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Arbitration in Israel
The Arbitration Law 1968
Recongnition and Enforcement of Foregin Arbitral Award
The Arbitration Agreement
The Arbiration Clause
A Consensual Appeal
Stay of Court Proceedings
Justice and Effiecnent Ruleling
Interim Measures
The Arbitral Award
Setting Aside the Award
The New York Convention Regulations
Institutional Arbitration v. ad hoc
International Arbitration & Mediation




Home page Arbitration & A.D.R Arbitration in Israel

Arbitration in Israel

Date 6/9/2011

 

The domestic arbitration process in Israel is primarily governed by the Arbitration Law, which provides parties with a simple alternative method for resolving disputes efficiently and conclusively. Under the Arbitration Law, the arbitration process is valid where the parties enter into a written arbitration agreement. As provided in Article 2, the First Addendum to the Arbitration Law ("First Addendum”) will apply to the parties' arbitration agreement by default, unless agreed otherwise. This First Addendum consists of important terms that have been implemented and used for decades in almost every arbitration process in Israel. For instance, under the First Addendum of the Arbitration Law, an arbitrator is not required to apply substantive law, Court procedures, or rules of evidence, unless the arbitration agreement explicitly states otherwise. Thus, the arbitrator is free to resolve the dispute by reaching a just and efficient result without legal constraints. 
 
Almost every dispute can be settled by arbitration in Israel, with a number of exceptions. The major exception is an arbitration agreement regarding a matter which cannot be subject to agreement between disputed parties and is thus invalid1.  This mainly includes all criminal matters, mandatory labour rights which cannot be subject to agreement as well as illegal agreements.

Although arbitration has many well-known advantages, such as swiftness and efficiency, it has not yet reached its full potential in Israel. The reason for this might have been due to the absence of  an option to appeal  the  outcome of an arbitration in the past. The conclusiveness of the arbitration process, while usually constituting an advantage, caused Israeli litigants to lose faith in the entire process. As a result, in the Second Amendment the Knesset added two consensual appeal options to the traditional method of arbitration:
 

a) An appeal before an arbitrator.
b) An appeal by leave of the Court.

These two options enable parties to overcome their main concern of a substantive mistake being made in the arbitral award, which in the past could not be amended by the Court.

It must be emphasised that parties which have agreed on an appeal process must include this in writing in their arbitration agreement in advance. If the parties did not explicitly include one of the two appeal options in their agreement, then the traditional process with "no appeal option" will be applied. Thus, these appeal procedures won't be implemented in international arbitration taking place in Israel as default, unless parties included them specifically and professionally. 

The Second Amendment to the Arbitration Law also introduced additional important rules, such as establishing a practical time frame for arbitrators and parties to follow, as well as other guidelines and methods for ensuring punctuality, meeting deadlines, and maximising efficiency.

Advocate Ronen Setty has led the second amendment to the Arbitration Law from its first draft until The Israeli Parliament enactment on November 2011.

The importance of this amendment is based also on the Israeli Court Statistics reports which revealed the average cases per judge in Israel is more than 1,000 cases per year. This is also right to 2013 annual report concerning first instance courts' burden. Thus, arbitration might be the best way for reaching a balance concerning the number of Judges won't changes soon.

The Arbitration Law requires an arbitral award to be in writing, signed and dated by the arbitrator.  If the award was rendered by more than one arbitrator2, then the signatures of the majority (together with an explanation for the absence of the rest of the signatures), is sufficient. The arbitral award can be approved as a judicial award in accordance with Article 23 of the Arbitration Law through a simple procedure, which results in the award being recognized as a judgment of the Court. However, a motion for setting aside the award may be filed within 45 days of receiving the award. If an application for the approval of the award has been filed, then the deadline is shortened to 15 days as long as the  full  period of 45 days had not passed3.  The Court may set aside the award in whole or in part, supplement, amend, or return it to the arbitrator for one of ten reasons4.  These include cases in which the arbitration agreement was found to be invalid, cases of the arbitrators exceeding their authority, or instances in which a party was not given an appropriate opportunity to make its claims or present its evidence. These reasons concern mainly irregularities and misconduct in the arbitration process rather than matters of content of the arbitral award. However, due to the fact that in the traditional process there was no appeal option to deal with possible substantive mistakes, losing parties often tried to base their claims on such reasons.

The Israeli Courts' approach toward arbitral awards is generally favourable and they are usually approved as judicial awards, enabling their enforcement. The 1969 Arbitration Procedure Regulations ("Regulations”) govern Court procedures implementing the Arbitration Law and ensure its enforcement.

On the international arbitration front, Israel ratified in  full  and unconditionally the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention”) on June 10th 1958, 
 
which  came into force in Israel on June 7th 1959. The Regulations for Execution of the New York Convention ("New York Regulations”) were published on August 6th 1978 and came into force on September 5th of that year. The Israeli Courts have been robustly enforcing the New York Convention ever since5.
While the Israeli Arbitration Law does not include a definition of "International Arbitration", it refers to it implicitly in Articles 6 and 29a. Article 6 governs the issue of a stay of proceedings ordered by the court when an International Convention governs the dispute, and Article 29a governs the recognition and enforcement of Foreign Arbitration Awards. In practice, both of these matters are also governed by the New York Convention.

Advocate Ronen Setty was the Israeli Rapporteur to the "ICC Guide of National Rules of Procedure for Recognition and Enforcement of the N.Y Convention Awards", 2008 and is a Member of the ICC World Commission on Arbitration and A.D.R, Paris, France.
___________
1Article 3 of the Israeli Arbitration Law, 1968.
 2Article 20 of the Israeli Arbitration Law, 1968.
 3Article 10 of the Israeli Arbitration Regulations, 1968.
 4Article 24 of the Israeli Arbitration Law, 1968
5Pursuant to Articles 5, 6 and 29A of the Israeli Arbitration Law, 1968.
 
 
 




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