This information was provided by David Reisner on 15 September 2020,
and should be reviewed against any later legislative updates.

In Israel, there is no integrative foreign investment law.

Instead, authority to regulate foreign investments is decentralised and divided between various government agencies, according to their specific sphere of responsibility. Examples of prominent regulatory bodies in this regard are:

  • the Capital Market, Insurance and Savings Authority, which operates within the Ministry of Finance;
  • The Securities Authority, which operates under the Securities Law;
  • the Bank of Israel and the Supervisor of Banks, both which regulate investments in commercial banks in Israel; and
  • the Government Companies Authority, which regulates government owned companies.

While the language of the relevant laws differs, generally speaking, each of these (and other) regulators are authorised to consider “vital national interests” as part of their approval process. In addition, under the Israeli Land Law 5720 – 1960, all foreign investments in real estate in Israel (subject to specific exceptions and exemptions) require the approval of the Israel Lands Authority.

As a recent development, in December 2019, in response to intense US pressure, the Israeli government appointed an internal governmental advisory committee on foreign investments. The committee’s mandate and guidelines have not been made public, but it should be stressed that only regulators (such as those listed above) are entitled to approach the committee for its recommendations with respect to foreign investments.

As explained above, Israeli law in this regard is decentralised. As a result, the following are some examples of relevant laws:

  • The Israeli Land Law 5720 – 1960 regulates foreign investment in real estate through Article 2a, which limits the ability of a “foreigner”, whether an individual or an entity, to own real estate property in Israel. This section defines a foreigner as an individual or an owner of an entity who is not an Israeli citizen or an Israeli resident nor entitled to immigrate to Israel on the basis of the Law of Return 5710-1950. According to section 2b, any acquisition (including long term lease) of Israeli real estate by a foreigner requires the approval of the chairman of Israel’s Land Authority (who has the authority to consult with the Defence Ministry and the Foreign Ministry and other relevant authorities, depending on the applicant’s identity).
  • The Government Companies Law 5735-1975 regulates all investments in, and the purchase of, government companies. According to this law, any significant investment in a government company (by any entity, be it Israeli or foreign) requires the approval of Government Companies Authority Section 59h in chapter H2 of the law (added in 2003) empowers the Authority to consider “vital national interests” as part of the approval process.

As explained above, as there is no comprehensive “screening law”, it is impossible to list all potentially relevant sectors.

Sectors which are most relevant would include the defence, critical infrastructure, banks and insurance sectors, but potentially could be much wider. See answer no. 1 for more detail.

The de-centralized nature of the Israeli regulation in this matter does not set a singular approach for reviewing an investment. Similarly, as the guidelines for the new governmental foreign investments committee are not public, it is impossible to set out a comprehensive list of criteria in this regard. Accordingly, each case would need to be discussed on a case-by-case basis.

It depends. In some cases (such as with respect to Government Companies) it would apply equally to all potential investors. In others (such as with respect to real estate) it would only apply to foreigners.

Since Israel is not a member of the EU, there is no formal difference between an EU foreign investor and a non-EU foreign investor, irrespective of holding structure.

It depends on the specific sector and varies widely. For example, with respect to insurance companies, the threshold would be acquisition of 5% or more. On the other hand, with respect to Government Companies, the threshold is “control”. Interestingly, with respect to regulated defence exporters, the “control” threshold is relevant for mandatory notification, but no approval is formally required.

Generally yes. However, the government is often allowed to share the information within the government. In addition, while Section 23b to The Protection of Privacy Law, 5741-1981 prohibits the authorities from revealing any private information that was delivered to them, unless the individual or entity gave its permission to reveal it in public. In practice, quite often such information may end up “leaking” to the press.

Depends on the sector in question. For example – with respect to real estate – no transaction can formally enter into force until the approval from the Lands’ Authority is received. With respect to regulated defence exporters, any change of control must be notified to the Ministry of Defence no later than 30 days from the change.

Depends on the sector in question. Quote commonly both the seller and the potential buyer approach together.

There is no generic list. Each regulator may ask different questions. In addition, as the new government foreign investment committee’s guidelines have not been made public, there is at present no written guidance as to the expectations of the committee.

In most cases the competent authority takes the decision. However, each legal regime also refers to allowed (or mandatory) consultation requirements. For example, the Commissioner of the Capital Market, Insurance and Savings Authority is obliged to consult an advisory board established by the Minister of Finance. The Israeli Land Law empowers the chairman of the Israel Lands Authority to consult with the Defence Ministry and the Foreign Ministry (or any other relevant authorities), depending on the applicant’s identity.

See above (answer 11) regarding confidentiality considerations.

There is no specific list in this regard. Where a formal approval is required, the regulator can refuse to grant the approval, or make it subject to any reasonable condition.

Depends on the specific sector. In some cases – any transaction without the appropriate approval would have no legal effect. In others – it could create risk of legal proceedings against the non-complying entities.

Yes. Any decision by an Israeli regulatory authority can be challenged through an administrative appeal (either to the District Court of the Supreme Court, depending on the specific case).