ISRAEL PRACTICE NEWSLETTER TABLE OF CONTENTS
FALL-WINTER 2019
Introduction..................................................................................................................................................................... 2 Discovery in International Arbitration: The Ever-Expanding Scope.................................................................................... 2 Virtual Currency: The Taxman Is Coming.......................................................................................................................... 3 California Attorney General Releases Draft Regulations on the California Consumer Privacy Act...................................... 3 Foreign Ownership of Real Estate: New Rules from CFIUS.............................................................................................. 4 New Regulations in the Cannabis Industry: What Israeli Companies Need to Know?....................................................... 4 A Legal and Regulatory Overview of Dietary Supplements............................................................................................... 5 Media Mentions............................................................................................................................................................... 5
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ISRAEL PRACTICE
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Holland & Knight is a U.S.-based global law firm with a strong commitment to the state of Israel. We focus on providing guidance to Israeli investors and companies interested in doing business in the United States and Latin America. With more than 1,300 professionals in 28 offices, our lawyers and professionals are highly experienced in all the interdisciplinary areas necessary to guide entrepreneurs, investors, and startup or established companies through the opportunities and challenges that arise throughout the business or investment life cycles. Areas of legal guidance that are typically provided to our Israel Practice clients include real estate, mergers and acquisitions, private equity, international tax, cross border and customs, internet privacy and cybersecurity, intellectual property, government lobbying, regulations and compliance, U.S. Foreign Corrupt Practices Act (FCPA), U.S. Foreign Account Tax Compliance Act (FATCA), and litigation and dispute resolution. We invite you to read our Israel Practice newsletter, in which our authors discuss pertinent American-Israeli topics. As Israel has been a crossroads and a prolific source of new ideas for more than 3,000 years, a natural tradition of inventiveness finds its most recent expression in the creation of a technology startup ecosystem with global impact. This newsletter addresses, among other relevant topics, how the innovative technologies and ideas generated in Israel can be deployed in the United States and globally. We invite you to discuss your thoughts on this issue with our authors listed within the document.
Discovery in International Arbitration: The Ever-Expanding Scope By Marisa Marinelli, Michael J. Frevola and Adolfo E. Jimenez Two recent U.S. federal appellate court decisions addressing a U.S. statute, 28 U.S.C. § 1782 (a), often used to obtain discovery for use in international arbitration will have a significant impact on the conduct of cross-border dispute resolution. In the first case, the U.S. Court of Appeals for the Sixth Circuit allowed parties engaged in private international arbitration with a situs outside of the U.S. to obtain discovery in the U.S. In so doing, the court interpreted 28 U.S.C. § 1782 (a) and found that a U.S. federal district court “in the district in which a person resides or is found” may order discovery “for use in a proceeding in a foreign or international tribunal” upon application by “any interested person.” In a subsequent unrelated decision, the U.S. Court of Appeals for the Second Circuit held that § 1782 (a)’s “resides or is found” language extends its reach to the limits of personal jurisdiction consistent with due process, leaving to the U.S. federal district court’s discretion on a case-by-case basis whether such discovery might include discovery of materials located outside the U.S. Given the complexity of many cross-border disputes, the involvement of multinational companies that often are parties in these disputes, and the reality that information relevant and necessary to the dispute resolution process rarely will be located in one jurisdiction, the ability to seek evidence from a party in the U.S., even if that evidence is located outside of the U.S., using § 1782 (a) is a significant tool available to Israeli companies and individuals involved in cross-border dispute resolution. The willingness of courts to permit applications by parties engaged in private arbitration outside of the U.S. presents an advantage for the party seeking discovery from a U.S.-based entity. Read full article >> 2
Virtual Currency: The Taxman Is Coming By Alan Winston Granwell, Andrea Darling de Cortes and Alexander Olama Virtual currency transactions have become a focus of tax authorities, including the United States and Israel. U.S. taxpayers living in Israel need to be cognizant of how the United States and Israel view virtual currency. This article overviews the actions of the U.S. Internal Revenue Service (IRS) in providing guidance on the character of virtual currency, open questions and the compliance options that U.S. taxpayers have to remediate noncompliance of virtual currency transactions. Likewise, in Israel1, although virtual currencies are not recognized as actual currency by the Bank of Israel (as is the case in the U.S.), it has been reported that the Israel Tax Authority has proposed that the use of virtual currency should be considered as a “means of virtual payment” and subject to Israeli taxation. That is, virtual currency is viewed as an asset for the purpose of income tax and value-added tax (VAT) requirements, and is taxed in accordance with relevant transaction classifications. Thus, in illustration, for Israeli tax purposes, an increase in the value of cryptocurrency will be regarded as a capital gain. Importantly, the Israel Tax Authority will require documentation of virtual currency transactions to verify the tax consequences. Thus, U.S. taxpayers living in Israel need to obtain both Israeli and U.S. tax advice to comply with this new area of activity. Read full article >> Summary comments relating to how Israel treats virtual currency were derived from “Regulation of Cryptocurrency Around the World,” prepared by the Law Library of Congress, Global Legal Research Center, June 2018 1
California Attorney General Releases Draft Regulations on the California Consumer Privacy Act By Ashley L. Shively, Mark S. Melodia and Marissa C. Serafino The California Consumer Privacy Act (CCPA) and its regulations apply broadly to many companies conducting business with California consumers. Specifically, the CCPA applies to foreign and domestic for-profit companies that conduct business in California, and that collect consumers’ personal information and determine the purposes and means of the processing of such information. In addition, covered companies must meet one or more of the following requirements: 1) has an annual gross revenue of more than $25 million (irrespective of the extent to which revenue is derived from California), 2) alone or in combination, annually receives or shares for commercial purpose the personal information of 50,000 or more California consumers, households or devices, or 3) derives 50 percent or more of its annual revenue from selling California consumers’ personal information. The CCPA also applies to any business that controls, or is controlled by, a business that meets the aforementioned criteria and shares common branding with the business, which could impact franchises and other business structures. Even if a company is not directly subject to the CCPA, it may still be impacted by doing business with, or providing services to, a covered business. The wide reach of CCPA makes it likely that many Israeli companies fall within the scope of the law, which becomes operational on Jan. 1, 2020. While it remains unclear how California will implement and enforce many provisions of the CCPA, it is important for companies to undertake due diligence in the short-term to assess risk and, as appropriate, operationalize the requirements of the law. Read full article >> 3
Foreign Ownership of Real Estate: New Rules from CFIUS By Antonia I. Tzinova, Gordon Griffin and Caroline D. Bisk The United States and Israel are historically close political, strategic and economic allies. The two countries entered into a free trade agreement – the U.S.’s first – in 1985. Israel is currently the U.S.’s 23rd largest goods trading partner, with $35.5 billion in total goods trade during 2018. Israel’s foreign direct investment (FDI) in the United States totaled $13.6 billion in 2018, up 13.9 percent from 2017.1 The FDI is led by manufacturing, depository institutions and, increasingly, real estate transactions, particularly multifamily, office and retail spaces. Israeli companies will need to be cognizant of the new Committee on Foreign Investment in the United States (CFIUS) rules implemented through Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), including those relating to real estate transactions. The impetus behind FIRRMA was increased investment activity by China in the U.S., and the threats arising from Chinese investment. Given that Israeli companies receive more and more funding from Chinese investors, and collaborate more with Chinese companies, Israeli investors into the U.S. ought to consider the impact of their Chinese exposure on potential U.S. investments and operations. With regard to Israel, it is also important to note that FIRRMA envisions an “excepted state” and “excepted real estate investor” paradigm. Although the proposed FIRRMA regulations do not themselves establish a “white list” of excepted countries, a list of eligible foreign states is expected to be published within two years of finalizing the proposed regulations. Excepted states will have implemented robust processes to review foreign investment in their own countries similar to the CFIUS process in the U.S. Such a process is currently in development in Israel, sparked by Chinese investment in the Haifa port, which in turn prompted warnings from U.S. authorities. In early 2019, senior Israeli officials convened high-level meetings during which draft proposals were weighed and evaluated.2 Therefore, it is probable that in a few years, Israel might receive a special status under CFIUS regulations. Read full article >> 1 2
”Israel,” Office of the United States Trade Representative “Foreign Investment in Israel’s Critical Infrastructure: Towards New Legislation,” Foundation for Defense Democracies
New Regulations in the Cannabis Industry: What Israeli Companies Need to Know? By Meital Stavinsky Israel is a Cannabis-Tech powerhouse and is at the forefront of medical cannabis research. It is home to Prof. Raphael Mechoulam, a scientist at the Hebrew University of Jerusalem, who among others, decades ago first isolated and identified the cannabis compound tetrahydrocannabinol (THC), a psychotropic cannabinoid best known for its mind-altering effects. The results of the decades-long clinical trials conducted in Israel have a tremendous global impact and contribution. For Israeli CannabisTech companies eyeing the U.S. market, the evolving regulatory framework may be quite confusing. While marijuana has been approved for medical usage in 33 U.S. states in the U.S. and in 10 states for recreational as well, pursuant to federal law, it is still an illegal drug. Hemp, on the other hand, was legalized on a federal level pursuant to the 2018 Farm Bill. Read full article >> Reprinted with permission by The Times of Israel 4
A Legal and Regulatory Overview of Dietary Supplements By Charles A. Weiss Dietary supplements occupy a unique place in the regulatory scheme administered by the U.S. Food and Drug Administration (FDA). Many of them have the visual appearance of drugs, because they are usually in the form of tablets or capsules that are packaged in the kinds of bottles associated with over-the-counter pharmaceuticals. From a regulatory perspective, however, they are treated more like food. A company intending to make a dietary supplement should understand how to avoid inadvertently bringing its product under the much stricter regulatory standards that apply to drugs. This article provides a legal and regulatory overview of dietary supplements, with an emphasis on 1) the types of ingredients permitted and prohibited in them, and 2) do’s and don’ts of labeling. It also addresses the regulatory status of cannabidiol (CBD). Read full article >>
Media Mentions Opinion: Technological Innovation as an Information Lever, Globes, Meital Stavinsky, December 3, 2019 Jewish Democratic Council Ad Calls Trump the ‘Biggest Threat’ to Jews, Jewish Telegraphic Agency, Ron Klein, November 20, 2019 Women Entrepreneurs Learn to Believe in Themselves, Take Risks and Not Be Afraid of Failure, People and Computers, Meital Stavinsky, November 12, 2019 Dollar Barrier: Israeli Companies Move to US, Israel Defense, Ron Klein and Meital Stavinsky, November 10, 2019 We Started From Scratch: The Entrepreneurs That Opened a Company in the U.S. and Had to Relocate, Ynet, Meital Stavinsky, October 20, 2019 The FIRRMA Act: What Israeli Investors and Companies Need to Know, Times of Israel, Meital Stavinsky, October 17, 2019 Bottlenecks and Parking Shortages: The Solution Is (Also) Explanatory, Globes, Meital Stavinsky, October 14, 2019 No Room for Mistakes: Tips for Israeli Companies Who Want to Come to the US, Ma’ariv, Meital Stavinsky, September 24, 2019
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A Strong Commitment to the State of Israel Holland & Knight is a U.S.-based global law firm with a strong commitment to the state of Israel. We focus on providing guidance to Israeli investors and companies interested in doing business in the United States and Latin America. With more than 1,300 professionals in 28 offices, the lawyers and professionals in our Israel Practice are highly experienced in all of the interdisciplinary areas necessary to guide an entrepreneurial or an established company through the opportunities and challenges that arise throughout the company’s life cycle. Areas of legal guidance that are typically provided to our Israel Practice clients include real estate, mergers and acquisitions, private equity, international tax, cross border and customs, internet privacy and cybersecurity, intellectual property, government lobbying, regulations and compliance, reimbursement, U.S. Foreign Corrupt Practices Act (FCPA), U.S. Foreign Account Tax Compliance Act (FATCA), and litigation and dispute resolution. Among our Israeli clients are leading innovative technology companies in a wide range of industries, including information technology, advanced transportation, agtech, cleantech, healthcare and life sciences, medical devices and cybersecurity. Our Israeli real estate clients are leading commercial and residential developers and investors, and Holland & Knight’s venture capital and private equity attorneys advise both Israeli funds and U.S. funds investing in Israeli companies. A core value of Holland & Knight is our dedication to delivering the highest quality of legal services and providing responsive and cost-effective counsel to every client. This core value of the firm – coupled with our business acumen, legal experience and solid commitment to the Israeli marketplace – enables us to successfully assist our Israeli clients operating in the United States, as well as companies and investors doing business in Israel. The members of our team have client and business meetings in Israel on a regular basis and would be delighted to arrange for a meeting in person. Please do not hesitate to reach out to us with any questions, as we look forward to helping you excel and achieve your business goals in the U.S. and Latin America.
מחויבות עמוקה למדינת ישראל אנו מתמקדים במתן שירותי יעוץ למשקיעים וחברות ישראליות. הינה פירמת עורכי דין אמריקאית גלובלית בעלת מחויבות עמוקה לשוק הישראליHolland & Knight עורכי דין ואנשי מקצוע1,250- מעסיקה למעלה מHolland & Knight פירמת עורכי הדין.המעוניינים להרחיב פעילות או להשקיע בארצות הברית ובאמריקה הלטינית ומספקים מגוון, הפוליטיקה והסביבה החברתית בישראל, הינם בעלי הבנה עמוקה של הכלכלהHolland & Knight חברי הפרקטיקה הישראלית של. משרדים27-ב לחברי הפרקטיקה הישראלית שלנו ניסיון רב בכל תחומי המשפט.רחב של שירותים משפטיים ללקוחות ישראלים שפועלים בחו"ל ולחברות ומשקיעים הפועלים בישראל . חברות הזנק וחברות מבוססות בכל שלבי ותהליכי הצמיחה וההתפתחות של החברה, משקיעים,הנחוצים כדי להנחות יזמים פרטיות ואבטחת, מסחר בינלאומי ומכסים, מיסוי בינלאומי, קרנות השקעה, מיזוגים ורכישות, נדל"ן,התחומים בהם אנו מייעצים ללקוחותינו הישראלים כוללים בין היתר . סיוע ביישוב סכסוכים עסקיים וליטיגציה,FATCA - וFCPA לרבות, ייעוץ לוביסטי ורגולטורי, קניין רוחני,מידע , מים, סביבה, חקלאות, תחבורה חכמה, לרבות בתחומי טכנולוגיות מידע ותקשורות,בין לקוחותינו הישראלים נמנות חברות מובילות בתחומי החדשנות הטכנולוגית . עם לקוחות הנדל"ן שלנו נמנים משקיעים וחברות מובילות העוסקים הן בנכסים לשימוש מסחרי והן בנכסי נדל"ן למגורים. ציוד רפואי ואבטחת מידע, מדעי החיים,אנרגייה .עם לקוחותינו בתחומי ההון סיכון וקרנות השקעה נמנות קרנות ישראליות וקרנות זרות המשקיעות בישראל ערך. הוא מחויבותנו להעניק שירותים משפטיים באיכות הגבוהה ביותר ולספק יעוץ אישי המותאם לצרכיו של כל לקוח ולקוחHolland & Knight ערך מרכזי של מאפשרים לנו לסייע בהצלחה ללקוחותינו הישראלים הפועלים בארצות- הניסיון המשפטי ומחויבותנו האיתנה לשוק הישראלי,מרכזי זה בשילוב האינטיליגציה העסקית נפגשים עם לקוחות בישראל באופן קבוע, שחלקם דוברי עברית, חברי הפרקטיקה הישראלית שלנו. ולחברות ומשקיעים הפועלים בישראל,הברית ובאמריקה הלטינית .וישמחו לתאם פגישות עם חברות ויזמים המעוניינות ללמוד על הדרכים בהן נוכל לסייע להצלחת מיזמים עסקיים בארצות הברית ובאמריקה הלטינית
For inquiries regarding this newsletter, you may contact: Ronald J. Klein Co-Chair, Israel Practice Fort Lauderdale +1.954.468.7874
Meital Stavinsky Co-Chair, Israel Practice Miami +1.305.789.7710
Washington, D.C. +1.202.469.5152 ron.klein@hklaw.com
Washington, D.C. +1.202.828.5004 meital.stavinsky@hklaw.com 6
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