Supreme Court Relieves Israeli Borrower of 1.6 Trillion Shekel Debt

A gray-market loan from the 1990s grew as sides fought in court. The borrower now owes just 22 million shekels

Supreme Court Judges in Jerusalem on August 3, 2018.
נועם מושקוביץ' / ו

An Israeli borrower on relief from the Supreme Court and now owes just 22 million shekels after running up a debt of no less than 1.6 trillion shekels ($460 billion) on a loan he took out decades ago, but he finally wafter multiple lower-court verdicts against him and .

The story began in the 1991-94 period, when the unnamed borrower secured a 3 million shekel loan from the gray (unregulated) market lender Amiron STL. The loan terms required him, in the case of arrears, to pay interest at the prevailing overdraft rate at commercial banks plus four percentage points a month, a figure that worked out to 77% annually.

According to court papers, the borrower was repaying the principal and a supplement of 150,000 until 1996, when he stopped his payments. Amiron went to court two years later, seeking 12 million shekels.

In 2012 the Central Region District Court ruled in favor of the lender; an appeals court upheld the judgment two years later, by which time the debt doubled. The borrower lost a second suit, from 2016. By then the debt had ballooned to 778 billion shekels, and he appealed to the Supreme Court.

“To put it in perspective, we are talking about an amount that exceeds Israel’s national debt and is more than double the annual state budget,” the debtor’s lawyers, Mordehai (Moti) Baicz and David Shmulevitz, told the Supreme Court.

Justice Isaac Amit ruled that the court could order penalty interest rates canceled retroactively and brokered a compromise that ended with a payment of 22 million.