Where law meets finance,
and ideas meet execution.

Corporate law, in its nature, serves to provide a wide normative framework for firms and corporate constituents alike. Due to the field’s dynamic nature, corporate legal standards continuously update in line with new challenges that are posed by market players, especially within the court system. The judiciary plays an essential role in interpreting corporate regulation and generating normative rules and standards for years to come, especially through ad-hoc, fact-intensive inquiries that require judges to pick apart complex economic disputes.

There is just one problem: Israeli corporate law is still laden with indeterminacy. Firms and other corporate constituents severely lack normative guidance with respect to the various legal standards in corporate law, including fiduciary duties, judicial review and related-party transactions. Similarly, parties are quick to take advantage of alternative methods of dispute resolution, where quiet agreements limit the ability of practitioners to develop normative takeaways from those respective disputes.

One aspect of corporate litigation is particularly impactful in this respect: the court-approved settlement. Judicial proceedings involving corporate law are often times resolved through settlement agreements, which are then subsequently approved by judges – generally, with minimal intervention or normative guidance. As a result, fact-intensive rulings with potential normative consequences are replaced with simple, individualized resolutions.

To take a deeper look into the phenomenon, we hand-collected and analyzed a dataset of 116 in-court settlements approved by Israeli judges who specialize in corporate law, including judges in the Economic Courts in Tel Aviv and Haifa. We examined these cases across a number of different criteria, including the respective topic in corporate law; the level of judicial intervention; the methods through which judges, if at all, intervened; the stage of litigation where the settlement was approved; the extent of plaintiffs’ awards and attorney fees; and the involvement of arbitrators prior to the settlement.

In light of our findings, we discuss timely policy implications that serve to contextualize the institution of court-approved settlements in corporate litigation. We illustrate the evergrowing necessity of normative statements and expanded rulings within the context of court-approved settlements, where judges can voluntarily discuss their initial views with respect to the relevant legal disputes.