It's an unheard of, 8-month old case from a negligible jurisdiction in global terms, but potentially interesting to bloggers and bloggees nevertheless: HCJ 2587/04 Bukhris et al. v. Hedera Tax Assessor, 23.6.05, a petition brought before the Israeli Supreme Court sitting as High Court of Justice ("HCJ"), the ruling written by President Aharon Barak. If the names ring a bell, they're the same judiciary and judge associated with much of Israel's contribution to the trans-national jurisprudence on international humanitarian law in domestic legal responses to belligerent occupation. It's really a footnote of a case, just a desperate (and quite creative) effort by an aggressive commercial litigator. But I think it raises (or accentuates) some interesting questions about the regulation of trade and migration, especially about GATS Mode 4. The case is available only in Hebrew, so I will provide a brief summary.
In Bukhris, two Israeli petitioners – a flower grower employing only 5 Thai workers, and a "manpower company" employing 373 Chinese and 238 Romanian workers - challenged a statutory levy to be paid by employers of "foreign workers", at a rate of 8% of the salary paid to each worker during the fiscal year (the "Levy"). A "foreign worker" is defined as a worker who is neither an Israeli citizen nor an Israeli resident. The challenge was based entirely on international law, in three categories:
(a) Prevention of Double Taxation Treaties – the gist of this argument was that the Levy charged from employers of foreign workers would in practice be deducted from the workers' pay and hence would be a tax violating double taxation treaties. The tax treaties were explicitly incorporated into Israeli law (Israel has a dualist legal system). The Court found that because the statute establishing the Levy prohibited its deduction from foreign workers' pay, there was no fear of double taxation (I shall reserve comment; it would not be the first time that the HCJ placed such trust in the willingness and capacity of administrative authorities to enforce the letter of the law).
(b) ILO Migrant Workers' Convention – A non-discrimination issue. The argument: the Levy discriminates against foreign workers. Here we are getting close to the justification of this post (which is already too long). Remember who the petitioners were – employers, not workers. And they invoke ILO non-discrimination rules. At any rate the claim was rejected because the agreements were not incorporated into national law.
(c) GATS – The petitioners argued that the Levy violated national treatment under the GATS. Importantly (for Israelis and traders in Israel, at least), the HCJ did not throw this out on the basis of non-incorporation of the WTO/GATS into Israeli law, in contrast with the ILO convention claim. Rather, it cursorily stated that the workers in question were unlikely to be active in a relevant GATS services sector, and that the petitioners did not show that any of the workers were covered by Israel's Mode 4 obligations, which apply horizontally only to executives and experts.
The thread common to all three claims, is that the local employers were trying to improve their competitive position on the domestic market, arguing on the basis of their foreign employees' rights under international law: the right to avoid double taxation, the right to non-discrimination, and the right to national treatment under GATS. None of these were the employers' rights, and it is doubtful that workers would have benefited in any way from the indirect enforcement of their rights.
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Setting aside the tax and labor law issues, and focusing on GATS, and even though the petition was denied, this is the kind of case that will give Mode 4 a bad name, emphasizing its propensity to commoditize labor rather than enhance welfare. That said, this kind of levy is certainly a barrier to temporary labor mobility, aimed at reducing the number of foreign workers, and hence foregoing the economic advantages.
