The State of Israel has two official languages – Hebrew and Arabic. As a result, in recent years the Israeli Companies Registrar has held that all documents submitted to the Registrar have to be submitted in either of these official languages. If a document was submitted in English it would be rejected. Such documents include the constitutional documents – the articles of association of Israeli companies and debentures creating pledges over the assets of such companies.
The unfortunate result is that Israeli companies receiving foreign investment often negotiate the investment documents in English, and then have these translated into Hebrew for submission to the Israeli Companies Registrar; the Hebrew translation is then deemed to be the binding document. This process is both time consuming and costly.
More importantly, no translation is perfect, and where the translation is not completely true to the original, or where the words used are open to different interpretations in their respective languages, such requirement can lead to uncertainty and injury to the contracting parties’ rights.
For years Israeli lawyers have tried to find creative solutions to overcome this predicament. For example summarizing the material terms in Hebrew and referring to the English original where there is a lacuna, or submitting both the English original and the Hebrew translation, and including a provision that where there is a contradiction between the two the English language will prevail. Unfortunately these techniques have not always been accepted. Our office has had almost identical requests for different clients both accepted and rejected by the Israeli Companies Registrar.
In light of this uncertainty, at the beginning of December 2015, the Ministry of Justice published a new draft bill. The draft proposes that Israeli private and public companies should be able to submit such documents in English. The bill also provides that where documents are submitted in English, the submitting company will be required to include a translation in Hebrew. However, such translation will be for convenience purposes only, and the English language document will prevail. The rationale is to ensure that the Israeli public who are relying on these documents, and do not have a high command of the English language, will still be able to understand their nature.
The Ministry of Justice explained its proposed bill by acknowledging that English is a common language, widely spoken in Israel, moreover it is the prevailing language in international business and the high tech world; investors are used to negotiating and drafting their agreements in English. The aim is to ease the process for foreign parties interested in investing in Israeli business and participating in Israel’s high tech story.
If the law is passed, although the headache of translating such submissions will remain, the uncertainty will hopefully disappear.