Employer, Watch Out!

April 17th, 2011

By Hadas Raccah, Head of Labor Law at Shibolet

Employer – thought you can monitor any e-mail correspondence on company computers? Think again…

On February 8, 2011, Israel’s National Labor Court delivered a precedential ruling addressing the rules applying to employees and employers with respect to computer usage at the workplace, (Labor Appeal 90/08 Tali Isakov Inbar v. The Women’s Employment Law Commissioner et al).

Said court ruling made a distinction between different types of electronic mailboxes and set far-reaching rules of surveillance of such electronic mailboxes. The court ruling further determined the duty of employers to set rules and guidelines with respect to the usage of computers in the framework of an employment relationship.

For example, a private mailbox owned by the employee and usually located on an external server (such as Gmail, Hotmail, etc.) is considered by court as private property of the employee, and the employer is forbidden to use technological or other means to enter it or to monitor communications or content data therein. In the event that the employer believes that there are circumstances that justify surveillance of or entry into such employee’s private mailbox, it may not do so unless it has an appropriate court order (“Anton Piller”), which shall be granted solely in rare and extraordinary cases and upon the existence of the conditions required by law.

In light of the said court ruling, it is recommended to examine any existing procedures with regard to the employees’ usage of electronic communications in the framework of their employment.

It is further advised to examine what actions can be taken in any event in which there is a need to enter employees’ correspondence on computers allocated to them by the employer in light of said court ruling.

For more information about the said ruling, you are invited to read

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Shedding Light on Green Building

April 3rd, 2011

By Anat Lahovitsky

Wikipedia currently defines a green building as ‘an outcome of a design philosophy which focuses on increasing the efficiency of resource use — energy, water, and materials — while reducing building impacts on human health and the environment during the building’s lifecycle, through better siting, design, construction, operation, maintenance, and removal.’

The green building concept is part of a variety of projects initiated by various authorities, NGOs and activists to promote buildings, neighborhoods, and cities to be healthier and more comfortable places to live and work in. The green building concept, adapts these public notions on a building level, attempting to foster urban and suburban landscapes that are environmentally friendly for their surroundings through efficient, effective and non-intrusive use of energy, water, materials, and land.

On a more practical level, green building developers will tend to use recycled or recyclable materials, incorporate renewable and energy efficient power generation systems, tend to effectively control outdoor air ventilation systems, use non-toxic paints, finishes, adhesives, furniture and fabrics that do not negatively affect air quality or have any potential adverse effects on individual residents, use water resources more efficiently and produce less waste. Consequently, the owners of green properties are able to reduce some operation and maintenance costs, lower utility bills, reduce their impact on the environment and improve the wellbeing of the occupants.

New York was among the first states in the US to offer a tax incentive program for developers and builders of environmentally friendly buildings. The Green Building Tax Credit program, managed by the New York State Department of Environmental Conservation (DEC), provides for tax credits to owners and tenants of eligible buildings and tenant spaces which meet certain “green” standards. Some of the standards that need to be met to qualify for the “green” credit are as follows:

* Energy efficiency – no more than 65%-75% of energy use allowed under   The New York State Energy Conservation and Construction Code (depending on the type of building).
* Purchase of energy saving appliances and HVAC equipment.
* Indoor Air Quality – Ventilation and exchange of indoor/outdoor air; smoking areas; ventilation capable of purging two floors at a time; fresh air intake located away from sources of contamination; annual indoor air quality testing; carbon monoxide, carbon dioxide, volatile organic compounds, radon, and particulates.
* Mechanical Plant Commissioning.
* Facilitating recycling of wastes.
* Energy compliant plumbing fixtures.
* Building materials, finishes and furnishings.
* The size of the property – Generally, the property has to have at least 20,000 square feet of interior space.

In addition, the New York City Department of Design and Construction (DDC) published the High Performance Building Guidelines, an internationally recognized green building reference. A companion piece for roadway and underground infrastructure, the High Performance Infrastructure Guidelines, was one of the first of its kind in the world (both guidelines can be found at ).

While the Building Guidelines were in development, DDC launched a pilot program to incorporate sustainable features on several projects. By early 2008, more than 60 projects incorporating sustainable strategies were in design or construction, or were built.

Among the first buildings to be issued Credit Component Certificates in New York City were a condominium at 1400 5th Avenue, New York City, for which the sponsor, 1400 5th Avenue LLC, received a tax credit of over $1,500,000 and an office building at 959 8th Avenue, New York City, for which the sponsor, Hearst Communications, Inc., received a tax credit of $5,000,000.

On the federal level, the standards for green building are the LEED (Leadership in Energy and Environmental Design) standards, developed by the United States Green Building Council (USGBC). LEED is a third-party certification program and the nationally accepted benchmark for the design, construction and operation of high performance green buildings. LEED gives building owners and operators the tools they need to have an immediate and measurable impact on their buildings’ performance. LEED promotes a whole-building approach to sustainability by recognizing performance in five key areas of human and environmental health: Sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality.

The LEED standards provide developers with a straightforward checklist of criteria by which the ‘greenness’ of a building can be judged. Points are awarded in various categories, from energy use (up to 17 points) to water-efficiency (up to five points) to indoor environment quality (up to 15 points); the total then determines the building’s LEED rating. Extra points can be earned by installing particular features, such as renewable-energy generators or carbon-dioxide monitoring systems. A building that achieves a score of 39 points earns a “gold” rating; 52 points earns a “platinum” rating.

A gold-rated building is estimated to have reduced its environmental impact by 50% compared with an equivalent conventional building, and a platinum-rated building by over 70%. A typical green building can save up to 30% in energy; 35% in greenhouse gas emissions and up to 50% in water usage. Rating buildings in this way reveals how inefficient traditional buildings and building processes are.

All certified projects receive a LEED plaque, which is the nationally recognized symbol demonstrating that a building is environmentally responsible, profitable and a healthy place to live and work.

One of the current examples of green buildings in New York City to obtain the LEED certificate is the Bank of America Tower at One Bryant Park. It is a 1,200 feet skyscraper on Sixth Avenue, between 42nd and 43rd Street, opposite Bryant Park. It is the second tallest building in New York City, after the Empire State Building. It has been designed to be one of the most efficient and ecologically friendly buildings in the world.  The building is 54 stories high and has 2,100,000 square feet of office space.

The design of the building makes it environmentally friendly, using technologies such as floor-to-ceiling insulating glass to contain heat and maximize natural light, and an automatic daylight dimming system. The tower also features a greywater system, which captures rainwater and reuses it. Air entering the building is filtered, as is common, but the air exhausted is cleaned as well, and carbon dioxide sensors signal increased fresh air ventilation, when elevated levels of carbon dioxide are detected in the building. The occupants are provided with multiple air column units, enabling them to control their own space temperature as well as improve the ventilation effectiveness. The construction of the building contains about half of the concrete usually found in traditional buildings. The cooling system produces and stores ice during off-peak hours, and then uses ice phase transition to help cool the building during peak load. Water conservation features in the tower include waterless urinals, which are estimated to save 8 million gallons of water per year and reduce CO2 emissions by 144,000 pounds per year. The tower has a 4.6-megawatt cogeneration plant, which provides part of the base-load energy requirements. Onsite power generation reduces the significant electrical transmission losses that are typical of central power production plants. Bank of America also states that the building is made largely of recycled and recyclable materials. Bank of America Tower is the first skyscraper designed to attain a Platinum LEED Certification.

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Tips on How to Manage Your Legal Affairs in a Greener Manner

March 21st, 2011

In this post we provide business owners and executives dealing with attorneys and legal matters, with several tips on how to how to run the legal affairs of the company in a more environmentally-friendly manner.

1. Digital Archiving. Unless originals are required by law (e.g. notes, wills) or may be used as evidence in a formal proceeding, try to replace your paper folders, binders and space-consuming filing cabinets with a well-backed digital archive. A digital archive of scanned documents, saves paper and space while keeping the files available, even when you are out of the office, saving of mail and courier fees.

2. Greener Legal Correspondence. Legal related correspondence often involves lengthy documents, drafts and exhibits. Adopt a green habit by adding a short message to your emails suggesting that the recipient consider the environment before printing out your email and that if he or she does print the email, have the paper recycled.

3. Greener Workplace Practices. Work with firm’s employees on green provisions in the workplace and consider adding such provision to the company’s billboard or event employment handbook. Provision may include a statement of commitment to recycle, save energy and consider the environment before deciding to print.

4. Digital Signatures. Ask your attorney about recent digital signature laws, that allow binding digital execution on legal documents, eliminating the need for printing documents, faxing them or sending them out by regular mail and saving time, paper and energy.

5. Get a “Green Business” Certificate. Local authorities define a green business as one that operates in environmentally-friendly ways by adopting green principles, policies and practices. Each locale has different criteria, which a business must comply with, in order to be acknowledged as green. Having a “green certificate” is great as a marketing tool and may even provide governmental incentives and insurance benefits.

6. Enroll for Green Newsletters. There are several websites that send out periodic lists of green-friendly tips for workplaces and updates on recent business-related environmental rules and regulations on various levels.

7. Take Advantage of Legal Benefits. Talk to your tax attorney, accountant or book-keeper about constantly developing benefits for running a green business. In the US, many business owners participated in the “Cash for Clunkers” program, making their vehicles more environmentally-friendly. Take advantage of other tax incentives and grants.

8. Get a How-to-go-Green Manual. Several organizations have published manuals on how to adapt green habits, what green products are recommended, how to refit your business to be more energy efficient and what legal policies to adopt in your work place.

9. Think Green!

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Shareholder Oppression Claims – Not Always a Walk in the Park

March 6th, 2011

Posted by: Dani Rinot

Many boards of private companies in which a dispute exists between its shareholders find themselves in a state of unrest when approving the company value at which an internal round of equity financing will be carried out. This concern stems from the possibility that the minority shareholders will attempt to seek recourse from the courts on the basis that the round was not carried out at a “fair value”, thus constituting oppression of the minority shareholders. Generally, the Israeli law enables minority shareholders to base a claim of shareholder oppression where a company has acted in a way which deprives their rights.

A recent ruling rendered by the Israeli Supreme Court (Aaron Shechter vs Aeronautics Defense Systems Ltd.) demonstrates that the burden of proof necessary to invoke a shareholder oppression claim based on an undervalued issuance of shares is not always so easy. A few weeks after successfully completing an equity financing round, the board of directors of Aeronautics decided to carry out an additional investment round in order to meet its financial projections. Hence, the company circulated amongst its shareholders notices of such resolution allowing each shareholder to participate in the upcoming round pro-rata to his respective shareholdings in the company. One of the minority shareholders (the “Appellant”) notified the company that he wishes to make an investment in the company based on the company value determined in the preceding round. The case was brought before the Supreme Court after the minority shareholder’s claim was dismissed in the District Court.

The Appellant argued, inter alia, that the price per share applied in the initial round did not reflect a fair value for the company and therefore constitutes shareholder oppression. This argument was supported by the sharp increase in the price per share between the two rounds which were only a few weeks apart ($26.2 vs $47.8). Nevertheless, the court affirmed the District’s Court judgment in favor of Aeronautics. Although the issuance of shares at an unfair value may constitute, under certain circumstances, shareholder oppression, the Appellant has not presented any indication aside from the proximity of the two issuances that the price per share in the first round did not reflect a fair value for the company. The submission of an expert’s appraisal, for example, could have supported the Appellant’s claim.

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Visit Shibolet’s Art Gallery on the Firm’s Website

February 21st, 2011

Shibolet & Co. is proud to introduce its art collection on the firm’s website. This type of collection is a rarity among Israeli law firms, and we feel privileged to be the standard-bearer in this field. This collection of contemporary art faithfully reflects Israeli motifs coming into fruition.

Guests and clients who enter the firm’s offices and hallways are exposed to a rare exhibition of Israeli contemporary art, which is gaining ever growing recognition in Israel and around the world.

The Shibolet art collection consists of dozens of paintings and photographs by leading Israeli artists including Raffi Lavie, Moshe Gershuni, Yair Garbuz, Michal Na’aman, Tsibi Geva, David Reeb, Ido Bar-El, Gabriel Klasmer, Leonid Belaklav, Mosh Kashi, Gil Marco Shani, Alex Kremer, Asaf Ben Zvi, Khen Shish, Maya Gold, Ori Gersht, Tal Shochat, Roi Kuper, Amon Yariv, Shai Ignatz, Tamar Karavan, Tamar Amit and Gaston Zvi Ickowicz.

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Tragic Suicide Forces Israeli Legal System to Reexamine Heavy Case Loads

February 20th, 2011

Posted by: Efrat Elias

It is no secret that the Israeli courts are suffering from exceptionally heavy case loads for several reasons including the excessive number of cases opened in the courts, a shortage of judges, the profusion of lawyers in Israel, and various other causes.

Just recently, during a discussion regarding the tragic suicide of his Honor Moshe Ben Attar of the Jerusalem municipal court, this issue once again became the focus of the public agenda, and various data were revealed regarding the number of cases opened in the different courts, the courts’ levels, the number of cases assigned to each judge, the number of open cases that the judge must hear every day and more. During the discussion, the issue of ADR (Alternative Dispute Resolution) – offering the possibility of resolving disputes through alternative methods rather than court – was raised once again.

ADR – Alternate Dispute Resolution

One of the prominent ADR methods is arbitration, in which a neutral and objective arbitrator is appointed to resolve the dispute instead of the court, and his or her ruling is binding vis-à-vis the involved parties.

Another alternative method is ENE (Early Neutral Evaluation) in which a professional entity, also neutral and objective, is appointed. The evaluator provides an expert opinion including his or her preliminary evaluation regarding the conflict, thus enabling the parties to gauge the chances of their claims being accepted in court through a third party. This process is not binding.

The Advantages of Mediation

Another process which is not binding is mediation. A neutral and objective mediator is appointed whose role is to try to bring the parties to an agreement. The agreement shares the same status as a contract but the parties may agree to submit the agreement to the courts at the end of the mediation process in order to ensure that it is granted the validity of a ruling (although this is not necessary).

The mediator’s work is made up of several stages: To begin with, the mediator must learn the facts that are up for discussion and the positions of the parties from the parties themselves. After hearing these presentations, it is the mediator’s role to extract the issues for discussion which will constitute the basis for the mediation process. At this stage the mediator must make sure to gauge the parties’ interests, because the latter motivate their actions and omissions, as well as the way they choose to present their positions. In most cases, this process takes place during a meeting of all of the involved parties.

Following the initial joint meeting, the mediator holds subsequent meetings with each party separately. These meetings are confidential and the mediator is not allowed to divulge their content to the other party. This fact enables the party to present the mediator with additional facts, positions and interests which he does not want to share with the other party. Following the separate meetings, the mediator possesses all of the information he or she needs to attempt to formulate an agreement between the parties.

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PRIVATE EQUITY RECENT DEVELOPMENTS & TRENDS

July 5th, 2010

Posted by: Yaacov Yisraeli, senior partner:

The world economic crisis is not over yet, although it has already left different effects in different locations. In July 2010, one can safely indicate several general conclusions  concerning changes in  the Private Equity industry.

  • Mega deals – belong to history

Shortage of financing, loss of confidence among investors and lending institutions, fear from long term engagement and other reasons convinced today’s investors to focus on mid-size and small deals.

  • No flips, no quick exits

For all the above reasons, and others, such as the negative effect created on the stock markets around the world, more attention is already being paid to working with the portfolio companies in a serious and professional effort to increase their value. That means that the private equity staff shall need to be less general in their approach, more specialized, their professional staff will have to spend more time with their portfolio companies in the attempt to increase their value. Once the IPO market opens up again one may expect to be faced with a new brand of investors, who ask for more, who are  more choosy, hesitant, and much more demanding.

  • More regulatory demands

As already noted in the US and to a lesser extent in some European countries, one may expect more regulatory demand, primarily directed at public companies, but some of which may have an effect over management conduct in private companies as well. That may raise the risk level of directors and officers, lead to the adoption of more detailed compliance programs and may require additional legal counsel and assistance and inflict additional cost on the company.

  • Changes in the exit strategies

The depressed IPO’s market, as already mentioned,  forces private equity investors to think harder and earlier about their exit strategy in each particular case. Some of the markets either remain reasonably active (in some of the Asian capitals for example) or become reasonably active again recently, and that still presents for an exit opportunity. However one may expect that such market which became active again shall behave differently. The institutional investors are expected to be more cautious and more demanding. They will be questioning more the company’s potential and they will be pushing hard the price per share down. Other potential exits may rarely include holding companies buying just for the sake of enlarging their portfolios, as was often the case in the past. Under the new circumstances a purchase of a portfolio company may still be expected by another company or a group of companies for commercial reasons (such as buying complementary technology or line of products, easing on competition, or for other strategic reasons. As already mentioned, one should be prepared to stay with the company for a longer period of time and invest more in raising its value, before one contemplates an exit.

Due to the above described slow down and changes concerning exits, it is expected that private equity as well as other investors, when checking new investment opportunities, will be looking harder for profitability of each potential portfolio company and its capability to steadily distribute dividends, bearing in mind the longer exit time and the anticipated pressure of its own investors.

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Photovoltaic Power Plants in Israel – a reality?

June 28th, 2010

Posted by: Richard M. Roberts, senior partner

Several years ago the Israeli Government resolved to reduce dependence upon fossil fuels by 10% by 2014.

Some of the Ministries have taken action to achieve that goal, however, the regulatory bodies required in order to implement it are dragging their feet so that at this time it is unlikely that the original goal will be achieved in the time frame designated therefor.

  • The Israel Land Authority, the owner of more than 90% of Israel’s land, has recently adopted a resolution which has thrown a wrench into the works by deciding that Kibbutz land leased in order to erect p.v. plants will require the Kibbutz to be at least a 26% owner of the project. There are very few (if any) Kibbutzim that have sufficient funds in order to make investments of that magnitude and the other investors cannot justify giving the Kibbutz a “free-ride”. In order to resolve this new issue it most likely will be necessary to file an application to the High Court of Justice and seek its ruling on the matter. Many of the potential p.v. sites are on Kibbutz lands.
  • The Ministry of Interior has raised many issues with respect to the town planning and zoning aspects required to erect photovoltaic power plants.
  • The Public Utility Authority – Electricity (“PUA“) has been going back and forth on determining the quota of megawatts to be produced using photovoltaic power in given periods of time with the limit for small units (up to 50 KW) initially being determined to be 30 MW, to being unlimited (at least with respect to units being established in the peripheral areas of Israel) and now they are trying to limit that determination, so it has now become unclear as to what will be the limit. The present limit for medium size plants (up to 5Mw) is 300Mw for the coming 2 years. There are many people vying to be included in that quota.
  • Plants that are larger than 650 KW require a feasibility study from the Israel Electric Corporation (“IEC”)(the monopoly for producing and transmitting electricity in Israel) as well as a Power Purchase Agreement (“PPA“) to be signed between IEC and each producer. IEC does not have the manpower to prepare the feasibility study in a timely fashion and the draft PPA which they prepared is now being reviewed by PUA and is subject to its approval.
  • Some local authorities are attempting to levy local rates which will make it economically unfeasible to carry out the project.
  • Recently, one of the developers of photovoltaic plants has filed an application to the District Court to enjoin many local town planning authorities from approving photovoltaic installations on land in their jurisdictions, which will give that developer an advantage in the race to benefit from the quota of 300 MW approved by the PUA for medium sized plants since that developer has acquired rights to rooftop installations . The preliminary hearing is scheduled to be held in the District Court of BeerSheba later this month.

Having said that, the first medium size plant (5 MW) will be built in Kibbutz Ketura located in the Arava, one of preferred locations as far as radiation is concerned (in excess of 2,200 hours annually).

Our firm represents Arava, the developer and owner of the new power plant (which will be erected by a special purpose vehicle, Ketura Sun LP, the ownership of which will be: Kibbutz Ketura – 26% and the balance by Siemens Projects Ventures, Yosef Abramovitz – founder of Arava and other investors from Israel and abroad.

All of the regulatory approvals and the project finance agreement are in the last stages of approval with financial closing scheduled for this month.

We will keep you updated as to the progress of this pioneering project.

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