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Corruption is not an obstacle for businesses operating or planning to invest in Israel. Businesses may encounter demands for bribes or gifts particularly when dealing with public procurement, yet, corruption is not institutionalized in any of the country’s sectors. The government has put in place a comprehensive legal framework to combat corruption and enforcement has been effective. The Penal Code addresses corruption offenses including, bribery, extortion, embezzlement and abuse of office. Government corruption has come under the spotlight in several instances, however, impunity is not a problem. Several corruption cases have been tried and high-ranking government officials have received prison sentences. Both gifts and facilitation payments are criminalized in Israel.
Last updated: August 2016
The judiciary does not carry corruption risks for business, and very few companies rank the judicial institution as an obstacle in Israel (ES 2013). Bribes are not exchanged in order to get favorable court decisions (GCR 2015-2016). Furthermore, the courts operate independently and without government interference (FitW 2015). Nonetheless, one-third of surveyed households perceive the courts to be corrupt (GCB 2013). Businesses perceive the courts to be moderately efficient in settling disputes and challenging government regulations (GCR 2015-2016).
Enforcing contracts in Israel is very time-consuming, taking an average of 975 days (DB 2016). Israel is a member of the International Centre for Settlement of Investment Disputes (ICSID) and has signed and ratified the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
The police does not present a corruption risk for business. Nonetheless, more than half of surveyed households perceive the police to be corrupt (GCB 2013). Businesses perceive the police to be moderately reliable in protecting them from crime and enforcing the law (GCR 2015-2016). More than half of surveyed business pay for security in Israel, despite that a very little percentage of companies identify crime as an obstacle for business (ES 2013). Authorities have established effective mechanisms to investigate corruption and abuse among police officers (HRR 2015).
Former chief prosecutor Ruth David, police investigator Eran Malka and prominent lawyer Ronel Fisher, have been charged in 2015 with bribery. Allegedly, Ruth David collaborated with Ronel Fisher and Eran Malka in a scheme, which consisted in Fisher extorting bribes from clients in return for sharing sensitive intelligence information received from Malka. Ruth David also received bribes and expensive gifts from Fisher, with whom she was romantically involved, to use her influence in the cases and investigations of his clients. The events, however, took place after David had retired from public service. Ruth David was freed from jail and allowed to travel abroad despite the gravity of the charges (Arutz Sheva, Mar. 2016). The case is ongoing.
The public services sector presents business with a moderate corruption risk. Companies do not expect to provide officials with gifts to obtain an operating license (ES 2013), however, at the same time, some business executives report that bribes are sometimes exchanged in return for public utilities (GCR 2015-2016). Inefficient government bureaucracy ranks as the most important obstacle for businesses in Israel (GCR 2015-2016). Starting a business is more time-consuming and more costly than the regional average (DB 2016).
The land administration carries low corruption risks for businesses. Gifts are not expected when applying for a construction license (ES 2013). Property rights are guaranteed and properly protected in practice (ICS 2016). Registering property in Israel is more time-consuming and more costly than the regional average (DB 2016).
Aryeh Deri, head of the Shas party, is involved in an ongoing corruption case. Deri came under the spotlight for alleged financial wrongdoing related to the ownership of several properties in Israel (The Times of Israel, Mar. 2016). In another corruption case, the police recommended the indictment of head of Israel’s Land Authority, Benzi Lieberman. Reportedly, the police has amassed sufficient evidence to incriminate Lieberman for illicit real estate transactions, conflict of interest and improper management. Lieberman had allegedly secured land deals; including land leasing, for a real estate company, which he had worked for in the past. The corruption case reportedly also involves Parliamentarian Nahum Langental (The Times of Israel, Mar. 2015). No further information is available on the case.
Companies contend with low corruption risks when dealing with the tax administration. Businesses do not expect to give gifts when meeting with tax officials and bribes are seldom exchanged (ES 2013, GCR 2015-2016). Business complain about uncertainties regarding taxation and see these as a competitive disadvantage for the country (ICS 2016). Paying taxes is more time consuming in Israel compared to the regional average, taking 235 hours per year (DB 2016).
The customs administration presents business with a low corruption risk. Bribes are rarely exchanged when dealing with imports and exports (GETR 2014). Trading across borders is generally substantially more costly and more time-consuming than the regional average; time to import, for instance, takes an average of 44 hours compared to four hours in neighboring countries (DB 2016).
Moderate to high corruption risks are faced by businesses venturing into public procurement in Israel. Bribes are sometimes exchanged in order to obtain public contracts (GCR 2015-2016). Businesses believe that funds are sometimes diverted to individuals or businesses due to corruption and report that favoritism is widespread among procurement officials (GCR 2015-2016). The public procurement process lacks transparency and state-owned companies very often make use of selective tendering procedures, which, combined, greatly undermines fair competition (ICS 2016). Companies found guilty of foreign bribery are not automatically debarred from participating in future tenders (OECD, Jun. 2015). Authorities have not enforced procurement laws and regulations consistently (ICS 2016).
In march 2016 Isaac Herzog, the head of the Labor/Zionist Union and opposition leader, was named as a suspect in a corruption investigation. Herzog allegedly received illegal donations to campaign for the ouster of Shelly Yachimovich from his party’s leadership during 2013. Herzog was allegedly ‘reimbursed’ by a nursing company he had helped during his time as welfare minister, by giving a political operative ILS 40,000 to run a negative campaign against Yachimovich, whom Deri hoped to disadvantage in the race for party leadership (Times of Israel, Mar. 2016). Another corruption case related to the diversion of public funds has implicated several public officials, including former deputy minister of the interior, former minister of tourism, former Ministry of Agriculture director-general and many others, who had allegedly illegally transferred government financial support to entities in return for kickbacks to members of the Israeli parliament and their associates and/or lucrative public positions to these associates (Globes, Oct. 2015). In October 2015, the police recommended putting several of the people involved on trial (Arutz Sheva, Oct. 2015). No further information is available on the case.
The government of Israel has a strong legal anti-corruption framework in place and laws are enforced effectively. Impunity is not perceived as a problem, nonetheless, there have been reports of official corruption (HRR 2015). The Penal Code criminalizes corruption offences, including passive and active bribery or any other promised or offered benefit, facilitation payments, extortion, embezzlement, and gifts in the public sector. Money laundering is addressed under the Prohibition on Money Laundering Law. The Penal Code does not specifically address corruption in the private sector, nonetheless, Israeli courts previously determined that employees from the private sector may be tried for bribery considering that they’re employed in corporations providing a public service and thus expanding the definition of a ‘public servant’ (UN, Jun. 2015). Bribery can incur fines and prison sentences up to seven years (OECD, Jun. 2015). Both the Penal Code and the Money Laundering Law criminalize the bribery of foreign officials, and both corporations and employees can be held liable for the bribery of foreign officials and can be subject to prison sentences and fines (OECD Jun. 2015). However, investigations into foreign bribery cases have been limited (OECD, Jun. 2015). Public officials are prohibited from participating in commercial activities without prior permission as provided by the Civil Service Rules. Senior government officials subject to financial disclosure laws, nonetheless the information is not made public and there are no provisions specifying sanctions for noncompliance (HRR 2015). Both public and private whistleblowers enjoy legal protection from retaliation under the law; employees that suffer mistreatment or dismissal because of reporting on corruption are entitled to compensation or reinstatement (OECD, Jun. 2015). Israel has signed and ratified the UN Convention Against Corruption and is a member of the OECD Anti-Bribery Convention.
Freedom of speech and press are guaranteed under the law and the government generally respected these rights in practice (HRR 2014). The media is free to report on corruption (FitW 2015). The media is independent and privately owned, however, its concentration in the hands of a few displays the political bias of media owners (FitW 2015). Libel is criminalized and journalists face the threat of legal action, yet the courts generally rule in favor of journalists (FotP 2015). Furthermore, aggressive censorship has reportedly increased over the past years (FitW 2015). Press cards have been occasionally withheld from journalists, particularly Palestinians to restrict them from entering the country (FitW 2015). Public access to government information is provided for by the law, yet not all government agencies implemented the law effectively (HRR 2015). The government did generally not restrict internet access (FitP 2015). The media environment in Israel is considered as ‘free’ (FotP 2015).
Israel has strong civil society traditions (FitW 2015). Civil society organizations active in fighting corruption operate freely in Israel (HRR 2015). The government has been generally cooperative with civil society and has invited NGOs critical of the government to participate in parliamentary debates and policy-making (HRR 2015).
- World Economic Forum: Global Competitiveness Report 2015-2016.
- World Bank & IFC: Doing Business 2016.
- US Department of State: Investment Climate Statement – Israel 2016.
- The Times of Israel: ‘Same suspicions, different day’, 31 March 2016.
- Arutz Sheva: ‘Disgraced ex-DA may face added charged’, 16 March 2016.
- BBC News: ‘Ehud Olmert jail term: Israel ex-PM begins sentence for bribery’, 15 February 2016.
- Freedom House: Freedom in the World – Israel 2015.
- Freedom House: Freedom of the Press – Israel 2015.
- US Department of State: Human Rights Practices Report – Israel 2015.
- Globes: ’30-40 indictments seen in Yisrael Beitenu graft affair’, 19 October 2015.
- Arutz Sheva: ‘Police: Put Senior Yisrael Beytenu Figures on Trial’, 21 October 2015.
- OECD: Phase 3 Report on Implementing the OECD Anti-Bribery Convention in Israel, June 2015.
- United Nations: Conference of the States Parties to the United Nations Convention against Corruption, 1-5 June 2015.
- Times of Israel: ‘Police recommends corruption trial for Land Authority head’, 12 March 2015.
- World Economic Forum: Global Enabling Trade Report 2014.
- World Bank Group: Enterprise Surveys – Israel 2013.
- Transparency International: Global Corruption Barometer 2013.