Arbitration Law in Israel
Arbitration Law in Israel
Israel’s arbitration law is governed by the Arbitration Law, 1968 (also referred to as the Arbitration Law - 1968). It provides a comprehensive framework for both domestic and international arbitration and is designed to encourage arbitration as a method of resolving disputes outside of the courts. Israel’s arbitration law was modeled on the UNCITRAL Model Law and closely aligns with international arbitration practices, making Israel an attractive jurisdiction for resolving both local and cross-border disputes.
1. Legal Framework
Arbitration Law, 1968
The Arbitration Law, 1968 regulates arbitration in Israel. It was significantly amended in 1999 and 2008 to align with international standards and improve the arbitration process. The law recognizes the principle of party autonomy, allowing parties to freely choose the rules, procedures, and arbitrators for their dispute resolution.
Some key aspects of the Arbitration Law, 1968 include:
Applicability: The law applies to both domestic and international arbitration. International arbitration is primarily governed by the same legal principles, with a few modifications for foreign elements.
Court Intervention: Israeli courts are typically hands-off with regard to arbitration proceedings, intervening only when necessary, such as when enforcing an arbitral award or resolving specific procedural issues.
Recognition and Enforcement of Foreign Arbitral Awards: Israel is a party to the New York Convention (1958), which governs the enforcement of foreign arbitral awards. Therefore, Israel generally enforces foreign arbitral awards, subject to limited grounds for refusal based on public policy or other narrow exceptions.
2. Arbitration Agreement
Form of Agreement: The Arbitration Law requires the agreement to arbitrate to be in writing. This can be in the form of a separate agreement or an arbitration clause included in a broader contract.
Enforceability: Arbitration agreements are enforceable in Israel, and courts will typically uphold such agreements unless there are specific grounds for invalidating the agreement, such as fraud or lack of consent.
3. Appointment of Arbitrators
Selection of Arbitrators: Under the Arbitration Law, 1968, the parties are free to choose the arbitrators for their dispute. In practice, arbitration proceedings in Israel often involve one arbitrator for less complex cases and three arbitrators for more significant disputes.
Default Appointment: If the parties cannot agree on the selection of an arbitrator, the court may appoint one. The law also allows the parties to choose an institution (e.g., the Israel Arbitration Association) to help with the appointment process.
Qualifications of Arbitrators: While there are no strict requirements for the qualifications of arbitrators, they must be independent and impartial, ensuring fairness in the proceedings.
4. Arbitration Procedure
Party Autonomy: Like the UNCITRAL Model Law, the Arbitration Law, 1968 emphasizes party autonomy, meaning that the parties have significant freedom to determine the arbitration procedure. This includes selecting the seat of arbitration, the applicable law, and the rules to govern the arbitration (such as institutional rules or ad hoc rules).
Arbitration Rules: The Israel Arbitration Association (IAA) provides standard arbitration rules for those choosing to arbitrate under its auspices, but parties are free to agree to other rules, such as the ICC or LCIA rules.
Interim Measures: Arbitrators in Israel can issue interim relief, such as orders for the preservation of evidence or assets. The Arbitration Law allows for urgent relief by the court if the arbitration tribunal is unable to act promptly.
Confidentiality: The proceedings are generally confidential unless the parties agree otherwise. This provides protection for sensitive business information and ensures that arbitration remains private and separate from the public court system.
5. Role of Courts in Arbitration
Israeli courts generally adopt a minimalist approach to arbitration, intervening only when necessary. Some of the key functions of courts include:
Appointment of Arbitrators: Courts may intervene to appoint arbitrators if the parties are unable to agree on a selection or if an arbitrator fails to perform their duties.
Interim Relief: While arbitrators have the authority to issue interim measures, Israeli courts can also provide urgent interim relief in support of arbitration, including injunctions or asset preservation orders.
Setting Aside an Award: A party may challenge an arbitral award before the courts, but the grounds for setting aside an award are limited. Courts can only set aside an award based on specific grounds, such as fraud, corruption, lack of impartiality, or if the award contradicts public policy.
Recognition and Enforcement of Awards: Israeli courts will enforce both domestic and foreign arbitral awards under the New York Convention. Foreign awards are recognized and enforced unless there are significant reasons to refuse enforcement, such as a violation of Israeli public policy.
6. International Arbitration
UNCITRAL Model Law: Israel's approach to international arbitration is heavily influenced by the UNCITRAL Model Law. This means that international arbitration cases are subject to the same legal principles and protections as domestic arbitration cases, with a few additional considerations for foreign elements.
Recognition of Foreign Arbitral Awards: Israel recognizes and enforces foreign arbitral awards in accordance with the New York Convention (1958). As long as the award meets the criteria set forth in the Convention, it will be recognized and enforced by Israeli courts, subject to limited exceptions.
Choice of Law: In international arbitration, parties are free to choose the applicable law, whether it is Israeli law or the law of another jurisdiction. Israeli courts respect the parties’ choice of law, as long as it does not violate public policy.
7. Arbitration Institutions in Israel
Israel Arbitration Association (IAA): The IAA is one of the leading institutions for domestic and international arbitration in Israel. It provides arbitration rules, appoints arbitrators, and administers arbitration proceedings. The IAA is widely recognized for its experience in commercial arbitration.
Israel Institute of Commercial Arbitration (IICA): Another important institution in Israel that provides arbitration services, focusing primarily on commercial disputes.
International Institutions: Parties in Israel also often choose well-established international institutions for arbitration, such as the ICC (International Chamber of Commerce), the LCIA (London Court of International Arbitration), or the UNCITRAL rules.
8. Challenges and Opportunities in Arbitration in Israel
Challenges
Cost: Arbitration in Israel, particularly in high-stakes international cases, can be expensive. Fees for arbitrators, administrative costs, and legal representation can accumulate quickly.
Limited Institutional Support: While Israel has arbitration institutions like the IAA, some may find the domestic options less developed than those in larger jurisdictions with longer histories of arbitration practice.
Opportunities
Stable Legal Framework: Israel's arbitration law is well-developed and adheres to international best practices, providing an attractive forum for both local and international disputes.
Growing International Recognition: Israel is increasingly recognized as a hub for arbitration in the Middle East and North Africa (MENA) region, especially for cross-border disputes involving parties in the region.
Focus on Technology and Innovation: Israel is a leading player in industries like technology, cybersecurity, and finance, and arbitration in these sectors is becoming increasingly important. Israel’s arbitration framework provides a flexible and efficient dispute resolution mechanism for such high-tech industries.
Conclusion
Israel’s arbitration law, under the Arbitration Law, 1968, provides a comprehensive, efficient, and internationally recognized framework for resolving disputes. The country has created a legal environment that encourages the use of arbitration for both domestic and international disputes. While courts are generally supportive and provide necessary oversight, the law encourages party autonomy and minimal intervention. Israel’s participation in the New York Convention and its adoption of the UNCITRAL Model Law make it an attractive jurisdiction for arbitration, particularly for disputes involving commercial, technology, and finance sectors.
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