Welcome to the second edition of IsraelDesks - our bimonthly magazine focused on bringing Israeli law firms and International firms with Israel Desks closer together.
June Edition IsraelDesks 2019 Presented by In Partnership with In this Edition Welcome to the second edition of IsraelDesks - our bimonthly magazine focused on bringing Israeli law firms and International firms with Israel Desks closer together. Innovative and international in outlook, this magazine focuses on the most cutting-edge sectors, increasingly prominent jurisdictions, relevant news and conferences and introduce you to who you need to know to help your clients. In this edition, we share with you professional insights and experience of the auto tech industry after the recent EcoMotion conference in Tel Aviv saw the attendance of almost 4,000 participants from 44 countries. We also shine the spotlight too on Israel's growing closeness with a seasoned veteran of the automobile industry - Japan - and explore the opportunities for collaboration, bringing Israeli and international counsel, clients and investors closer together. IsraelDesks Industry Focus | AutoTech Jurisdiction in the Spotlight | Japan Recent Market Trends | The US-Israel Legal Review 2019 GC in the Spotlight | In-House Counsel: Technology Roundtable From One Desk to Another »» IsraelDesks News from Around the Globe »» IsraelDesks News from Israel »» Roundup of Market Trends and News from Israeli Financial Pres (April-June 2019) Table of Contents 04 10 18 26 32 5 Industry Focus Auto Tech With more than 600 smart car and transport start-ups, up from less than 100 in 2013, Israel is leading the mobility and smart transport technologies. For a country without a single auto assembly line, it is astonishing that it is today a leader in fields such as automation and connectivity, urban mobility, shared mobility and electrification. This June, Renault and Nissan inaugurated a new facility for a joint innovation lab in Tel Aviv, focused on sensors for autonomous driving, cybersecurity, and big data. Also, in June, Ford opened its Ford Research Center in the city, focused on identifying technology partners in relation to connectivity, sensors, in-vehicle monitoring, and cybersecurity. BMW, General Motors, Honda, Uber, Volkswagen and Volvo have been investing in Israeli technology since 2016, while Mercedes-Benz, Hyundai and German mapping company HERE Technologies also operate local innovation centers. These companies understand that Israel’s involvement is only likely to get larger and larger in the years to come. “The unique lack of hierarchy in Israeli businesses, born out of shared military service, is the “spark” that creates innovation,” said Bill Ford, the executive chairman of U.S. giant Ford Motor Company, in his keynote speech at the annual EcoMotion event. At this month’s four-day conference, which welcomed 5,000 visitors and more than 130 start-ups, he added that “carmakers must encourage disruptors and start-ups, and join forces with them.” Having entered the field with the now-defunct electric car company Better Place, Israel was the birthplace of both Waze and Mobileye, two of the biggest recent success stories in automotive tech. Google’s USD 1 billion purchase of Ra’anana-based mapping company Waze in 2013 and Intel’s 2018 acquisition of self-driving car technology powerhouse Mobileye, located in Jerusalem, for a staggering USD 15.3 billion are credited with putting Israel’s automotive tech scene firmly on the map. Auto Tech Moving Into The Fast Lane Lack of Hierarchy Sparks Innovation 6 7 The Israeli auto-tech sector has raised USD 500 million so far in 2019, with automotive technologies in demand include autonomous vehicles, artificial intelligence (“AI”) and Internet of Things in cars, new materials and alternative fuels, as well as cyber protection, a particularly competitive market. Cyber defense is regarded as especially critical for autonomous vehicles, and the market in Israel is highly competitive, with the country able to tap into a highly developed cyber defense technology and a major knowledge pool. This was underlined in 2017 by the USD 450 million sale of Israel’s Argus Cyber Security to Germany’s Continental AG, while the appeal of AI was appealing to Porsche, which invested an “eight-figure sum” in the Israeli venture capital funds Magma Venture and Grove Ventures, both focused on the use of AI in different uses for the automotive sector. “The automotive and mobility industries are attracting a lot of interest from foreign investors, both financial and strategic,” said Yaniv Aronowich, a Tel Aviv partner and Sector Leader of the Transport and Aviation group at Tadmor & Co. Yuval Levy & Co., EcoMotion’s Israeli legal partner for six years running. “Between 2016-2018 these industries raised almost USD 2 billion in more than 100 financing transactions. It is also interesting to see new players that are not traditional automotive investors, such as insurance, aviation and general IT companies looking to invest in the automotive area.” There have been fewer direct investments from the auto-industry and more investments from venture capital funds, compared to previous years. The high valuation of some auto-tech companies, the length of time needed for autonomous driving and the China-US trade war are key factors in the thought processes of auto manufacturers, according to a recent article in Globes, but investors and investment funds are stepping in from outside the and outside the sector. This March, for example, Israeli car laser sensor company Innoviz raised USD 132 million in a series C round led by Chinese funds China Merchants SINOBLR Capital Management and Shenzhen Capital Group and New Alliance Capital, as well as Israeli investment institutions, Harel Insurance Investments and Financial Services and Phoenix Holdings. “Israeli start-ups are still at the forefront, but they now have much tougher competition. Areas such as imaging, LIDAR and navigation have become crowded, and companies in these fields have to think of how they are going to differentiate their product or service. While it is challenging for investors to sift through the multitude of opportunities, Israel's close-knit community makes it relatively easy to find business partners, including such that could act as “first look” agents and try to find a right match for an investor, adds Aronowich. In agreement is Dr Mathias Reif, head of Corporate & M&A in Germany and global head of DWF's Israel Desk. “Israel has an unrivalled reputation as a pioneer in technology associated with autonomous vehicles, electrification, connected cars and shared transport. Those entities involved in the automotive industry recognize that in Israel the focus is on sensors and cybersecurity. Europe and its car companies are increasingly feeling the pressure not to be left behind and thus are searching with huge effort to close the innovation gap to the “new kids on the block”. It is therefore no surprise that nearly weekly we sign up Israeli companies as clients in this sector and work with them to be successful in Europe,” adds fellow partner, Jonathan Moss, head of DWF’s Transport sector. “There has been a slow shift from investments in more hardware-based companies, to software-based technologies. These include autonomous technologies, e-mobility and AI. I believe that the next wave of investments will be in AI-related technologies, as well as in smart mobility cross-platform solutions,” notes Aronowich. DWF’s Moss adds “vehicle cybersecurity and satellite navigation systems are where the striking opportunities lie. Autotech is a developed subsector of the automotive industry and radar technology and the systems which detect sleepy drivers are very exciting.” Lack of Hierarchy Sparks Innovation Israeli Start-Ups Face Tougher Competition More Investments from Venture Capital Funds 8 9 Persistent Challenges of Regulation To realize the full potential, regulation needs to catch up. “Israeli regulation is lagging behind. Shared transportation solutions are generally banned, and there is not enough awareness for implementation of new technologies from the government’s side. Having said that, two recent regulatory developments now enable ride sharing (to a certain – very limited – extent), and in addition a “regulatory sandbox” for testing autonomous and other technologies has been created,” said Aronowich. Furthermore, he goes on to say “the Israeli government operates a broad range of measures that stimulate the founding and growth of new businesses. These include extensive financial R&D support programs, marketing and networking institutions, and tax-reduction programs. In January 2017, the government of Israel approved approximately USD 55 million to be spread over five years as part of the National Plan for the Development of Smart Transportation.” Support in the European Union is critical too. “The EU recognizes that the automotive industry is crucial for Europe's prosperity. The sector provides jobs for 12 million people and accounts for 4% of the EU's GDP. The EU Is among the world's biggest producers of motor vehicles and the sector represents the largest private investor in R&D. The European Commission has also more than doubled funds available for "cooperative" research and innovation in the automotive sector for the period 2014 – 2020,” said Reif. “There has also been large investment in autonomous driving as a result of the UK inviting trials of the technology,” points out Simon Garbett, a London partner in Squire Patton Boggs' Automotive sector. He adds that a reported £500 million has been invested by the automotive industry, technology companies and the UK government into connected and automated vehicle (“CAV”) R&D and testing. “Universities in the UK have invested in research and development and there are many examples of partnerships between manufacturers, universities, technology companies and government bodies.” While Israel’s involvement in the industry may not historically match that of the UK, Germany, or Detroit, birthplace of Ford, the growth of diversity of investment in Israeli technology is turning it into an ever-important player. Exciting times lie ahead. Key Industry Bodies to Know The Israel Innovation Authority (IIA) - The IIA program aims at encouraging and stimulating research and development by new businesses, offering support for the first two to two-and-a-half years. Applications to the IIA program pass through a highly structured threemonth evaluation process in which the level of innovation and business potential is evaluated. Several start-ups have used positive feedback from the IIA as a "quality seal" to convince venture capitalists to invest in them. Drive – is a state-of-the-art acceleration hub founded by Mayer Cars and Trucks Ltd. which runs acceleration programs for start-ups, introduces them to investors, and takes them on international road shows. Drive also has a roster of top-notch mentors for its start-up companies. EcoMotion – Israel’s “smart transportation community”, serving as the umbrella organization for Israel’s 600+ startups in anything transportation-related. Ecomotion’s annual main event attracts thousands of attendees, including many top brass executives from multinational OEMs and Tier 1s. Fuel Choices Summit is a major fixture on the event calendar, exploring innovation in alternative fuels and smart mobility. It is held annually in October/November in Tel Aviv. 11 Jurisdiction in the Spotlight Japan In January 2019, approximately 200 representatives from nearly 100 Japanese companies, including Mitsubishi and Toshiba, accompanied the Japanese Minister of the Economy, Hiroshige Seko to Israel. They attended meetings of the Japan Israel Innovation Network (“JIIN”), whose goal is to advance and strengthen economic cooperation between Japan and Israel and which has organized business networking for more than 1,000 companies through more than 50 events. And certainly, there are strong grounds for optimism. When Japanese Prime Minister Abe visited Israel in May 2018, he announced that economic relations of the two countries was developing at an exponential level. Compared to the time the second Abe Administration started in 2012, the number of Japanese companies in Israel increased almost three-fold from 25 to 70, and Japanese investment in Israel increased from 1.1 billion yen to 130 billion yen, a 120-times increase. Clear government support was a strong factor. In 2017, Israel and Japan signed and ratified a Bilateral Agreement for Liberalization, Promotion and Protection of Investments, offering protections from one country to the other. Other cooperation agreements were signed in 2017, promoting increased cooperation among government bodies, economic organizations and companies across a wide range of sectors, including in artificial intelligence (“AI”), robotics, Internet of things and autonomous driving, as well as life sciences, space, industrial research and agriculture science. One key agreement calls for increased investments and joint activity in the field of cybersecurity, especially with one eye on the 2020 Tokyo Olympics, next July. Such collaborations are hardly surprising given the interests and strengths of these two technological titans. “It is often said that Israel is turning from a start-up nation into a scale-up nation. Scaling up is what Japanese companies are best at, so the opportunities for the commercial connection between the two countries are expanding further,” said Motoki Kurita – Commercial Attaché at the Embassy of Japan in Tel Aviv. The Land of the Ever-Rising Sun: Japan and Israel 120-fold increase in Japanese investment in Israel, and rising 12 13 Cyber and Automotive increase their share Biggest Deal to Date in 2017 – OVER USD 1 billion Quoting data compiled by consultants Harel Hertz Investment House, an investment company focusing on Japan-Israel, Mr. Kurita adds: “Japanese companies and VCs invested in Israeli companies mostly in the field of IT (53%) and semiconductor (12%) from 2001 by 2014. But since 2015, when Prime Minister Abe visited Israel for the first time, the variety of the investment sector has been obviously getting wider. The portion of IT decreased (18%), and other sectors such as Cyber (16%), pharma (12%) and automotive (7%) increased their share.” Among a number of major Israeli law firms with strong Japan and cross-border practices, there is also agreement. Israeli powerhouses Herzog Fox Neeman (“HFN”) and Yigal Arnon have seen similar trends. “The number of Japanese companies interested in the Israeli innovation, as well as in collaborations with Israeli academic institutions and companies in the private sector, is growing steadily,” said Gilad Majerowicz, head of HFN's Japan Practice. “The main fields of interest we have seen in the past two years are cybersecurity, automotive technologies, digital healthcare, artificial intelligence (“AI”), big data/data processing, and industrial technologies (Industry 4.0).” Peter Sugarman and Eliran Furman, co-heads of Yigal Arnon's Japan Practice agree, adding: “there is also a more general interest in innovative technology in the fields of drones, food tech and agri-tech.” Certainly, investments in technology have typically led the way. “In many cases, I still see outbound and inbound investments in technology, including Fin-Tech, AI, and healthcare, said Makiko Kawamura, partner and head of Tax in the Tokyo office of global law firm DLA, which has a strong Israel practice. “We also see that Japanese companies go to Israel to establish an R&D center, and hire local talent with expertise in these areas,” she adds. Since Japan’s Rakuten paid USD 900 million for Israeli instant messaging software Viber in 2014, Sony has bought Altair Semiconductor, developer of LTE chipsets, for USD 220 million, Canon bought Briefcam for USD 90 million, and there has been the largest deal to date involving Israel and Japan - the USD 1.1 billion acquisition of the Israeli biotech company Neuroderm by Mitsubishi Tanabe Pharma, in July 2017. According to a recent Times of Israel article, in 2018, Japanese firms invested in and acquired Israeli start-ups and tech companies for more than USD 790 million in 28 deals, and so far in 2019 there have been 13 announced investments for a total of USD 38 million. “The big story, though, is the increase in strategic investments by major Japanese corporations in Israeli start-ups, which in many cases, include also a significant commercial collaboration, whether through an exclusive distribution or licensing arrangement, a joint R&D effort or other types of collaborations,” adds HFN’s Majerowicz. In Japan, despite the dominance of huge conglomerates, such as Panasonic and Mitsubishi, there are concerted efforts to create a fertile breeding ground for start-ups. Since 2011, mayor of the city of Fukuoka, Sōichirō Takashima has been at the heart of efforts to position this fast-growing city, 1,000 kilometers west of Tokyo, as Japan’s Silicon Valley. Despite the country’s reputation for hi-tech wizardry, Japan’s start-up scene remains surprisingly low, and Japan’s number of unicorns - a private company valued at over USD 1 billion – is less than Israel, with just one unicorn – Preferred Networks. Israel has four – Gett, Infinidat, ironSource and OrCam Technologies, according to CB Insights (May 2019). The U.S. (172) leads with China in 2nd (89) and UK in 3rd (17). In Fukuoka, Japan, there have been cooperation deals signed between leading business delegations and start-up hubs like San Francisco, Taipei and Helsinki, which provide support and introductions for Fukuoka start-ups looking to expand abroad or foreign start-ups looking to enter Japan. This too is where Israel can step in. The Start-Up Nation to help the Not Long Started. Japan does have serious issues to address. “We would like to promote the collaboration between the two countries especially in the field of digital health,” says Mr. Kurita. “Japanese society is getting older and older and it is getting more and more important to keep the society healthy. We have to focus on preventive medicine and improvement of habits of lifestyle and there are a lot of businesses focusing on these. Israel has been collecting digital records of individual health data for around 20 years. So, both Israeli digital-health technology itself and this infrastructure is attractive to Japanese companies.” “We believe that Israel’s strong technology core and innovation can play a significant part in offering solutions in these areas,” add Sugarman and Furman at Yigal Arnon. “To date, only a few Israeli companies have been able to penetrate the Japanese market, although we believe that there is a growing realization of the vast potential of this market, in terms of commercial cooperation, customer base, industry expertise, and investment.” 14 15 As El Al launches three direct weekly flights between Tel Aviv and Tokyo from March 2020, “Israeli businesses looking to enter the Japanese market should do it based on existing technologies and products, and adjust them to the market needs, as opposed to first selecting a field of business to focus on in Japan,” advises Majerowicz at HFN, while Sugarman and Furman at Yigal Arnon point out that Japan's sophisticated banking and financial sector could become a new source of liquidity for established Israeli businesses with a global footprint.” Whatever the strategy companies decide, the sun looks set to keep rising in the east, for quite some time. 6 5 9 7 12 13 37 37 25.7 19.5 105.5 1,251.0 197.8 1,511.0 2,156.5 635.5 25 25 25 30 36 57 64 71 0 10 20 30 40 50 60 70 80 0.0 500.0 1,000.0 1,500.0 2,000.0 2,500.0 2011 2012 2013 2014 2015 2016 2017 2018 number of investment amount of investment, M$ Japanese companies in Israel 33 out of 71 have Japanese staffs. (source) number of Japanese companies: Ministry of Foreign Affairs of Japan Number and amount of investment: Harel-Hertz Investment House Ltd. (source) Ministry of Finance of Japan (source) Central Bureau of Statistics of Israel and Japan National Tourism organization Economic Relations between Japan and Israel Japanese Companies in Israel and Investment in Israel by Japan Amount of Trade between Japan and Israel Visitors between Japan and Israel 1,736 1,141 1,493 1,8281 ,826 2,142 2,289 2,387 861 940 1,0791 ,170 1,4151 ,416 955 1,549 2,597 2,081 2,572 2,998 3,241 3,558 3,244 3,936 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 0 500 1,000 1,500 2,000 2,500 3,000 2011 2012 2013 2014 2015 2016 2017 2018 JPN→ISR ISR→JPN I貿n t易ot総al額 （100M \） 8,329 16,247 13,344 10,152 12,186 17,900 19,600 11,334 13,173 12,205 14,189 6,931 10,415 18,808 21,928 29,436 32,758 39,193 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ISR→JPN JPN→ISR 8,329 16,247 13,344 10,152 12,186 17,900 19,600 11,334 13,173 12,205 14,189 6,931 10,415 18,808 21,928 29,436 32,758 39,193 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ISR→JPN JPN→ISR 16 17 Japan-Israel Innovation Network 2.0 Digital Healthcare Subcommittee - Knowledge sharing/Business seminars Japan Israel Innovation Network (JIIN) is a platform by governments/economic organizations to strengthening business relations between Japan/Israel. In 2018, JIIN has done business networking for [1,000+] companies through organizing 50 events including 9 business missions and 41 business seminars. Japan-Israel Innovation Network 2.0 Existing Function of JIIN New Approach - Hands on support to companies Digital Health Gateway - Hands on support to companies On 15 Jan 2019, both governments welcomed strengthening the function of JIIN to further promote investment / trade between the two countries. Establish “JIIN Hub” as front office in Tel Aviv to provide hands-on support to companies developing business in Japan/Israel. Establish “Digital Health Gateway(DHG)” in both countries to provide hands-on support to companies developing business in Japan/Israel in the field of digital health. Establish two subcommittees under JIIN; (1) Investment Subcommittee and (2) Digital Healthcare Subcommittee, to support activities of JIIN Hub/DHG through sharing knowledge and holding business seminars. Investment Subcommittee - Knowledge sharing/Business seminars P A R T N E R S & C O A F INE S PACE FOR L AWYERS YOUR OFFICE IN TEL AVIV A new initiative for international law firms PARTNERS & CO are proud to invite you to join an exclusive network, consisting of Israel’s prestigious lawyers and law firms. Our offices are located at the heart of Tel Aviv. Make your firm more approachable to the Israeli market and enhance your professional work environment in Israel. CONTACT US FOR MORE INFORMATION [email protected] • +972 (54) 522 5280 • +972 (03) 509 6000 CONCIERGE SERVICES BUSINESS ADMIN SUPPORT LOUNGE LOCAL PHONE AND EMAIL CONFERENCE ROOMS & EVENTS OFFICE SPACE 19 Recent Market Trends The US-Israel Legal Review 2019 Read the digital version Nishlis Legal Marketing and Global Legal Media in association with ACC– Israel, are delighted to introduce the inaugural issue of The US-Israel Legal Review, an annual guide which takes a deep dive into the bilateral commercial relationship between America and Israel and explores the legal and regulatory issues arising from this dynamic. The Review includes the first ever Israel Desks League Tables, showcasing those international law firms involved in Israeli deals and with Israeli clients; a GC Technology Roundtable; and chapters from Israeli and US law firms illuminate a full range of issues arising from the US–Israeli commercial relationship. Read more. 21 Doing Business in the Ever-Changing Israeli Legal System This article by Ezra Gross and David Osborne of Yigal Arnon & Co. focuses on several areas which should not be overlooked by U.S. and other foreign lawyers when engaging Israeli law firms for specialist advice in the context of investments and M&A transactions involving Israeli targets. The article also highlights certain important new legislative changes which demonstrate the fluidity of the Israeli legislature and then refer to other aspects generally relevant for transactions in Israel. Read more. Israel Desks League Tables: The Results Nishlis Legal Marketing and Global Legal Media, publishers of The US-Israel Legal Review 2019, are absolutely thrilled to bring you the first ever Israel Desks League Tables, showcasing those law firms that are not only involved in Israeli deals and with Israeli clients, but also with a deep understanding of market trends, of their clients’ opportunities, and the challenges to overcome. After an extensive period of meetings, data collection and analysis, we would like to thank more than a third of all the 100 international law firms with an Israel Desk around the world for submitting a range of deals in M&A, high-tech, VC and private equity, real estate, and more – all helping to showcase their immense expertise to a hungry Israeli audience with a healthy appetite for international deals. Read more. Trusts and Estates in Israel Inheritance procedure in Israel is complex. In a situation where a US person owns assets in Israel, or an Israeli resident owns assets in the US, a separate procedure must be executed in each jurisdiction. The creation of a trust may provide a good alternative, especially if the person wishes that his or her assets will be managed in accordance with his or her instructions for a relatively long period of time after his death. However, tax implications and possible conflict of laws should be taken into consideration when deciding the best course of action. Dr. Alon Kaplan of Alon Kaplan and Meytal Liberman of Herzog Fox & Neeman navigate through the complexities in this article which appears in The US-Israel Legal Review 2019. Read more. Risk Allocation and Management in PPP Projects from a Legal Perspective Over the past 20 years and especially in the past decade, Israel has made enormous progress in the field of initiation and performance of large-scale, capital-intensive, infrastructure projects utilizing the Private Finance Initiative / “Build Operate Transfer” Projects model. Nadia Davidzon, partner and head of Infrastructure, Energy and Project Finance at Amit, Pollak, Matalon & Co., outlines some of the most common major risks in the Public Private Partnership / PFI / BOT projects field, and how to mitigate them. Read more. US Commercial Real Estate Transactions: Trends for 2019 2018 was another strong year for global commercial real estate markets with several exciting developments in the US CRE space, including a flurry of opportunity zone activity, impacts from the Tax Cuts and Jobs Act, big corporate headquarters announcements and continuing growth of e-commerce and the sharing economy. With record CRE transactions, have we peaked? Or will the positive trends continue in 2019? Jay Epstien, partner and Co-chair of DLA Piper’s Global Real Estate sector, provides some answers in this article. Read more. M&A In Israel: Looking Back At 2018, And Towards 2019 Ever-growing transactions and higher valuations marked a prosperous 2018 for M&A in Israel, with North American investors and acquirers remaining the strongest players. In this article which appears in The US-Israel Legal Review 2019, published by Nishlis Legal Marketing and Global Legal Media in association with ACC–Israel, Shay Dayan and Nitzan Aberbach, partners at Erdinast, Ben Nathan, Toledano & Co., anticipate that trends such as sky-high valuations, significant transaction volume, massive potential for growth, and a strong preference for M&A exits as opposed to IPOs will all continue into 2019. Read more. Emerging Opportunities in the US Hemp and CBD Space Legalized cannabis is a rapidly expanding industry in the United States, with a growing list of jurisdictions now regulating its use for medical and/or recreational purposes. The 2018 Farm Bill, a comprehensive update of the United States’ agricultural laws, has opened up a wealth of new opportunities in the rapidly growing Hemp and Cannabidiol (CBD) product space. But, as Bill Bogot and Joshua Horn, partners at Fox Rothschild LLP explain in this article which appears in The US-Israel Legal Review 2019, patience and diligence will be needed for companies hoping to take full advantage. Read more. Chapters Covered in the Guide 20 23 Corporate Tax: Doing Business in Israel in 2019 Daniel Paserman, partner and head of Tax at Gornitzky, looks at the current corporate tax law in Israel and the US-Israel Tax Treaty. Topics covered include: • Offset of losses • Tax credits • Special tax regimes and exemptions • Transfer pricing rules • Foreign tax-“transparent” Entities • Corporate mergers and divisions • US-Israel Tax Treaty and MLI Read more. The State of Play for Cryptocurrencies in Israel • As the virtual currencies industry continues to experience a fast-tracked evolution and maturation both in Israel and worldwide, the likelihood of a convergence with the traditional financial sector has also grown. Yehoshua Gurtler and Roni Cohen-Pavon, partners in Herzog Fox & Neeman’s e-Commerce and Crypto Department, answer a variety of questions covering: • The Israeli regulatory landscape concerning the emerging blockchain industry • The driving force behind Bitcoin and other virtual currencies • How transactions using virtual currencies as the medium of exchange are taxed in Israel • Israel’s tax regime in relation to ICO’s conducted within Israel • Virtual currencies and inflation control • The potential risks of virtual currencies in terms of fraud • Key trends in investment flow in the US over the next 12 months • Israel as a pioneer in high-end technology. Read more. Employment Law in Israel Israel’s labour and employment law is extensive, unique and constantly evolving. Especially for first-time employers in Israel, consulting with local counsel is essential. Orly Gerbi, partner and head of Herzog Fox & Neeman’s Labour & Employment Department, answers a variety of questions covering: • The differences in employment law in Israel and the US • The key issues for a first-time employer in Israel • The Hours of Work and Rest Law • Overtime • Discrimination claims and the Equal Opportunities Law • Employee unionization rates • Rules regarding employee/contractor classification • Employment contracts in Israel • Local and foreign workers • Regulations on whistleblowing • Trade secrets and restrictive covenants. Read more. International Judgement Enforcement in the United States and Israel Tools available to parties in both jurisdictions allow for coordinated, crossborder asset recovery campaigns. In this Q&A Robert W. Henoch, Jef Klazen and Jeremy Bressman of Kobre Kim answer a variety of questions covering: • The legal framework under which an Israeli judgement would be recognized and enforced in the US • What constitutes a judgement capable of recognition and enforcement • What requirements an Israeli judgement must satisfy to be enforceable in the US • The connection to the jurisdiction required for the courts to accept jurisdiction for the recognition and enforcement of a foreign judgement • Differences between recognition and enforcement under US and Israeli law • Grounds for challenging recognition and enforcement • The legal framework applicable to the recognition and enforcement of foreign judgements relating to specific subject matters • The relevant limitation period • Interim relief available pre-judgment to prevent those suspected of involvement in the fraud from dissipating their assets • Information and evidence from law enforcement and regulatory agencies for use in civil proceedings • Tools available for obtaining information from third parties not suspected of wrongdoing • Alternative funding arrangements available to parties contemplating or involved in litigation • Recovering assets in cases where there are competing creditors. Read more. 22 25 Intellectual Property Law in Israel – An Overview Intellectual Property is an important if not essential tool in the vibrant Israeli knowledge based economy. Asa Kling, partner and head of IP at Naschitz Brandes Amir, outlines the many changes currently taking place in the country’s IP legal services, including patents, design, trademarks, copyright and neighboring rights, and the challenges to come. Read more. The Israeli Hi-Tech Industry Israel’s hi-tech ecosystem is known worldwide. With a growing number of investment, exits, start-ups and more NASDAQ listed companies than any country in the world (except for US and China), Israel is a global innovation powerhouse. Amir S. Iliescu, corporate and M&A partner at Shibolet with Raved Magrizo Benkel & Co., analyzes the key reasons for this remarkable rise. Read more. Civil Litigation in Israel in Theory and Practice The State of Israel has an independent, adversarial legal system, modeled after the Common Law tradition. Disputants are free to define the scope of their dispute and the court will adjudicate only on the basis of their pleadings and the evidence they present. Those acquainted with Common Law will recognize many of the foundational principles of the Israeli legal system, alongside other formal and unwritten rules unique to Israel. Yechiel Kasher, partner and the Head of Litigation and Dispute Resolution at Tadmor Levy & Co., provides further insight into civil litigation in Israel. Read more. Real Estate in Israel In Israel, unlike the United States, there is no strict procedure forcing the parties in a real estate transaction to conduct examinations about the status of the property. When buying real estate property in Israel, the buyer is advised to make sure that before signing the purchase agreement, his lawyers conduct all the necessary inquiries with regard to the property and the seller’s rights therein. Lee Maor, partner in the Real Estate group of Yigal Arnon & Co., details the importance of these inquiries before signing the agreement. Read more. US M&A Weathers Geopolitical Storms The political and economic backdrop may be unstable, but 2018 was a strong year for US M&A, especially domestically. However, a strong stock market cannot last forever, nor can a booming M&A market. The US is set to remain an attractive destination for investors going forward, even with material uncertainty. John Reiss, Colin Diamond and Daniel Turgel, partners at White & Case, advise that while a US recession may not be imminent, potential buyers must prepare for one. Read more. 24 Read the digital version 27 GC in the Spotlight In-House Counsel: Technology Roundtable Aric Press conducts a roundtable discussion with two of Israel’s senior in-house technology counsel - Edva Liveanu-Justo of HP and Gideon Rosenberg of Mellanox Technologies, Ltd. For 16 years, as editor in chief of The American Lawyer and then its parent company, ALM Media, Aric Press was the leading journalistic observer and commentator on the world of large law firms and their clients. It is a small boast to say that no other journalist, perhaps no other human being, met with or watched more law firm and legal department leaders than he did. Aric is now a partner at PP&C Consulting, based in New York, where he works with law firms and legal departments on many of the critical challenges they face. PP&C work on strategy for firms and groups, do deep-dive client interviews, train lawyers in business development, handle various marketing and positioning issues, and help firms improve their compensation and governance structures. Edva Liveanu-Justo is Region Counsel, Central Europe and Israel, for HP. Edva is an experienced in-house counsel with a demonstrated history of working in the information technology and services industry in a multinational global corporate environment. Skilled in negotiation, Data Privacy, Employment Law Project Finance, Competition Law, and Dispute Resolution. Gideon Rosenberg is Deputy General Counsel & Vice President of Legal Affairs for Mellanox Technologies, Ltd. Mellanox was recently acquired by NVIDIA for $6.9 billion, uniting leaders in processing and interconnect for the high- performance computing market. Gideon is a long-established inhouse counsel with international experience having worked both in Israel and in the US. ARIC PRESS PP&C CONSULTING EDVA LIVEANU-JUSTO HP GIDEON ROSENBERG MELLANOX TECHNOLOGIES 28 Aric Press: Edva, you’re a seasoned in-house counsel. Can you share a little about how your role as regional counsel has evolved? Edva Liveanu-Justo: Thanks Aric, happy to be joining you. I have been working as an in-house lawyer at HP since 2010, first as a member of the legal department in Israel, and later as the Country Counsel for Israel after the separation at HP in 2015. My regional role (Central Europe Region Counsel) was created as part of a realignment to the go-to- market organization in my assigned sub-region (Central Europe, Middle East and Africa). Aric Press: And Gideon, you have experience working in-house both in the US. and in Israel. What first attracted you to the tech sector? Gideon Rosenberg: Thanks Aric, delighted to be participating in this inaugural issue. I joined my first tech company back in 2003. I believed that this was going to be the most exciting sector to be working in, given the global reach of technology and the fact that Israel was becoming a world leader in technology. I believed that this sector would evolve and develop at a much faster pace than other sectors which meant that I would never be bored and always be challenged. This has of course turned out to be true! Aric Press: So which key issues are currently the most pressing – and how do you see this changing over the next few years? Edva Liveanu-Justo: On a regional level, the most pressing issues I identify relate to compliance with various regulations; whether it is data privacy (not only GDPR), consumer issues, anti-trust, and anti-corruption. Over the next few years I foresee a rise in internal enforcement requirements, in the existing areas and in new areas, as this appears to be the new trend for the various regulators. Another growing element is AI and its impact on numerous business and legal aspects, as well as the impact on the way we lawyers are operating and performing our roles. In other words, legaltech is here to stay, and we will need to see how to harness it to our needs and not vice versa. Aric Press: How does the Israeli legal team interact with the other legal teams within the global operation, particularly the US. legal team? Edva Liveanu-Justo: Within the legal department at HP, known as Global Legal Affairs, we have a high level of internal networking and subject matter experts are at arm’s reach. As a region/country counsel, I am usually the first “go-to person” for most legal matters for the people in the region/ countries, and then, according to the subject matter, I will interact with my colleagues in the legal department, as well as those in the US. Specifically, with my US colleagues, my work is primarily IP issues, Corporate/Mergers & Acquisitions and occasionally, Litigation. Gideon Rosenberg: We do not consider ourselves two separate teams. We are one legal team that works together. While of course there is a split 29 of work between the various members of the team we work in collaboration on many areas, including compliance and others. In fact, the larger part of the team is located in Israel and not in the US. Aric Press: Edva, what trends do you observe in the US-Israeli bilateral legal dynamic - and how relevant is the US. market to your regional work? Edva Liveanu-Justo: While there is no immediate impact, due to the regional structure at HP, there is lot of cross pollination at strategic level on product/ company strategies. I expect that the more global legal dynamics involving the US these days will eventually influence even my neck of the woods, all things considered. Aric Press: Are there certain types of work that you tend to assign to outside counsel as opposed to keeping in-house? Edva Liveanu-Justo: Our policy at HP’s legal department is to have the in-house team on top of synchronizing the various viewpoints, taking smart risks and being an enabler to the business teams. We engage outside counsel mostly for technical and specialized opinions. I often find myself dealing with many issues on my own and assigning tasks to outside counsel where special subject matter expertise is required for a particular legal topic, or, given the volume of work, it is logical to outsource. Gideon Rosenberg: We prefer as a general rule to keep everything inhouse. Having said that of course some matters such as litigation, certain M&A work and most of our patent work is done via outside counsel. We of course work closely with our outside counsel on our public filings, compliance matters and seek their advice on other various matters. Aric Press: Gideon, have you taken any special steps to control costs? Has that been an issue with the firms you have dealt with? Gideon Rosenberg: Our main step in controlling costs has been to bring more work in-house. For example, we recently added a patent attorney to the team which has led to a reduction in our outside counsel fee as related to patents. In addition, we tend to work with local firms rather than large multi-national firms in most of the jurisdictions we work in. we have long standing relationships with most of our outside counsel firms which has of course helped us in keeping costs under control. We monitor our fees on a monthly basis and expect the firms to provide us with budget estimates every month which has helped us plan our budget in a more efficient manner. Aric Press: And Edva, at HP? Edva Liveanu-Justo: We have detailed fee arrangements with our outside counsels which provide cost control mechanisms; to-date, I am not aware of any issue due to this. Furthermore, we keep very much with the times, and are quick to try various combinations or arrangements with our outside counsels OCs. 30 Aric Press: Gideon, Mellanox and NVIDIA have reached an agreement for a $6.9 billion acquisition. What does this tell us about the US. – Israeli bilateral dynamic within the tech sector? Gideon Rosenberg: I think this shows us the strength of the Israeli tech sector. The fact that cutting-edge technology which interests the largest US and other companies around the world is being developed in Israel is a true testament to our ability as a country and a people to innovate and work hard to achieve success. Aric Press: Indeed. As an early innovator in high- performance interconnect technology, Mellanox pioneered the InfiniBand interconnect technology, which along with its high-speed Ethernet products is now used in over half of the world’s fastest supercomputers as well as in many leading hyperscale datacenters. So what is it about the Israeli tech sector that enables this level of innovation and growth? Gideon Rosenberg: I believe that this is due to our hard work and desire to prove that we can be world leaders in all markets. I think Israelis are innovators by nature and therefore are constantly trying to realize their dreams and therefore address areas or markets which have yet to be discovered by others. Israeli innovators are true visionaries. This is all coupled with the hard worked and dedication of the Israeli employees leads to the ability of Israelis to establish successful companies in all sectors. Aric Press: Edva, in your view, are there steps that outside counsel should take to improve the service and value? Edva Liveanu-Justo: In my opinion, a good outside counsel needs to be proficient and knowledgeable on the one hand, and with a good understanding of the external client’s business needs on the other hand. In other words, they need to be enablers, and shake off the traditional approach of just putting the legal position on the table. I would also expect them to be able to convey the message in short, as much as possible. Gideon Rosenberg: We are very satisfied with our outside counsel. The reason we are satisfied is because they provide us excellent legal services which to us means not only understanding the legal part of the advice being given but also the business context. So from my perspective the best outside counsels I have worked with understand that they are part of our team and business and need to provide us not just the pure legal answers but also those which enable us to reach the business goals of the company. 31 If you are an International Law Firm with an Israel focus, IsraelDesks is your first destination Inform Israeli law firms about your events, clients updates and firm news Join IsraelDesks group on LinkedIn IsraelDesks.com to expand your network LEGAL MARKETING by SETTING THE BENCHMARK WWW.LEGALMARKETING.CO.IL [email protected] TEL: + 972-72-338-7595 FOLLOW US: 33 From One Desk to Another IsraelDesks News SEC Adopts Rule 15l-1 to Require Broker-Dealers to Act in Best Interest of Retail Customers? - Murphy & McGonigle On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg. BI”), which not only required the disclosure of interest, but also imposed a standard of conduct on broker-dealers (“BDs”) when making a recommendation to a retail customer of any securities transaction or investment strategy. Read more. Technology will produce a new type of lawyer - DLA Piper DLA Piper co-CEO Adv. Simon Levine was recently in Tel Aviv to talk about the impact of advanced technologies like AI and machine learning on law firms. Read more. China Passes Foreign Investment Law - DLA Piper In the face of a grueling trade and technology war with the US, China is trying to find new ways to galvanize its own economy. One strategy is to attract more foreign investment and give foreign investors the so-called “national treatment”. The newly promulgated “Foreign Investment Law” is a major step in that direction. Israeli companies that are exploring “Made in China for China (maybe as financed by China)” should take note of the new legal framework for foreign investment that will take shape as of January 1, 2020. Read more. Retail Innovation Booming in Israel - Greenberg Traurig Retail innovation is booming in Israel and corporate executives best take notice, as reported in a recent Forbes article. Hardly the first time Forbes has taken notice, this most recent article was inspired by a major retailer CEO’s visit to Israel. The article lists the staggering numbers boasted by Israel’s impressive retail technology start-up scene and advises, “if you are a retail executive, and you have yet to visit to Israel, it is time to book your ticket.” Read more. IsraelDesks News from Around the Globe Provided by IsraelDesks Platinum Member Firms. 01 35 New USPTO Guidance May Clear Path for More Technology Patents - Greenberg Traurig On January 4, 2019, the United States Patent and Trademark Office (USPTO) released new Patent Examiner Guidance (Guidance) for subject matter eligibility. The updated guidance could benefit any technology patent applicant who has a computer-related invention — from smartphones to artificial intelligence - and who has previously had difficulty acquiring patents under the USPTO's procedures for determining patent subject matter eligibility. Read more. Read more. Robert Henoch Examines Potential for FCPA Enforcement Actions into Israel in Haaretz - Kobre & Kim Kobre & Kim lawyer and former U.S. Department of Justice prosecutor Robert Henoch spoke with the independent Israeli newspaper Haaretz to explain the function and application of the U.S. Foreign Corrupt Practices Act (FCPA) in cases of suspected bribery. Read more. U.S. Increasingly Enforcing Against India - Kobre & Kim The termination of India’s preferential trading status with the U.S. is the latest in a series of events detrimental to bilateral relations between the two countries. Below, our government enforcement defense team points out the “hot spots” where the next wave of criminal enforcement actions from the U.S. could occur, as well as what Indian entities can do to mitigate any risk of finding themselves on the wrong end of a cross-border investigation. Read more. Driverless Economy - DWF This seminal report provides valuable and necessary insight into how business feels about the current and future role of transport and its reliance on a robust transport network at a critical time for trade and the economy. Read more. How will Blockchain disrupt the Energy sector? - DWF Blockchain technology has the potential to facilitate data exchange in an increasingly decentralised energy system as well as to accelerate processes. It enables an efficient, transparent and secure exchange of information without the need for intermediaries. This opens up new possibilities for market participants in the energy sector. Read more. 34 Three Key Actions Attorneys Should Take After a Data Breach - Fox Rothschild Cyber criminals are targeting law firms for their valuable confidential information from trade secrets to personal data. According to the American Bar Association, approximately one in four attorneys or law firms surveyed reported that they have experienced a data breach. Data breaches are on the rise across the board for small, medium and large firms with hackers infiltrating some of the most sophisticated law firms. Read more. Where HIPAA Stops, CCPA Begins - Fox Rothschild The California Consumer Privacy Act (CCPA) applies to a wide range of for-profit businesses that collect the personal information of California residents. However, CCPA includes a convenient carve-out for HIPAAcovered entities and business associates: it doesn’t apply to protected health information, or PHI, as that term is defined under HIPAA. Read more. Registration of Trademarks for Cannabis-Related Goods is now Allowed in the US - Herzog Fox & Neeman On May 2, 2019, the United States Patent and Trademark Office (the “USPTO”) issued new guidelines with respect to the examination of trademarks for cannabis and cannabis-related goods and services (the “New Guidelines”) following the recent signing into law of the 2018 Farm Bill. According to the New Guidelines, trademarks filed after December 20, 2018, for certain cannabis-related goods will be accepted for registration. Read more. CCPA Compliance Playbook for GDPR Compliant Companies - Herzog Fox & Neeman At the beginning of next year (2020), the new data protection reform in California (the California Consumer Privacy Act, or the “CCPA”) will come into effect, which will dramatically change the current data protection regulatory framework in the most populous state in the US. The underlying aim of the CCPA is to grant consumers greater control over the use of their personal information online, and similar to the European General Data Protection Regulation (“GDPR”), it will very importantly, have extraterritorial reach. Read more. IsraelDesks News from Israel Provided by IsraelDesks Israeli Law Firm Members 02 36 37 The Business Judgement Rule in Derivative Actions - Lipa Meir In a recent judgment of the Israeli Supreme Court, a significant precedent was handed down by Judge Yoram Danziger, setting out that the Business Judgment Rule applies to a company’s board of directors when it is deciding whether to file a derivative action. Read more. Tax on Wheels - Erdinast Ben Nathan Toledano & Co. In an important ruling given on May 23, 2019, the Israeli Supreme Court ruled that grossing up the tax value for leasing vehicles would be calculated on a regular and full basis, without distinguishing between “business” trips and “private” trips performed by the employee in the vehicle. Read more. California Consumer Privacy Act of 2018 - Yigal Arnon On June 28, 2018, the California Consumer Privacy Act of 2018 ("CCPA") was enacted, introducing restrictions with respect to the processing of personal information of California residents. Israeli entities that conduct for-profit business in California or that are otherwise active in the state, should therefore take note of the requirements imposed by the law and the associated liabilities. The following is a non-comprehensive overview of key provisions of the CCPA. Read more. he Israeli CFC Rules Apply to Foreign Real Estate Companies Controlled by Israeli Shareholders - Gornitzky Recently, the Supreme Court published the judgment in the matter of Tax Assessor for Large Enterprises v. Rosebud. and overturned the decision of the District Court in a decision that is likely to have implications for the activities of Israeli taxpayers outside of Israel, through foreign companies in their control, and in particular, for companies that invest in real estate outside of Israel. Read more. Roundup of Market Trends and News from Israeli Financial Press (April-June 2019) 03 Weizmann Institute ranks 3rd globally for scientific research quality, according to Nature Index 2019 Web Link Intel to launch smart robo cabs in Israel in 2020 Web Link Israeli startup Eviation has unveiled the industry's first all-electric aircraft at the Paris Air Show. Web Link Israeli start-ups keep stores relevant in age of Amazon Web Link Fiverr IPO on Wall Street at value of USD 645 million Web Link Israeli cyber to help developing countries in Africa and Asia Web Link US cloud software giant Salesforce to buy conversational intelligence platform Bonobo for between USD 50-40 million Web Link Blockchain startup Qedit raises USD 10 million Web Link Gett expands pre-IPO financing round to USD 200 million Web Link US cyber co Proofpoint buys Israel's Meta Networks for USD 120 million Web Link InterCure's Canndoc sets up second cannabis farm Web Link Cannabis co Cannbit raises NIS 31.4m on TASE Web Link Vimeo buys Israeli video creation co Magisto for USD 200 million Web Link Energean to become a competitive player in Israel's gas market after Karish gas discovery Web Link ElectReon wins tender to build smart road in Sweden Web Link China and Israel collaborate on medical cannabis: Israel-Cannabis and Thalys Medical Technology, a Chinese healthcare conglomerate Web Link Japanese corporation SoftBank leads financing round in Lemonade, the AI-based online property and casualty insurance company Web Link 38 39 Delek Group to buy Gulf of Mexico oil field from Royal Dutch Shell for USD 965m Web Link Isracard IPO: Bank Hapoalim issued %65.2 of Isracard's shares for NIS 1.8 billion. Web Link With delay to electrification, Israel Railways to buy diesel rolling stock for NIS 2.4b Web Link Argus, Deutsche Telekom unit team on car cybersecurity Web Link Isracard TASE IPO attracts high demand Web Link 1,000 participants from 45 countries gathered in Tel Aviv this week for the 4th annual CannaTech conference. Web Link Larry Mizel bids over NIS 1b for Africa Israel Web Link Ehud Olmert joins Israeli cannabis co Univo TASE to hold IPO in next few months Web Link Agri-tech company Evogene enters medical cannabis sector Web Link Pension company Altshuler Shaham mulls IPO for pension activities Web Link CHINA’S SHANDONG PROVINCE SETS SIGHTS ON ISRAELI INNOVATION: Greentech, water technology, renewable energy, life sciences and various aspects of the technology, media and telecom (TMT) sector are all areas of interest for the delegation Web Link BMW to trial autonomous cars in Israel this year Web Link Tel. (USA) 732 432 0174 Tel. 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