Update – February 19, 2010 – Are Real Patent Term Extensions and Real Data Exclusivity Provisions on the Way for Israel?

Today I found this story in English online version of Haaretz and this one in the Hebrew-language Globes (the English version is here), which confirm my suspicions about the putative changes in Israel’s patent and data exclusivity laws.  In exchange for these changes, the USA will reportedly now support Israel’s entry to the OECD and will also remove Israel from its “priority watch list”.

 

One aspect of the story that intrigues me is the impetus for the change being Israel’s desire to join the OECD.  Specifically, opening up Israel’s legal services market doesn’t appear to be one of the demands being made for Israel’s acceptance into the organization.  That’s a pity, because without such opening the consumers of those services will continue to pay more than they need to.

 

I should explain.  At present, Israel has a statutorily created bar association, and to practice law in Israel you have to be a member of the bar association (unlike, say, New York, where admittance to practice is contingent upon paying a fee to the Office of Courts Administration but not upon bar association membership).  In a throwback to the guilds of the middle ages, ILBA rules state that an Israeli lawyer cannot be a partner with anyone who isn’t also a member of the ILBA.   Ostensibly this is to protect the purity of the profession (because we all know lawyers as a group have a lily-white reputation) by ensuring that all lawyers practicing in Israel adhere to the same code of ethics, but it’s really just a protectionist measure.  This rule is the one of the primary reasons why there are no multinational firms with offices in Tel-Aviv: were the Israelis to partner with lawyers from outside Israel, the Israelis would be subject to disciplinary action and possible disbarment.

 

Another primary reason for the lack of a multinational presence is taxation: foreign firms are scared that if they have partners in Israel, those firms’ entire profits will be subject to Israeli taxation.

 

The result is that Israelis needing foreign legal services often end up paying more than they ought to for those services: their local attorneys often act as middlemen who drive up the price, and the local legal services market is itself somewhat insulated from the pressures of competition from without.  (In some cases local firms have created strategic alliances with foreign firms, but that’s not the same as being integrated into a single unit.)

It’s time for Israel to amend its laws to facilitate partnering with foreign lawyers.  The OECD should be demanding such reform as part of the price of admission.