The respondents similarly noted in their summaries that "to the extent that the body in question [...] The deeper it is rooted in the public sphere, the less legitimate it will be to allow the filing of a derivative action in relation to it, since quasi-public bodies are subject to more comprehensive supervision by the state" (paragraph 48 of the Association's summaries). My emphases, R.R.).
At the same time, the quasi-public nature of the corporation and the nature of its relationship with its members do not necessarily indicate the existence of extensive and effective means of supervision and enforcement. In those cases where the supervision and enforcement mechanisms to which a quasi-public corporation is subject are not sufficient, deterrence considerations may justify intervention in corporate governance failures even by way of private enforcement. In other words, the fact that a particular corporation is public or quasi-public in itself, does not necessarily lead to the interpretive conclusion that private enforcement mechanisms should not be recognized in relation to him. In practice, the legislature recognized, in various cases, the possibility of using private enforcement mechanisms against the state and public bodies supervised by it (see, for example, section 29 of the Class Actions Law, which applies the provisions of the law to the state).
- It should also be clarified that the existence of additional enforcement mechanisms that are not derivative claims is not the be-all and end-all. Thus, there are many private entities whose supervision by various regulators does not exclude the possibility of their shareholders filing derivative (or class) claims on their behalf within the framework of private enforcement (such as banks, which are supervised by the Supervisor of Banks; insurance companies, supervised by the Commissioner of the Capital Market; etc.). As noted, the possibility of private enforcement stems from the understanding that the regulator cannot necessarily detect all the relevant violations, prevent them, and deter their existence. For this reason, a supplementary enforcement mechanism is needed, the initiators of which are private individuals. Such a mechanism is an addition to the deterrence and enforcement of deterrence and enforcement.
The Status of the Association and its Supervision
- In light of the above, we will now examine what are the supervisory mechanisms to which the Association is subject, and whether they are sufficient to lead to the conclusion that in terms of the objective purpose, the "silence of the legislature" constitutes a negative arrangement with respect to the possibility of filing a derivative action. In this framework, we will also address the additional considerations raised by the Supreme Court in the Kahani case, which may have an impact on the question of supervision: the position of the association on the private-public axis, and the relationship between it, between its members and the state. As we shall see, the association is a "dual-natured" body whose activities involve aspects of both private and public law; And it is subject to the supervision of a number of public bodies.
The Association is a "dual" body
- The association is a dual entity, which is subject to norms from both private and public law – a phenomenon known as "normative duality" (see introductory stimulus (Tel Aviv) 1027/02 Aviv Giladi Productions in Tax Appeal v. Israel Football Association [Published in Nevo] (The Honorable Justice A. Baron) (7.4.2003) (hereinafter: "The Giladi Matter"). The judgment was upheld by the Supreme Court, other municipal requests 4583/03 Israel Football Association v. Aviv Giladi Productions in Tax Appeal [Published in Nevo] (July 13, 2003)). The Association's activities are regulated by two main laws: The Non-Profit Organizations Law and the Sports Law.
Indeed, the association has the characteristics of a private body. First of all, in terms of the manner in which it is incorporated, the association is a corporation of private law and not part of the government authorities. It was founded in 1928 as an Ottoman association, and today it is incorporated as an association under the Associations Law (see section 1 of the Sports Law and section 1 of the Associations Law).