Israel Moves to Ease Class-Action Burden on Small Businesses

By Gastón Saidman

Small businesses in Israel could soon receive greater protection from class-action lawsuits under a proposed reform that has advanced in the Knesset.

The legislation seeks to address a concern raised by business representatives: that relatively small companies can face legal expenses and pressure that are disproportionate to the underlying issue, particularly when a problem could be corrected quickly.

Under the version that advanced in a joint Knesset committee, businesses with annual turnover of up to NIS 9 million would be excluded from the scope of the Class Actions Law. The threshold would also be linked to inflation, following a request by the Federation of Israeli Chambers of Commerce, so that it does not gradually lose its real value.

The threshold has been one of the points of discussion during the legislative process. Business representatives had pushed for a higher limit, arguing that the protection should extend to a broader range of small and medium-sized enterprises. The committee ultimately moved forward with the NIS 9 million threshold.

The proposal would also change the procedure for certain class-action claims by requiring claimants to notify a business before filing a lawsuit. Once notified, the business would have 60 days to address and correct the alleged violation before a class action could proceed.

The measure has drawn support from business organizations, while legal and consumer representatives have raised concerns about how the changes could affect the ability of individuals to enforce their rights through class actions.

Shahar Turgeman, president of the Federation of Israeli Chambers of Commerce, captured the business community’s position during the discussion with a pointed analogy: “The nuclear weapon of the law should not be used against a small business.”

The reform is intended to strike a balance between consumer protection and the economic realities faced by smaller companies. Supporters argue that giving businesses an opportunity to correct relatively minor violations before litigation can reduce unnecessary legal costs while still preserving consumers’ rights.

The proposal has not yet become law. After the committee stage, it must still go through the remaining legislative process and receive final approval by the Knesset.