In a recent client update we elaborated on a decision of the Israeli Antitrust Authority ("IAA") that raised some questions concerning the participation of non-Israeli financial Institutions in financing consortia related to Israel.

The IAA put some of these questions to rest this week in its new letter [Hebrew] describing its policy on consortia agreements and expressly applying its policy to international financing entities acting in Israel.
Hereinafter is a short explanation:

  • The IAA's position is that a financing consortium may constitute a "restrictive arrangement" under the Restrictive Trade Practices Law, 1988 the ("RTPL").   
  • Since 2002, the issue is regulated by no-action letters confirming that the IAA will not enforce the RTPL on consortium arrangements which comply with certain conditions. 
  • The most recent of these letters was issued on December 31, 2015 (the "New Letter"). This letter contains several changes compared to its predecessors: The first and foremost change is that the New Letter expressly relates to institutional entities and banks organized outside Israel. More specifically, while the former letters applied expressly only to "parties" who were "banking corporations" under the Banking Law (Licensing), 1981 and "institutional bodies" under the Control of Financial Services (Insurance) Law, 1981, in the New Letter, "parties" are clearly defined to include "similar entities incorporated outside Israel". 
  • The condition prohibiting exchange of information between the parties of the consortium, except with regard to the consortium itself, was removed. However, and as the IAA notes, this does not mean that broader exchange of information is now permitted, but rather that the usual rules pertaining to exchange of information between competitors apply in this respect. 
  • The New Letter also changes some of the components of reporting requirements to the IAA. Reporting requirements apply to all parties of the consortium, including entities incorporated outside Israel. A reporting format was included for the first time detailing the information which must be reported to the IAA. 
  • Nonetheless, and as noted in our previous update, the IAA policy is only relevant to consortiums which may be considered "restrictive arrangements" and to which the RTPL is applicable. The IAA does not elaborate when a consortium agreement will be considered a "restrictive arrangement" under the RTPL. In our opinion, the RTPL can only apply to consortium agreements which have significant nexus to Israel. As we elaborated in our previous client update, evaluation of such matter will require examining, for example, whether the financing is marketed in Israel; whether a considerable number of the lenders are Israeli; whether the relevant project or transaction will take place in Israel; and whether the borrower is Israeli.