Costs and insuranceAward of costs
May the courts order the unsuccessful party to pay the costs of the successful party in litigation? May the courts order the unsuccessful party to pay the litigation funding costs of the successful party?
The court will usually order the unsuccessful party to pay some of the costs of the successful party. The amount will usually be significantly lower than the costs that are incurred by the successful party. To date, the courts have not been asked to rule on whether an unsuccessful party should pay the litigation funding costs of the successful party. Given the relatively low amounts that are often granted to a successful party in respect of its legal costs, it is unlikely, at least in the near future, that the courts would order an unsuccessful party to meet such a cost.Liability for costs
Can a third-party litigation funder be held liable for adverse costs?
No. According to Civil Procedure Regulations 5744-1984, only the party to the litigation can be liable for adverse costs.Security for costs
May the courts order a claimant or a third party to provide security for costs? (Do courts typically order security for funded claims? How is security calculated and deposited?)
Civil Procedure Regulations 5744-1984 and Companies Law 5759-1999 allow the court to order a claimant to deposit security to meet the defendant’s costs. When the claimant party is a limited company, the normal position is that the claimant is required to deposit security with the court (clause 353a of Companies Law 5759-1999 (when the company is established outside of Israel the chance of security being granted is even higher)). If the claimant is a natural person, the normal position is that he or she will not be ordered to deposit a security. The main reason for this difference is that courts want to prevent claimants from hiding behind the legal personality of a company to avoid paying the expenses incurred by the defendants. The court might depart from the default position, if the financial strength of the company is insufficient or the claimant’s claim is particularly strong.
Although the court is not able to order a third-party funder to provide security for costs, there have been cases in which a funder has voluntarily provided security on behalf of the claimant to allow the claim to continue. The calculation of security varies from case to case, but could be up to 2 per cent to 2.5 per cent of the claim value. The most common means by which security is provided is a payment of cash into court, but in some circumstances, a bank guarantee will be permitted.
If a claim is funded by a third party, does this influence the court’s decision on security for costs?
The fact that a claim is funded is not, itself, a ground upon which the court may make an order for security for costs. In a recent case, the existence of a third-party funder tipped the balance in favour of the court ordering security for costs.Insurance
Is after-the-event (ATE) insurance permitted? Is ATE commonly used? Are any other types of insurance commonly used by claimants?
There is no statutory prohibition on the use of ATE insurance; however, ATE insurance is not commonly used in Israel. Defendants’ costs are sometimes paid by insurances, such as professional negligence or directors’ duties cases.