Israeli hi-tech sector opposes judicial reform

They say that money talks – and there’s been a lot of chatter in Israel over the past few weeks regarding the new government’s plan to reform the Supreme Court.

Many sectors of Israeli society have spoken out against the proposed reforms, but one sector might have the most impact: business. 

For four weekends in a row, politicians, advocates, lawyers and private citizens from all parts of the country have been in the streets, raising their voices and their banners. During a series of Saturday night protests, torches were lit and lights passed from one person to the next. In addition, individuals came out with drums, and teenagers stayed out late on school nights in the name of democracy, or so they say. And while Saturday nights between 7 and 10 p.m. became the noisiest hours of the week for around 100,000 Israelis who demonstrated, one little hour on Tuesday morning January 24th may have spoken the loudest.

A few hundred hi-tech workers left their workplaces that day in Tel Aviv, Jerusalem, Haifa, Beersheba and other tech zones throughout the nation. Their message: Stop reforms that seek to give the parliament veto power over Supreme Court decisions; and prevent parliament from choosing whom to appoint to the bench. These are the two top suggestions from members of Prime Minister Benjamin Netanyahu’s coalition on how to make the judicial system more fair.

What do Israeli hi-tech leaders think of the proposed judicial reform?

The tech sector makes up about 25 percent of Israel’s income taxes and contributes about 15 percent to the country’s annual GDP. Over the course of just two decades, the tech sector has brought Israel to unprecedented economic heights. Many want to see that continue.

In an effort to hold on to investors, clients and local employees, many chief executives say that Israel must maintain an independent court – one that cannot be swayed by parliament. Before the Tuesday tech protest, a number of Israeli companies sent emails to their employees letting them know that they would be supported if they wanted to exercise their right to demonstrate. Most companies stressed that there was no pressure to protest, but that if employees wanted to participate, the hour was theirs.

Israeli companies such as Lemonade, Natural Intelligence, and Wiz are just a few that spent time with their respective teams thinking about the message they wanted to send employees ahead of the scheduled protest. 

Many executive officers not only gave employees the OK but joined in as well. Chief product officer Tomer Fuss of Natural Intelligence was one. The Israeli company of 500 employees uses its solutions to match consumers around the world with the right products and services. Fuss says that executives from his company got together and decided that the best course of action was to support the effort.

“We even thought about taking more steps and joining other forums of leaders from the hi-tech industry. We are partnering with other companies to think of what we can do to stop these processes in the government,” Fuss said.

He added that there are a number of behind-the-scenes forums and meetings among management, as companies are trying to align in the next steps. Before the one-hour protest, there were a number of preparatory meetings, and there are more happening now.

“We are worried about our business. All of our customers are from North America and Europe. We want them to feel that they are working with a company from a stable market and a stable state, where the law has meaning and the court has power,” Fuss said.

Fuss highlighted that while political parties come and go, the court remains for the long run, and he’s already thinking about ways that parliament could change Supreme Court decisions that might ultimately alienate some of his employees.

“We have women, men, LGBT employees, non-Jewish employees. We also think about them; we want them to live in a safe place,” he stressed.

Daniel Schreiber, CEO of the Lemonade insurance company, has been referred to as an “insurance disruptor.” But at one time, he was a new immigrant from the United Kingdom and… a writer. He began putting words to paper in 1996 when Israel had a Supreme Court reform that rocked the country. He wrote about it with a conservative approach in an article in a March edition of The Jerusalem Report titled “The Supreme Coup.” Today, his highly successful insurance company is revolutionizing the industry by going digital. Nearly half of the company’s claims are handled without human intercession.

Here is part of what he wrote 27 years ago:

March 21, 1996

“A new power now dictates the law in Israel. In the past few months, it has decreed equal rights for homosexual couples, ordered government religious councils to accept Reform rabbis, made the Air Force open to women — and, most importantly, has empowered itself to override the Knesset. It is the Supreme Court. Many in Israel are thrilled with this “constitutional revolution.” They shouldn’t be. In several imaginative rulings, the Supreme Court has recognized the so-called Basic Laws as being the country’s constitution, and in a November 1995 ruling augmented these by granting itself the power of judicial review. The last point is the crux: The fundamental problem with our new constitution is not the changes it sanctions but whom it sanctions to make changes — unelected, unrepresentative, unaccountable judges.”

Before doing a phone interview with Schreiber, this journalist’s expectation was that he would again take a more conservative approach. That was entirely inaccurate.

“The balance of the court and legislative branches are out of whack, and that’s what I was cautious about in 1996. It was excessive at the time. I am still dead-fast opposed to the proposed legislation today. I think that was an overcorrection [then] and this is an overcorrection [now],” Schreiber said.

Lemonade has taken a stand on political issues in the past, but it was previously done in the country where their customers live – the United States. Lemonade took a stance on gun control following the Las Vegas massacre in 2017 and even changed its policies regarding which guns the company would insure. Lemonade also conditioned coverage based on “responsible usage.”

Lemonade has 1,120 employees and is publicly traded on the New York Stock Exchange.

One of the CEO’s commentaries on the reforms was that in order to veto a court ruling, only a thin majority of 61 votes from the 120-strong Knesset would be needed.

“That means the coalitions can do what they want. What would happen if the Knesset passed a law saying no more elections?” Schreiber asked.

Another tech company, Wiz, has been an active part of the Tel Aviv tech protests. Co-founder Yinon Costica weighed in on whether he thought the Supreme Court issue was a partisan matter. In the way that only a tech founder could, he said this: “It is not about politics; the Israeli tech sector stays away and does not get involved in politics. In tech terms, it’s about the operating system, not the application.”

The men quoted thus in this report come from countries where democracy has always been a given. But for Israeli citizens like former MK Alex Kushnir, who emigrated from the former Soviet Union as a teen, the proposed legislation is unnerving, to say the least. Kushnir says that having a weak court signals two things: a rocky democratic experience for society and the beginning of the end of potential investors in Israeli companies. Kushnir knows all about that. He was the chair of the Knesset Finance Committee during the previous administration and has been a financial consultant throughout his professional career. He says that if firms are doing their due diligence, they will likely be discouraged to find that Israel’s court rulings can be overthrown by its governing body.

“What Netanyahu is doing now is grabbing all the institutions to make him an unlimited ruler with all the power,” Kushnir said. He added that most Israelis treat democracy as something that comes “without saying” and don’t know how it feels to live in a nation with limitations.

Before entering politics, Kushnir spent a lot of time assessing risk for his Israeli clients who were in the business of making financial ventures abroad. He said that part of his advice included a deep review of how the court system in the specified country was operating.

“This was something we checked for – to see if those courts could protect Israelis. Our clients had to be sure they had the protection of the court and that the government couldn’t make any unreasonable decisions,” Kushnir said. “If the [Israeli] government achieves what it wants to, the court will not be able to protect. That’s why you’ll see a lot of hi-tech investors saying they will not put their money in Israel now.”

Kushnir referenced Insight Partners, a New York-based global venture capital and private equity firm, which is considered to be the largest investor in Israeli start-ups. While many VCs privately discussed suspending investments with their companies, Insight sent an official public letter to all the businesses in its Israeli portfolio. It stated clearly that the company is aware of the political unrest and “denounces acts that seek to stifle personal freedoms or acts of hatred, violence or discrimination.”

While the statement from Insight did not directly reference what it would do with its funds, Kushnir said the company is sending a clear message that it is reconsidering its investments.

“Netanyahu is sacrificing the Israeli economy and Israeli democracy for his own problems that he wants to solve. All of this reform in the court is targeted to achieve one goal – to soothe the criminal problems of Netanyahu,” Kushnir stated. “I know what it’s like to live in a country where democracy does not exist, and I have this sharp feeling that this is happening now in Israel. And that is why we have to do everything to stop it.” ■