The volume of trade between the United States and Israel is expected to reach $50 billion in 2025, according to estimates by the U.S. Trade Commissioner. This is an impressive figure that highlights the economic potential for Israeli companies and investors. Alongside these opportunities, commercial disputes often arise between parties from both countries. These disputes can lead to significant losses—losses that could have been prevented through a proper understanding of the American legal system.
Just a few days ago, a group of Israeli investors lost $70 million in a real estate project in New York due to bankruptcy. A precisely worded contract might have helped reduce the loss. Time and again, experienced businesspeople and leading companies encounter legal pitfalls rooted in the failure to consider the critical differences between the Israeli and U.S. legal systems.
Understanding these differences is essential for any Israeli entity operating in the United States. While Israel has a unified legal system, the U.S. has 50 independent state legal systems alongside a federal system. Each state has its own laws, procedures, and sometimes unique interpretations of similar legal principles. Moreover, there are fundamental differences—such as the binding nature of the U.S. Constitution on all legislation and court rulings, the involvement of juries in civil proceedings, and the expansive discovery process, which requires far more disclosure of documents and information than in Israel.
In this context, it is vital to draft contracts that include clauses ensuring legal certainty. A choice of law clause determines which jurisdiction’s law will govern the agreement—for example, the laws of the State of New York or the laws of Israel. This is a significant legal decision, as interpretations of the law vary from state to state. A choice of forum clause specifies the legal venue where disputes will be resolved—whether through a court or arbitration. This choice influences the speed, cost, and transparency of the proceedings. Additionally, a choice of venue clause designates the physical location of legal proceedings—such as Miami or Tel Aviv—thereby preventing disputes from being handled in inconvenient or unexpected places.
Beyond that, it is advisable to define the scope of possible remedies. A limitation of liability clause allows the parties to agree in advance on the circumstances under which legal liability will apply—typically only in cases of gross negligence or willful misconduct. A limitation of damages clause restricts the types of compensation that may be claimed—for instance, excluding indirect damages like loss of future profits. A merger clause, stating that the written agreement reflects the entire understanding between the parties, can also be critical in preventing disputes based on verbal promises.
Although the American legal system is complex, it offers a variety of legal tools for managing contractual risk. When agreements are drafted carefully, investments can be effectively protected—even in the face of unforeseen disputes. For those Israeli investors who have already lost their money, the way back is closed. But every new deal presents an opportunity to act more cautiously and consciously.
The author is a managing partner at a law firm specializing in commercial law and international arbitration.
Originally published in Hebrew here: https://tv10.co.il/opinions/%d7%9e%d7%a9%d7%a7%d7%99%d7%a2%d7%99%d7%9d-%d7%91%d7%90%d7%a8%d7%94%d7%91-%d7%9b%d7%9a-%d7%aa%d7%95%d7%95%d7%93%d7%90%d7%95-%d7%a9%d7%94%d7%97%d7%95%d7%96%d7%94-%d7%99%d7%92%d7%9f-%d7%a2%d7%9c/
