CA 6821/93 Bank Mizrahi v. Migdal Cooperative Village 1 CA 6821/93 LCA 1908/94 LCA 3363/94 United Mizrahi Bank Ltd. v. 1. Migdal Cooperative Village 2. Bostan HaGalil Cooperative Village 3. Hadar Am Cooperative Village Ltd 4. El-Al Agricultural Association Ltd. CA 6821/93 1. Givat Yoav Workers Village for Cooperative Agricultural Settlement Ltd 2. Ehud Aharonov 3. Aryeh Ohad 4. Avraham Gur 5. Amiram Yifhar 6. Zvi Yitzchaki 7. Simana Amram 8. Ilan Sela 9. Ron Razon 10. David Mini v. 1. Commercial Credit Services (Israel) Ltd 2. The Attorney General LCA 1908/94 1. Dalia Nahmias 2. Menachem Nahmias v. Kfar Bialik Cooperative Village Ltd LCA 3363/94 The Supreme Court Sitting as the Court of Civil Appeals [November 9, 1995] Before: Former Court President M. Shamgar, Court President A. Barak, Justices D. Levine, G. Bach, A. Goldberg, E. Mazza, M. Cheshin, Y. Zamir, Tz. E Tal Appeal before the Supreme Court sitting as the Court of Civil Appeals 2 Israel Law Reports [1995] IsrLR 1 Appeal against decision of the Tel-Aviv District Court (Registrar H. Shtein) on 1.11.93 in application 3459/92,3655, 4071, 1630/93 (C.F 1744/91) and applications for leave for appeal against the decision of the Tel-Aviv District Court (Registrar H. Shtein) dated 6.3.94 in application 5025/92 (C.F. 2252/91), and against the decision of the Haifa District Court (Judge S. Gobraan), dated 30.5.94 in application for leave for appeal 18/94, in which the appeal against the decision of the Head of the Execution Office in Haifa was rejected in Ex.File 14337-97-8-02. The applications were adjudicated as appeals. The appeal in CA. 6821/93 was rejected. The appeals in LCA 1908/94 and 3363/94 were accepted, and the files were returned to the District Courts to continue adjudication. Editor’s Synopsis The Family Agricultural Sector (Arrangements) Law was adopted by the Knesset in 1992, as part of an attempt to rehabilitate Israel’s agricultural sector following a severe economic crises. To that end, the law established a body called the “rehabilitator,” which was granted broad authority to settle, restructure and cancel debts that had been created up to the end of 1987. In 1993, the Knesset found it necessary to intervene again, and amended the law. Among other changes, the Family Agricultural Sector (Arrangements) (Amendment) Law, 5753-1993, redefined the debts subject to the law, and extended the applicable time period so that debts incurred until the end of 1991 also fell within the scope of the law and the authority of the rehabilitator. Following the adoption of the Primary Law, but prior to the adoption of the Amending Law, the Knesset enacted Basic Law: Human Dignity and Liberty. Section 10 of the Basic Law stated that the Basic Law “shall not affect the validity of any Law in force prior to the commencement of the Basic Law. CA 6821/93 concerned a suit brought by the appellant in the District Court against the respondents who had guaranteed the debt of the Cooperative Agricultural Fund Ltd. The respondents requested that the matter be transferred to the jurisdiction of the rehabilitator, in accordance with the Amending Law. The Court granted the request. The appellants argued on appeal that the Amending Law violated their property rights under s. 3 of Basic Law: Human Dignity and Liberty, and was contrary to s. 8 of that Basic Law, which establishes that there shall be no violation of rights under the Basic Law except “by a law befitting the values of the State of Israel, enacted for a proper purpose, and to an extent no greater than required, or by regulation enacted by the virtue of express authorisation of such Law.” LCA 1908/94 concerned debts incurred by the appellants for the rental of agricultural equipment. The District Court held that the provisions of the Amending Law that extended the period of debts were incompatible with s. 8 of the Basic Law and were void. While the Amending Law served a proper purpose, the Court found that it applied CA 6821/93 Bank Mizrahi v. Migdal Cooperative Village 3 selectively to a part of the public and was therefore incompatible with the values of the State of Israel. LCA 3364/94 addressed the District Court’s decision to reject the request of the appellants to transfer their matter to the jurisdiction of the rehabilitator. The Court found that the debt had been incurred in 1988 and thus did not fall within the scope of the Primary Law. The stay of proceedings and the transfer of the debt to the jurisdiction of the rehabilitator were a result of the Amending Law. The Court held that the Amending Law infringed creditors’ rights beyond what was established in the Primary Law. While the Primary Law was immune to review under the provisions of s. 10 of the Basic Law, those provisions did not apply to the Amending Law, which was, therefore, subject to review under s. 8. The three cases represented the first instances in which Israeli courts annulled a law passed by the Knesset on the grounds of unconstitutionality due to a violation of fundamental rights established in a Basic Law. Inasmuch as the three cases raised the same fundamental questions of constitutional law, the appeals were heard together before an expanded bench of nine judges of the Supreme Court. In deciding the appeals, the Supreme Court was called upon to address the questions of whether or not the Knesset possessed constituent authority to frame a constitution and limit its own legislative authority thereby, and whether Basic Laws enacted by the Knesset enjoy supra-legislative status. After establishing the place of Basic Laws in the legislative hierarchy and the ramifications of a conflict between regular legislation and Basic Laws, the Court addressed the specific issue of whether the Amending Law violated rights established under Basic Law: Human Dignity and Liberty and whether the violation was incompatible with s. 8 of that law, and the consequences of such a violation. Each of the nine judges wrote a separate opinion. The primary approach of the Court is set out in the opinion of President Barak. According to President Barak, the Knesset’s authority to frame a constitution derives from the doctrine of constituent authority. The Knesset derives its constituent authority from the First Knesset by means of constitutional continuity. This view of the Knesset’s constituent authority best reflects the national consciousness and legislative history of the State of Israel. The Knesset, therefore, acts in two capacities. It enacts laws as a regular legislature, and it adopts Basic Laws in its capacity as constituent assembly. Basic Laws so enacted enjoy supra-legislative, constitutional status. Judges Bach, Goldberg, Levin, Mazza, Tal, and Zamir concurred in their separate opinions. Former President Shamgar based the Knesset’s authority to frame a constitution upon constituent authority deriving from the Knesset’s unlimited sovereignty. It is the Knesset’s unlimited sovereignty that underlies its authority to frame a supra-legislative constitution that can limit the legislative power of future Knessets. 4 Israel Law Reports [1995] IsrLR 1 In his dissenting opinion, Justice Cheshin agreed that the First Knesset was granted the power to frame a constitution, but argued that the First Knesset’s constituent authority was not transferable, and it was not transferred to subsequent Knessets. Moreover, According to Cheshin, J., constituent authority must be unequivocal, yet Court precedent and Israel’s legislative history do not reflect such a clear view of the Knesset’s authority, and the legislative history of the Basic Laws does not support a conclusion that the Knesset believed it was adopting legislation of a constitutional nature in enacting them. The Court unanimously held that although the Amending Law violated the property rights of creditors, the provisions of the Amending Law were consistent with the requirements of s. 8 of Basic Law: Human Dignity and Liberty. The appeal in CA 6821/93 was therefore dismissed, and the appeals in CLA 1908/94 and CLA 3363/94 were upheld and the decisions of the District Court were set aside. (Per Shamgar, P.) The Basic Law did not infringe pre-existing laws, but applies only to laws adopted following its entry into force. The Amending Law was adopted following the entry into force of the Basic Law. Two primary theories explain the Knesset’s power to enact legislation of a constitutional nature: The theory of unlimited sovereignty and the theory of constituent authority. Of theses two theories, that of unlimited sovereignty more accurately expresses Israel’s legislative history, its accepted legal concepts, and the case law of the Supreme Court. The Knesset has the power to enact laws of every type and content, and can formally or substantively entrench the fundamental values of the State of Israel, and thereby limit its own power and that of subsequent Knessets. The extent of the Knesset’s power to limit itself is a question of constitutional policy. Both the theory of unlimited sovereignty and that of constituent authority recognize the Knesset’s power to limit itself. In terms of preferred law, a Basic Law should be changed only by another Basic Law. In this regard, a distinction must be drawn between changing a right as opposed to infringing it. An infringement does not change the basic right. (Per Barak, P.) The Knesset’s power to adopt a constitution derives from its constituent power. The source of the Knesset’s constituent power is the sovereign, that is, the people.