Foreign Law Applicability to a Foreign Trader Directing Its Activity to Customers in Israel – Key Points (Law Memorandum, 2026)
Provided by Eyal Doron with S. Horowitz, Tel Aviv, Israel 
On February 25, 2026, Israel’s Ministry of Justice published for public comment a draft legislative memorandum that would regulate when mandatory provisions of Israeli law apply to a “foreign trader” that directs its activity to customers in Israel. The initiative responds to the growth of online cross-border transactions with Israeli customers, often under standard-form terms, and aligns with recent Israeli Supreme Court trends regarding the enforceability of choice-of-law and forum-selection clauses in online consumer contexts.
The memorandum applies to a “foreign trader”, defined as a trader whose center of activity is outside Israel (regardless of Israeli registration). It also defines “customer” broadly to include not only individual consumers but also small businesses (up to five employees or annual turnover up to NIS 2 million), provided the purchase is made under a standard-form contract.
A foreign trader will be considered as “directing activity to Israel” based on the totality of the circumstances. Indicia include proactive steps to sell or market goods or services in Israel (including indirectly) and transactions relating to Israeli real estate. Examples in the explanatory notes include Hebrew-language content or customer support, pricing in Israeli currency, and marketing targeted specifically to Israel.
Where a foreign trader directs activity to Israel and sells an asset or service to such customers, the mandatory Israeli laws listed in a proposed Schedule will apply. The current list includes the Consumer Protection Law, Protection of Privacy Law, Standard Form Contracts Law, and Payment Services Law. The Minister of Justice would be authorized to amend the Schedule by order, subject to consultation and approval by the relevant Knesset committee, and only with respect to non-derogable provisions.
The framework includes key enforcement and supplementary rules: (i) non-waiver – the mandatory rules apply notwithstanding any waiver or agreement to the contrary; (ii) choice-of-law limitation – private international law rules may not be used to apply foreign law in a way that derogates from the listed mandatory Israeli laws; and (iii) a narrow exception under which a court may, for special reasons recorded in writing, decline to apply the law if doing so would cause substantial harm to the public interest.
The proposal also requires foreign traders directing activity to Israel to publish prominently on their website either an address of a representative in Israel or an email address for service of process.
Consequential amendments are proposed as well. These include a presumption under the Standard Form Contracts Law that terms selecting foreign governing law (or granting the supplier an exclusive choice of governing law) are unfair, and repeal of Section 47 of the Payment Services Law, so that the applicability of that law to foreign payment service providers would be determined under the new framework.
If adopted, international companies (including airlines) may need to reassess their terms of use, choice-of-law clauses, Israel-focused marketing practices, and potential regulatory and litigation exposure in Israel.
For foreign airlines that do not maintain Hebrew-language websites and do not transact in Israeli currency, the memorandum’s implications should be considered in light of Class Action (Central District) 54491-01-15 Bashan v. easyJet (8.6.2020) (the “Bashan Matter“).
In the Bashan Matter, the court held that, absent an express statutory provision extending the Consumer Protection Law to foreign airlines without a presence in Israel (no local address or employees, no acceptance of payment in Israeli currency, etc.), that law does not apply to such entities.
More recent legislation (including the Payment Services Law, 2019) and subsequent Supreme Court jurisprudence suggest that “directing activity” at Israeli consumers may, by itself, be sufficient to trigger the application of Israeli law.
The draft memorandum codifies this “Targeting” test, stating that the law will apply to a non-Israeli resident service provider if it directs services to customers in Israel, and is expected to follow criteria from existing legislation and case law (including Hebrew-language approach, pricing in Israeli currency, and offering an option to provide an Israeli address as part of the engagement).
Accordingly, it may be argued that the memorandum could change the outcome reached in Bashan, by removing the key obstacle identified there – the lack of an express statutory provision applying the Consumer Protection Law to foreign companies without a physical presence in Israel.
The memorandum is open for public comments until 2/27/2026 and is expected to undergo revisions prior to final approval (if approved at all).