Snapshot: domestic bribery laws in Israel

Domestic bribery

Legal framework

Describe the individual elements of the law prohibiting bribery of a domestic public official.

Section 291 of the Israeli Penal Law-1977 prohibits the payment of bribes to domestic public officials. This offence has three main elements (see CA 766-07 Barak Cohen v State of Israel (Nevo, 19 Nov 2007):

• giving a bribe;
• to a public official; and
• for the performance of an act connected to his or her position.

 

Failing to prevent bribery of a domestic public official itself is not a crime, however, the ability to demonstrate that risk mitigation steps were taken to prevent such crimes from occurring (such as through the adoption of an anti-bribery policy and robust procedures) may positively impact any investigation and subsequent legal proceeding.

Scope of prohibitions

Does the law prohibit both the paying and receiving of a bribe?

In addition to prohibiting the payment of bribes to domestic public officials (under section 291 of Penal Law-1977), section 290 of the Penal Law prohibits domestic public officials from receiving bribes for the performance of acts connected to their positions.

Definition of a domestic public official

How does your law define a domestic public official, and does that definition include employees of state-owned or state-controlled companies?

Penal Law-1977 defines ‘[domestic] public official’ as any of the following:

• a state employee, including a soldier (within the meaning of the military justice Law-1955);
• an employee of a local authority or local education authority;
• an employee of a religious council;
• an employee of the National Insurance Institute;
• an employee of the Bank of Israel;
• an employee, member of management, or board member of the World Zionist Organization, the Jewish Agency for Israel, the Jewish National Fund, and the United Israel Appeal (Keren Hayessod);
• an employee of the Unemployment Service Office;
• an employee of an enterprise, institution, fund or other body in whose management the Israeli government participates, including a member of its board or management;
• arbitrators;
• an officer or functionary under legislation, whether by appointment, election or agreement, even if not included above; and
• a director representing the Israeli government in a government company, a government-owned subsidiary, or a mixed company (in accordance with their meaning in the Government Companies Law-1975) or a person employed by or engaged in the service thereof.

 

In addition to the categories of domestic public officials enumerated above, section 290(b) of the Penal Law adds that an employee of a corporation who provides services to the public is considered a domestic public official as well. It is important to emphasise that this addition is broad and, in theory, can capture employees of corporations that normally would be seen as entirely private sector entities. Israeli jurisprudence has provided some clarity here and, in several cases, has applied two tests for determining whether an employee of a given company is a domestic public official:

• Is the service provided by the company essential to the public?
• Do private persons engaging the company have limited alternative options for engaging a competitor of the company?

 

Applying these tests, Israeli courts have ruled that different types of companies, generally are seen as private sector players, fall within the scope of public sector entity for the purpose of domestic bribery offences. For example, these have included banks (CA 122/84 Mantzor v State of Israel (4 November 1984)) and mutual fund management firms (CA 8573/96 Markado v State of Israel (18 December 1997)).

Gifts, travel and entertainment

Describe any restrictions on providing domestic officials with gifts, travel expenses, meals or entertainment. Do the restrictions apply to both the providing and the receiving of such benefits?

Israeli anti-bribery laws prohibit the payment of ‘bribes’ to public officials, without specifically defining this term and without promulgating specific restrictions for gifts, travel expenses, meals and entertainment. Thus, offering gifts, travel expenses, meals or entertainment as bribes, regardless of their nature or value, would be illegal. To sharpen this point, in theory, giving inexpensive gifts as bribes is illegal, while giving lavish gifts for reasonable purposes (ie, not as a bribe) would not necessarily be illegal (CA 4115-08 Avner Gilad v State of Israel (Nevo, 24 January 2011). In this context, best practices have development that identify reasonable limits (monetary thresholds) for offering gifts, travel expenses, meals and entertainment to foreign public officials and generally reject anything lavish.

Israel has a framework of legislation that applies directly to Israeli public officials (as opposed to offering parties), which dictate when benefits may (and may not) be accepted from outside parties and the procedures guiding how such benefits may be accepted lawfully. Key legislation includes the Public Service (Gifts) Law-1979, the State Service (Discipline) Law 1963, the Civil Service Regulations (the CSR or Takshir), and the Attorney General Directive No. 1.170, and local best practices in this regard are informed by this legislative framework.

Facilitating payments

Have the domestic bribery laws been enforced with respect to facilitating or ‘grease’ payments?

Israeli law prohibits facilitation or ‘grease’ payments to public officials. While not explicitly set out in the Penal Law-1977, the case of facilitation payments is not distinguished from other unlawful bribes, Moreover, section 293(7) of the law clarifies that no distinction exists between receiving bribes to deviate from standard practices and for performing acts that had to be executed anyway by virtue of the public official’s position – both are unlawful.

Public official participation in commercial activities

What are the restrictions on a domestic public official participating in commercial activities while in office?

Generally, domestic public officials may not participate in parallel commercial activities while in office. This issue is regulated under section 42.4 of the Israeli CSR, which prohibits civil servants from engaging in private work in parallel to their civil service work as a violation of the Civil Service Law (Discipline)-1963. In this context, private work includes work as a salaried employee, as an independent contractor, in a management position in a for-profit corporation, and as a business owner or shareholder (where the circumstances of the business require participation in the business’s management). However, in certain cases, permits may be issued that allow civil servants to engage in such private work.

Nevertheless, there are specific exceptions to the issuance of permits (ie, exceptions to the exception) whereby they will never be issued, including:

• cases where the private work is connected, either directly or indirectly, to the civil servant’s current position, and specifically if that private work likely will create a conflict of interest between the civil servant and his or her civil service; and
• cases where the private work involves various agency activities (ie, based on the nature and character of the private work the circumstances would deny the issuance of such a permit).

Payments through intermediaries or third parties

In what circumstances do the laws prohibit payments through intermediaries or third parties to domestic public officials?

Israeli law generally does not prohibit payments to domestic public officials through intermediaries or third parties per se. However, the Israeli Penal Law-1977 specifically prohibits giving anything of value to a third party for that party to pay a bribe. In other words, the offence of bribery can be committed either directly or indirectly through a third party. It is emphasised that while payments to domestic public officials via third parties technically is permitted (if they are lawful), such use of third parties generally is viewed as a risk factor for bribery in Israel.

For sake of completeness, brokering bribery is an offence under the Penal Law such that third parties are prohibited from receiving anything of value to pay a bribe.

Individual and corporate liability

Can both individuals and companies be held liable for violating the domestic bribery rules?

Under the Israeli Penal law-1977, a company may have criminal liability for the actions of its functionaries. For offences involving strict liability, a company may have criminal liability if the offence was committed by an individual while performing his or her company function. For offences requiring mens rea, a company may have criminal liability if, under the circumstances and considering the position, authority and responsibility of the actual offender in the management of the company’s affairs, the bribery offence and offender’s criminal intent can be attributed to that company.

In both cases, the company’s criminal liability would be in addition to the offender’s own personal criminal liability.

Thus, criminal proceedings may be lodged against both specific individuals working on behalf of the company involved in bribery (in their personal capacities) and against the company itself (qua corporation), and both may face criminal sanctions simultaneously.

Private commercial bribery

To what extent does your country’s domestic anti-bribery law also prohibit private commercial bribery?

Israeli anti-bribery laws do not prohibit private commercial bribery per se. However, ‘[domestic] public official’ is defined broadly under the Israeli Penal Law-1977 and includes employees of corporations that provide services to the public. In other words, the Penal Law prohibits the payment of bribes to (and acceptance of bribes by) individuals who normally would be seen as employees of private or commercial sector companies.

There is no additional legislative guidance on the scope of this definition, however, Israeli jurisprudence provides insight. In a series of cases, Israeli courts have applied two tests for determining whether an employee of a given company is a domestic public official:

• Is the service provided by the company essential to the public?
• Do private persons engaging the company have limited alternative options for engaging a competitor of the company?

 

Applying these tests, different types of companies that generally are deemed to be private sector actors have fallen within the scope of ‘domestic public official’ for the purpose of domestic bribery offences. These have included banks (CA 122/84 Mantzor v State of Israel (4 November 1984)) and mutual fund management firms (CA 8573/96 Markado v State of Israel (18 December 1997)).

Defences

What defences and exemptions are available to those accused of domestic bribery violations?

There are no specific statutory defences or exemptions for those accused of domestic bribery violations. That said, having in place an anti-bribery policy and robust procedures that are executed properly within a company may positively impact any investigation and subsequent legal proceeding.

Moreover, those accused of domestic bribery violations will have at their disposal general criminal law defences set forth under Chapter 5(1) of the Penal Law-1977 (eg, necessity or duress). Finally, enforcement and sanctions for domestic bribery offences committed abroad by Israelis may be limited as a result of defences and exemptions adopted by foreign jurisdictions under sections 14(b)(2) of the Penal Law (Israeli criminal law will not apply to foreign bribery offences committed abroad if a relevant exception to criminal liability applies under the laws of the foreign jurisdiction); section 14(b)(3) (the offender either was acquitted or convicted but was not subjected to sanctions); and section 14(c) (sanctions under Israeli law will not be imposed that are more severe than the sanctions of the foreign jurisdiction).

Agency enforcement

What government agencies enforce the domestic bribery laws and regulations?

 Israel has a few different government agencies involved in the enforcement of domestic bribery laws and regulations.

With respect to investigative bodies, there are three key bodies that investigate domestic bribery offences. First, the Israel Police has a dedicated unit for investigating serious offences (including bribery) (called Lahav 433). In parallel, the Investigations Unit in the Israel Securities Authority (ISA) has powers under the Securities Law-1968 to investigate ‘securities offences’, which is defined as including, among others, domestic bribery offences under sections 290-291 of the Penal Law-1977 committed in relation to other offences under the Securities Law, as well as money laundering offences under section 3-4 of the Prohibition on Money Laundering Law-2000 committed in connection with such bribery offences. The investigative powers of the Israel Police and ISA are parallel, and each body can make recommendations to the State Attorney’s office (the public prosecutor) to prosecute bribery offences.

Finally, the Israeli Money Laundering and Terror Financing Prohibition Authority (which is an agency of the Ministry of Justice) is an additional financial crimes intelligence agency that investigates predicate offences of the crime of money laundering, including bribery, and engages in information sharing with other enforcement bodies such as the Israel Police and ISA.

The State Attorney’s Office (under the Ministry of Justice) prosecutes domestic bribery offences.

Patterns in enforcement

Describe any recent shifts in the patterns of enforcement of the domestic bribery rules.

In recent years, the Israeli government has been targeting high-profile politicians who (allegedly) are or have been involved in domestic bribery offences. Most notably:

• In 2015, the Supreme Court upheld the conviction of former Prime Minister, Ehud Olmert, of domestic bribery offences from the period when he served as the mayor of Jerusalem.
• In 2016, Knesset Member Haim Katz was investigated for (allegedly) committing bribery offences, however, ultimately, he was indicted for charges related to bribery (fraud and breach of trust) but not for bribery itself.
• In 2020, the serving Prime Minister, Benjamin Netanyahu was indicted on charges of (inter alia) bribery.
• There are ongoing investigations of current Knesset Member David Biton regarding (alleged) bribery offences.

 

There are also ongoing investigations and indictments of lower-level politicians (eg, at the municipal level, such as the ongoing investigation of Or Akiva mayor, Yaakov Edri, for domestic bribery offences).

Prosecution of foreign companies

In what circumstances can foreign companies be prosecuted for domestic bribery?

Under section 12 of the Penal Law-1977, Israeli criminal law applies (inter alia) to:

• an offence committed in part or in whole within the territory of Israel, and
• an act in preparation of, or attempt, attempt to induce another, or conspiracy to commit such an offence, which occurred outside of Israel, so long as the intention is to commit at least part of the bribery offence within Israel.

 

Thus, a foreign company may be prosecuted for domestic bribery if at least a part of the formal act of domestic bribery was committed in Israel. Additionally, a foreign company may be prosecuted in Israel even if the preparation of, attempt, attempt to induce another, or conspiracy to commit the domestic bribery offence took place outside of Israel, if the intention was to commit the offence in Israel. On this basis, in theory, the intention of bribing an Israeli domestic public official can serve as a jurisdictional hook for prosecution.

Sanctions

What are the sanctions for individuals and companies that violate the domestic bribery rules?

In Israel, the offence of bribing foreign and domestic officials carries criminal sanctions of either imprisonment (up to seven years) or a criminal fine (the greater of 1.13 million shekels for individuals or 2.26 million shekels for corporations, and four times the value of the benefit intended to be paid as a bribe). In this context, criminal proceedings may be taken against both specific individuals working on behalf of the company and involved in bribery (in their personal capacities) as well as against the company itself (as a corporation). Moreover, in the event of a conviction, a court can order the forfeiture of the bribe and require the one who paid the bribe to pay the value that would have been received in consideration of the bribe to state treasury.

These criminal consequences do not preclude an injured party from filing civil claims.

Additionally, bribery is a predicate offence under the Israeli Prohibition on Money Laundering Law-2000.  Accordingly, in addition to the bribery-specific penalties enumerated in the Penal Law-1977, the violation of anti-money laundering laws can carry additional consequences and sanctions, including imprisonment, criminal sanctions, and forfeiture of property or funds used in the offence (even as early as with the commencement of criminal investigations).

Recent decisions and investigations

Identify and summarise recent landmark decisions and investigations involving domestic bribery laws, including any investigations or decisions involving foreign companies.

While there have not been landmark cases in recent years involving breakthrough rulings, a number of important themes continue to resurface in the jurisprudence of the Israeli Supreme Courts with respect to bribery offences:

• Bribery is not a strictly defined offence (by design), particularly since the concept of ‘bribe’ can take on many forms (CA 8573-96 Mordechai Mercado v State of Israel, PD 51(5) 481).
• Considering the severity of the offence of bribery, someone convicted of such offences should serve an actual prison term and for a real period of time (CA 3295-15 State of Israel v Shimon Gafso (Nevo, 31 March 2016); CA 3856-13 Shai Gonen v State of Israel (Nevo, 3 February 2014); CA 766-07 Barak Cohen v State of Israel (Nevo, 19 November 2007).
• Bribes paid to a public official to induce an act in connection with his or her position are unlawful regardless of whether the contemplated act is by virtue of the public official’s formal powers or whether it is to take advantage of the capabilities, connections or influence stemming from the public official’s work (CA 3295-15 State of Israel v Shimon Gafso (Nevo, 31 March 2016).

 

Additionally, in 2016, Siemens AG reached a settlement with the Israeli Ministry of Justice in which it paid US$43 million for paying bribes to the Israel Electric Company to win contracts. This was a case where personnel of a quasi-private sector entity were deemed public officials for the purposes of the offence of domestic bribery. Moreover, in 2018, Teva agreed to a settlement with Israeli authorities in which it agreed to pay a fine of US$22 million and admitted to paying bribes to foreign public officials in Russia, Ukraine and Mexico between 2007 and 2012.

In recent years, the Israeli government has been targeting high-profile politicians who (allegedly) are or have been involved in domestic bribery offences. Most notably:

• In 2015, the Supreme Court upheld the conviction of former Prime Minister, Ehud Olmert, of domestic bribery offences from the period when he served as the mayor of Jerusalem.
• In 2016, Knesset Member Haim Katz was investigated for (allegedly) committing bribery offences, however, ultimately, he was indicted for charges related to bribery (fraud and breach of trust) but not for bribery itself.
• In 2020, the serving Prime Minister, Benjamin Netanyahu was indicted on charges of (inter alia) bribery.
• There are ongoing investigations into current Knesset Member David Biton regarding (alleged) bribery offences.