Arbitration in Israel
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Institutional Arbitration v. ad hoc
International Arbitration & Mediation

Home page Arbitration & A.D.R Institutional Arbitration v. ad hoc

Institutional Arbitration v. ad hoc

Date 16/6/2011

Most of the parties to an international dispute will refer it to an international institute of arbitration. The ICC International Court of Arbitration, the London Court of Arbitration, the International Centre for the Settlement of Investment Disputes and the American Arbitration Association are considered the leading institutions for international commercial arbitration. In contrast, ad hoc arbitration takes place when the parties refer their dispute to a certain arbitrator who is not subject to the institutional arbitration rules.

In practice, institutional arbitration has several major advantages over ad hoc arbitration:

Institutional arbitration implements professional arbitration rules. Usually these codes are quite sophisticated. They give the parties a lot of confidence and save complicated negotiation over the arbitration procedures.
Some arbitration courts supervise the arbitrator. An arbitrator who acts under the rules of the International Court of Arbitration of the International Chamber of Commerce ("ICA-ICC"), must receive the ICA-ICC's approval before signing an arbitration award. The ICA-ICC is even authorized to replace the arbitrator for certain reasons.

However, institutional arbitration has disadvantages as well, one is lack of flexibility and another is frequent added costs associated by the court administration's procedures and delays. Nonetheless, most consider the advantages to justify the preference of institutional arbitration.

The most effective way to deal with international institutional arbitration is to include an arbitration clause in the commercial contract. Undoubtedly, parties to a commercial contract will agree on an institutional arbitration process as a part of their commercial contract. It would likely be too difficult to agree on such a mechanism after these parties have already become involved in a dispute. Many institutional arbitration courts suggest an arbitration clause which could be adopted in the commercial contract. Although it shall be recommended to refer an international commercial dispute to an institutional arbitration it does not derogate from reaching an agreement on the arbitrator's identity. This will be highly important when appointment of an Israeli arbitrator is requested as well. I believe that an international professional arbitrator must offer a combination of understanding of the international arbitration mechanism, knowledge of the disputed subject matter and have an authoritative personality, as to manage this process effectively.





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