It was further stated that
"As a rule, the principle of separate legal personality should not be ignored and for the purpose of ignoring such aforesaid, the veil must be lifted in accordance with the provisions of section 6 of the Companies Law, 5759-1999," and this will be done only "in exceptional cases, where it is necessary to prevent the misuse of the principle of separate legal personality, for example, in order to defraud a person or deprive a creditor of the company."
The Applicants indeed claim that Thai and Cuba should also be added by virtue of the lifting of the veil between them and Thai, but then the question arises as to what burden of proof is required of the petitioning party to join the shareholder of the company with which it signed the arbitration agreement, when it claimed to lift the veil under section 6 of the Companies Law, 5759-1999.
On the one hand, it is clear that for the purpose of joining, a declaration of intention to petition in the arbitration proceeding to lift the curtain is not sufficient, on its own, at the level of a headline only, without any evidentiary or circumstantial addition to it .
On the other hand, it is not possible to require the Petitioner to Join to lay before the Court already in the Joining Proceeding, here and now, "a proper factual basis and compliance with the burden of proof required for this purpose" (paragraph 16 of Ronen v. Cohen) for one of the alternatives listed in section 6 above, for if you say so, the court will be found doing the arbitrator's work, and already deciding on the question of the shareholder's liability or non-liability to the company's debt. When it comes to clarifying this issue, the arbitration is correct.
- On the question of the extent of the burden, the Be'er Sheva District Court (the Honorable Judge Ariel Vago) also wrestled with a judgment it recently handed down in a civil case 27877-11-23 Carmei Gat Buyers Committee v. Emunah Initiation and Management of Projects in Tax Appeals et al., [Nevo], 28.05.2024). There, too, it was argued that the controlling shareholder of the companies, the issuer and the client, by virtue of lifting the veil, was added to the arbitration proceeding, the court harshly stated:
"... Ostensibly, a "vicious circle" may be created. The harsh allegations are completely denied. No one has yet determined that the conditions for lifting the veil have been met. We will only be able to know this after an orderly proceeding has been conducted, and a decision has been made. If Israel is added to the arbitration, it will only be known at the end of the arbitration whether there was any justification for joining him on this level. If a separate proceeding is ordered to be held in order to clarify the issue, then the correct and authorized forum for this will be a court. In practice, that "petty trial" will require clarification of the questions of fact and law, identity, in whole or in part, with the contents of the arbitration, and the split, which is very undesirable, will return "through the back door. There is no denying that this issue raises a certain difficulty, given the stage at which things are located, and when there is no proven basis, even at the initial level, regarding the harsh allegations raised against Israel's conduct."